BOOK REVIEW: Taxtopia, The Rebel Accountant

This isn’t the first book to allege a breathtaking unfairness in our tax system, rewarding the wealthy and cracking down on the poor. But this forensic analysis from inside the accounting profession is so first-hand, so no-holds-
barred, that the whistleblower has decided to remain anonymous, writes Simon Bain…

The author’s nom de plume – The Rebel Accountant – allows him to give a highly personalised tell-all account of his career, always irreverent and by turns shocking and funny.

Taxtopia takes the lid off the secret world of tax avoidance and reveals just how tax advisers have enabled their big wealthy clients to mitigate, minimise, or escape entirely the tax obligations that bind us little people. The technical stuff is often in chatty footnotes full of jokes, while the narrative lays bare the absurd and unjust complexities of a tax system designed by accountants, he says, to keep them in work.

As a writer of investigative tax stories back in the day, I knew a bit about artificial tax schemes, which have been generally outlawed since 2013. But these pages brought one reveal after another, along with the laughs, across the whole tax landscape.

Take VAT. He writes:

“It’s accountants who advise the government on how to write the rules, so they make damn sure the rules are as complicated as they can be….which is how VAT partners at midsized accountancy firms get paid £600 per hour to enquire into the provenance of a toddler’s goat-fur beret.”

As for fees, he adds:

“If you have ever paid an accountant, they have charged you what they think they can get away with, not what the work is worth. Always complain about your fee.”

And rules. Rich people can become ‘nondoms’ which allows them to choose their domicile and pay just £30,000 to escape all tax on all their overseas wealth. They just have to claim ‘foreign’ interests and, ideally, a foreign grandmother. “This is the kind of thing I mean when I say our tax laws are specifically designed to reward the wealthy.”

Yachts, private jets and Lewis Hamilton

There is a jaw-dropping tale of the author, his boss, and a bronzed yacht salesman at the Monaco Boat Show persuading a ‘shockingly famous’ client to spend up to £25million on a yacht. The brochure apparently listed trimmings such as ‘adornment girls’ and a frig of cocaine “usually described on invoices as flowers”.

Celebrity tax capers spice the narrative. Racing driver Lewis Hamilton’s advisers dodged £3.3m of VAT by claiming that a £16.5m jet was purely a company asset. It was leased by an Isle of Man company to a British Virgin Islands company via a Guernsey-based company – all three companies owned by Hamilton. The man himself however couldn’t resist plastering images of ‘my jet’ all over his social media, helping to trigger a ‘Paradise Papers’ expose in the Guardian.

But nothing happened – “Ernst & Young’s profits went up and Lewis was knighted by the Queen”. That’s because when HM Treasury investigated the Isle of Man leasing company, it found no evidence of VAT fraud as it had
“followed the correct procedures”, while the actual outcome was “a concern”.

The author says Hamilton:

“was only doing what countless other UHNW (ultra high net worth) individuals are doing all over the world right now – just look at how difficult it has been for Western nations to seize the yachts of sanctioned Russian oligarchs”.

As for little people on modest incomes, we are reminded that if at work you are allocated a £100 bonus, you’ll be left with between £45 and £58 – after employer’s national insurance, your national insurance, your income tax, and probably your student loan repayment and small pension contribution. The bigger earners, meanwhile, pay an effective tax rate of over 48% on anything they earn above £150,000.

But his sting in the tail is that if those big earners are your employers – as in professional partnerships – the £100 bonus of which you might get only £42 will save them £48.50 in tax because it is a deductible expense. Next in the shooting gallery is former Radio 1 DJ Chris Moyles, whose advisers claimed he was a used car salesman to avoid an annual £300,000 tax bill on his £630,000 BBC salary. This scheme used five different companies, a ‘Bare Trust’, and 20 transactions, to create an artificial £1m trading loss in his supposed used car business – which did not exist. Over 400 people paid one advisory firm to use this ‘scheme’ and save a total £290m. But for once, it seems, there was a happy ending for the taxman, who got it all back.

Why Elon Musk pays no income tax

The author’s first boss ‘Wilhelm’ was only interested in the super-rich, those in the top 0.01% of the population, whose wealth increases at maybe £5m every year. He explains:

“Get into the top 0.01% and normal everyday chores evaporate. I knew one client who paid £4000 a week for a concierge service which she only used for booking restaurants and, on one occasion, ordering some new towels (because she didn’t know how else to buy towels).”

And did you know that the likes of Elon Musk pay no income tax? That’s because they use borrowings, not salary, to fund their lives. In death, the borrowings simply reduce the estate left to heirs – cutting the tax bill.
Those mega-donations to charity make sense too, as they are 100% deductible.

“Effectively the richer you are the more you get to decide whether you’d rather pay tax or give to charity (or in some cases neither).”

I think my favourite tale is when the tax inspector calls. Wilhelm, flanked by apower-suited woman, our hero, and a QC “inventing” tax law section numbers, stalls all the questions, wastes time, then stages a fake call from a senior government minister and fobs off the inspector with ‘give a list of your queries to my assistant’. It reminded me of when the SEC visited Bernie Madoff (see Iona’s Netflix review!)

Most clients of the top firms have cash in illegal accounts, which the firm ‘doesn’t know about’. Or rather it does, but it just asks the client not to tell them about it…. so it ‘doesn’t know’.

In the international arena, transfer pricing is used by multinational corporations to shift profits between tax jurisdictions often using fake prices – researchers had found evidence of pens from Trinidad priced at $8500 and
cartons of apple juice from Israel at $2052.

One of the hardest hits in the book stems from our rebel’s experience of a tax fixer in Australia who used transfer pricing for Papua New Guinean timber. He writes:

“I’d always accepted that the tax system in big western democracies was stupidly over-complicated, and that the law allowed people to weave through those laws to arrive at their most beneficial outcome….But depriving one of the world’s poorest countries of tax revenues using bogus transfer prices while stripping their forests bare seemed a step too far.”

The companies – and individuals – choosing how much tax they pay

Royalty payments are similar. Big corporations like Starbucks move artificial royalty payments around within their own empire because royalties are tax deductible in some tax jurisdictions but not others. Then there is the ‘based in’ scam, where a corporation chooses to be ‘based in’ say Ireland or the British Virgin Islands, moves its profits there, and pays its tax there, even though it may only have a brass plate there. He summarises: “Hundreds of millions, if not billions, of pounds have been shifted to places like the Cayman Islands due to these perfectly legal payments.”

All this leads the author to the broad conclusion that when it comes to paying company taxes, “profits can be pretty much whatever you want them to be”. So all company taxes should be scrapped (see his Taxtopia solution).
But discussion of an important tax conundrum for the humble self-employed at home – whether to be a sole trader or a company – was a tad brief. I wanted him to note that tax and dividend rate changes can affect the equation, and that companies are more useful to traders with spouses.

Another top scalp is Tony Blair. It was revealed in 2021 that the ex-PM avoided a £312,000 tax bill by not buying his £6.45m London townhouse. Yes, you guessed it, an offshore company owned it, and Tony bought the offshore company, not the house. He fessed up to it, saying it was all at the behest of the Bahraini owners, and that the property would fall within the scope of UK taxes “from now on” (only).

But what I found truly shocking was the explanation for why so much of London’s prime real estate is overseas-owned. Buying a property for £100m and selling it for £120m would cost a UK investor £80m in taxes (including
death tax). To a foreign investor, using multiple offshore companies, the tax bill would be £15m. In a real-world example, it’s suggested that on just one block of luxury London flats the UK Treasury:

“may have lost out on hundreds of millions in avoided taxes….that’s billions in taxes that haven’t been and aren’t being collected….it’s madness, and more than a little suspicious (as) this is a
huge tax break for unbelievably rich people”.

Even though the Russian invasion of Ukraine has prompted a new Economic Crime Bill which will supposedly require full disclosure of property ownership, there are (the usual) loopholes.

So much for the new money – the old money is at it too! The entire value of agricultural land is exempt from inheritance tax, as is “business” property, which potentially exempts our richest landowners from the tax ordinary
mortals can’t avoid. Even the ability to make non-taxable gifts before you die looks rich-friendly. He explains: “If you’re a billionaire you could quite comfortably squirrel a million a week to your offspring and legally avoid £20m a year in potential inheritance tax.”

At page 255 we are reminded that in 2013 came “the legislation that was to end the golden era”, in the shape of the ‘general anti-abuse rule’ (GAAR). It outlawed virtually any scheme designed to avoid tax, and the rest of the book does not track the effects on the rich and their advisers.

Instead, the author highlights how 50,000 unwealthy people had joined ‘loan schemes’ aimed at saving them and their employer tax, legitimately. In 2017 HMRC declared the schemes illegitimate and cracked down, with “thousands of demands for tax payments that were going to literally bankrupt people”. A highly critical MPs’ report found seven of those people had taken their own lives.

There’s a quick pop at fiscal drag, where tax thresholds are frozen while our income goes up. This of course is the current government’s principle shameless stealth tax. “If the justification for taxes is that they are fair, then shouldn’t all thresholds rise at the same rate as inflation? But they don’t.”

Finally we get an analysis of Universal Credit, lambasting the fact that someone on UC who gets a job loses 55% of his benefit, so is effectively paying a 55% tax rate, while a millionaire accountancy partner is paying a 51% rate.

The Taxtopia Solution

The rich-poor stuff is sometimes more rhetoric than rounded analysis, but it does tee up the rebel’s final chapter: the Taxtopia solution. He says the whole system could be dissolved and just three simple taxes would
nail it completely: a universal tax on any increase in wealth be it income or capital; a sales tax on product harms, a sort of VAT in reverse penalising non- value; and a withholding tax to block all offshoring of wealth.

“Put all this together and Big Tech companies will have to onshore their operations to avoid tax, Starbucks will suddenly decide their royalty payments weren’t necessary after all, and the Wilhelms of this world will have nowhere to hide. You make your money – you pay your taxes.”

It’s beautifully simple, and we don’t get to hear the downsides or difficulties, but that can be forgiven. We also don’t get to know what happened to our hero. I’d like to think he was out there still rebelling, perhaps advising the good guys.

Taxtopia is written by The Rebel Accountant and is published by Monoray, £15

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