Unintended consequential tax bill

One of those unintended consequences from the current crisis will be future taxation. I have a sense that some people, maybe most people, think that the stimulus packages being unveiled and in action around the world are being given out by governments thankful to a good a loyal workforce with a pat on the back and a kind word in the ear.

Wouldn't that be nice.

More likely, and call me a sceptic if you wish, is that, once the crisis is over and the country has regained 80% of it's pre-crisis level, the people that have been helped out will begin to see the bill arrive at the table, just like a date that went wrong and the would be partner has stormed out without paying.

How this money will be expected to be paid back is another question. Possibly through increases in general taxation levels or in increases in tax on what might consider luxury items such as wine and tobacco. The usual suspects. Or, and it is not exactly rocket science to suggest, but another round of austerity where the governments of the world having been so generous in the crisis then turn more miserly post-crisis.

We do not even have to look back too far into history to see how this might pan out. The financial crisis of 2007/8 cost governments huge sums of money to shore up a financial system that had exploited every loophole known to man, and then made up some more just for luck. That crisis had still not finished its work by the time this crisis took hold as the world economy was still dragging its feet in 2019 with yet another promise of green shoots being seen but with about as much confidence as a yeti being found in a backpackers bar in Nepal smoking a cigar and drinking whiskey.

So, once the crisis is over, you can expect to be billed for it even though it was not your fault, but then you have been paying for the excesses of financial elites for the past twelve years and that wasn't your fault either. In fact you have probably become inured to it after so long. And of course the only people that did not pay for that crisis were the people that allowed it to happen, governments together with their declawed and toothless agencies and the financial industry itself.

But you can still pat yourself on the back for having done so, after all, if the financial system itself had fully collapsed, and it was very close, then this crisis would seem more like an annoyance like knocking your elbow against a door as you walk through it. Trust me, the financial system, commerce and globalisation have had a net positive impact on society, if it were not for commerce, we would all be living in primitive conditions toiling a living off the land with disease and pestilence still rife and us still blaming gods and making sacrifices to them.

Back to today...

One fun little consequence will be for those that are self-employed. In the UK today there will be announcements made as to the safety net the government is about to unfold for them to save them from becoming destitute.

That's not the fun bit, that's the good bit, the oh what a lovely cuddly caring government we have bit. The fun bit is, that it has been known for some self employed people to do things like work for cash in hand to bypass any of that grimy tax type stuff. Or, they run limited companies and, with the help of government rules and aided by an accountant, pay as little tax as possible by simply declaring as small a salary as can be achieved within the legitimate rules around tax avoidance.

So the problem is, if you have, legally and with the help of a good accountant, avoided paying tax and your income is relatively small for tax purposes, but the amount you need to have coming in to maintain your life is actually quite a bit higher, well, you must be able to see the issue. Firstly, any payment from the government will somehow be based on your income as declared to HMRC and will be capped anyway.

But on top of that, and I cannot help but chuckle at this for the sheer diabolic nature, is, that once you start telling HMRC what you need to live off, you can be pretty certain that their computers and big data analysts will not forget and come the next tax return some people might well expect a phone call to clarify actual earnings. And as HMRC have six years to perform follow up checks, they have all the time in the world to do so and with a government that will be seeking to get its money back post-crisis, my money is on them increasing the size of the HMRC resources for this specific purpose.

As with all things, we will see.