According to Accountancy Age Arther Levitt, former head of the SEC in the States has said opaque accounting is putting US pension funds at risk.
He’s right.
Adopting country-by-country reporting would be one thing that would reduce the risk. After all, pensioners are real people living in real places with real interest in what is happening in their locale. Which is why reporting for their benefit might be of importance.
I’m grateful to friends in Jersey for sending me a letter sent to all members of the States of Jersey on Monday by Terry Le Sueur, Jersey’s finance minister.
Terry’s been reading my blog. And in particular the one about the Isle of Man failing to secure EU approval for its tax regime.
He says:
He’s right on 1 and 2. But then Jersey paid me to tell them that. So it’s unsurprising.
But point 3 is fascinating. Le Sueur (to use the formality he accords to me) has often claimed that Jersey’s new tax system is fully EU compliant. He and Senator Walker have said so repeatedly in public. And now he has admitted in writing that this is not true. All that has happened is that informal discussions have taken place with UK officials and they are confident that the proposals are Code compliant.
No doubt those were the same officials who told the Isle of Man the same thing.
And he should, I am afraid, place little faith in the UK opinion on this matter. Dawn Primarolo was well known in the EC to be the sole person on the Code Group, that has to actually approve these laws, who believed you could be Code compliant by pretending to shift you’re ring fences into the personal taxation domain. And she’s gone.
So I’m afraid to say you’re wrong Terry. I think you know it.
And as for from my comments adding nothing new they do the exact opposite. First they confirm that I’m a sound judge on these issues. Second they added a new criteria for review of legislation not known about at the time I was working in Jersey. That’s very new.
And while I’m making correction, I am not denigrating the Island – whether it be Jersey or the Isle of Man. I care about both. I’m denigrating those, such as Le Sueur who have sold them out to those in the financial services industry who wish to use them to undermine the world’s tax systems and the whole system of democracy that is dependent upon a government’s ability to collect the tax due to it. That’s quite different. And much more personal.
I am profoundly annoyed about the debate on migrant workers.
I’m well aware that migration can cause problems. I live in the area with the highest proportion of Eastern European workers in the UK – and I am well aware from reports from my wife (who is a GP) of the strain they are putting on services – if only because translation has a cost and everything takes three times longer. And I know that their failure to integrate causes local stress, although I always have to ask how much do any of us really integrate beyond a small circle of like minded people? So don’t call me naive. This stuff affects me and my family.
But I still get very angry when the BBC can headline its news (as it did last night) with a report that 50% of all new jobs in the UK in the last ten years have gone to migrants but at the same time the very politicians who are blowing this story up from the political Right are also repeating perpetually the advantages to the UK of having non-domiciled people here and that we must do nothing to make them go away.
This is blatantly discriminatory. What it says is if you can earn a lot, are white and can speak good English then you’re welcome even if the work you do is blatantly harmful (as much of what happens in private equity is, for example). If on the other hand you are seeking to earn the minimum wage, will work all hours God gives you and will do work that is essential and no one else wants to do then we don’t want you.
I don’t think I exaggerate. Not one bit.
And I don’t like it. I want and expect level playing fields for opportunity. And right now we have a system that is horribly biased to the rich. It shouldn’t be. Removing the domicile rule entirely would be a powerful and important sign that we intend to treat all-comers (quite literally) fairly and equally on their merits. It would be a sign of an open society.
And there should be another sign. That is that if any limits on migration are imposed then the case for coming to the UK has to be proven, not by the availability of skills, but by the need for the skills, which is quite different.
And wealth is not a skill. Nor is the ability to extract it from others a desirable skill. The ability to generate wealth is a skill. And as most of those who have come here who are now amongst those reviled for doing so have shown – they can generate wealth by doing the jobs that our economy needs.
So if anyone should stay – they should. In my opinion.
But we then need to ask the bigger question – which is why we have so abandoned our own commitment to relevant education that we need their skills at all. And that brings us back, at least in part, to tax.
The Guardian has reported that Warren Buffett, the United States’ second-richest man, has again complained that he pays a lower rate of tax than any of his staff – including his receptionist. He has said:
The taxation system has tilted towards the rich and away from the middle class in the last 10 years. It’s dramatic; I don’t think it’s appreciated and I think it should be addressed.
Apparently Mr Buffett undertook an informal survey of 15 of his 18 office staff at his Berkshire Hathaway empire. The billionaire said he was paying 17.7% payroll and income tax, compared with an average in the office of 32.9%. He said:
There wasn’t anyone in the office, from the receptionist up, who paid as low a tax rate and I have no tax planning; I don’t have an accountant or use tax shelters. I just follow what the US Congress tells me to do.
Who does he blame? Hedge fund managers are one group. He said:
Hedge fund operators have spent a record amount lobbying in the last few months – they give money to the political campaigns.
And what happened? Congress backed off changing their taxes. Bribery pays, in other words.
But he then asked a much more pertinent question:
Who represents the cleaning lady?
To that I have an answer – unions should be. It’s why I’m pleased to be working with the TUC in the UK on tax issues right now. Because tax is at the centre of the social justice debate. And it always will be.
Prem Sikka asks this question on the Guardian blog today. He illustrates his argument with a powerful analogy:
Imagine visiting a dentist for some surgery. The dentist charges £200, but botches the surgery and inflicts life long discomfort, pain and further expense. Just when you are getting ready to sue the dentist for negligence you learn that the dentist’s liability is ‘capped’ and that your maximum compensation cannot exceed £2,000, or say 10 times the fee paid.
Such a ‘cap’ on liability does not yet exist in the UK, but it could be introduced to indulge accountants acting as company auditors. The liability concessions given to auditors cannot easily be denied to doctors, surgeons, dentists, engineers, butchers, supermarkets and producers of food, drink, medicine, automobiles, cigarettes, or anything else. This will be the beginning of the end of the consumer protection principle: that the wrongdoer should suffer the consequences of his/her negligence.
Simply putting the argument this way shows how absurd is the claim that accountants should have a financial limit placed on their duty of care.
More absurd still is the fact that the demand for a liability ‘cap’ is being pushed, as Prem notes, by PricewaterhouseCoopers, KPMG, Deloitte & Touche and Ernst & Young. These firms, as he reports:
audit 97 per cent of the FTSE 350 companies, as well as major companies in other countries.
Their combined income of US$80bn is exceeded by the gross domestic product (GDP) of only 54 nations.
They claim that their survival is under threat, even though lawsuits against negligent auditors are rare.
And as Prem also points out:
Their annual audited accounts do not provide any meaningful information about their liability costs, insurance cover, legal or out-of-court settlements.
Why is that, I wonder?
Could it be that this is just a way of seeking to increase their already enormous annual earnings? I think that is all there is to this. And in accordance with the pattern we are seeing everywhere, the protection is given to those least in need of it.
Prem’s arguments are spot on – and thankfully have the support of the Association of British Insurers. It’s odd how often these days that those arguing for justice for civil society and investors find themselves working in harmony against the vested interests of management of large companies and their auditors.
CNN Money has reported that Stanley O’Neal, who left Merrill Lynch as CEO today has left with a package of up to $160 million.
The company reported a loss of $8 billion last week on sub-prime mortgages.
O’Neal has made 2% of that to walk away.
I’m not sure what I find more offensive:
1. Lending to people who you know cannot repay;
2. Paying people small fortunes to decide to buy that debt;
3. Losing pensioner’s money, because that was, at the end of the day, used to finance these deals – after all – most stock holding is now in mutual funds of some sort or other;
4. Paying $160 million to reward incompetence.
If you tell me you think this economy is sustainable I won’t believe you. It isn’t. Justice requires that it isn’t. And justice tends to have its way, in the end.
The FT has reported that the Isle of Man has concluded Tax Information Exchange Agreements (TIEAs) with the Nordic countries to follow on from those it concluded with the US in 2002 and the Netherlands in 2005.
The TIEA covers two issues. The first part covers shipping and aircraft taxation and means international businesses from those sectors based in the Isle of Man will not be taxed in the Nordic countries. This is no big deal. These sectors have almost fallen out of tax anywhere in the world now.
More important, the TIEA provides for tax information to be exchanged on a case-by-case basis.
The Isle of Man hopes as a result that they will get credit from Organisation for Economic Co-operation and Development member states, which have long-standing concerns about harmful tax practices. This is somewhat ironic when last Friday the Isle of Man had to admit that its tax system was still considered to be harmful by the EU as it still retains all the “ring fences” that are the surest indication of harmful tax practices by the EU and OECD.
All of which means that the claim by Allan Bell, the island’s treasury minister that the IoM is:
a responsible nation hosting quality international businesses
just a touch ironic. Because as the EU has shown, it’s not responsible at all. It’s pursuing abusive practices, and so, I suspect, are most of the companies located there.
But then I’m well aware that the same Minister has said for some time that everything I have said about the IoM is wrong. Odd how I was proved right by the EU and he was proved wrong in that case.
Dennis Howlett has written a good blog on this issue.
I won’t quote at length. I’ll just suggest you go and have a read. It’s worth it.
I know Nicholas Sarkozy has proposed it and now it is catching on: the latest craze is tax-free overtime. Malta is the latest mimic. As Maltatoday reports:
Alfred Sant has once again set the country’s agenda by proposing that all overtime should be made tax-free.
You just have to presume those who propose these things are either mad, naive or are trying to undermine the tax system. There’s no other possible explanation.
As has been reported of the Maltese proposal:
[The] proposal has been met with scepticism by former finance minister Lino Spiteri and veteran economist Karmenu Farrugia, who have warned that if overtime taxes are removed, employees will be encouraged to shift income from their basic pay, which will still be taxed, to overtime hours which will become tax-free.
Too true. But let’s imagine the benefit to the self-employed for a moment. They will set a basic hourly working requirement of 35 hours a week for which they will pay minimum wage or little more, and then pay massive overtime rates. It would make the dividend wheeze that is currently causing so many problems in the UK look like small beer by comparison.
This idea is mad. I just hope the French realise that is the case before they try it.
| © 2005 - 2011 Tax Research UK. Some rights reserved.  |
Suffusion theme by Sayontan Sinha |
