Banking regulations and tax loopholes – yawn.


There were a couple of articles in the free London papers on Friday that suggest that the powers that be still don’t understand human behaviour.   It would be funny, except for the fact that they show that the public are still going to pay more than they need, because the powers that be are part of the problem, not the solution.


One, the front page in the Metro, was about how advisers to Government use their knowledge to help their rich clients dodge tax laws.


Twenty five years ago, I used to point out to clients that I couldn’t afford myself.  I advised wealthy people how to make the best use of their money, tax relief etc.  If they could afford me (or more correctly, us, as I didn’t do it all solo), they could benefit. Such as the couple who were, if I recall, an accountant and a solicitor with two children.  They sued one another for divorce and maintenance of one child each, but still lived together. That and various other dodges meant that they paid about £1,000 tax on a combined income of about £85,000 (which was quite a bit then).  They could have eliminated the £1,000 if they could have been bothered.  


There’s always been a three tier system, the very poor don’t pay much tax because they don’t have much money anyway and you can’t get blood from a stone.  The middle income (most of us), get screwed into the ground because we get taxed but can’t afford the thousands we need to get the fancy advice to get out of the tax net (it’s like the law, if you’re not wealthy, you can’t really afford defamation actions etc.)  And the very rich can pay somebody to save them a lot more tax than they pay in fees.


And being an adviser and using the “inside track” isn’t new.  When Cameron was talking about parenting lessons, one of the providers who was going to be able to get Government supplied vouchers from parents was “Parentgym, the company run by Mr Cameron’s friend and former adviser, Octavius Black.” 


I did point out at the time that it looked as if Mr. Black had advised Mr. Cameron to adopt a policy, and then set up a company to benefit from that policy.  Maybe that wasn’t how it happened, I don’t know, but while, a year or so later, the Metro thinks it’s front page news that people take advantage of links or that big firms with big connections can benefit from policy and help the wealthy avoid tax, well, sorry, but it’s not “man bites dog”, it’s “dog bites man”; it isn’t news.


The other article was in the Evening Standard, under the headline, “Bankers face jail under regulation rethink”.  We have, apparently, disagreement over how to achieve a “robust set of rules”.  This is to try to punish “bad behaviour” and “behaving recklessly”.  


Wow, the “members of the cross party group of MPs and Peers” are against sin – fantastic!


I have said before what needs to happen in practice, rather than in theory.  I’ve described a way to think about regulating personal financial services, what we could do about the Retail Distribution Review (RDR) and how people pay for advice and how the regulations need to deal with the reality of behaviour and stop playing the blame game 


These articles also, like this one, have a lot of links to other useful items.


I also wrote an article on the subject of “honest bankers” and how the “we’re all against sin” might work in practice.  Sadly, Mindful Money, the site I wrote it for doesn’t carry my blog now, and they seem to have taken down that post (or maybe I just can’t find it).  So I’ve put it on this site, here.


It would be nice if the regulators, Government and the media would read some or all of the posts – I really think we could make things better in a practical way.







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