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Jimmy Carr and the crowded moral high ground over K2 tax avoidance. By Michael White

Tories have been queuing up to defend the amateur tax-dodger and comedian, but there are lessons here for us all about duty




Jimmy Carr has been labelled a martyr to socialism by one Tory website. But he's obviously an amateur when it comes to tax dodging. Photograph: Ian West/PA

Jimmy Carr may be an idiot and a hypocrite, albeit with a low pain threshold, but he's an easy mark for David Cameron and the lynch mob on Twitter to condemn for the tax-avoiding scam he embraced - and now repents - while mocking Barclays Bank's similar scams on telly to sustain his overpaid career. You wouldn't catch serious tax-dodgers drawing attention to themselves like that, Jimmy. Talk about satire - he deserves next week's satirist's OBE.

Far more interesting on these occasions are those who come out of the woodwork to proclaim - as the influential ConservativeHome website does this morning - that young Jimmy is a "martyr to socialism". There you have it in a nutshell. It wasn't Jimmy's fault; he was forced to do it by Ed Miliband, Tony Blair and Clem Attlee and their punitive tax rates. Jimmy's a victim, too.

Right on cue, the fustian Tory MP Jacob Rees Mogg, who could be the estate manager on Downton Abbey, pops up to remind us all: "We do not have a moral duty to pay more tax than the law requires." Andy Sparrow, the Guardian's blogger-who-never-sleeps, spotted that gem, which is precisely back to front.

Mogg would be right to say we do not have a legal duty to pay more tax than the law requires - that is the difference between tax evasion, which is fraud, and tax avoidance, which is what Jimmy Carr was doing via the K2 scheme and tax lawyers and accountants spend sad-but-lucrative careers dreaming up to stay one step ahead of HMRC.

Where Mogg misses the point, as David Cameron does not, is that we have a moral duty to look out for each other, do we not? Could that be why Cameron, clearly an inferior brain as Mogg makes abundantly clear, is PM while young Jake languishes, mocked and unappreciated, on the backbenches? However poor and self-sacrificing he probably feels (he could be making so much more in the City), Cameron knows he is seen as the wealthy leader of the rich tax-dodgers' party, he has to appease the Twitter lynch mob and to do so because Nick Clegg gets too pious. Ed Miliband had the luxury of being able to show restraint and warn against stone-throwing.

Moggy is not to blame for his father, former Times editor and quangocrat, William Rees Mogg, who has made a good late career out of Thatcherite and Catholic pieties while doing quite well out of the state. People like that are always telling us our moral duty, although, like their heroine (her husband's firm was bailed out), they prefer church and other private or charitable institutions rather than the state to be running social welfare.

I share their belief that taxes should be as low as necessary to get the job done (they are very high in wartime) and that the state should be our servant, not our master. But it's often deployed by people who think they are rich enough and smart enough to do without whatever it is they think the state is over-charging them for.

In his "Jimmy the Victim of Clem Attlee's Tyranny" piece, the clever former MP Paul Goodman seeks to make the point that things are much worse now than in the Thatcher era, when the Lady was able to make the case for wealth-making without embarrassment. Why? Because today we see the rich as foreign plutocrats who are much to blame for our plight, says Goodman.

Well yes, Paul, we do - and we are right to do so. Thatcher's legacy brought many benefits to the battered UK economy (you can now buy a phone in less than six months), but one of the disbenefits was excess, a dysfunctional market for rewards at the top which is completely out of control at a time when most people's pay is stagnant and falling.

It damages everyone - customers, shareholders, employees and innocent passers by - everyone except the rascals coining it in. So belated efforts are under way to curb those excesses, along with more complicated matters like Basel III capital ratios and the ringfencing of casino banking, which has its place, but nowhere near your current account.

It so happens that we are also living through a time when we can examine the other side of the Thatcherite revolution, renewed efforts, not to privatise public utilities and services outright - a mixed performance since that happened to rail, power, water and the rest - but to inject private and voluntary providers into the provision of health, education, police and the rest.

I am in favour of such experiments, too, but have to admit that they are exposing a lot of rackets which we do not have to detail here. All those champions of free enterprise and self-reliance queuing up to rip of the state and thereby the taxpayer, among whose numbers we are beginning to realise they are just the sort of people to avoid being. Jimmy Carr was a rank amateur as a tax-dodger to fall at the first fence. Another reason that makes him an easy mark for the lynch mob.

In mocking excessive tax rates, Paul Goodman asks if Polly Toynbee should be left to decide who pays what. Ho, ho! I prefer to consult an even wiser authority, Warren Buffett, the Omaha investment genius who is one of the world's richest men (and he still lives in Omaha), even cleverer than Jacob Rees Mogg if Private Eye's reporting on their investment fund management skills is any guide.

It was Buffett who complained that, yes, there is a class war ("It's being waged by my class, the rich, and they are winning" was his drift) and that million-dollar-a-year folk should pay the same proportion of their income as average American taxpayers. It's complicated - tax always is - so I offer this link - less abusive than most - to acknowledge the point.

Barack Obama has taken up "Buffett's rule", as well he might in a country where income and wealth inequality is eroding the civic and political space in ways hard to grasp at this distance. It will do them no good, and Jimmy Carr - as a right-on comic - should have known that without having to be told by the Murdoch-owned Times, whose proprietor is fiscally quite nimble.

I prefer a simpler pitch, sent to me a while back by a family member who found it on YouTube. It's someone you may never have heard of called Elizabeth Warren, but you will do. She's a Harvard law professor and public intellectual with a ferocious CV, probably even cleverer than Jacob Rees Mogg, and she's been overwhelmingly endorsed to be the Democrats candidate to take back a Massachusetts Senate seat in November, the one carelessly lost when Ted Kennedy died.

Seriously brainy people are always vulnerable in public life, sometimes partly their own fault - think Oliver Letwin - sometimes victims of their own intellectual honesty. But I like this clip about what the rich and successful owe to the societies that nurtured them. Check it out, Jimmy.


Jimmy Carr apologises for 'terrible error of judgment' over tax scheme

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The comedian Jimmy Carr has issued an apology for his "terrible error of judgment" in using a tax avoidance scheme.

Carr confirmed that he had changed his tax affairs after the scheme was revealed this week. On Wednesday the prime minister had labelled the situation "morally wrong".

In a series of Tweets the comedian said: "I appreciate as a comedian, people will expect me to 'make light' of this situation, but I'm not going to in this statement as this is obviously a serious matter.

"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."

"I now realise I've made a terrible error of judgment.

"Although I've been advised the K2 tax scheme is entirely legal, and has been fully disclosed to HMRC [Her Majesty's Revenue and Customs], I'm no longer involved in it and will in future conduct my financial affairs much more responsibly. Apologies to everyone. Jimmy Carr."


The apology follows a Times investigation which revealed that Carr, who has lampooned bankers for failing to pay their tax, protects £3.3m a year by channelling cash through the Jersey-based company K2, which then returns the money in the form of a loan. This is not subject to income tax.

The Treasury minister David Gauke welcomed Carr's decision to pull out of the scheme and urged other people involved in it to do the same. "I welcome what Jimmy Carr has said. I think it's the right step for him to take," he said. "All the focus has been on him. But of course there are many people who have invested in these schemes that are very artificial and contrived. They are clearly not in accordance with the intention of parliament and they are not fair on the general taxpayer who has to pay more as a consequence."

He added: "I hope others who have invested in such schemes, who maybe thought: 'Well, it's a great opportunity to reduce my tax bill,' also think carefully about it, think whether it is fair, whether it is right that they do so."

On Wednesday David Cameron criticised the situation, describing it as "morally wrong". The Times reports of Carr's financial arrangements suggested "straightforward tax avoidance", said the prime minister, and it was unfair on the people who paid to watch him perform that he was not paying his taxes in the same way that they did.

Cameron said he had not had time to look at other allegations relating to the singer Gary Barlow, who was given an OBE in the Queen's birthday honours list.

Speaking to ITV in a round of TV interviews during his trip to Mexico, the prime minister said: "I think some of these schemes - and I think particularly of the Jimmy Carr scheme - I have had time to read about and I just think this is completely wrong.

"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.

"That is wrong. There is nothing wrong with people planning their tax affairs to invest in their pension and plan for their retirement - that sort of tax management is fine. But some of these schemes we have seen are quite frankly morally wrong.

"The government is acting by looking at a general anti-avoidance law but we do need to make progress on this. It is not fair on hardworking people who do the right thing and pay their taxes to see these sorts of scams taking place."

The Channel 4 standup is reported to have used a legal tax-avoidance scheme that enables members to pay income tax rates as low as 1%.

He spoke out amid claims that members of Take That - Gary Barlow, Howard Donald, Mark Owen and the band's manager, Jonathan Wild - invested at least £26m in another scheme, run by Icebreaker Management Services.

Earlier, a Downing Street spokeswoman had said Cameron backed George Osborne's description of aggressive tax avoidance as "morally repugnant".

Asked if Cameron was "disappointed" about the reports of the tax affairs of Barlow, who campaigned alongside the Tory leader at the general election, she said: "I just go back to the general point about tax, that everybody should pay the right level of tax.

"Separately, the jubilee celebrations were a great success and Gary Barlow played a big part in that."

Asked if the government might consider whether the tax affairs of individuals should be a factor when considering people for honours, she said: "I am not going to comment on individuals in terms of what's happening in a newspaper report."

Later, another Downing street source appeared to harden the government's position on celebrities' tax affairs, and said: "All tax avoidance schemes need to be addressed by HMRC whichever big-name stars are involved."

Separately, No 10 sources said a general tax avoidance rule, due to come in next year, was the best way of handling tax loopholes, rather than constantly chasing down every individual tax scheme.

Carr was confronted over his financial arrangements during a show in Tunbridge Wells, in Kent. Challenged by a member of the audience, who told him: "You don't pay tax," he replied: "I pay what I have to and not a penny more," the Times reported.

It came after he appeared to make light of the furore surrounding his tax payments. He asked: "Got through the papers? I haven't really been through the papers today. The Murdochs are after me ..."

Carr is said to be one of more than 1,000 beneficiaries who shelter £168m from the taxman each year using K2.

Barlow, Donald, Owen and Wild are among almost 1,000 people who contributed £480m to 62 partnerships in music industry investment schemes, the Times reported.

An HMRC spokesman said it had successfully challenged an avoidance scheme run by Icebreaker LLP, winning on the main arguments in the tribunals. The spokesman said: "We are now preparing to litigate Icebreaker 2 but for legal reasons cannot say more at this time. We examine the implementation of avoidance schemes in detail and will not let any aspect of these cases go unchallenged."

HMRC said the K2 scheme was already under investigation.

The spokesman added: "We have taken firm action to protect the exchequer from unacceptable tax loss.

"We do not accept that the Icebreaker tax avoidance schemes have the tax effects their promoters claim - we have already successfully challenged one Icebreaker scheme in the tribunal."

HMRC could not confirm whether or not members of Take That and their manager had been involved in an Icebreaker 2 scheme.