Did Nadhim Zahawi really pay a £1m tax penalty for being 'careless'?

The opportunity to point out the risks of seeking to get one over the tax system is always welcome, and I have done my fair share of media work over the last week discussing Tory Party chair Nadhim Zahawi’s tax affairs.

The facts of this matter or now known. Zahawi set up YouGov twenty years ago. Shares he might have owned in that company because he co-founded it were instead issued to a Gibraltar-based company owned by his father.

Those shares were subsequently sold, the biggest batch going in 2018. Gains of up to £27 million might have been made on those sales.

Some time after those sales of shares, HM Revenue & Customs investigated Zahawi’s tax affairs and decided some of those shares recorded as owned by his parent’s company should have been owned by him. As a result it is thought that they have charged him £3.7 million in additional tax – and it is now confirmed that a fine of 30% of the tax owing was also charged, bringing the total bill to more than £5 million.

We also know that all that tax and those penalties were, apparently, paid whilst Zahawi was Chancellor of the Exchequer, and so in charge of bringing in UK tax revenues.

Zahawi has tried to brush the whole of this affair off (having previously tried to silence comment on it by way of legal threats) saying HMRC have agreed his error was merely "careless".

READ MORE: Westminster Tories dubbed 'parcel of rogues' amid Zahawi tax row

In my forty-year experience of managing tax investigation cases, a 30% penalty very rarely implies a taxpayer has been careless.

As importantly, in my experience as a business adviser I have never known anyone setting up a company "carelessly" misallocate the ownership of shares in it. I guess it has happened, but even then I am certain it has always been corrected. People don’t "carelessly" give away more than £20 million without good reason in my experience, but they might if they thought it saved tax.

However, Rishi Sunak cannot – despite all informed tax commentators being seemingly of one mind that nothing that happened in this case was careless – make his mind up on whether any issues of concern have arisen. A penalty of more than £1 million is unable to help him decide.

So although the whole country is aghast at a minister having so blatantly failed to declare their taxes properly, Sunak is having to refer the matter to his ethics adviser, who (unbelievably) happens to be the father of one of Sunak’s own senior policy advisors.

There are three obvious conclusions to draw from this. The first is that if Zahawi cannot decide if he is unfit for office given what has happened he is clearly unfit to hold any government post from now on.

Second, if Sunak cannot decide Zahawi should go based on this evidence he is not fit to be prime minister.

Third, if the Tory party have not told them both that Zahawi is not fit for office they should not be in government.

READ MORE: Zahawi inquiry could conclude quickly amid pressure on Downing Street

What we see instead, and yet again, is an issue being kicked into the long grass for as long as possible as if there is a process to be gone through when in times not long past ministers who had made mistakes and brought the government of which they were a member into potential disrepute went of their own accord, knowing that was what was expected of them.

Now we have government by dishonourable people.

How does Scotland avoid being governed by such people in the future? There are no easy answers, excepting one glaringly obvious one. If a person seeks political office on the basis of a political creed that suggests maximising wealth is the best indicator of human success then it is very likely that they will be unable to identify the conflicts of interest that necessarily come with holding public office, and will not be able to put the public interest first.

Or to put it another way, never vote a Tory (or those further to the right of them) into office ever again.