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Jimmy Carr apologises for tax avoidance but what is Cameron doing?

The comedian has said sorry for his 'terrible error of judgement'. Will the PM do the same? And can we have a proper debate about tax?

 

I’d like to know what is fundamentally different between doing that and using a tax avoidance scheme like Carr and others have done? One is 'disguised remuneration', the other is 'disguised wealth'. 

In attacking Carr Cameron may have opened a can of worms he comes to regret. The people who advise wealthy clients to buy into tax avoidance schemes like K2 are the same sort of advisers who might recommend an offshore fund or two.

The K2 arrangement is said to involve drawing up an employment contract between an offshore company and the wealthy individual. The offshore company pays the individual a low salary but tops this up with ‘loans’ which can be written off against tax.

In other words it is the kind of 'employee benefit trust' that the last Labour government and the coalition government have repeatedly said they wish to target. Employee benefit trusts have been widely used in the City in recent years. As a result I can’t wait for the stories to appear about how many people linked to the prime minister and his government have benefited from these schemes.

Chris Evans on BBC Radio 2 this morning cleverly made the comparison between the Carr controversy and Pastie-gate, for this could be another PR disaster for the PR man turned PM. Like pasties, how do you tell when a tax planning arrangement is ‘hot’ or ‘cold’, ‘dodgy’ or ‘morally ok’?

The HMRC last week published plans for a general anti-abuse rule (GAAR) which will make it much easier for it to close down tax avoidance schemes it doesn’t like. Rather than identifying every conceivable loophole, the HMRC will issue a set of principles against which schemes can be judged.

Some people argue it is no coincidence these stories about celebrities' tax affairs are appearing now, as it softens us up into thinking the GAAR is a good idea. In my opinion GAAR is more good than bad. Yes, it gives the tax authorities a lot more power, and that could cause problems, but the main benefit is it will enable HMRC to escape the silly cat-and-mouse game with accountants and tax experts, some of whom spend far too much time devising ways around tax law.

The principle-based approach to tax has got to be the right one. But we need to work out what the principle is and what it means in practice. I’m not convinced we have a government or a prime minister well placed to lead that debate.

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81 comments so far. Why not have your say?

gggggg hjhjkl;'

Jun 21, 2012 at 17:13

One of the key ingredients of this country is the rule of law. Without this many more people would follow the Greeks and ship yet more of their wealth abroad.

I was always taught that "tax avoidance" was legal and "tax evasion" illegal (as per the existing law) and that morality was a personal thing and had nothing to do with it. I think Cameron has treated Jimmy Carr very unfairly and should apologise for his unjustified behaviour.

The clear ignorance of politicians and in particular this hypocritical prime minister makes one want to weep.

If the government does not like these schemes rather than criticise those using them, for popularist reasons, they should quickly legislate to close them down. However this would not bring the headlines they so like would it.

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fatcat

Jun 21, 2012 at 17:38

good on you Mr Cameron for bringing this tax dodging little twerp to book! More of this from the PM I say

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Keith Simmonds

Jun 21, 2012 at 17:44

There are many celebs who pretend to be 'blokes' with a conscience yet are total hypocrites. Jimmy Carr has completely lost his credibility after satirising Barclays for their actions to avoid tax whilst being a champion offshore dodger. It is worth asking other populist individuals such as Richard Branson and Tony Blair quite why they have to conceal their business activities behind complex and obscure arrangements in remote tax havens.

Similarly, the BBC remain curiously reticent about disclosing the pay of their own celebrities despite the fact that we have to pay the licence fee or face a criminal prosecution. The maxim 'we are all in this together' is hilarious!

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Tripehound

Jun 21, 2012 at 17:48

Sorry fatcat can't agree. If the law allows then so be it. Wicked of Dave to pick on Carr, plenty in his position would do the same and do. Change the law through parliament then it becomes a criminal offence. Leave it and people will go on doing it.

I would concentrate on the corporations that are hiving their profits and tax into Luxembourg, the financial cesspit of Europe. They are bleeding countries like ours by taking our corporation tax.

Luxembourg is also the centre for international fraud by backing institutions like Landsbanki (now in liquidation) who have raised finance through illegal equity release schemes and dragged in unsuspecting pensioners trying to stretch their pensions who are now facing eviciton all over France and Spain.

So come on Dave start helping your fellow citizens not just by restricting tax schemes but also protecting them from fraudulent bankers in Luxembourg.

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Anonymous 1 needed this 'off the record'

Jun 21, 2012 at 17:54

Osborne has a trust fund in the Caymans. I suppose that's alright then.

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RL

Jun 21, 2012 at 17:56

It's only when Jersey etc are closed down as tax havens that we will know the government is serious about tax avoidance.

However the law only goes so far, and there is a covenant that good ctizens pay their fair share of taxes. Those who stand on the legal position are of course quite right legally, but society consists of more than just laws, and there are strong societal or moral obligations that go beyond the law. Unfortunately the concept of service or society is getting lost, with a whole group of people now thinking that if it ain't illegal then they have every right to do it. Well that's plain wrong, and society would break down if everyone took that view.

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Dreckly

Jun 21, 2012 at 17:56

One step nearer to a single flat rate tax ??

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Tripehound

Jun 21, 2012 at 18:07

They can't do a single tax rate, they have to have multiple sources so they can keep increasing each one bit by bit. Keep it at one tax and you would end up paying more than you earn (which I think we do already).

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Derrick G

Jun 21, 2012 at 18:13

There are many situations where something that is legal is not necessarily moral.

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TJL

Jun 21, 2012 at 18:19

If this story 'has legs', as they say, and I think it probably will have, I bet there are SO many people in various high profile positions just dreading being 'outed' when their turns comes (how many investigative journalists do you think are working on this issue right now - a lot of them is my guess).

My humble opinion is, it's not illegal, so what's the problem?

If it should be illegal, the powers that be should make it so.

And, I still think 8 out of 10 Cats is one of the best treats of the week!

Regards

TJL

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Anonymous 2 needed this 'off the record'

Jun 21, 2012 at 18:22

I suspect this individual has been targeted as an investigation would have a successful outcome to HMRC, as well as some PR 'heat', and a message 'pour encourager les autres.' In other words a safe shot.

I look forward to hearing moral statements from large corporations of interest to HMRC. Could take a while.

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Mike_B

Jun 21, 2012 at 18:29

I lived in Switzerland in the 1970's, and every year the Swiss Government published the tax payments from every Swiss citizen. Why not have similar transparency in the UK?

This would probably more effective than any amount of tax legislation.

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Lucky me

Jun 21, 2012 at 18:40

Now that Cameron has chosen to open this particular can of worms perhaps he could ask some of his cabinet chums and associates where they have squirrelled away their nuts?

This sort of avoidance is common amongst footballers so why didn't he name a few of them too? It's always been the same, the have nots contribute the most and the haves hang on to what they have. Cameron is a disgrace and if he has any credibility should push for closing these loopholes for good. Of course this will never happen even though we are all in it together.

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Punter in the Park

Jun 21, 2012 at 18:55

Jimmy Carr disappoints me not for what he has done but for folding so easily follwing Cameron's comment: As already stated "Avoidance is legal" so he should not feel he has done wrong and certainly nothing illegal. He and anyone else should stand firm against such bullying. Tell Cameron and his millionaire cronies "If you don't like tax avoidance change the law."

As for public opinion we know the general flock are only driven by jelousy so they should certainly be ignored.

I would love to know what the uber-rich Cameron family have done to protect their wealth.

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Stephen Griffiths

Jun 21, 2012 at 19:02

Total hypocrisy. Like TJL points out...it's not illegal. Cameron is in government after all so could shut all the loopholes any time he likes. I wonder why after several years in government in a time of dire financial crisis when the government needs all the tax it can get its hands on...he hasn't shut these loopholes? Could it possibly be the company he keeps. Snuggling up to the likes of the Murdochs and Lord Goldsmith. This government reeks!

Definitely time to unleash the dogs of investigative journalism. Expenses scandal round two? Full transparency please!

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Neil M2

Jun 21, 2012 at 19:05

Schemes such as Carr's are not without risk. For example if HMRC retrospectively decided it IS tax evasion there is a chance he will lose all his money. Or if the company that loaned him the money decides they do want the loan to be repaid (why shouldn't they?)

So the major disincentive for people using these schemes is that the risks are huge and not something the vast majority of people would be prepared to take on.

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Anonymous 3 needed this 'off the record'

Jun 21, 2012 at 19:07

Picking on one individual - who has done nothing illegal - is the act of a bully. Cameron is the one whose judgement is most at fault.

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Tripehound

Jun 21, 2012 at 19:08

Hear Hear Stephen that is exactly what we need and they can start by looking at Luxembourg, the safe haven for all illicit cash and home to the biggest money launderers in the world.

You would be amazed what is waiting to be uncovered there

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TJL

Jun 21, 2012 at 19:13

BREAKING NEWS !

News agencies are receiving reports that Gary Barlow is now hiding in the Ecuadorian Embassy seeking financial asylum!

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Robin Cregeen

Jun 21, 2012 at 19:14

if cameron really beleives that what carr did was wrong, he should change tax laws. it is totally unfair to pick on one individual when most people try and minimise tax by tax avoidance, but not tax evasion. cameron was playing to the gallery> Rather sad that a PM feels he need to do that

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tank

Jun 21, 2012 at 19:34

what i find most irritating about this sort of planning is that most of the schemes don't work and when HMRC do challenge them in court they almost always win leaving the punters well out of pocket after their costs. Problem is that HMRC dont have the resource to challenge enough of them . Carr being self employed is better placed than many to do this sort of stuff but generally where a UK person contracts with an offshore entity with the result that the offshore entity accumulates income that would otherwise arise to the individual it is caught and Carr would be unlikely to win if litigated. The fact is that the tax rules are a lot tighter than the current press would suggest and the punters of these schemes massively understate the risks to their wealthy client base. I don't mind people avoiding tax where the schemes really work but most of these don't and HMRC should take them on. Of course the super rich will always avoid tax because like Philip Greens wife they make sure that they are not resident in high tax jurisdictions.

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William Bishop

Jun 21, 2012 at 19:57

It would have been better for Cameron to have resisted the temptation to name and shame a particular individual. But I would not for one moment have accepted the Guardian view about his late father's investing through offshore funds. Providin that these were declared to the UK tax authorities, they would have come under a pretty rigorous set of tax rules.

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mark jukes

Jun 21, 2012 at 20:25

Alan Carr has not broken the law he has simply done what all of us, who are not on PAYE do every time we fill in our tax returns - Avoid paying as much tax as possible. Okay he has a lot more to lose to the taxman so he has used a loophole that most of us couldn't use.

But he has done nothing that anybody else in his position would not have done.

The problem is not the way we all avoid tax but the fact that we are able to so in the first place - is HMRC run by a bunch of complete morons? (think I already know the answer to that!)

The government and HMRC need to get their acts together - not pick on an innocent man.

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landlord 88

Jun 21, 2012 at 20:25

Good on you Mr Carr.

There was absolutely nothing wrong with what you did to avoid paying more than you have to in the first place. And apologising so as not to hurt your career is also the smart move.

What is morally wrong is those who knowingly disobey the law - however much they may disagree with it.

What is morally wrong is those in position of power criticising others who obey the law they themselves have set up.

What is morally wrong is those who shop around for the cheapest deals and criticise others for doing the same.

What is morally wrong is those lazy bums who think others should pay more than them for the same privilege of living in this country.

What is morally wrong is the government that spends money like it is out of fashion because it is not theirs.

Mr Carr : Just keep your head down, apologise to shut up the hypocrites and get on with your life.

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mark jukes

Jun 21, 2012 at 20:27

TJL

I think you are right the papers are going to be full of this kind of thing over the coming months

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Raymond Randalle

Jun 21, 2012 at 20:41

I do not think Cameron dares look too closely at what goes on in Luxembourg even if it is like a Banana Republic and is costing Britain an arm and 2 legs.

I think the corruption has penetrated every echelon of the establishment, that the corrupt in Britain take full advantage and that the elderly pensioners who have fallen victim to the fraud and scams of Luxembourg bred Equity Release scandals will not be protected by The Eton Club.

I think Cameron cares little about the elderly pensioners who have financed Luxembourg failed banks!

Jersey is a kindergarten by

Comparison and they are not known for torturing and abusing the elderly.

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EARLY BIRD

Jun 21, 2012 at 20:50

i find some of the comments here SO depressing. . What Carr was doing is not illegal so no one should complain, except that the law may need changing. But of course the problem lies at the door of the level of tax- reduce the tax rates and more tax will be collected ! I propose a full debate about how much tax an UK Govt is allowed to collect. It's about time the electorate said enough is enough - presently far too much - politicians seem to think they can take as much as they like and are always looking for ways to raise more. It's time the people said " x % overall, not a penny more and manage the country on this. If you can't, then make way for someone else ". I think this debate has to start with Income Tax, Company taxes,National Insurance and then move onto all the others like VAT , Inheritance Tax, fuel tax, pasty tax etc. I've voted Conservative all my life, I am beginning to wonder when a truly Conservative Govt will return, and don't blame everything on the Coalition- Cameron are you a Conservative or a conservative? Worse still a rich socialist? . We know the present answer, you'd better wake up soon,-we don't like what your doing or what you seem to believe in.

Harness the people, they will work their socks off if you don't take all their reward in tax! .

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Sinic

Jun 21, 2012 at 20:51

Provided a tax payer pays the tax that the law demands he has fulfilled his legal obligations. There is no law that defines our moral obligations and I would certainly ignore any moral judgement from the whining masses many of whom pay insignificant amounts of tax anyway. If you want people to pay more tax then change the law, close the loopholes and be prepared for large tax paying companies and individuals to relocate to more benign tax regimes, but don't condemn those who refuse to pay tax more than they are obliged to.

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Anonymous 4 needed this 'off the record'

Jun 21, 2012 at 21:00

Tax avoidance is legal everyone is supposed to do as much of it as they can!

Tax evasion is illegal!

Taking payment for services provided on an 'hourly' basis, while billing through a company you substantially own, or control has been declared to be (under IR35) working as an employee - (to the annoyance of many IT contractors), so why is there so little publicity for the people the government is paying that way so they can not declare the payments as earnings, and take the cash as dividends some paid to spouses avoiding 40% income tax, and both employee and employer NI.

Tax avoidance -

Well owe the VAT man, and the tax man, and the banks, and your customers - go bankrupt and avoid paying them.

Defraud pensioners of the odd hundred millions of pounds, and go to prision for a year - open prision that is, so you can go home weekends and start up another couple of business ventures.

Claim from the public purse for buying and running a 'home' in London, and get to keep the place after 4 years, with a nice pension to help with the costs of keeping it as a rent-out, or just use the golden goodbye to do it up and sell it for a tax-free? profit.

Me, I'd like to see the press actually push this as well, or perhaps better than they pushed the earlier MP's expenses scandle.

How many people are paid by the government for activities that come under IR35.

How many people associated with the government have income that they are not paying PAYE tax on - and that includes the cost of accomodation and/or travel to and from their place of work?

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Hotrod

Jun 21, 2012 at 21:24

I have been listening to what Sir Michael Darrington has to say about directors pay. I think it is part and parcel of the same problem, and is pertinent to the debate about tax avoidance.

It comes down to a question of culture. Animal Farm come to mind, where everyone is equal but some people are more equal than others.

Sir Mike pointed out that if the rich get richer, and the poor get poorer, UK will end up as a banana republic.

One man's meat is another man's poison. i.e. One man's tax avoidance is another man's deprivation. The money has to come from somewhere if bills are to be paid.

I think HMRC and the Govt. have been working hard , but the problem has been that as soon as they close one loophole, some rotten bast**d thinks of another one.

The only way to control these abuses is to agressively expose exactly what has been going on. It's money laundering by a bunch of greedy pigs.

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Westwinds3

Jun 21, 2012 at 21:31

The Scottish Parliament never had the same problem as Westminster over MSPs' expenses. This was because all their claims were published on the web. The test became not whether a claim was legal, but whether the MSP would wish their constituents to see what they were claiming. Simple and remarkably effective. Perhaps something similar would work, particularly for celebrities. Margaret Thatcher famously said there is no such thing as society. She was wrong, even chimpanzees have society. When the super rich set up arrangements to pay far less than most of society would consider their share, then at least they should have to look us in the eye.

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Jonathan

Jun 21, 2012 at 21:53

Avoidance is legal and legitimate after all we are encouraged to put money in ISAs. Evasion is what is illegal

But there is now a new term "aggressive avoidance" it is not at all clear where the line would be drawn with this.

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Smithy

Jun 21, 2012 at 22:48

Tax law defines (sometimes rather imprecisely) what is allowed and what is not allowed, setting the boundary between the legal and the illegal. This attempts to set a clear and unambiguous boundary. However, how can one define a ‘moral’ boundary? What is moral to one person is immoral to another. This is just a huge grey area.

Cameron was wrong to single out any individual and then judge them on ‘moral’ grounds. He should apologise. If he was going to pick on an individual, perhaps he should have singled out Sir Philip Green who paid his wife £1.2bn in dividends (she lives in Monaco) and none to himself, thereby completely avoiding tax. Carr probably avoided less than 1% of what Green has. Perhaps Jimmy Carr wasn’t one of Cameron’s chums?

Rather Cameron should take the real culprits to task – HMRC. The tax laws were out of date, inefficient and ineffective decades ago, long before Brown/Balls came in and further complicated the whole mess. Get these straightened out, streamlined and unambiguous. Make them effective and efficient again. He promised this before he was elected – done precious little to this effect since then. Another vacuous politician?

So Jimmy, now that you have regained some of the ‘moral high ground’, it’s time to start hitting back. Figure out how much tax you avoided and go public stating that you will now not pay this as tax (where it will be largely wasted in the inefficient public sector machine), but rather donate it to charities of your choice where it can be put to better use. Then do some research on Cameron and his chums. Every time you lampoon (harpoon?) a politician or a chum of tax avoidance or dubious financial practices, you can tell your audience that the laughs they have all enjoyed at the expense of Cameron, Osborne or whoever you have targeted, has just earned Charity X another £5000.

Money well-spent, I’d say. And Cameron would be a little more circumspect about bullying others in future.

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invsb

Jun 21, 2012 at 23:03

Parts of the article and some of the comments seem to me to give the impression that David Cameron went out and made a public statement on this whereas from what I've read I believe he was simply answering a question specifically about Jimmy Carr and the scheme.

I tend to agree with the PM, but I'm not defending his or his colleagues own tax position, just his opinion on this scheme. Tax planning is OK - ISAs etc - as the cost of this has been assessed as part of the budget process. My understanding of this avoidance scheme is that it's being used by people it wasn't intended for by the law. This leads to HMRC getting the schemes closed.

If we all avoided tax using such schemes there would be little money left for public services. It would not be good if we had a system where people who can afford expensive tax specialists pay less tax than those who can't.

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ray silvester

Jun 22, 2012 at 08:20

It's a joke.

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ray silvester

Jun 22, 2012 at 08:23

Someone suggested Carr donates the tax saved to charity. Really?

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Simon W

Jun 22, 2012 at 08:53

Oh, the oppobrium we saw on these and other pages about politicians and their expenses! Let's be clear on this issue. Tax evasion is so bad it's illegal. Tax avoidance, however, (only available to people who have enough money to afford it), is absolutely fine as long as you don't do it in front of the children. It's not banned so it's allowed. 1 Timothy 6:10.

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ray silvester

Jun 22, 2012 at 09:07

Evade: To escape or avoid

Avoid: To escape or avoid

I always thought that a scheme or arrangement specifically designed to avoid tax and nothing else was void. Or should be.

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Jonathan

Jun 22, 2012 at 09:21

ray silvester

What about putting your money into an ISA to avoid paying tax on the interest. Do you think they should be void?

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Tortoise

Jun 22, 2012 at 09:55

When you start talking about morality in tax you are moving into very sticky ground. Is it right that someone should pay more through higher taxes for their healthcare just because they earn more, yet pay the same as everyone else for their bag of groceries? After all, we all need healthcare and we all need to eat. I do not know the answer to that. A sensible debate on taxes is what we need, as there are some serious fundamental flaws in our tax system. As for tax avoidance, the real culprits here are governments who pass legislation allowing people to juggle their affairs to reduce their tax bill. When are we going to get a halfway decent tax accountant as chancellor instead of, what usualyy happens, the PMs best mate?

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Tripehound

Jun 22, 2012 at 10:12

Put enormous pressure on tax havens such as Luxembourg, probably the biggest, and force them out of business. After all there is so much evidence of corruption over there.

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Jonathan

Jun 22, 2012 at 10:36

I noticed that Jimmy used the offshore tax haven of Jersey. If you look on the map Jersey is nearer France than it is to England. The only reason these British colonies are tax free havens is as a sweetener or bribe to keep them from changing nationality. This is something that really needs to be rethought. Is it right for the government to bribe these places by making them tax free?

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Pat

Jun 22, 2012 at 11:12

I like Dreckley's comment.

However, my sentiment is that the whole espisode is psychologically engineered - to avoid further uproar as generated by the 45p tax and to pave the way to tax cuts in time for election in 2 years' time

- pick on someone who has no chance of global spread (unlike Benny Hill and Mr. Bean, Carr's gaffes are only vocal and localised) - fear of name and shame bring the foes and freiends alike to 'morally correct' tax arena - lower the taxes

Michael Portillo seemed to appreciate the stroke of artistry in last night's Andrew Neil's 'This Week'.

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john_r

Jun 22, 2012 at 11:19

The blame for Jimmy Carr's actions does not belong to Cameron, nor to Jersey, nor to Philip Green. Quite simply the blame for Jimmy Carrs actions belongs to Jimmy Carr.

Cameron is right to give his opinion on these questionable practices which I personally agree with.

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Raymond Randalle

Jun 22, 2012 at 11:38

How much does Cameron have tangled up in the Luxembourg frauds which they are trying to keep under wraps?

Is it an accident that the SFO Serious Fraud Office has a record of Botch up and Leggit?

The SFO botches up the inquiries into fraud and abuse as well as breaching EU consumer laws in order that the Banksters and friends can Leg it!

How can this be just an accident?

Look to Luxembourg and you will find a sewer.

The xxxx is about to hit the fan and we will be able to see those who have covered up Europe's biggest and most costly frauds.

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Hotrod

Jun 22, 2012 at 12:00

@Jonathan

I would disagree with your prognostication regarding Jersey.

Jersey is an autonomous self-governing state, which makes its own laws and imposes its own taxes. Depositing money there may appear to be tax-free but it's not. The rub comes when you try to repatriate the deposits. Spending large amounts of cash on the Island is not that easy either. You cannot buy real eatate with it unless you can prove you have indigenous hereditary ancestors.

At the outbreak of the second world war, Churchhill declared that Britain would not defend the Channel Islands because as far he was concerned they were of no strategic importance. The high commissioner subsequently left, leaving the Germans a free passage to simply walk in and take control.

When the war ended, the inhabitants had a choice, and could have been uncooperative and prevented Britain from making any territorial claim, but they chose to continue being a soveriegn dependancy. Why? God only knows. Any self-respecting society would have given Churchill the "V" sign and aligned themselves with Brittany and France, but there it is. It's something of a conundrum.

Tax avoidance is nothing new; the "Window" tax was introduced in 1696 and prevailed for 156 years. Basically it was a fair way of calculating tax as there were exemptions for the poorest, and discounts for the moderately well off. But it was the same old story: The rich refused to pay, and simply bricked up some of their windows.

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ray silvester

Jun 22, 2012 at 12:01

Jonathan, ISAs were introduced by the government. And EIS, SIPP, etc.

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Jonathan

Jun 22, 2012 at 12:16

hotrod, if "The rub comes when you try to repatriate the deposits". Why would Jimmy Carr have put his money there?

ray silvester, yes, I know, I was trying to point out that avoidance is acceptable. Where you do you draw the line though to define aggressive avoidance? Not a simple question to answer.

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Graham Barlow

Jun 22, 2012 at 12:42

What is Cameron doing? He is having lots of fun playing at being Prime Minister.

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Hotrod

Jun 22, 2012 at 13:03

@Jonathan

That's the big question. In the past people have been able to salt money away in anonymous numbered accounts, making traceability by HMRC virtually impossible. Because of international money laundering agreements that practice is becoming harder to hide.

The fact remains that moneys earned in the British Isles are liable to British income tax, but moneys used by a company to repay a loan are deductable before tax is calculated. As long as his money stays in Jersey JC is safe but when he tries to repay himself with it. HMRC is going to ask. "Where did you get this money from? We understood that you didn't have any, and that most of your income was being used to pay off a loan.

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Anonymous 4 needed this 'off the record'

Jun 22, 2012 at 14:49

I suspect the process HMRC accept is:

Money earned by person for foriegn company is 'that companies'

When that money is made 'available' to the person, that person accrues a tax liability @ 40% (No taper relief - it was removed from such processes - retrospectively) about a decade ago.

A bank loans person an amount appropriate to money in a deposit account that will accrue compound interest @ BOE rates.

The loan to the person accrues interest at slightly over BOE rates

(The difference between the loan and the deposits matching the difference in the interest paid/charged)

So foriegn company paid £100, person gets paid (paye) £10, £80 to deposit account, £10 taken by 'structure management'

Now - person defaults on the loan -

Lender takes money from deposit account in recompense (it was used as surety)

Lender is happy they got their money back

arranger got their cut

person paid tax and NI on mimimum amount to qualify for benefits etc.

No tax due on the loan, so HMRC gets to keep the NI and PAYE paid on the £10 and gets no cut of the £80

ALL legal

The person could have accrued other debts - possibly using the deposit as an indication of their future net worth, become bankrupt just to be sure that HMRS and others are getting nout.

but remember - put your money in the right sort of organisation, and government tax incentives such as for startup means you'll only pay 10% anyhow!

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Jonathan

Jun 22, 2012 at 15:11

He probably also buys his fast expensive cars from a disabled driver who has put a knob on the steering wheel to avoid paying any VAT then fills the tank up with CAP subsidized vegetable oil.

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Jeremy Fryman

Jun 22, 2012 at 16:06

Hooray for HMRC they were embraced by the Rednap debacle but perhaps they will have another go a all the 'premiershit' dodgers. That IS their job. I pick up the tab for someones avoidance and all the cries of 'it's legal' and who would not does not disguise the fact that it is an immoral and selfish act.

Maybe we should look at Greece's status if we all decide not to pay our dues.

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Graham Barlow

Jun 22, 2012 at 17:58

It is immoral for a Government to charge 20% VAT on nearly all purchases, but is anyone saying so except me? Their are many thousands of businesses in Britain where the Government is taking out more in VAT than their gross take, let alone emplyment tax (NI) ,plus a large slice of any profit you may have left. In other words you work for the Government ,not for your shareholders anymore. That has gone out of the window with the likes of Cable ,Osborne ,plus the previous lot of avaricious wasteful Politicians we breed in Britain. No wonder jobs are becoming evermore difficult to find. Who would run the risk as a small company to take on staff without examining minutely if you can get by without them. Legal tax avoidance is a result of gross over taxation. You could not run a shipping line unless you were in a tax haven, you just could not compete internationally.. I would go further to say that Britain has not got a level playing field with the rest of Europe. How can it be moral for a FTSE company to relocate to Dublin just to get a substantial reduction in Corporation Tax? No the whole Tax situation is rotten to the core with Politicians trying to pick of Tax avoiders to make out they are really doing something when in reality they haven't got a clue.

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invsb

Jun 22, 2012 at 20:41

Graham - it's just you.

The simple difference between ISAs and tax avoidance which isn't acceptable is that the government has budgeted money for you to use ISAs in the way they were intended. Unacceptable tax avoidance is where you use a loophole or scheme not in the way it was planned by the legislators.

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Graham Barlow

Jun 22, 2012 at 23:19

Invsb. I posted the question rhetorically. In reality I know that I am not alone, but my view is also very very widely held throughout Britain. Most small to medium size firms will tell you that it is doubtful if they would have ever started in business if they had known it was to be like it is to-day. In fact one told me that it would be impossible to make a start like he did under Mrs Thatcher to-day , as Britain has become the land of the official busibody , not only totally unproductive,but also a counter to growth. In regard to VAT it is not only a disincentive to buy, but also a major overhead to be finaced whilst unpaid collection is carried out. It slows down payment except for HMRC who will hang you out to dry if you haven't paid on time whether you have received it or not. Clearly you know very little about trying to run a business. I wouldn't recommend you try frankly.

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banjofred

Jun 23, 2012 at 09:00

This is all so funny. What turds these posh lads are. Thank Gawd they are not sending us to war as they would have no clue.

Oh hang on they have got us in a war, and will probably seek one or two more soon.

A bit of a maxim here - just because somebody talks posh doestn mean they have any brain cells at all. In the same way just because someone is a devious Scotch pretned Presbyterian doesnt mean he will be "prudent" with our cash and gold.

My theory stands true - most of us live our lives; some try for power and control and try to makes our lives miserable. Some go into Government or teaching to get the "respect" of society, but in fact its the proper workers who should have the respect.

I voted for that blue suit (like an idiot), to escape the cheating scheming lying labour lot, but things get no better.

Never mind eventually we all get older and dont worry about these kids playing games.

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invsb

Jun 23, 2012 at 09:31

Graham - your belief that you can analyse my business skills from a 5 word comment is truly amazing. :-) I was just stating that no-one else was stating that charging 20% VAT is immoral. It may be bad politics or economics, but it's not in my opinion immoral and I've not heard anyone else say it is...hence the comment. And they don't charge it on 'nearly all purchases'. A large part of my budget goes on energy and food - no 20% VAT.

In any case, the main reason for my short comment was that you had gone off the subject of the article somewhat.

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Anonymous 2 needed this 'off the record'

Jun 23, 2012 at 10:17

Like some of you I voted Conservative with better hopes for our great country. Then Eric Pickles showed up and decimated the public sector (don't recall that being in the manifesto). So many services for the vulnerable disappeared in the blink of an eye. Immoral is one word that could be fairly applied here.

I am not sure that HMG have realised that if you throw lots of people out of work who have nothing whatsoever to do with a banking crisis then everyone will draw in their horns and not spend as much. Equally if their earnings are now pear shaped they won't be able to pay as much tax either. Most PAYE tax affairs are quite transparent and indeed most low/medium earnings self employed are also straightforward. The result of this social experiment to reduce 'the deficit' is that HMG and HMRC now have a significant shortfall so celebrities, and anyone with a complicated tax arrangement is now of significant interest.

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Sinic

Jun 23, 2012 at 14:38

Anonymous 2 you surely didn't expect the Conservatives even with the dead weight of the LibDems in tow to continue to fuel Labour's unsustainable social gravy train financed by borrowings? Surely you noticed a clue or two that they might just try and introduce a smidgeon of economic control and fiscal responsibility? Now, after just 2 years the reality is just beginning to take effect and all the 'big girls blouses' start to bleat that austerity isn't working! We gave Labour's economic lunacy 13 years before we called a halt to unproductive profligacy. Heaven save is from prevaricators and vacillators!

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gggggg hjhjkl;'

Jun 23, 2012 at 17:23

It does occur to me that in attemping to "avoid" tax these indivduals are laying themselves open to major scams.

After all if I propose a tax avoidance scheme to you (particularly one abroad), for millions of pounds, which you accept and then run off with your money, you are hardly able to complain or seek redress.

I am suprised it ha not already happened, or has it!!!!

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Tripehound

Jun 23, 2012 at 19:11

Now that is a very interesting blog from g hj it is already happening in our midst. You have to look no further than LUXEMBOURG the centre of all financial scams where it appears the judiciary backs the fraudsters. They will happily take your hard earned dosh, tie you into some sort of loan arrangement then when the ink is dry change the goal posts and foreclose on your house.

Guess what you can't raise the money to repay, they repossess your house. You loose they win.

So if by any chance you are looking for a tax haven, don't they should all come with a heath warning eg. "Luxembourg could seriously damage your wealth"

Particular bank in question "LANDSBANKI LU IN ADMINISTRATION."

As they say let the buyer beware and don't say I did not warn you, I know !!!

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Sinic

Jun 23, 2012 at 23:20

Tripehound, you speak as one with a personal axe to grind! If a debtor has failed to take the right legal advice on a contract which allows the goalposts to be moved then more fool him.

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Raymond Randalle

Jun 24, 2012 at 08:16

Sinic, you are sounding more and more like someone who works through Luxembourg! This is a Bankster haven which moves their laws to fit their goalposts.

Luxembourg creates debtors to finance Banksters.

Areyou really applauding this corrupt heart of Europe which is quietly doing untold damage to European economic recovery whilst promoting and covering up FRAUD on a massive scale?

Luxembourg may be helping you to move legal goalposts, but it is not helping the rest of Europe!

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Raymond Randalle

Jun 24, 2012 at 08:16

Sinic, you are sounding more and more like someone who works through Luxembourg! This is a Bankster haven which moves their laws to fit their goalposts.

Luxembourg creates debtors to finance Banksters.

Areyou really applauding this corrupt heart of Europe which is quietly doing untold damage to European economic recovery whilst promoting and covering up FRAUD on a massive scale?

Luxembourg may be helping you to move legal goalposts, but it is not helping the rest of Europe!

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Tripehound

Jun 24, 2012 at 08:30

Thank you Raymond, you have hit the nail on the head. When you sign a contract you do so respecting the laws that it is defined by.

When the laws are then changed to suit the authority and not the contract then you are in a no win situation. Luxembourg does that, it adapts the laws to suit the case in question.

And yes I do have an axe to grind, and so do 400 others caught in the same fraudulent scam.

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Hotrod

Jun 24, 2012 at 09:36

I have been reading an interview with Jimmy Carr's astranged father; published in the Daily Mail. It gives a revealing insight into JC's psychological background.

Jim (senior) is an accountant by profession and has warned his son to steer clear of such schemes in the past, but his advice has fallen on deaf ears. It would appear to me that success as a commedian comes at the price of logical thought, and one's basic instinct of recognising danger is impinged.

The FT has another take on the subject: They report that HMRC is working to close down K2 and similar schemes. It would appear that subscribers to the trust fund are "seconded" to the company as employees, thus making the loans legal, but HMRC is working to establish that this arrangement is fictional, and that the subscriber is in fact self-employed.

I am beginning to understand just who is the puppet and who pulls the strings. As long as Jimmy boy keeps accepting the loans, the trustees of K2 can keep milking him for more dosh.

JC says he has terminated the arrangement. Maybe he has, but in that case, my guess is, that he has said bye bye to his £3.3 million.

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Tripehound

Jun 24, 2012 at 10:04

Yes the big question is Hotrod who controls the money ? I have learnt the hard way that to give that power to someone else invites trouble. When it's not their money they will take the most extraordinary risks. The whole scheme sounds very Ponsi to me.

The article in The Mail is good gossip but a bit too sensational for me. Why drag in the family ? Bit too much like Jeremy Kyle ( whoever he is because of course I never watch him !)

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Anonymous 4 needed this 'off the record'

Jun 24, 2012 at 10:51

Tripehound,

Hotrod,

gg-hj

Have you read my post of 14:49 on the 22nd?

The money you earn goes into a deposit account.

You get a 'loan' of most of that into your account.

The deposit can only be withdrawn with your agreement, or if you default on the loan.

Yes the administartors can run-off with your latest payment.

Yes they get a cut of your earnings.

Heck, your agent can do that, or those you worked for can not pay you and go 'bankrupt', get 'wound-up' or into liquidation!

The incentive to enter such a process is that HMG wants more than half of your earnings.

Such techniques used to be for the 'big-boys' such as those who pump millions into political funds, but as the revenue has reduced reasonable options for the lower earners (down to even less than £50,000 a year) they have been incentivised to pay the costs, and take the risks of such schemes.

Note the failure to apply IR35 to those government consultants who get paid via a company for hourly billed services to the conservative government.

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Raymond Randalle

Jun 24, 2012 at 11:02

Well if you don't like Ponzi schemes then stay clear of Banks harbouring their Ponzi's in Luxembourg Tripehound!

I did read the ongoing amazing blog on ICELOG linked on here and I must say it does sound like Ponziland!

However the thing that is the most useful material for a comedian, is surely that Luxembourg of all places is asking for the TAX RETURNS of the old pensioners rental income which Luxembourg has seized!

Now that is like a 'Carry On ' show in the financial world! I am sure that my banker friends do not want to be applauding this sort of low financial cunning.

There are limits, Sinic, to what one can shrug a shoulder at and simply say

" More fool him".

Old pensioners are easy targets for such Ponzi schemes in such Ponzi countries aren't they?

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Hotrod

Jun 24, 2012 at 12:21

@Anonymous 4

My take is slightly different from yours.

As I understand it, K2 is not a holder of a deposit account. It is in fact a Trust Fund which is bound by terms and conditions set by the trustees.

JC announced that he would no longer contribute to the fund or accept loans from it: Forthwith.

What will this mean, in terms of winding up his connection with the scheme?

(1) He will ask for his deposit (£3.3m) to be returned. (transferred to a UK bank) but the trustees will probably say: By terminating the contract without warning you have breeched the terms & conditions, therefore we want compensation.

(2) When the remaining deposit lands in JC's UK bank account, HMRC is going to say: How did you acquire this money? Answer: From earnings. Was income tax paid on these earnings. Answer: It was originally, but some of it has been rolling over into a circular loan/repayment scheme. HMRC with then make a calculation as to how much of the lump sum they think is retrospectively taxable.

(3) The accountants are going to have a field day, because before tax returns can be filed, there will be an awful lot of argument and cross-examination. (for which they will expect to be paid)

(4) What will JC have left at the end of the day?

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Anonymous 4 needed this 'off the record'

Jun 24, 2012 at 13:48

Hotrod,

Accepting I am not familiar with the exact workings of the K2 money handling/manipulation process, but I believe the general technique is the same, just avoiding the bit that (10 years ago) was getting taper relief until Brown retrospectively removed that relief from the set class of investments.

However, as a loan equivalent to the bulk of the 'income' will already have been received, I suspect Mr Carr (et al) is unlikely to note a massive dissapearance of his earnings, and still have to repay the loan.I suspect that, to avoid the money coming into the UK, and 40%+ going to HMG, he will default on the loan, and HMG will get nout.

If the process is similar to the one I looked at (over 10 years ago) HMG were likely to get 10 to 15% of the gross as the money returned from the trust and was used to pay off the loan, with Mr Carr possibly collecting about 5% as taxable capital gains depending on the interest rate and excess kept over the loan amounts made to Mr Carr.

Then again, that would depend on the setup of the trust etc - If I remember correctly, a larger startup fee could add more UK tax avoidance.

I suspect the basic process will be as I indicated - default on the loan, and lose all the trust money, with it never coming under the UK tax authorities.

So -

Mr Carr loses - perhaps 5% of the earnijgs

The Taxman loses 10% to15%

The 'money managers' get the extra 15 %

Congratulations Mr Camaron - your lip movements probably just cost HMG (Yes - that will be us taxpayers and voters) nearly half a million £.

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Sinic

Jun 24, 2012 at 14:19

RR, I accept that there are limits as to what you can shrug off and if rather wild and emotional generalisations are backed up with some evidence I would be less likely to dismiss it with a 'more fool you'. Nevertheless in my experience few people admit to losing their money through their own lack of diligence and sense or through greed outweighing caution, preferring to blame it on the disreputable or dishonest activities of the other party. Caveat emptor!

You betray your own partiality with terms such as 'bankster'. There are many competent, honest, ethical investment bankers in the world including I dare say a number in Luxembourg.

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Raymond Randalle

Jun 24, 2012 at 16:46

I think there is sufficient evidence of fraud and examples of wreckless banking in Luxembourg Banks with few bankers admitting that their Banks went into bankruptcy through their own lack of diligence and sense or through immense greed outweighing caution, nor accepting the obvious fact that the banks went down due to their disreputable and dishonest activities.

My son is a banker in New York and most of my friends are in some way or other associated with bankers, mostly in London and they are amongst the competent, ethical, responsable bankers you refer to.

I do not believe any one of them refers to the bankers who are part of schemes based in Luxembourg in order to defraud elderly pensioners by taking their life savings as anything other than 'BANKSTERS'. In fact we are ashamed to even consider them in the same profession.

Your loyalty to Luxembourg does not prevent you from looking into what the SFO's of several countries are doing as they raid Luxembourg bankrupted banks' offices and to look into some of the scams that have their roots there.

There is a list of banks who have had the same type of elderly pensioner scam set up there as the special laws there protect the Banksters.

Research and you might surprise yourself and start understanding the meaning of the word 'Bankster' and why it is being so widely used!

Did you see the film ' INSIDE JOB'?

You will learn the meaning of the word you fear.'

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MyTwoPenneth(Net_of_Tax)

Jun 25, 2012 at 10:30

Our Prime Minister takes a break from his audience with President Obama to lampoon the financial planning of one individual?? Well done David, priorities?

If I were to go to see Jimmy Carr at a theatre, or purchase one of his DVDs, the money with which I purchased the ticket would have twice visited the HMRC coffers. Initially from my taxable income and then another fly-past in the form of VAT.

His performances or DVD production generates income (and therefore tax) from another group of individuals – all of which finds its way to the treasury…… Perhaps the media (and Mr Cameron) should direct their resentment to other more deserving areas of tax “avoidance”!

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Graham Barlow

Jun 25, 2012 at 11:19

If you examine the welfare benefits in Britain , and assume an average family is drawing down the full panoply, as the husband and wife do not work, and then add to that the cost to the state(Tax payer) the free education their children enjoy plus all the extras they can claim from free Council Tax and Housing benefit, you will quickly come to the conclusion it does not pay to have middleclass standards . Thriftyness, honesty hardwork, and having independant views which cost money ,like private education do not go hand in hand with paying 40%/50% Tax and NI at 11%. The welfare family if you add back the tax paid by a middleclass hard worker then you will find that the standard of living is higher by doing absolutely nothing. This is why we now have a thriving international industry in TAX AVOIDANCE, It used to be restricted to commerce who couldnt exist under socialist corporation Tax at 52%, and so they avoided it to survive. It is no good Cameron /Clegg being mealy mouthed about this and talking with a forked tongue. You have to tackle the matter at its root. The Socialist structure of the Welfare state which they have inherited is the sure way to bankcruptcy and state failure, and until they stand up and say exactly that Britain will continue down the slippery slope.

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RL

Jun 25, 2012 at 11:24

If avoidance is a problem, what's the problem with highlighting the issue.

If avoidance is not a problem, then what's the fuss about.

The fact there is a fuss shows that there is a problem and it's quite right that moral pressure is applied and even seems to work (even though some seem to think it's not a moral issue)!

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Raymond Randalle

Jun 26, 2012 at 08:37

I agree with Graham Barlow 100%! Nothing to add to it except that the elderly must be protected and be treated with respect, which is a major problem in the

U K. This is more than a question of finance. It is a question of culture.

We have to change things at their roots, as you rightly say.

Cameron and Clegg tread on eggs around all the controversial issues which must change in Britain after Labour's circus performance and illegal unwinnable wars Britain could I'll afford and did not want to wage.

Cameron lacks guts and Clegg lacks courage.

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Tripehound

Jun 26, 2012 at 09:58

http://www.youtube.com/watch?v=TN_1mF-3JTI

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Tripehound

Jun 26, 2012 at 09:59

Sorry meant to comment as well. Nigel Farage tells it straight on the above clip. Not a very good outlook for us all.

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Raymond Randalle

Jun 26, 2012 at 16:51

Thanks for that link Tripehound.

Nigel Farage is the only politician who dares say the most uncomfortable truths the others shy away from.

Europe is a total disaster and the fact that Herman Von Rumpoy earns more than President Obama just shows what robbers are all about.

The financial heart of Europe , Luxembourg and the European Parliament is destroying democracy and few have the courage or insight to say or do anything about it.

Bankers are thriving on the demise of honesty and decency.

The outlook is dim indeed.

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