Well, clearly, one can use Julian Richer as an example of all sorts of things. But in a piece about how philanthropy should be replaced just by people paying their taxes you’ve got a problem.
The underlying point here is that rich people giving away their money doesn’t work. Because it should be the State that decides how all the money is spent. We’re not greatly enamoured of that idea truth be told. It being individuals deploying their own resources that makes the world a better place, more government just gains us more government cheese.
We don’t even agree with this:
Philanthropy, it is popularly supposed, transfers money from the rich to the poor.
No, it’s simply spending my money on what I want but isn’t perhaps directly of obvious benefit to myself.
The common assumption that philanthropy automatically results in a redistribution of money is wrong.
Not interested in whether it is or it isn’t. It’s philanthropic to build a statue somewhere. Nowt about the poor or redistribution there.
The real complaint here is that rich peeps seem to spend their money in a manner that the author doesn’t like. Therefore it should be taxed off them then spent by the sort of committee that the author might gain a seat upon. One of those variations of Kip Esquire’s Law.
This though, this is a problem:
There is therefore a strong argument that the money donated by philanthropists might be put to better use if it were collected as taxes and spent according to the priorities of a democratically elected government. In which case, should the state be giving tax relief to philanthropists at all?
All of this undermines the argument that the rich are entitled to keep their wealth because it is all a result of their hard work. Indeed, some overtly acknowledge the existence of this social contract. In the UK, Julian Richer, founder of the hi-fi chain Richer Sounds, transferred 60% of the ownership of his £9m company to his employees in a partnership trust in 2019. Asked why he had made this decision, he replied that the staff had demonstrated loyalty over four decades, so he was now “doing the right thing” because that way “I sleep better at night.”
Well, yes, except that use of Richer is a significant problem. Because the method by which he sold – sold, not gave away – the company gives him the cash tax free. If I’ve read the legislation right – not a sure thing – it doesn’t even become part of his estate for inheritance tax purposes.
Julian Richer will pay no capital gains tax on the sale of Richer Sounds. Even though he’s cashing in with an initial near £10 million receipt:
The company will pay Richer an initial £9.2m for the stake
No CGT – nor, obviously, income tax – will be due on that sum. No nurses will be employed as the NHS has more money by his gaining those millions. And that’s the initial payment. The total is going to be rather larger:
If Richer Sounds continues to be successful Richer will receive additional payments over a 15 year period
And as I say, no tax will be forthcoming.
Using Julian Richer as an example of what happens when the state, righteously, gets to divvy up the riches doesn’t really work.
The hi-fi entrepreneur Julian Richer has hit back at critics accusing him of laughable hypocrisy for signing a Davos letter calling on millionaires to pay higher tax after he received tax breaks for handing control of his company to staff.
Miles Dean, head of international tax at Andersen Tax UK, had said it was hypocritical for Mr Richer to sign the Millionaires Against Pitchforks letter last month along with former Unilever boss Paul Polman, Innocent Smoothies co-founder Richard Reed and US real estate developer Jeff Gural.
Last year, Mr Richer sold 60pc of his shares in the electronics retailer he founded in 1978 to an employee-owned trust for an initial payment of £9.2m. He did not have to pay capital gains tax on the sale due to an exemption in the Finance Act 2014.
Just to note, I’m fine with such employee trusts, with employee owned companies, with Mr. Richer cashing in his life’s work without paying for diversity advisers. Good on all of ’em. But to use it all as an example of how philanthropy shouldn’t be directed by the rich, tax should be paid instead, that, well, that shows a certain inattention to detail, doesn’t it?
Julian Richer funds a tax whingeing protest group led by Ritchie’s friend, Brooks (Taxwatch)
Julian Richer has just sold his company using a structure that means no capital gains nor income tax liabilities on the sum received.