I’m going to say something that might be deemed controversial by some (though hopefully not many) – MPs shouldn’t commit tax evasion! I know, I know, a radical suggestion that those elected to represent the country should be happy to pay the country what they owe in taxes. The news this week that Nadhim Zahawi, current Chair of the Conservative Party and former Chancellor of the Exchequer, has agreed to pay up an amount that he (may have) evaded summing to around £3 million is frankly outrageous. So how should we respond to alleged tax evasion by MPs?
In my view, this is yet another area that needs significant reform. It’s lower down my priority list than some other matters, but this seems like an easy thing to fix, so perhaps it will end up being higher on the agenda.
What Happened?
This story has really blown up in the last month, but it has been brewing for a long time. In essence, Nadhim Zahawi set up YouGov, and information-gathering firm. So far so good.
Where it goes wrong is that he deliberately created this in an offshore vehicle, owned in large part by his parents. While the exact technicalities of this are beyond me and well into the realm of tax professional, the exact structuring has been analysed by Dan Neidle at Tax Policy Associates for several months. Worth a read here. Dan and I definitely don’t see eye to eye on all matters of tax, but on this we are without question united in our rage.
Dan Niedle of Tax Policy Associates, probably Nadhim Zahawi’s worst nightmare at the moment.
Importantly, that’s not where this ends. Zahawi clearly didn’t like this analysis, so he challenged it. Not just by disagreeing with the analysis, but by instructing solicitors Osborne Clarke to essentially threaten legal action against Dan Niedle. Dan being a former partner at a very successful London law firm was not the ideal target for such a threat, and he responded wonderfully. Again, the whole saga is worth a read, but the long and short of it is that Osborne Clarke ended up not pursuing a claim against Dan, and were in turn reported to the Solicitors Regulation Authority for abuse of the legal system.
End Result
So how does this saga end? We have someone allegedly evading taxes of £3 million and only coughing up after months of analysis and questions from a very well-qualified outsider. His agreement to repay the taxes shows clearly that this amount should have been paid in the first place, and as such this looks like evasion rather than avoidance – the latter being legal use of things like ISAs and pensions, which HMRC would have no claim over.
Given this is – apparently – tax evasion by a former Chancellor of the Exchequer and the current Chairman of the Conservative Party, what should we expect to happen?
My prediction is “nothing at all”.
The Conservative Party has displayed very little interest in punishing tax evaders of a certain level of wealth. It seems that once you get above a certain level of wealth, you get carte blanche to behave however you like, with barely even a slap on the wrist if you get caught. In this case, paying back the tax that should have been paid in the first place is nowhere near enough. This is a man who served as the Chancellor and before that called for the tightening of tax loopholes under the former Labour government. He clearly knew exactly what he was doing and chose to deny millions of owed tax to the UK regardless.
Whether you support conservative principles or not, this sort of behaviour should not go unpunished. Zahawi should have to pay back considerably more than the tax he underpaid, and should right now be facing criminal charges to analyse whether his behaviour was egregious enough to warrant jail time.
At the very least, he should no longer be allowed to serve as an MP.
