Why wealth taxes fail - and what we should do instead

26:15For the median earner, it's gone down. The median earner is paying less tax today than they were in the 70s, paying less tax today than they were 20 years ago. The Tories increased tax quite significantly on the richest 10%. It's something no one talks about. There's like a little political conspiracy. The Tories don't want to say, hey, look how great we were at taxing the top 10 % because their own donors would be furious. Labour certainly doesn't want to say, you Tories, you increased tax on the rich. That's outrageous. So no one talks about it, but it's true. Now, they certainly didn't increase tax a lot on the very, very wealthiest, the top 1%, 0.1%.

26:49But absolutely, that increase in tax that you see, and it's a pretty large one, was on the top 10%. People always think they're overtaxed. No politician's ever going to say, hey, people of the UK, you are historically undertaxed if you're a median earner. And as a country, we're undertaxed compared with most of the rest of the OECD. No one's going to say that. We would like to think we're overtaxed. But we're not. I think it's value for money as well is probably the issue, right? If everything seemed to work OK and the country felt great, people probably wouldn't mind. Well, I'm a bit of a pessimist about this.

27:19I fear that you could have a successful society with lower tax than we have and a much lower level of state support and public services. Or you could have a successful society with much more generous welfare state and much higher taxes, meaning more taxes on the median earner. But I worry that there isn't a stable middle ground, which is where we are at the moment. You either have, you know, American public services and American tax levels or European public services and European tax levels. Maybe it doesn't quite have to be those two extremes, but some way towards it, yeah. I don't see other countries in the OECD at the level that we are.

27:51What do you think is a better system? Low taxation, low government, or high? I try not to talk about politics publicly. I have my own political views. I have no expertise in that. I have nothing very interesting to say. Who did you vote for? I'm not going to hide my political preferences. I voted Labour. I'm a member of the Labour Party. But you speak more to the Conservatives, is what you've said. No, I think on tax policy, I agree more with the likes of the Adam Smith Institute than many of the lefty think tanks. But then if you look at successful welfare states like Sweden, they do it by having a simple tax system, a higher rates of tax, but simple.

28:32In fact, I don't think you can have high rates of tax and a messy, complex tax system. Before we move on to specific taxes and look at them in detail, because I think your views on... This is a platform where we can maybe bring people on board with changes around VAT and things like this. I want to just keep on the tax avoidance thing because I can hear the audience saying, you know, all we've seen over the last few years is examples of wealthy individuals sheltering money, the Panama Papers. And again and again and again, it's like, oh, they get to just opt out of tax, whereas mine just gets taken from a payslip every month.

29:05So how can we say to those people that that is a fair system and that indeed they should even potentially pay more? Well, I'm going to give another boring nuanced argument, which is why I'll never be invited onto question times. So the first part of the point is that tax avoidance is really small as a percentage of the economy. So the HMRC estimates, and it's a pretty good estimate, there's about 40 billion pound tax gap. That's the difference between the tax that should be collected if everyone behaved, the tax that is collected. Most of that is tax evasion by small businesses. It's men in white vans.

29:39Cash in hand. Yeah. Now, some of that is the very wealthy. And exactly how much is unclear. is probably somewhere between 1 billion and 5 billion. Now, that is not nothing. And we absolutely should be collecting this. Things that could be done to collect it. But it's not going to move the dial. So populist ranting about tax avoidance by the very wealthy is, yeah, it can be slightly overregged. There's absolutely things that can be done. So take offshore accounts. Almost every country in the world has now signed up to a system that means accounts get automatically reported across the world. So if I open up an offshore account in Bermuda tomorrow, at the end of the year, HMRC gets a nice report of what's in there.

30:19That is a massive change. Can you still hide money? Sure, there are definitely ways to do it, but it's much, much harder than it was. So things have changed and things can continue to change. There's about to be an extension of those rules to apply to cryptocurrency, which is an obvious way today that someone can stash money and not be taxed from it. so you you're saying that the the bigger tax avoidance issue in the uk is small businesses getting paid in cash tax evasion cash in hand is absolutely where it is yeah i mean overall that means the uk loses until like 15 billion in in tax a year so nothing comes for free could we crack down on that more sure would it be a good idea don't know i mean you have to you have to put up with a certain level of fraud in any system because when you get if you want to reduce fraud an evasion further that has knock-on effects it means more admin and hassle for honest people it might mean say banning people from using cash which i don't think would be a good idea at all so um tax evasion cash in hand is a big problem are there things we could do about it a bit but probably not it's not something we can end then the individual like you said you go for your haircut and you're like paying cash or whatever you're like it's 10 pounds it's 20 pounds whereas You see in the news, Starbucks isn't paying this billions or millions in tax.

31:38And this company's moved offshore and this person's moved offshore. And my friends moved to Dubai to have less tax. And my other friends moved to Thailand to have less tax. So you're kind of like, I'm here. I'm paying all my taxes. This is like a little savings for me. So you don't really feel like it's affecting the whole country. But when you say the numbers, it is quite drastic. Yeah, it does. It does. Do you know people who've moved to Dubai for tax reasons? We were talking about this in another episode. And Damien's like, oh, it's just stories. you know i don't i know lots of i mean the incentive for me to base myself in dubai or portugal is pretty high as a as a creator yeah and i could just set up my studio to look exactly the same and pretend that i'm in england like you know i could i could do that and there's lots of people that have gone out there and there's lots of people driving lamborghinis in in dubai that couldn't do it if they were here because you know it's basically the tax money that they're spending but they are in dubai so how much do we lose by people leaving the country for tax i mean it's very hard to figure out but like for tax for cheaper tax havens or like you said in your untaxed radio untaxing untaxing radio series available now on bbc sounds really really good really funny really interesting but you said there was a guy who was he lived in london on 100 100k and he was going to move with his family to scotland but they have now a 48 percent tax this is the laugh of curve thing isn't it yeah yeah and they have a higher tax rate so he's i'm not moving to scotland because they've got higher tax so yeah how about the people like i don't want to stay in england because of the tax rates so you know there's been no studies of that dubai effect that i'm aware of there's lots of studies around say in the us people moving from one u.s state to another and the differences tend to be quite small really it's the difference obviously you're paying the same federal tax it's just different in in state income tax elon must move though didn't it imagine that was a big impact yeah california to texas yeah you you you have Now, if you're wealthy, it can make a big difference.

33:28But for a moderate earner, it makes a difference, not huge. Here, if you're a moderate earner moving to Dubai, it makes a big difference. So it's plausible those effects. How big are those effects? Don't know. Is there anything we could do about that? Well, no, we can't. We can't cut our tax to Dubai levels. A large advanced economy, that is not just - We don't have loads of oil to subsidize that, or slave labor from Pakistan. It is just not possible. Not merely not politically possible. but it's not possible. I mean, as someone who would be highly incentivized from a monetary perspective to move to Dubai, and I could do that, what I will say is I'm tied here through family, through the culture, through lots of other soft factors that seem to just outweigh the money.

34:16I mean, I can't speak for everyone, but that's my perspective. There's only so many people in the end who can move to Dubai. It's a relatively small place. it's quite a long way from here it's very culturally different scotland is in a slightly slight slightly bigger pickle because it is just so easy to choose whether you live in scotland or england for many people so there's a the again untaxing available on bbc sounds we talk about this and how i love how you say it in an advert voice you lock in you lock in on the zones out the eyes go glazed over like ai i probably need to learn to be smoother at this but yes if you listen to untaxing available on bbc sound you you will find out how the scottish government is very generously running a controlled scientific experiment into how high you can push tax rates and collect more money and they are right at the cusp on their own figures of increase in taxes actually losing revenue almost at that point we'll find out in a few years so this is the lapper curve um and it's this idea that if you if go on you want me to hit a buzzer yeah all right i'm saying it why buzzer i don't know because people don't know what the lafacombe is clearly i'm not trusted to explain what the lafacombe is our producer well that's another i think i think the eloquent description that you put was if taxes are you know zero the country raises no money if taxes are 100 the country raises no money because you know 100 no one's going to work and it wouldn't be just a step down there's got to be a curve between that yeah a bell-shaped curve yeah this point where it tips.

35:49Now, of course, the problem with that description is every step in it is wrong. So, I mean, it's an accurate description of the Lafferco. But if taxes were 100%, it is not true that no one would work. I mean, I work for no money because I enjoy it and I want to do it. And there are other weirdos who are similar to me. So that's not true. If tax was 0%, well, there are some weirdos, not me, who give money to the government voluntarily. So the description isn't quite right. And the idea is it's a smooth curve. I mean, in the social sciences, you never see nice smooth curves. Apologies again to everyone listening to this who can't see my finger in the end.

36:26Probably apologies to people who can, because it's not actually very helpful. But the basic proposition is correct, that for every tax, there is a point where if you raise the tax, you will get less money. So in the 1970s, the top rate of income tax was 98%. I've read, that's crazy. No one who had advice paid that. There were a zillion things you could do to not pay it. So when they cut that rate, I am certain as anything that that raised more money. But what applies to a 98 % tax rate does not apply to a 45 % tax rate. And that's when the latter curve was thought about, was in this kind of high tax environment.

37:03But the very same people who argued at the time that cutting tax would raise money, and in some cases they were correct, still make that case now when I think it's pretty clear it's not correct. So it's a political tool more than it is a useful economic theory. But you think that on middle earners or on the income tax rates, we might be at the laffer curve, at the tipping point? There's been some pretty compelling research by rather lefty economists as to what is the tipping point? Where is the tipping point? The tipping point is a bit above 50%. Now, if you currently are an additional rate taxpayer in the UK, paying 45 % tax plus 47%, plus 2 % national insurance, and then you had employer national insurance on that, which ultimately employees bear the cost of, your tax is right at that point.

37:52And there are plenty of points on the salary curve where you can be paying a higher marginal rate than 55%. If you're earning£100 ,000, your rate is over 60%. If you get free childcare and you earn£100 ,000, your marginal rate goes up to 20 ,000%. So yeah, there are definitely points in our tax system where you could be cutting tax, and conceivably that would bring in more revenue. The VAT threshold on small businesses that are direct to consumer, so for example, beautician businesses, if they hit the VAT threshold, they have to just up their prices and they can become non-competitive. So I know my partner will just stop working when she's near the BAT threshold because she doesn't want to charge her customers more.

38:37She becomes non-competitive. But that's madness. So we have a tax system, which is forcing your partner and I calculated about 40 ,000 businesses across the country to not grow their business. Yeah. Madness. Now, what do you do about that? So the one thing is, well, we should raise the VAT threshold. No, no. If you do that, you're not solving the problem. you're just moving it into slightly larger businesses. And the larger a business it is, the more economically important it is. So you're making the problem worse. Congratulations. Don't do that. What we should do instead is reduce the threshold.

39:08Now, if you reduce the threshold, a lot of small businesses will scream. But others will realize, actually, hang on. What's bothering your girlfriend isn't charging the 20 % VAT. It's being uncompetitive versus other businesses that don't. But if you put everyone in the same position, it's different. And if you use the revenue... We should bring it down. You should bring it down so that essentially anyone who's beyond a hobby business is charging VAT. That's what they do in most of the continent. And if you do that and you use the revenues to cut the rate of VAT, it wouldn't cut it very much. It would cut it by a bit.

39:42You make clear this is not a government tax grab. This is making the system better. This is boosting growth. It's a pro-growth tax change that a brave government could introduce. Did this government do it? Nope. nope instead i mean again all the politicians the smart ones everyone at the treasury knows this and their answer is well yeah okay we will freeze the vat threshold or let inflation erode it and so in 20 years time we'll get there seems to me the country's in a growth pickle and we can't wait 20 years time we need to be doing bolder things so vat absolute example of where there is a big problem it has a solution everybody knows but the politicians are too scared to do it they don't think they can sell it to the public.

40:23And there's other areas of VAT that you've looked at as well, which I think might be kind of unpalatable, would be... Oh, the fucking Jaffa Cakes. Jaffa Cakes. Is it a cake or is it a biscuit? They're pretty palatable. I can't do the pimping of the radio show again, but we have a whole episode... Where is it? Where is it available, sorry? I believe it's available on BBC Sounds. So, Untaxing, the second episode is about... Jaffa Cakes. The Jaffa Cakes. And it's this oddity that before we joined the EU, we had a confusing series of duties and sales taxes, and there was a tax on luxuries. And it was thought that a chocolate biscuit is a luxury, and a cake is not a luxury.

41:06Why that is, I guess maybe a sociologist would have some theories. And VAT inherited elements of that. Some people say VAT's attacks on luxury is not true, not how it works at all, but it bears the kind of remnants, the archaeological remnants of that. So some clever person at Wittes thought, aha, we are going to argue that our Jaffa cake is in fact a cake. McBitty's biscuits, I might add. That's the name of the business, isn't it? That's a highly prejudicial... You said that, you were like, they're called McBitty's biscuits, it probably didn't help, did it? Well, it was called a Jaffa cake, and they're like, it's clearly a cake, it's in the name sorry yeah i can't and so you had these uh very very highly professionals throwing out arguments like well um if you make a really big one it looks like a cake and if you leave it out of a box in the air for a while it will turn soggy hard and then the biscuits turn soft okay you're much better tax tax yeah yeah so these are these are arguments that are just childish but they are relevant arguments we had another one recently um about the mega marshmallows do you make marshmallows so um marshmallow confectionery is taxed vat at 20 an ingredient 0 mega marshmallows large marshmallows sold in a packet that suggests they used for s'mores which an american thing you get a skewer you put a marshmallow and a biscuit on it you toast it over a flame and it's disgusting or delicious depending depending on your predilection for hot sweet things and mega marshmallows won in court and this is a ridiculous time suck it's hugely inefficient it makes life complicated and expensive for shops and you have daft distinctions another one is children's clothes so children's clothes 0 % VAT adults clothes 20 % VAT you can go to the Harrods website now, you can see children's gold lame jackets at£4 ,000, 0 % VAT.

43:05How is that in the public interest? So in a sane world, what would you do about that? Well, you'd scrap the VAT 0 % on children's clothes. You would uprate child benefit so that the average family doesn't live out job done but again that requires some political balls because people say oh you're taxing children's clothes you're you're taxing food all of this there's an obvious populist counter-argument so doing the right thing is politically hard how do you get that message over to people how do you say to everyone if we just bang it on your kids trainers and your food and all of this. So I have a theory.

43:46My theory is that all this is doable if it's clear that you're not raising tax as a whole, that clearly you are raising it on this, but then you're lowering the rate for everyone. It makes it a different dynamic. It's not government taking money from you. I'd like to speak more about the property stuff, though, because I think there's one. So you're in favour of essentially scrapping every property tax and replacement of a land tax. They are all shit. So Stamptity Land Tax, clearly shit. Everyone knows that. Business rates, super shit, because they're uprated so irregularly that you can have a high street where the rents have collapsed.

44:21Business rates are now still high. Southport. And the businesses just can't survive. Like the local independents, you just get all these charity shops. Yeah. Because I guess they get favourable rates, right? Or none, yeah. So you just get 15 charity shops. So no one wins. You end up with a crappy high street and less tax revenue. Disaster. Couser tax. Couser tax. I keep banging on about this. that someone living in a£100 million penthouse in Mayfair pays half as much council tax as someone living in a semi in Bolton. What is going on? How can that make any kind of sense? So you could kind of just tweak all of these a little bit, and maybe this government's going to do that, but it would be much better to say, you know what, we need something really radical.

45:01We need to sweep all of these away, place them with a modern tax that's actually driving growth rather than holding it back. And you could do that. The window for doing that is closing rapidly, because it would be so unpopular in some quarters. You need to do it really early in a parliamentary term. And if this government does that, I will eat my T-shirt. It's just not happening. And they would need to do it in the next budget, basically. Probably the last one. But yeah, the next one is the last chance of any major tax reform. I don't think, I fear we won't see it. Were you hopeful that they were?

45:32I was hopeful. I was hopeful. What is the best possible scenario for pro-growth tax changes? Well, it'll be a government that comes in saying, it's all about growth. We're really focused on growth with a large majority, with almost certainly a five-year term. It's never going to get better than that. And they didn't. And do you think tax reform would deliver growth and prosperity for the UK? Is it that simple? Well, I'm not an economist. But if we can identify parts of the tax system that hold back growth, your girlfriend, her growth is being held back by VAT. magnify that effect across the economy throw in income tax and the cliff edges in income tax the incorporation tax and all of its complexities throw in land tax all of these are pro-growth tax changes what is the overall economic effect of fixing all of them don't ask me not my job but it's going to be positive it's something when we're cooking around for a bit of growth yeah yeah doing the same thing and expecting anything to improve is not going to work I want to come back to the housing stuff again, because I think people are really going to be focused in on that.

46:41I read the paper that Martin Wolf talked about, because you cited his article, so this is grey, and then he referenced the paper. And within it, they basically said, they were using America as an example, but they said that an increase in the tax rate on the value of land from a level of 0.55 % to 5.55 % with reductions in taxation on produced capital and labour. So you increase the land tax and you reduce taxes around working. They think that that would raise output by 15%. So they're talking about GDP there. Yeah. That's massive. Again, this is conventional amongst economists of left and right that we should be taxing land more than we tax labour.

47:26but it doesn't happen it's been a political idea since henry george in the 19th century and no advanced economy has done it now i'm i'm not being that ambitious i'm suggesting replace our shitty land taxes with a better land tax you could go further and and use some other revenues to reduce income tax but uh i that means even more complaints from people in large houses If you remember Ed Miliband's mansion tax, it was so slated at the time, a cynic would say because it affected a lot of newspaper editors, but it was so slated at the time that even Jeremy Corbyn didn't include that or anything like that in his two manifestos.

48:06The Labour Party was so bruised by the mansion tax experience. And I fear that's why we won't see any kind of major loan tax reform, just as the pasture tax experience means we're not seeing VAT reform. We had Martin Wolf here. He was great. He was very sharp. He's a very smart guy. Yeah, he is. And he said something in his article that made me think about it. He said, basically, I bought a house in London and I have benefited from the collective work of everyone in London and the price of the land under my house has risen. I did nothing for that. He's like, yeah, I was part of the London system, but actually that London system has benefited from the work ethic of millions of people and the taxes that they've paid to improve the system.

48:47So by not taxing the land, you're just giving people a free ride on the backs of others' efforts, essentially, is how we positioned it. The problem is that people who are living in a house which is appreciating value don't think that. They think they've done something clever. And any attempt to tax that is going to be hugely resisted by boomers living in large houses who've paid off their mortgage. And these people vote. Yeah. So it's a hard one. And they're probably not going to move house again, so they don't much care about the other taxes that are so damaging. So it's a difficult political problem.

49:20Do you think there's taxes that are not a difficult political problem which you just go after straight away? Sure. Corporation tax simplification. Absolutely, you could do that. Capital gains tax. How can it be that someone can change their earnings into a form that's taxed at so much smaller a rate? Makes no sense. The Beatles. Yeah. I heard this on BBC Sounds. You are just goading me now and I'm not going to do it. But if anyone wants to hear that, they could go to BBC Sounds. and listen to, I think, the... No, it's the second episode. I said the second before and I was wrong. It's the second episode, which is about how the Beatles were...

49:58When these tax rates were super high, 70, 80, 90, almost 100%, they weren't paid by the very wealthy because there were so many ways to get around it. But if you were someone from a pretty modest or working class background who suddenly got a lot of money, you didn't know that. So the people paying this tax were a lot of the time pop stars and the Beatles were paying a hell of a lot of tax. So they came up with this brilliant wheeze, or rather their advisors did, which is they would put the rights to the royalties on all of their music into a company. They listed that on the stock exchange, and they sold the shares they owned in the company to the public.

50:34That meant they wouldn't get the royalties on that anymore, but they'd get this big sum of money from selling it. That was a capital gain. And at that time, capital gains were not taxed. So instead of paying 95 % tax, they paid nothing. But it's a cautionary tale, because it turned out over time, the royalties were enormously valuable. And the Beatles had sold them. And these rights changed hands again and again, eventually ending up with Michael Jackson. The Beatles had no control over them, didn't get the money. So lost probably tens of billions, ultimately. So the lesson is, don't ever do something just for tax purposes.

51:12because often that means you're doing something that doesn't make economic sense and it's going to cause you a problem. How can a consumer know what's dodgy and what isn't? Because if you type into Google how to avoid tax, you get a load of shysters. Yeah. They're right there. And HMRC are doing nothing about that. The HMRC historically was not a regulator. If you set up a business avoiding tax, HMRC didn't really touch you. They would go after your clients once they found out about it, sure. But you as a business, they didn't go near. And 30 years ago, 25 years ago, tax avoidance was done by Barclays Bank, ICI.

51:50All the big companies avoided tax, and firms like mine would construct elaborate schemes for them. And they stopped doing that, not because they suddenly became ethical, because it became clear the schemes wouldn't work. Some of the people who'd sold those schemes wanted to keep doing it. They couldn't say it's Barclays Bank, because Barclays Bank would say, fuck off, that's not going to work. But they could go to an IT contractor who's never going to get independent advice, never going to find out the scheme doesn't work. And so these tax avoidance schemes became sold to people on pretty modest incomes.

52:17And that creates a big public problem, because it's really a mis-selling scandal as a consumer protection angle, and no one is looking out for the consumer there at all. So it's a very long answer to your question, which is HMRC wasn't set up to and didn't, no one acted to take control of this. Belatedly, there's a realization that this has to end. So So there's one of the areas where I feel we've been a bit influential is making a fuss about this kind of avoidance. And there's a government consultation announced in the budget, which is really going to stamp down the people selling these schemes.

52:51New criminal offences, new civil offences. Hopefully it's going to make a difference. Yeah, they should go after the seller, the dealer, not the taker. Not the taker, yeah. The problem is... It's like arresting someone for buying drugs, but not arresting a drug dealer. But the difference is that if you're buying drugs, you have to buy it from someone on your street who you go and give the money to. But if you're buying a tax scheme, you're going to buy it from some company in the BVI, owned by a trust in Vaduatu. And maybe, maybe, maybe you can trace it back to someone in the UK. That's often quite hard.

53:22So much easier for HMRC just to go after all the little people. And that's what they did. We are going to be writing quite soon about how you could go after the big guys, not just going forward, but maybe retrospectively. so um a lot of people invest in digital assets and obviously the tax in the hmrc is not quite up to date with bitcoin and digital assets um so like you mentioned earlier some people might use it to avoid tax nowadays evade tax evade tax avoid is the good thing evade is the bad thing yeah so avoid was what you got paid for it was so not i will see you in court my clients paid Exactly the right amount of tax, not too much.

54:03I'll see you in court. This is important. So I should now pompously explain the difference. Evasion is dishonest. You are concealing, you're hiding something, you're lying. So you pay me the 20 grand we agreed for this interview. I don't declare it. Why are you laughing? I don't declare it to HMRC. That is tax evasion. yeah tax avoidance is it's not really a defined term but most people would say it means using some kind of loophole or unintended result to not pay tax so you pay me the 20 grand i um buy some investment products which supposedly generates a 20 000 pound loss which shields the income yeah that so it's not illegal avoidance in theory that's not legal but the shit just doesn't work these days if i really tried doing that i think i'm probably dishonest i probably is tax evasion so in theory there's a difference between the two in practice it's quite blurry but anyway um the classic crypto thing is you buy for one pound you sell for 20 000 pound you don't tell hmrc that is tax evasion yeah so what are hmrc doing to kind of crack down on this because obviously that's probably a loophole a lot of big brokers a lot of people are not they put a lot of pressure on them and there are also other exchanges like there's so many crypto exchanges like might be in russia might be in singapore might be in france so like you might have jurisdiction ultimately it has to touch the banking system if people want to get cash out it has to touch the banking system so you can you can get at it that way and there's an oecd initiative which kind of does that would create automatic reporting but hmrc screwed this up initially so back when crypto just started to be a thing we're talking early 2010s maybe HMRC came out with some guidance that said, crypto is basically gambling, so it's not taxed.

55:50Yeah. And I think they did that because they thought, oh, this newfangled thing the kids are doing, people are going to lose lots of money. We don't want to give tax relief for that, so we're going to say it's gambling. It was wrong as a matter of law, but I think a lot of people made a lot of money and didn't pay tax. Those were the good old days. Yeah. The wild, wild west. HMRC then, as they often do, they kind of wake up with a star and go, what's going on? And they reversed course. And clearly, it's taxable. If you say to me, I've just bought some and made some money, is it taxable? Even if I didn't hear the middle bit, I'll say, yeah, taxable.

56:24Can't tell you exactly how, but it's taxable. So it's taxable. It's pretty easy how it's taxable for almost everyone. It's taxable as a capital gain. And do you think that there's been improvements in HMRC's ability to go after people who work? Because there's going to be people listening going, good luck. Yeah, definitely. I mean, the thing about tax evasion is that HMRC can go back 20 years. So if HMRC in 10 years' time get records of your crypto transaction today, they can and will do you. And it's so much easier for them than cash in hand because it's all computerized. They can do it in bulk.

57:01They don't just send some inspector outside a kebab shop to count how many kebabs sold on a particular day. There's a record of it all on the blockchain. So they could be quite chilled on the basis that they go, we've got years to figure this out and we just go back and hit everyone. The blockchain is forever. Yeah, it's a record of every transaction. If a tax authority has no clue, it's a great way to evade tax. But once the authority rises up, it's a really bad way to evade tax. So actually, the dark secret is HMRC likes the blockchain because it's... Records. Ultimately, they can do it at their leisure.

57:34But they can't backdate it to before they introduced... Oh, yeah, they can. They can still go back and say... They were wrong, you see. It's basically the whole history of crypto they can backdate for. So they can backdate too. They can go back before Bitcoin was invented. But there were no laws back then. You don't need laws. I mean, there were no tax regulations back then. There aren't now. There isn't a single tax, I think. There isn't a single tax regulation on crypto. You don't need it. Capital gains tax applies to buying and selling anything. There's no capital gains tax on tables. But if I buy an antique table and sell it at a game, I'm taxed.

58:05So yeah, pay your tax on crypto, definitely. and if you didn't you should be voluntarily doing it because then you might escape penalties if HMRC catch you they will ding you with penalties if you have a large crypto gain find a good tax advisor meaning someone with letters none of them understand that's the problem my accountant's like what are you talking about none of them understand there aren't really crypto tax lawyers you shouldn't need to be there is nothing complicated about crypto for a good tax advisor so maybe an accountant who's not a tax accountant and wouldn't be able to do it. But anyone who's a member of the Association of Tax Technicians or the Chartered Institute of Taxation, they'll be able to do it.

58:46So look for a tax advisor who's ATT or CIOT. And if you have significant untaxed crypto gains, it's in your interest to fess up. Above the tax-free threshold, would you say? Yes, I mean, strictly. The threshold's only three grand. Yeah, it's dropped. It's just tiny, yeah. Yeah, but significant is relevant, isn't it? Someone on minimum wage might have like 20K in crypto. gains that's significant but it used to be more you you used to get um i can't remember 12 000 yeah it used to be now it's now it's now it's 2000 so um for someone making small gains but if you that there are quite a lot of people who made six figure gains yeah exactly pay tax and they are i would strongly advise them to go i can't give advice but i i can i would strongly advise them yeah pay your tax contact you think it's come in at some point and you know you're I think they will get caught.

59:40I think a lot of people are going to be. Someone who got cash in hand for cutting someone's hair is probably never going to get caught. Don't do it, kids. But the risk of being caught is low. But here, the risk of being caught is high. Because the digital records, you investigated a former chancellor and shone a light on... Mr. Sahawi, yes. Yeah, yeah, yeah. It was around YouGov. Yeah. The polling. So, at the time, I thought he was one of the most interesting and impressive figures in politics. So how many British politicians have founded a billion-dollar company? I mean, in recent times, none.

1:00:16Probably maybe Robert Maxwell, not a good precedent. But that's amazing. Richard's not married into one. You don't get points for those.

1:00:28So there was this funny story that he was being investigated, so how he was being investigated, by the NCA and HMRC. The NCA are really fucking serious people. They don't, none of the tax things I've looked at have ever merited the NCA looking at them. So that really got my interest. And I started looking into everything to do with Zahawi. And I found hidden in some of the documents that created when YouGov, the polling company, floated, it was clear that he'd held his shares in YouGov through an offshore company that supposedly was owned by his father. And it's really janky tax planning, really poor quality.

1:01:04It's the kind of thing that if you go to the pub and talk to someone, someone will say, hey, you know, you don't have to pay tax on this. Just have your dad own it through a Gibraltar trust. No tax advisor would say to do that because it's mad and doesn't work. So it's not that he avoided tax. He tried to avoid tax and it failed. And I thought a whole bunch of tax was due. And he initially tried to ignore me, then sent lawyers to threaten me. And I don't think he knew what the Streisand effect was because that meant I suddenly changed from being a tiny think tank read by a few hundred people in Turkey.

1:01:37Everyone on the internet wanted to read about how Zahawi had tried not to pay tax and how he was threatening the person reporting on it. So it all blew up. And eventually, a brilliant journalist at The Sun got a leak showing that not only had he not paid his tax, but HMRC had caught him. And he'd paid the tax and admitted it. At the same time he was sending lawyers to threaten me, he was negotiating this with HMRC and he was sacked. See you in court, bitch. Mike, he was sacked. Mic drop. Who are you investigating now? Who are you investigating? I'm not going to tell you who are investigating. How are you investigating people?

1:02:17I'm really lucky. I get all of these tips from accountants around the country who see all kinds of mad shit and have no one to tell about it. And now they can write to me. Is there no confidentiality between your accountant and the customer? Oh, God. Like a lawyer. Sorry, this is not... I need to make a quick phone call. I'll be right back. Who are you talking to? Who are you talking to? It's never the accountants doing in their own clients. I mean, yeah, they have to be crazy. No, it's that you've got this accountant in Chelmsford and they've got these lovely clients and everything's great. And then one of their clients goes to them and say, hey, someone's selling this brilliant scheme.

1:02:51Can I do this brilliant scheme? And the accountant says, no, you have to be crazy. The accountant says, well, fuck off then. And goes and leaves the accountant and goes to these crazy, greedy criminal people. The account sees that, and the account has furious. The account has done the right thing and has lost the client. And they can write to HMRC, but then they think it just goes into a black hole and they'll never hear again. Or they can write to us and we'll look at it. So we get all these brilliant tips, and we've got so many half-cooked investigations that I need to finish cooking and put out.

1:03:19There's a lot of them. Within the political space, was your experience that there, was, you know, was Howie, sorry if I mispronounce that, was he an exception? Oh, he's an exception. Very few politicians in the UK are rich to that degree. And that kind of tax avoidance evasion that he did, evasion, avoidance, somewhere in between, you'd only do it if you owned your own company. And so for the average MP, I mean, these days, most MPs famously don't have experience or earnings before they become MPs. So they just couldn't do that, even if they wanted to. We've looked into a couple of others. So Jeremy Hunt, there's stories Jeremy Hunt avoided tax when he sold his business or when he bought a portfolio of houses.

1:04:03It wasn't true. It didn't. So the whole seven houses stamp duty thing. It was just bulls. It wasn't true? No. Yes. If you buy one house, you pay stamp duty on it at a higher rate than somebody buys five or more houses. And that's the way the rules work. And he bought, I can't remember, sorry, six or more. If you buy six or more houses, you pay at the commercial rate. And the reason is because otherwise large-scale commercial landlords couldn't really operate. So that's the policy. He bought seven. So clearly he didn't do that just for tax purposes. There are people like Gary Stevenson who said, oh, it's a Tory loophole.

1:04:41And it wasn't a Tory loophole at all. It was a rule created by the Labour government when they created stamp duty in the first place. So no, Jeremy Hunt didn't avoid tax. Silly. Was it a marmalade business he had in Japan in the past? That sounds amazing. Didn't know about that. No, it was an education business. A failed marmalade business. It's on his Wikipedia. Okay, we're going to have to look into Japanese marmalade. Yeah, yeah, yeah. He sold an education business he created. He made quite a lot of money. People told me, oh, he avoided taxing this. And we had to look. No, he sold it in the way that you do if you're paying all your tax.

1:05:11Final question for you. As a man who retired very young, how did you structure your portfolio prior, in terms of investments? Not from a taxation perspective. I mean, what's your view investing and what does that look like from your end? So yeah, one of the reasons I could retire early is that I invested fairly sensibly through the amazingly boring strategy of putting it in index trackers. Music to our ears. Global, S &P, where were you at, do you think? That has changed a few times, but it's always been ETFs because I don't like the liquidity position of funds And I don't like the fact that if I sell it, I don't know the price that I'm selling at.

1:05:52So always ETFs. Always ETFs, the physical rather than synthetic. Always the fairly big ones with tight spreads. But which one you put it in, if they're tracking the same index, doesn't matter. No, no. That doesn't matter. So yeah, I mean, that's secret to my investment, not quite success. Just big, cheap index funds, ETFs. Go for investment mediocrity. Don't look at it too often. It's like I had a moment when, after Trump's brilliantly innovative tariff announcement, I always thought I should have sold these when Trump comes in. Maybe I should sell it. No, and I didn't. I stopped from doing anything.

1:06:31And now I know that was the right decision. And now I'm kind of thinking, you know, Trump, he's going to do more of this. The markets are being irrational. Stocks are going to fall. Maybe I should switch it. But no, I mustn't. I shouldn't look at it. I shouldn't think about it. I should just sit on it. you should focus on being a tax expert and delivering value through that and let the markets just do what the markets do. Yeah, although the value I'm delivering, I'm not getting paid for. So my economics are a bit shit. Why are you plugging the BBC Sound stuff then if you're not getting paid for it?

1:07:01You just want the fame nowadays. Just the clout. The clout. Just the clout. No, I want to be able to move tax policy a tiny, tiny, tiny bit in the direction of sanity. That's the thing that drives me. Yeah, I want to have fun and for probably reasons of my personality defect, I enjoy this, but I'm doing it because I want to change policy.

1:07:25How do you feel after that one, mate? Talk about tax. Absolutely fine. I mean, I pay exact right amount of tax, not too much, not too little. So I've got nothing to worry about. Got good advice. Great advice. I mean, actually it's relevant. So we now offer a service for self-employed people that can help them with their tax because I think it is quite complicated, isn't it? Yeah, me using an accountant was a game changer this year. Yeah, I mean, you moaned about that, though. Yeah. You told him it was too expensive. Yeah, but you saved me a lot of money, so I was pretty happy with that. I need to sort you out with a Northern boy, mate.

1:07:54Yeah, sort me out with your accountant. You need a good accountant from Derby, mate. That's where they're cheap. Is that where you're from? Yeah, cheap. Yeah, these London accountants are bleeding me. That's what I mean. They've got all these fancy offices. Retiring at 48. What's going on there? What is going on there? Yeah, so our service is not that expensive. We'll leave details of that below for you. retiring a 48 mate is that's nice isn't it that's true please remember this is not financial advice like we say a lot on the podcast investments can fall and rise in fact it's pretty much a guarantee past performance is no guarantee of future results so your money is at risk with investing and other fees may apply as with everything financial please do your own research we really encourage that because no one cares more about your money than you.

1:08:44I'm Damo. I'm T. This was an episode of Making Money from our company Most. It was filmed and edited by the team at Flow Spire, Jack and Ben. It was produced by Ruth Edwards and brought together by Will Stallman. What about Ruth and Toothless a Dog? Yeah, shout out them too.