Famous UK comedian Jimmy Carr has been embroiled in a recent media scandal.
In June 2012, Carr’s involvement in an alleged K2 tax avoidance scheme came to light after an investigation by The Times newspaper. The scheme is understood to involve UK earners “quitting” their job and signing new employment contracts with offshore shell companies based in the tax haven of Jersey. British Prime Minister David Cameron commented on the issue: “People work hard, they pay their taxes, they save up to go to one of his shows. They buy the tickets. He is taking the money from those tickets and he, as far as I can see, is putting all of that into some very dodgy tax avoiding schemes.” ~ Wikipedia
Carr apologised on his twitter account @jimmycarr. He tweeted, “I now realise I’ve made a terrible error of judgement.” Adding, “I’m no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone…”
The practices of Carr in the UK have become increasingly commonplace. Citizens wishing to legally minimize taxes have been able to defer their income overseas through a legal loophole. This is also something not available to the public but only the financial elite. Simply opening a business bank account in Jersey with the proper legal framework can cost upwards of 7,000 pounds. This does not include the financial advising and the preparation of legal documents to restructure existing contracts which can far exceed the company formation and account acquisition costs.
I met with a financial advisor and he said to me ‘Do you want to pay less tax? It’s totally legal.’ I said ‘Yes.’
It can certainly be seen that Jimmy Carr made an enormous mistake. That he betrayed the country’s trust and acted in a unethical and unfair manner. This, after all, is the picture the major media outlets in the UK have been painting. However, Carr’s actions can be seen in a different light. We all know that there are inequities in the world. If Carr had used his wealth to provide his children with a better education then publicly available, few would take up arms.
This history of tax avoidance in the UK in an interesting one to say the least. One of the more humourous stories came when in 1696 under King William III, a window tax
was placed. It was largely felt that allowing the government to peer into the private financial records of citizens was a huge violation of privacy. However, with sales tax, taxes are not levied unequally. The government wanted to find a way to tax richer citizens more. Instead of looking at personal accounts of citizens, they figured more wealthy individuals would own larger properties and with it, larger windows.
The law was a complete bust. Property owners ended up blocking their windows and the sentiment was that it was a tax on light and air. It lasted for 156 years and was repealed shortly after the introduction of the personal income tax which was introduced in 1842. The personal income tax remained wildly controversial well into the 20th Century.
In the US, during his run for presidency, Congressman Ron Paul repeatedly criticized the personal income tax. In his view, abolishing the personal income tax will solve more problems than it creates. The utilisation of a large workforce is in an unproductive capacity attempting to enforce an untenable system. In his view, agencies like the IRS are paid to do an unnecessary task which wealthy American individuals can loophole around, just like Jimmy Carr did in the UK. A personal income tax which is supposed to benefit the poor and tax the rich can have the opposite effect. Wealthy citizens of the US or UK will take full advantage of their capacity to legally avoid taxes while the poor cannot afford such measures. This will become a reality if it hasn’t already.
According to Carr , “I met with a financial advisor and he said to me ‘Do you want to pay less tax? It’s totally legal.’ I said ‘Yes.’” Carr also noted, “…I’ve been advised the K2 Tax scheme is entirely legal, and has been fully disclosed to HMRC (Her Majesty’s Revenue and Customs)…”
If so many UK citizens are taking advantage of the ability to avoid taxes, why then is Jimmy Carr singled out? One theory could be because of his attitude towards this issue in regards to the banks. Wikipedia states, “Earlier in 2012 Carr had lampooned people who avoid tax during the second series of Channel 4′s satirical news programme 10 O’Clock Live. A sketch from the show, in which he poked fun at the 1 per cent tax rate of Barclays Bank has now ‘come back to haunt him’.”
In the following youtube clip we can see also see another funny bit critical towards the banks.
It is up to the reader which side of the debacle they decide to choose. The relation to bitcoin is that bitcoin is non jurisdictional and free. Banking is a highly regulated industry. This leads to pseudo monopolies, a lack of consumer choice and incredible expenses for things like setting up an overseas account. Instead needing potentially tens of thousands of pounds to retain a portion of your income (making it only logical for those with very high incomes to take advantage) with bitcoin it is entirely free to practice the exact same tax avoidance scheme. By paying employees in bitcoin, one reduces the overhead and evens out the playing field. It is this writer’s feeling that Jimmy Carr was simply taking advantage of something that few citizens can. If Bitcoin levels this playing field, we can all take advantage.