Self Employed Australia

"Everyone needs an Advocate"

“Everyone needs an Advocate”

United Kingdom

We give evidence on Tax Fairness solution to UK Parliamentary committee/group

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UK-parliamentFor over a decade we’ve been campaigning for fairness and for rule of law principles to be applied when the ATO assesses and administers alleged tax debts, particularly those of self-employed, small business people.

We have found a template ‘solution’ based on how USA law requires tax administration fairness from the IRS. Here’s a video explanation and a one-page summary.

It transpires that the UK also has very similar problems with its tax administrator (HMRC) abusing self-employed people. We have a long-standing campaigning partnership with Contractor Calculator in the UK who, like us, campaigns for tax administration fairness. The UK problem is so severe that an all-party parliamentary group/committee has been formed to seek a solution to HMRC abuse. Some 250 UK MPs are in the group/committee.

Last month (on 21 February) we gave a joint presentation to the Taxpayer Fairness Group’s senior parliamentary members. We offered them a vision of a solution based on the USA model which we also recommend for Australia. Three of us gave presentations followed by Q&A (YouTube links below).

Ken-Phillips     Dave-Chaplin     Jason-Falinski

Jason made some strong points:

“At the core of this is whether governments exist to serve people or citizens exist to serve government … we have provided tax agencies in the Western world with extraordinary powers that are in breach of some pretty fundamental legal rights…”

We provided the UK parliamentary group with:

Almost exclusively, tax debates are about how much money is or should be taken out of which pockets of the people. But the way tax laws are administered cuts to the heart of the power of government over the people. And by ‘government’ we mean the faceless tax bureaucrats who administer the inevitable maze of tax laws.

Tax law administration must be subject to transparency, accountability and checks and balances so that the rule of (tax) law applies in a practical way. That is not the case in Australia nor, it seems, in the UK.

Our campaign is to secure that rule of law. The US model offers a practical template for reform.

 

New UK PM sets benchmark for self-employed (tax) rights

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truss-albaneseWe’ve been campaigning for more than a decade for major reform to how the ATO treats self-employed small business people. And since 2000 we’ve studied how the UK tax authority (HMRC) treats the UK’s self-employed. Both the ATO and HMRC seem to have been trained at the same bureaucrats’ ‘bully school’. Both defile the ideas and practices of justice and fairness.

But late last week, the new Truss government took a giant leap by repealing tax administration laws that HMRC has been using to bludgeon the UK’s self-employed. The Albanese government should take note.

What drove the UK repeal was a realisation that the UK laws were doing major harm to the UK’s economy. But more, the issue was cancerous for the Conservative Party’s political future.

The UK issue goes back to 2000. The UK tax authority, His Majesty’s Revenue and Customs (HMRC), views all self-employed people as tax dodgers. In 2000, laws were introduced (called ‘IR35’) which enabled HMRC to declare self-employed people to be employees. The trouble is that, invariably, when the courts looked at HMRC’s declarations, HMRC lost. But they kept destroying small businesses.

In 2017 HMRC shifted tactics. Instead of directly attacking self-employed people, additional new rules, called ‘Off Payroll’, required the engaging business to be responsible for deciding if a person was self-employed or an employee.

In 2021 HMRC applied the new Off Payroll rules to the private sector. This is where disaster struck (again). Third-party operators had evolved since 2017 who claimed that they could manage the Off Payroll rules. The public sector, followed by the private sector, forced self-employed contractors to work through these third-party operators. But far too many of these operators ran their own tax-dodging schemes, stole from contractors, and operated outside the UK to avoid UK laws.

In August 2022 the London School of Economics reported that UK self-employed numbers were down by 500,000, and dropping. It said, “The economy is not going to recover until we start treating them (self-employed people) better.”

This message about economic reality was delivered shortly after Boris Johnson had resigned as PM, but it was already resonating throughout the UK. Rishi Sunak was Johnson’s Chancellor. He introduced Off Payroll to the private sector in 2021. When Sunak made his pitch to become Conservative Party leader he was hammered on social media for his trashing of the self-employed. Liz Truss promised to do something about IR35. Truss won the leadership.

What has caught everyone by surprise is that the new Chancellor’s announcement last week is a complete destruction of Off Payroll. This is a massive embarrassment for HMRC but shows the extent to which the Truss government is seeking a total reset. Dumping Off Payroll is a headline part of a substantial package of UK business encouragement reforms aimed primarily at easing regulatory complexity.

What has all this to do with Australia? Business regulation complexity and bureaucratic stupidity grinds down economic growth. The UK’s HMRC has been doing huge harm to the base of the UK economy, self-employed people.  The ATO is doing the same in Australia. At some point we need a government that will seek a fix.

It’s about collecting tax within a framework of legislated fairness and justice. Here’s our model for a solution. (YouTube)

Regulation-lovers with a ‘solution’ desperately seeking a problem—Gig it!!!

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Monday, August 05, 2019

Since the Global Financial Crisis, unemployment has dropped to low levels in most of the developed world at least. That’s fantastic. It needs to continue.

One of the important factors in this positive trend seems to be the evolution of work arrangements that enable quick responses to fast-moving markets and consumers. Flexible work creates work! But this gets regulation-lovers worried. They reckon that if work isn’t controlled through government regulation, there’s got to be something wrong. Currently their focus is on the so-called ‘gig’ economy. Apparently, it’s a big ‘problem’ that needs a solution.

We’re intensely interested in the ‘gig’ issue because ultimately the regulation-lovers’ push is about squashing the right of people to be self-employed. And that’s a right that we love!

There are heaps of inquiries and reports. As examples, there are questions over Uber (ride sharing), Facebook, AirBNB and so on generating big media coverage. But here’s a core question. Just how many people are earning their income through ‘gig’ engagement’? How big is the issue?

We’ve pulled together data from reliable sources covering the United States, the United Kingdom and Australia. Here are the summary tables.

Get this. For all the big noise about the ‘gig’ economy the number of people using ‘gig’ engagement as their income source is tiny. The stats show that:

  • Only 1 to 1.8 per cent of workforces are involved in ‘gig’ work but, of those,
  • 0.63 per cent to 0.88 per cent are in fact ‘regulated’ employees.

And significantly

  • For 56 per cent, gig work is less than 15 per cent of their income. (UK)
  • 69 per cent earn less than £1,000 a year from gig work. (UK)

The results are similar in the USA and Australia.

That is, for the bulk of people using gig engagement, it’s pocket money or top-up ‘nice-to-have’ income, but not core income.

But it’s important also to distinguish between ‘gig’ and other self-employed work. The Centre for Research on Self-Employment (CRSE) in London has produced a great research report on this. The report looks at the freelancer side of self-employment and finds that:

  • 85 per cent of freelancers undertake project-based and ‘portfolio’ work.
  • Only 15 per cent are gig workers.

This is consistent with our summary table.

What’s more, CRSE identifies that the freelance sector generates some £140-145 billion of economic output for the UK economy. It’s major stuff. Here are some key extracts from the CRSE report.

An important finding by CRSE identifies skills as the key issue relating to income levels, not the nature of the contract:

…high skilled gig work generates higher quarterly income than equivalent employee work. It seems that skill rather than the nature of the employment contract is the most important determinant of a worker’s income…

Why are we concerned? Too often we’ve seen attempts by worker regulation-lovers to use ‘invented’ problems to try and kill off self-employment. It’s a campaign that’s been ongoing since around the 1990s. Its current rebirth is ‘gig’ focused.

Regulations are needed for real problems. But let’s not invent problems. We want a fact-based debate. Self-employment in its many forms—freelancing, gig, traditional shop-keeping, trades and so on—all make an important mix for job creation, economic activity and personal income creation. Let’s not kill off the good stuff!

UK self-employment surges—again

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It’s happened again. Self-employment in the United Kingdom has risen again, this time by 154,000 in the three months to December 2015, thereby making up more than half of the increase in UK jobs. We’ve been observing this since 2013. You’d think this surge in self-employment would level out at some stage, but it’s not happening yet.

It’s a structural change in the UK economy and society with significant political standing. A demonstration of this occurred just last week. Our UK ‘sister’ organization IPSE (Independent Professionals and Self-Employed) attended 10 Downing Street as part of PM David Cameron’s preparation for his negotiations in Brussels over the UK-European Union agreement.

IPSE has also successfully encouraged the government to conduct a review of ways to make it easier for the UK’s 4.6 million self-employed to prosper.

The prestigious Institute of Economic Affairs (IEA) has entered the debate, commenting on the structural shift that’s happening in the UK.  Significantly, the number self-employed women in the UK is rising faster than the rate for self-employed men—a major development.

With all the talk in Australia about entrepreneurship and innovation, it’s the self-employed, small business sector where the ‘guts’ of this is likely to happen in the economy. We’ve made big progress with the unfair contract laws. But Australia could well look at the UK to identify the reasons for its current success.