Politician and Tax Avoidance

The campaign for the office of Mayor of London is warming up. The vote will be on 3rd May and the polls indicate, even before the recent arguments about tax avoidance, that Boris Johnson is likely to win a second term.

The question of tax avoidance is interesting. Although there are no suggestions that either candidate has done anything illegal, Ken Livingstone's use of a limited company as a vehicle for his media work have allowed him to avoid a significant amount of income tax. By asserting that Boris Johnson had a similar arrangement (an assertion that turned out to be incorrect) Ken opened the way for Jenny Jones, the Green party candidate, to challenge her rivals to release the details of their tax returns. Boris (and Brian Paddick) agreed and promptly published, Ken released partial figures some time later.

Here are the details:

• For the year 2010-11, Ken earned £94,500 and paid just under £35,000 in tax.
• Boris did rather better, earning £473,280 (of which around £130k is his salary as the Mayor of London) and paying tax of £210,410.
• Brian Paddick's income was £76,804 (mostly his police pension) and he paid £14,534 in tax.
• Jenny Jones' finished fourth (coincidentally her expected position in the coming election) with a still very respectable £63,009 (around £15,133 in income tax) generated mostly from her work as a London assembly member.

Unsurprisingly, the Eton and Oxford educated Johnson leads the earnings table, gathering rather more than the other three candidates put together. Despite Ken's comments about tax avoidance, Boris  doesn't take advantage of the more tax-efficient arrangements favoured by Mr Livingstone and he also manages to pay more than three times as much tax as his rivals. In fact, not only does Boris pay the most tax in absolute terms, he also pays the most tax as a proportion of his earnings; as an example of "we're all in this together", Boris, despite his colossal earnings, is putting on a pretty good show.

The tax avoidance row probably won't affect Brian Paddick and Jenny Jones, who have almost no chance of winning the election, but it has probably damaged Ken's chances by exposing him to a charge of hypocrisy. Writing in The Sun on this very subject, Ken said:

"These rich bastards just don't get it…No one should be allowed to vote in a British election, let alone sit in our Parliament, unless they are paying their full share of tax."

It would be difficult for Ken to argue that he isn't fairly well off and, if we consider the evidence released so far, it would also be difficult to say that Ken is paying his full share of tax. Should we exclude Ken from the contest for Mayor of London simply because he appears to have channeled his fees through a (completely legal) tax efficient company? No, of course not, but we can certainly ask searching questions during the campaign.