With tax return season now upon us, and with the potential of a general election in the not-too-distant future, many will be curious as to what do our politicians report on their tax returns. Whilst in the USA it is fairly routine practice for politicians to publish details of their income, British politicians seem more reluctant to do so. In 2016, debate around the merits of this policy was reignited after the Panama Papers, a series of documents relating to offshore investments held by high profile personalities, were leaked. In a call for greater transparency by elected officials, the then Prime Minister, David Cameron faced public pressure to release his tax returns. Opponents on the other hand, contend that tax returns are private documents and that forcing politicians to disclose them infringes on their personal privacy.
David Cameron did eventually publish his returns. But how useful was this information to the general public?
Researchers who reviewed disclosures of income made by politicians in 175 countries worldwide concluded that “public, rather than confidential, disclosure is associated with lower perceived corruption and better government” and that “identifying the assets, liabilities, income sources, and conflicts of interest, as opposed to income and wealth levels, is more consistently associated with better government”. In other words, public confidence in politicians does not require politicians to disclose details about themselves which are private, and are more trusting of politicians who are open about their finances generally. That said, disclosures made by politicians are only beneficial if they can be understood by the general public. Unfortunately, the public often doesn’t understand what can sometimes be fairly technical documents and can rely on a sensationalist and biased press for interpretation and commentary.
David Cameron published a spreadsheet showing his net income for six years. However, information which is relevant in understanding his financial position was not provided. We weren’t told were details of the wealth that produced his income, or that his wife was a consultant for an offshore company. Nor did the public find out about movements of wealth within the family, such as sharing income with a spouse or transferring assets from parents to children.
At the end of March 2022, some five months after originally promising to do so, Rishi Sunak, the current Prime Minister, eventually released his income figures. He did not publish his full tax returns, but provided details of his income in the form of a letter from his tax advisers, Evelyn Partners. The information included totals of his income (earnings from Parliament, bank interest, dividends and capital gains), and of income tax and capital gains tax paid in the tax years 2019/20, 2020/21 and 2021/22. Helpfully, the accompanying notes from Evelyn Partners provided some explanation, perhaps most crucially that the investment income and capital gains arise entirely from a single US-based investment fund, which is held in a “blind management arrangement” on Sunak’s behalf. This means that he has no control over that money; he cannot direct how it is invested or when gains are realised. He also can’t access those funds while he is a minister, but he remains liable to UK income tax and CGT on them.
The Prime Minister received a salary of £156,163 in 2021/22, and also receives a considerable number of benefits in kind, such as free accommodation in “No 10”, travel by chauffeur-driven car and private plane, and the use of a country residence. Whilst necessary for his role, the value of these perks does not appear separately on the summary of his tax returns.
It has been reported that Sunak owns four properties: a family home, an apartment in Kensington, a large manor house in Yorkshire and an apartment in Santa Monica, California. However, no personal property income is reported in the income summary, so we are left to assume whether those properties are let out.
There are political points to be scored by politicians who release their returns. In 2012 former Chancellor of the Exchequer, under Labour, Ed Balls, voluntarily released his tax returns, setting a precedent for financial openness. His move was seen as an effort to demonstrate transparency and a commitment to the principles he advocated for in public office.
Jeremy Corbyn posted his income tax computations for the year 2015/16 (the SA302 equivalent) on his website jeremycorbyn.org together with some detailed schedules. In that year his income totalled £114,345 and included £77,019 from employments and £36,045 from UK pensions. He claimed gift aid on donations of £5,420. Interestingly, the then leader of the opposition had argued, that while he was willing to disclose his income and tax payments, certain aspects of his financial affairs, such as family income, should remain private. Yet he left his National Insurance number (NINO) and UTR on the documents, these are still online and is something which I would advise against.
When she was leader of the Scottish National Party, Nicola Sturgeon published her full tax returns for all years between 2015/16 and 2021/22. Ms Sturgeon was keen to point out that she had forgone her salary as leader and reported earnings of £140,496 from wages, £17,864 in benefits and Pension income of £58,332. Unlike Mr Corbyn, she redacted her UTR and NINO.
Typically, candidates running for President of the United States release their returns as part of their campaign strategy. Despite regularly promising that he would do so, Donald Trump failed to publish his returns, on the basis that he had an ongoing IRS audit. Eventually, and only after a congressional committee ruling, his returns were obtained and released. Although Trump claims to have made tens of millions of dollars, The New York Times revealed that as a result of losses, he only paid $750 in federal income taxes in 2016 and 2017 and faces substantial debts.
Should everyone’s tax data be made public?
It has been argued that if all taxpayers tax returns were made public, the transparency would create more equal societies, however concerns over privacy rights have meant that this has not generally gained traction. At present Norway is the only country which gives access to everyone’s tax returns via the internet. In Sweden, Iceland and Finland enquiries have to be made on an individual basis. In Italy, in 2008 the finance minister approved the publishing online of all 38.5m taxpayers’ tax returns for the 2005 tax year, however the national data protection authority required its immediate withdrawal. Canada, New Zealand and Ireland provide information about individuals who evade tax, but there is no evidence of a move towards making all individuals’ tax returns publicly available. Finally, in the US, taxpayers returns were publicised at various times between 1862 and the 1930s, but disclosure was eventually declared to be unconstitutional.
The politicians mentioned faced unique circumstances and made distinct choices regarding the disclosure of their financial information. Whilst the figures from their tax returns provided a glimpse into their income, tax payments, and, in some cases, potential conflicts of interest, it is debatable as to how useful this was and we need to be careful not to discourage people from serving in public positions. There is a delicate balance to be reached that respects both transparency and personal boundaries.
Yedidya is a Partner at Raffingers, a top 100 accountancy practice that specialises in strategic business, tax planning, charities and commercial business solutions. If you would like to discuss any aspect of this article or for any other business or accounting advice, please email Yedidya Zaiden at firstname.lastname@example.org