2009 April » Tax Research UK

Caine joins the Vain Drain

Economics, Ethics, Tax avoidance, Tax management 14 Responses »

Apr 272009

I noted from the Daily Telegraph this morning that Michael Caine will be leaving the UK as a result of the 50% tax rate.

The Sunday Times meanwhile highlights that the semi-retired Peter Hargreaves and High Osmond might go.

And both highlight the loss of entrepreneurial ‚Äòtalent’. But that’s not true. These people are leaving to protect what they perceive of as wealth already accumulated.

Caine is at the end of his career. I admit that with the exception of Educating Rita I’m not sure what he ever did that was much good (but then, I’m no film buff).

Hargreaves has sold financial services products. Heard anyone who’s been singing the praises of their private pension, endowment or ISA of late? No? Well let’s not mourn Hargreaves leaving then.

And Hugh Osmond has done pizzas (which he got right, I admit) and since then pubs and insurance on the back of debt – and both are now stellar sections of the economy as a result of the entrepreneurial reforms of the last decade, you’ll note.

So let’s get real: these people were entrepreneurs. They’re not now. Now they’re the rich seeking to preserve their wealth. That does not mean they are the basis for building economies now. They’ve done that. And like all those who leave they do so because they’ve become risk averse – not because they’re risk takers. Their behaviour indicates a desire to preserve, not to risk.

It’s time we learned something I appreciated a very long time ago from working day in, day out, with real entrepreneurs who ran real businesses – that not one who was any good at it did it for the money. They do it because they’re driven to do something they believe in well. Tax makes almost no difference to that. And a 50% top tax rate will certainly have no impact at all on real entrepreneurs. Not least because their money will all be made in companies – and you might notice they don’t pay 50% tax.

So let’s stop the nonsense on this issue and face reality. Reality is entrepreneurs need safety nets to cover their risk. The state provides that for them. Most are happy to pay for it. It’s only the wealthy who aren’t. And very, very few of them are entrepreneurial any more.

Swiss seek tax treaty trade-off

Banking, Switzerland, Tax evasion Comments Off

Apr 272009

The FT says:

Swiss and US officials will meet in Bern on Tuesday for their first talks on a new tax treaty after Switzerland asked the Obama administration to drop a legal case involving the Swiss bank UBS in exchange for the accord.

The talks were announced earlier this month.

NO! NO! NO!

This is completely abusive and wholly unacceptable.

And if that was not enough bad news for banking…

Banking 1 Response »

Apr 272009

The FT. reports that:

Sir Win Bischoff has emerged as a possible candidate to take over the chairmanship of UK Financial Investments, the government body that oversees investments in the banking system. Sir Win, who recently stepped down as chairman of Citigroup, is one of a number of candidates being considered for the position.

Wkikpedia notes:

On February 27, 2009 Citigroup announced that the United States government would be taking a 36% equity stake in the company by converting $25 billion in emergency aid into common shares.

Surely, surely, someone realises those who got us into this mess aren’t those to get us out of it?

Don’t they?

Branson keen on Northern Rock’s good half

Banking 1 Response »

Apr 272009

The FT says:

Sir Richard Branson’s Virgin Money has revived its interest in a potential purchase of the healthiest parts of Northern Rock, the mortgage lender it tried to buy last year before the government decided to nationalise it.

Staggering, isn’t it?

Worker representation is essential

Banking Comments Off

Apr 272009

As the Guardian has reported:

Worker representatives should sit on company boards as part of a wide-ranging revamp of the way big companies are run in the wake of the economic meltdown and near-collapse of the world banking system, a shareholder activist group says .

Alan MacDougall, head of Pirc, which advises pension funds responsible for assets worth £1.5tn, says employees should be elected to company boards "and act as a counterweight to entrenched interests" in much the same way as workers are represented at the top of leading companies in Germany.

Absolutely essential right now.

Let’s start with the nationalised banks.

Boots looks to follow Tesco’s bank lead

Banking 4 Responses »

Apr 272009

The FT has written:

Boots is taking a leaf out of Tesco’s book by considering a move into personal banking among a range of different services as it looks to transform itself from being a shopkeeper of shampoos and medicines to a broader business.

Boots is, of course, a Swiss controlled company these days.

So Swiss banking is coming to the High Street.

I’m sure that’s just what we need right now.

The Foot Review – Consultation Questions

Foot Review, Secrecy jurisdictions, Tax Havens 3 Responses »

Apr 272009

I thought it worth pulling out the consultation questions in the Foot Review Interim Report into British Offshore Financial Centres (note the title: it says a lot). They are:

1. What is the short to medium term outlook for the financial centres covered by this Review?

2. What are the implications of this outlook and how could downside risks be minimised?

3. Given the close links between the UK and these jurisdictions, should more be done to strengthen regulatory co-operation between the UK FSA and the local regulators?

4. In respect of retail products sold into the UK from some of the financial centres, is there a level playing field between UK suppliers and those operating from the financial centres and, if not, is change necessary?

5. Is the extent of the ‚Äòsafety net’ in place for retail consumers a material factor in the attractiveness of a financial centre as a location for financial services firms and consumers of financial services?

6. Are current resolution and intervention powers sufficient to maintain the confidence of providers of financial services in the financial centres covered by this Review and that of institutional and retail consumers of these services?

7. What action might be taken by the UK or internationally to assist in closing any gaps?

8. To what extent are the economic models in the financial centres covered by this Review reliant on being low tax jurisdictions?

9. How can the financial centres ensure that their tax models remain sustainable in the light of changing international standards and attitudes on tax evasion and avoidance?

I think the tone of these says a great deal:

The UK is covering risk (questions 1, 2, 3, 6)
The dedication to competition remains in the Treasury (4, 5)
The UK can intervene (3, 7)
Tax is only an issue in financial competitiveness (8, 9).

Of course there are questions in there on which broader concerns can be addressed. Questions 1 and 2 allow the broader picture to be addressed, although it is not what the Foot Review expects.

Questions 3 and 7 allow reform to tackle tax abuse to be demanded.

Questions 8 and 9 allow the issue of ‚Äòtax competition’ to be addressed.

I’ll be looking at these issues over the next few weeks. I would encourage as many people as possible to make submissions.

Should we have a 50% tax rate?

Tax management 18 Responses »

Apr 262009

William Keegan in the Observer said:

For example, [the Conservatives] are viscerally opposed to a 50% top rate of tax, but such is the gravity of the fiscal crisis they for some reason wish to inherit that in the immediate aftermath of the budget they could not bring themselves to
pledge a reversal.

This reluctance to foreswear a potential source of revenue is somewhat inconsistent with the view that "It won’t raise much revenue anyway". I am reminded of the time when, the day after his 1988 budget, Nigel Lawson claimed that reducing the top rate of income tax from 60p to 40p would not cost anything and might indeed raise revenue via incentive effects. That pious hope was not borne out by subsequent Inland Revenue accounts.

And what do I think of that 50p top rate? Well, dear reader, since you ask, I think it should have been introduced in 1997, when the country was under the forgivable illusion that it had elected a Labour government. As a well-heeled friend says: "I should have been happy years ago to pay a higher rate to finance better schools and hospitals, but I object to being made part of a package to bail out bankers.

Quite so.

But let’s also be clear: forget the hullabaloo about the justice of this. Let’s also forget discussion about the practicality of this. It can be made to work. The only real question is why a Labour government did not do it in 1997. And why a Labour government cut the base rate rather then cut borrowing since then. And why a Labour government has cut capital gains tax so much since then.

None of those cuts were needed. Think where we’d be without them.

Tax system penalises single income households

Accountancy, Ethics, Tax avoidance Comments Off

Apr 262009

This is the shocking revelation from Grant Thornton (Mike Warburton) and the ACCA (Chas Roy-Choudhury) in the Sunday Times.

The piece is written as if this is shocking. Have these two not noticed that those who can afford to have one working spouse get what many in society consider to be benefits as a result, and that this imbalance is, therefore, appropriate?

I see all around me the cost of two working parents. Of course they should pay less tax – their child care costs a lot more, for one thing.

But that’s not how the ACCA see it. For them this is a tax planning opprtunity. Roy-Choudhury says:

The income-splitting measure has clearly been put into the long grass ‚Äî the government can’t work out how to unwind these schemes.

It is good news for single-income families who will be increasingly looking to minimise their tax burden by taking advantage of their spouse’s personal allowance or looking to convert their income into dividends or gains.

According to the papers in the budget, measures to defer income-shifting arrangements cost the Revenue £500m.

But note the ACCA thinks this is ‘good’ government spending to be encouraged.

Yet again I despair of professional ethics.