Rachel Reeves has appointed Sir Edward Troup to be one of her four new tax advisers. He might be a former boss of HM Revenue & Customs, but he is a very odd choice.
First, as his Wikipedia page makes clear, he was a special adviser to Ken Clarke when he was Chancellor from 1995 to 1997. So he was, I think we can safely assume, a Tory set on opposing Labour at the time. I know people do change their spots, but I don't think this is a good start.
Then there is the problem of an article he wrote in 1999 for the FT in which he said:
Tax law does not codify some Platonic set of tax-raising principles. Taxation is legalised extortion and is valid only to the extent of the law.
I know of no one in tax justice or outside the Tufton Street think tanks who would share this view. The power to tax is part of what defines the state. Its power to use tax to organise society is one of the bedrock of left-of-centre thinking. Troup clearly did not share those views on the state or society. It is an exceptionally odd view for someone advising a Labour Shadow Chancellor to have held.
He added:
Tax avoidance is not paying less tax than you ‘should'. Tax avoidance is paying less tax than Parliament would have wanted. Avoidance is where Parliament got it wrong, or didn't foresee all possible combinations of circumstance.
The problem of tax avoidance is reduced to the problem of finding an answer to the question of what parliament intended and making sure that this is complied with. I would not pretend this is a simple task. But recognising this as the issue and dealing with it equitably and constitutionally would be a significant step on the way to tackling avoidance effectively.
Again, I would suggest that no reasonable person thinks now, or thought in 1999 that tax avoidance was the fault of Parliament. Tax avoidance is undertaken by those who wilfully seek to undermine the intent of parliament, aided and abetted by tax advisers (which Troup then was) willing to help them do so, in exchange for a fee.
I was not the only person with this concern back then. I raised my concerns in 2013 in anticipation of a Public Accounts Committee hearing in parliament. As a result, Margaret Hodge, who had read my post that morning (I sent it to her, together with another one), questioned Troup on these suggestions he had made. The record is still available. This exchange took place:
Q399 Chair: Well, the OECD does think that. Is it true that you said at some time that "Taxation is legalised extortion"?
Edward Troup: I am very glad that Mr Murphy and others go back and read the articles I wrote in the FT in the 1990s.
Q400 Chair: Did you say that?
Edward Troup: I wrote a whole series of articles.
Q401 Chair: People go back the whole time to stuff I did in the 1990s and 1980s, I can tell you. You never get away from your past.
Edward Troup: The article was making the point-indeed, it is relevant to a lot of what we discussed today about tax being a matter of law-
Q402 Chair: Did you say "Taxation is legalised extortion"?
Edward Troup: In the context of that article, which you read, I was making the point that it should not be left to the discretion of tax administrators to decide how much was due; it had to be left to the rule of law, and that is quite an important principle.
Q403 Chair: Did you say "Taxation is legalised extortion"?
Edward Troup: In the context of that article, those words appeared. If you read on-
Chair: You said it-thank you.
Edward Troup: Would you like me to read it?
Chair: No. I was interested; I would never dream of putting those four words together.
Hodge is now a colleague of Troup's on Reeves' new panel.
This, though, was not the only time Troup was called to account before parliament when he expressed contentious views. In 2004, he said when questioned by the Treasury Select Committee that:
I would not like to support anything which is perceived as tax avoidance, but you have got to remember that this is money left in the economy and this is not necessarily a bad thing for the economy. It may give a bit of an imbalance of incidence of tax between certain groups of people, but all we are actually saying is that some small, self-employed owned and managed businesses are actually paying less tax than the Government might have intended, which is not necessarily a bad thing, except to the extent that it creates inequity between equivalent classes of individuals.
In other words, he was indifferent to tax abuse by small businesses, did not care about inequality, the impact of tax abuse on honest smaller businesses, or the undermining of the rule of law that this activity represented.
So, the question is, if he thinks the tax is extortion and is apparently indifferent to the abuse of tax law, why is he a suitable person to advise Rachel Reeves? Could it be that, as quoted in a Guardian article in 2016:
“If you think the world needs to be changed you don't appoint Edward Troup to that job,” said Jolyon Maugham QC, an expert in taxation law.
I agree with Jolyon.
In that same article, Margaret Hodge said, referring to the matters I note above:
The fact that he had written that draws into question whether or not he should be in charge of our tax system.
Hodge's question still remains relevant, not least with regard to his appointment to advise Rachel Reeves. Troup looks like a most unwise choice by Reeves.
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One has heard of “it takes one to know one” – but in this case it seems that Troup’s response to recognising a tax avoider would be more likely to be taking him out for a drink!
This appointment is plainly ill-judged – and it again raises the question as to whether the Reeves problem is simply that which Nye recognised in Anthony Eden at the time of Suez. To paraphase;
‘Rachel Reeves may sincerely believe that Troup is the man for this job. No – no! She may do. In which case she is too stupid to be the next Chancellor”
At least we now all know what we are up against! If there were any doubts about the current Labour Party’s neo liberal credentials, this dispels them.
Labour’s emphasis on offshore tax dodging is starting to make sense now. Blame offshore tax constructions and do nothing about the domestic problem.
Taxes become extortion when they are arbitrary and uncertain. Which is what happens when government advisors suggest tax avoidance is the governments intention.
A good tax system does not need Troup.
As the saying goes, you can judge someone by the company they keep. At least Labour are being fairly open about what they plan to do and for whom, as opposed to what Obama did when the party of the ‘left’ in the US was elected in 2008. Maybe with such a huge lead in the polls Labour just don’t feel the need to lie as much about their intentions.
https://www.commondreams.org/news/2009/12/13/obamas-big-sellout-president-has-packed-his-economic-team-wall-street-insiders
Since contempt for the rule of law, national and international, is the mode for the 21st century, this chap is evidently the man for the season. As are Starmer, Streeting and Reeves. It takes one to know one.
What a pompous and arrogant man. I’m guessing that the choices Reeves is making reflect her somewhat narrow economic and financial background. Which disqualifies her from being the kind of chancellor we need, that would take on those vested interests.
Interestingly, now the Guardian have discovered your Taxing Wealth Report it seems they have started reading this blog – and based tonight’s editorial on this post.
It will be interesting to see if this continues, and whether the Labour Party realise they need more credible advisors.
Thanks Jonathan. Now noted on the blog.
If anyone wants to read the original article that is being criticised nearly three decades after it was written by Edward Troup, it was published by the FT on 15 July 1997 (not 1999 – that error keeps being copied by people who it seems do not check back to the original source and read the extracted sentences in full context).
On the four words “Taxation is legalised extortion”, I don’t have much to add to what I wrote about that eight years ago. https://www.taxresearch.org.uk/Blog/2016/02/25/why-does-hmrc-need-a-boss-who-thinks-tax-is-legalised-extortion/
“I look up extortion in the OED and I find “an act of illegal exaction”, and then exaction is “the action of demanding and enforcing payment (of fees, taxes, penalties, etc)”. So yes, tax is a legalised form of demanding a payment, enforced using the power of the state, in a manner that would otherwise be illegal.”
Yes, the legislation to impose a tax is passed by our legislature, and that is what makes it legal. But there is still a demand and enforcement of a payment. It is not a voluntary payment, is an exaction. Without that legislation, the exaction would be illegal: an extorsion. So the legislation creates a legalised extorsion.
In that article, Edward Troup was making the case that tax must be imposed by law, not by administrative fiat. And also that over-complex legislation can create more opportunities for tax avoidance just as it tries to close other opportunities down. He explicitly warned about tax reliefs for films being abused.
It is brave of Sir Edward to expose himself to abuse again, six years after he retired with his K. Perhaps the lure of further preferment? Any conversations he has with Dame Margaret Hodge would be fascinating to hear. I suspect they will get on in private. But I wonder if Dan Neidle was either not asked, or was asked but refused – and if so, why. I understand he is or at least was a paid up member of the Labour Party.
And I wonder if Troup’s selection reflects the continued rightward drift of British politics – perhaps a “One Nation” Tory of the late 1990s might feel at home in the current Labour party. Among other “special advisers” to Ken Clarke – both of whom ended up in the lords – were Tessa Keswick (later director of the Centre for Policy Studies) and a young chap called David Cameron. Whatever happened to him?
That is a technical view, I agree.
But those definitions are also not that which the common usage of the word permits, where the reality that tax is actually imposed by consent is reflected. And that is why the claim he made is wrong, and I disagree with you. In a democracy I do not agree that taxation is extortion. I think his interpretation is contemptuous of the will of the people who desire accountable government and are willingly subject to it, instead prioritising that of some individuals, and in political economic terms that is what worries me about it.
I think we might have to agree to disagree on this one. Words have meanings.
Most people pay the tax they think they are obliged to pay by law. And most would not pay the same amount without the legal compulsion.
I don’t recall ever giving consent to everything passed by Parliament, or even being asked for my assent. Indeed there is quite a lot of legislation I (and I suspect you too) would change.
I do occasionally vote for a parliamentary candidate but I have rarely backed the winner. In a first past the post electoral system, that sparse expression of a broad preference is a very weak basis to claim that everything a government does is backed by a totalising “will of the people” and we all have given our consent to everything – clause 28, invasion of Iraq, export of arms to Israel, the works.
As you say, we will have to disagree.
Words do have meanings, but those meanings are usually contextual and I am reading these ones in a different context to the one you are viewing then in. I think that explains our differing views.
Having worked in British film industry in the distant past, Troup pointing out that there is abuse of tax relief is no heroic act. It is an open secret that film and especially film distribution is a much favoured way to launder money by global criminal cartels.
Although many in the morbidly wealthy circles that Reeves and Starmer seem to be courting perceive tax avoidance as a jolly blood sport, as Robin Stafford in another post writes, sme’s and others are ‘treated as prey’ by them, it also undermines the rule of law and as Trout himself said in 2004, as quoted above, ‘creates inequity between equivalent classes of individuals’. Tax avoidance undermines the legitimacy of democracy and dissolves its societal structures.