Ken should know by now that lying only digs him deeper on the tax hook. But he just carries on! The key moment at Wednesday’s Evening Standard debate was when the hall erupted in derision at the “Town Crier’s” claim that he paid 35% tax, “so much tax that the government could get another one of these aircraft carriers without planes,” in fact. As the paper’s report puts it, “his claims were met with boos and cries of ‘champagne socialist’…the event was dominated by the tax avoidance row which has plagued Mr Livingstone’s campaign.” Observers in the debate said that Ken’s face turned bright red and he started sweating. He knows how bad this is for him.
As I’ve described in a previous blog, we can’t say exactly what Ken’s effective tax rate is – because he is the only one of the four main candidates not to have kept his promise to “disclose the full details of everything I’ve earned over the last four years.” That alone, of course, is enormously telling. But I can categorically say that Ken’s tax rate since he left City Hall is less than 35 per cent. Indeed, even in 2007/8, his last year as mayor – when he was taxed as an employee under PAYE in the same way as the rest of us – his effective tax rate was only 33.6 per cent.
33.6 per cent, that is, on the figures he originally put out last week. Unannounced, unnoticed, but fully in line with his tradition of making it up as he goes along, Ken has now quietly changed the numbers published on his website to claim that he has paid more tax than he said seven days ago. He now, bizarrely, claims to have paid almost £4000 more in tax in that PAYE year of 2007/8. What did he do – misread his P45?
He has also changed his figures for the following year, 2008/9 – his first as an ex-mayor, and the first in which he started channelling his earnings through a personal shell company, Silveta Ltd, to shield them from income tax and National Insurance. Ken now claims to have earned £63,390 in 2008/9 – up from the £21,645 he said last week – and to have paid tax of £20,043, sharply up from the £6,124 he said last week.
This might have something to do with the fact that – as he’s admitted in today’s Standard – he “forgot” to include in his declaration last week a “resettlement grant” he got from the GLA when he lost the mayoralty. But that resettlement grant was £71k – so even Ken’s new figures don’t seem to add up.
And, of course, he still isn’t including the colossal earnings – £232,000 in 2008/9 alone – which he channelled through Silveta and on which he has paid 21 per cent corporation tax instead of income tax at up to 40 per cent, and avoided National Insurance (up to 9%) altogether. We can be sure that those were his earnings because (a) Silveta’s accounts describe the figure as the “amounts invoiced during the period” (b) he has told me that all Silveta’s income came from his work and (c) this was the first year of the company, so can’t include income rolled over from previous years.
With Ken’s “revised” declaration, we are a tiny bit closer to understanding just what he isn’t telling us. As well as changing some of the figures, he’s changed some of the column headings. So the column once headed “corporation tax paid on dividends” (a nonsense – corporation tax is not charged on dividends) now reads “corporation tax already paid on dividends.”
This does make sense. Ken is telling us about the 21% corporation tax he’s paid on that part of his earnings channelled through Silveta which he has taken out as personal dividends. (In reality, according to his figures, it appears to be just under 19% – presumably testimony to the level of tax-deductible expenses he’s claimed.)
But he’s not telling us how much corporation tax he’s paid on the rest of his earnings – earnings he’s kept within the company – because that would allow us to work out precisely how much he (through Silveta) really earned each year, and thus what his effective tax rate really was. (We can’t be absolutely certain what he earned after the first year of Silveta, because some of the £523,000 income shown in the subsequent years’ accounts could have been money rolled over from previous years.)
For all the efforts by various BBC-type journalists to say that Ken faces “allegations” of tax avoidance, it shouldn’t be forgotten that Ken has actually admitted to me that he’s used Silveta to avoid tax. He’s done something known as “income spreading,” where a large sum earned in one year is held as a cash pile in the company and paid out in smaller chunks over several years to avoid higher-rate tax. As he told me: “We had a big influx of money in the year after I left [the mayoralty]… and then the money tailed off. So we spread it over the three years.” The latest accounts show he still holds a cash pile of £250,000 in Silveta.
Why has Ken suddenly changed his figures, on the quiet, without telling anyone? The main reason appears to be that even his incomplete disclosures last week don’t support his claim in the debate on Wednesday, that he paid 35%. Don’t be fooled by Ken’s new column in his latest set of figures claiming to show his effective tax rate – it’s a flat lie because it’s not based on his full earnings. Even on these phony, revised-up numbers, however, his effective tax rate in the years since he started Silveta is still less than 35%.
Given the many tax shelters available to KenCo, shelters he’s deliberately refused to tell us about – including income-spreading, splitting his income with his wife, even though it was all earned by him, and charging heavy, and sometimes probably disallowable, expenses against tax – my estimate last week that Livingstone’s true effective tax rate is in the low to mid twenties stands.