'Few of UK's highest-earners pay enough income tax'

Staff and agencies
Thursday June 21, 2007

Guardian Unlimited

Only a small proportion of Britain's highest-earners pay any income tax, it was revealed today.

Of the 400-plus people thought to earn an eight-figure income, only 65 declared taxable earnings of £10m or more, according to figures obtained under the Freedom of Information Act.

The disclosure came amid heightened concerns about the gulf between rich and poor as one of the UK's wealthiest men warned it could lead to rioting in the streets.

Sir Ronald Cohen, founder of private equity firm Apax, said that if people are "left behind" in the race to accumulate riches, riots like those that hit Paris in 2005 could be seen on the streets of Britain.

"When economic situations get bad, it takes a spark to ignite a violent reaction," he said.

Sir Ronald, who has an estimated £260m fortune, highlighted his concerns about the future for Britain's haves and have-nots in an interview with the Daily Mail.

Meanwhile, MPs gave some of the private equity industry's leaders a hostile questioning after one tycoon said many bosses paid less tax than their cleaners.

Today's Freedom of Information statistics led to new claims that the tax regime is more favourable for the wealthiest sections of society.

According to London's Evening Standard, which obtained the figures from the Treasury, 65 people who filed a tax return in 2004-5 declared a taxable income of £10m.

But, according to the Sunday Times Rich List there are more than 350 people in Britain with fortunes big enough to generate incomes of £10m a year through investments. Added to this, at least 60 City traders and company directors are thought to earn £10m a year.

Liberal Democrat treasury spokesman Lord Oakeshott said: "These devastating figures prove that the richer you are, the less tax you pay in Brown's Britain."

Yesterday four of the private equity industry's biggest players appeared before the Treasury select committee, which is investigating private equity.

Damon Buffini of Permira, Philip Yea of 3i, Robert Easton of Carlyle and Dominic Murphy of KKR tried to dispel their reputation as corporate "asset strippers", insisting that they were good for jobs and good for profits.

But they failed to persuade MPs that they should continue to benefit from privileges which mean they pay as little as 5% tax on their earnings. Angela Eagle, one of the committee members, said the quartet had been "disingenuous".

"They didn't provide answers that show they want to be open about what they do. But there are several themes becoming obvious: on transparency, on their relationship with wider stakeholders and whether the tax structure can be justified, which I don't think it can," Ms Eagle said.

Members of the committee were incredulous when none of the three could say how much their companies paid in capital gains tax.

Committee chairman John McFall said: "You guys are the really bright guys. You are the masters of the universe. I ask you how much you pay in capital gains tax and you can't tell me? I find that amazing."

Trade union leaders, appearing in front of the committee beforehand, likened the secrecy with which the industry operated to the Mafia.

Paul Talbot, assistant general secretary of Unite, cited the example of Duke Street Capital, which bought Burtons Food.

"Within months, two thirds of the staff were out of a job. Usually we could work with management, but private equity's secrecy means we couldn't find out what was going on," Mr Talbot said.

Guardian Unlimited © Guardian News and Media Limited 2007