2009 May » Tax Research UK

Chums can’t regulate chums

Banking, Ethics Comments Off

May 152009

Lord Myners is savaged for "naivet?©" over his handling of Sir Fred Goodwin‘s £16.9m pension pot in a damning report by the Treasury select committee of MPs. The committee says that the City minister should have demanded that the former Royal Bank of Scotland chief executive be fired over his role in the bank’s downfall, instead of allowed to retire with an enhanced pension.

The explanation?:

[T]he committee says Myners was too trusting. "We suspect that Lord Myners’s City background and naivet?© as to the public perception of these matters may have led him to place too much trust in the RBS board"

I’ve said it before, and I will again: chums can’t regulate chums. That’s why Myners was the wrong man for the job. The committee seems to agree:

Among the committee’s 45 conclusions is a warning that the review on the future of regulation by the FSA chairman, Lord Turner, is too complacent about the role of City pay in the current crisis. "Such a stance sends out the wrong signals and will only serve to encourage some within the banking sector to believe they have a green light to continue with some discredited remuneration practices as soon as the political and media spotlight moves away from them," the committee, chaired by the MP John McFall, says.

and:

They put some of the onus for reform on Sir David Walker, the banker charged with reviewing corporate governance by the government. Despite arguing that they are "not convinced" Walker is the "ideal person" for the job, they call on him to tackle the "cosy club" that sits on banks’ boards.

Precisely. When will we learn.

Send in Prem Sikka. That’s what I say.

Bond markets lack transparency

Bonds, Economics Comments Off

May 152009

The Financial Times has noted that:

Retail investors are being prevented from investing in the UK corporate bond market because of the way the market is structured, according to a new report.

The Investment Management Association (IMA) has warned that investors find it difficult to understand the risks of different corporate bonds, because of the large number of bond issues and the complex way they interact.

It is also difficult to design and implement best execution rules that are “critical” for investor protection, the IMA said, because of the lack of transparency in the market.

This is a damning indictment of the City.

It is also a considerable obstacle to those of us who want to use bonds as the basis for rebuilding the green infrastructure of the UK, as suggested by the Green New Deal.

The fact is that almost all real investment in the UK is now financed by bonds, and almost none at all by share issues. And the fact is that both corporate shares and bonds remain unattractive precisely because business is so clueless about the future. After all, let’s face reality: no one needs new cars any more since oil is very obviously running out and there really are a limited number of electronic toys anyone needs. The need for investment is almost entirely in socially owned infrastructure because that is quite clearly what people are short of, in which case an effective retail bond market has to be established to let people buy the financial securities needed to fund that development.

Reform is needed, now. At least the IMA has recognised that.

Indian ambassador to Luxembourg says banking secrecy laws attract illicit funds

Banking, Corruption, Development, Secrecy jurisdictions, Tax Havens 1 Response »

May 152009

Jaimini Bhagwati, the Indian Ambassador to the EU, Belgium and Luxembourg has written in the Indian Business Standard, saying:

Anti-money laundering efforts will not succeed unless banking secrecy laws are repealed.

He added:

The enabling role of tax havens and banking secrecy in the illegal transfer of funds across borders has been often debated. Supporters of tax havens distinguish between tax avoidance which is deemed legitimate and tax evasion which is accepted as illegal.

In stark contrast, banking secrecy legislation which has helped international banks headquartered in developed and island countries to attract enormous deposits from the kleptocratic elite in developing countries has received less attention. The IMF defines money laundering as a “process in which the illicit source of assets obtained or generated by criminal activity is concealed to obscure the link between the funds and the original criminal activity”. Since banking secrecy makes it difficult for tax and other investigation agencies to pinpoint the linkages between siphoned funds and illegal activities, it facilitates money laundering. Therefore, the role of banking secrecy laws in promoting flight of capital out of developing countries needs to be examined and addressed.

Which he then does, concluding:

The phrase “hypocrisy on steroids” was in the news recently to describe those remedies for the financial sector crisis which extravagantly favour bank shareholders and creditors at the expense of tax-payers. To summarise, the same expression could be used to describe the specious grounds on which banking secrecy laws are sought to be maintained when one of their objectives is to attract illicit funds.

He’s right, of course.

But what is now so important is that people like him are saying this in places like India. Now this has begun the time for real change has arrived.

And I can’t help but think he’d have remarkably little time for the Luxembourg Institute for Global Financial Integrity.

I was just acting on professional advice

Ethics, Tax avoidance 11 Responses »

May 142009

Quote from Tory MP Andrew MacKay who has quit as parliamentary aide to David Cameron over what the party said was an "unacceptable" expenses claim:

I thought we were acting correctly. We were acting on the professional advice.

The excuse of tax avoiders everywhere.

Here it loud and clear: abusing rules is unethical.

The tax profession should take note.

Mark Thomas is angry

Ethics 4 Responses »

May 142009

The comedian Mark Thomas is another man I enjoy working with.

Today he’s angry. He’s threatening to launch a judicial review of the Speaker’s actions on MP’s expenses.

I’m seeing Mark on Tuesday. He can count me in.

Orwellian integrity

Luxembourg, Secrecy jurisdictions, Tax Havens 4 Responses »

May 142009

I am proud to work with Global Financial Integrity, based in Washington DC. They are committed to exactly what their title suggests: global financial integrity.

I was therefore astonished to note a press release saying:

The Luxembourg Institute for Global Financial Integrity announced its constitution yesterday.

Founded by private citizens from Europe and the United States, under the auspices of Jacques Santer, former Prime Minister of Luxembourg and President of the European Commission, the institute is a nonprofit organization, that addresses the integrity of the global financial sector and the social responsibility practiced by all of its stakeholders.

According to Mr. Santer, “We recognized that the global financial sector is in need of stronger ethical practices and standards based on the principles of integrity: transparency, fairness, responsibility and accountability”.

So far it sounds so good. But this body is based in Luxembourg. It’s first conference is to be

The institute will initiate its first open dialogue within the global financial sector and with public and private institutions by organizing a Conference on “Ethics, bank secrecy and fiscal paradise” in Luxembourg on the 10th and 11th of December, 2009.

Of course, that could be something I’d organise. But this is organised by two leading politicians from Luxembourg who are committed to bank secrecy and fiscal paradise. Let’s put it another way, and as genteelly as I can: they are committed to deception and misinformation, for this is what bank secrecy and fiscal paradise are about. They will argue they do so legally: who cares? Deception and misinformation can be legal and still utterly unethical. After all, apartheid was legal. It never made it ethical.

There is something extraordinarily Orwellian about the abuse of language in this process. Here we have an institute promoting what it calls global financial integrity based lead by leading politicians from a state that bases its whole financial services industry on secrecy, the denial of access to information and the consequent risk of abuse.

And funnily enough I note I’ve not had my invitation to join yet, although they claim:

The Luxembourg Institute for Global Financial Integrity, is now enrolling members who will be active in all aspects of the institute. Banks, institutions and service providers in the global financial markets are being invited to join the institute. Research Fellows and Visiting Research Fellows are being sought out and brought on board. Collaboration is being established with universities, think-tanks and nongovernmental organizations (NGOs) engaged in social responsibility and transparency within the global financial sector.

What’s the betting the fees will be very, very high?

Cayman in the news

Cayman, G20, OECD 2 Responses »

May 142009

TJN has two very important blogs on Cayman out today.

One is about their attempt to get off the OECD grey-list.

The other refers to their internal panic about being on it.

Both well worth reading.

Let’s have some real extremists

Ethics, Tax avoidance 2 Responses »

May 142009

Will Self has said:

[S]itting MPs have managed to alienate the electorate all by themselves, by using taxpayers’ money to clean their moat/change their light bulbs/boost their property portfolio. Frankly, I hope the lot of ‘em do lose their jobs at the next election, we need some extremists in parliament, not fascists or communists – but men and women of extreme probity.

I agree with that last comment.

The professions need the same reform as well.

And it has to be said, there are some in the House of Commons already. And even a few in the professions. But we do need to hear them more – pointing out, for a start, that tax avoidance is unambiguously wrong, just as much as is claiming unjustified expenses.

Should this man be in charge of a public service broadcaster?

Ethics 4 Responses »

May 142009

Luke Johnson wrote this in the FT yesterday:

Business is tough now, but it could get much worse.

The backlash against free market economics is growing. From the demented new laws surrounding hedge funds and private equity proposed by the European Union, to the 50 per cent-plus income tax rates introduced in the UK, to the nationalisation of Chrysler, socialism is in the ascendance.

Right now, entrepreneurs are focused on cutting costs, generating cash, meeting bank covenants and coping with generally ghastly conditions. Thousands of businesses are struggling to survive. But once they win that battle, a chronic and perhaps more wearing conflict awaits: the contest to stop the state expropriating so much or tying everything up in so much red tape that it all becomes more effort than it is worth.

It’s manic stuff. Regulating businesses that have brought our economy to its knees is apparently “spell[ing] trouble for those who invest, add value and create jobs.”

And “Sharply rising redistribution and regulation is hardly the way to encourage wealth creation. In a mobile world, risk takers will go where their skills are rewarded and where the opportunities are greatest.” But it is now clear that a) those who took the risk did so with other people’s money and walked away with the rewards whilst b) if wealth is measured in any way that does not equate to totting up the amount Luke Johnson has in his bank account then more equal societies (created in part by redistribution) are wealthier on every measure anyone can think of. I suggest Mr Johnson does just a little reading.

It’s also horribly phobic: Mr Johnson’s phobia is the ordinary person without his resources. As he says:

I attended a round table of entrepreneurs and senior executives from various industries. They worry about consumer spending, about debt, staff morale and so forth. But they all raise the issues of regulation and taxation, and how they are suffocating their companies: employment laws, planning laws, competition laws, health and safety laws, and so on.

Tax pays for people’s health and education: the people who he once employed on low pay in Pizza Express: on whose back he built his fortune and without that state security net he could not have paid them so little. Employment laws stop people being exploited by employer’s whose only definition of well being is their bank balance. Planning laws protect our environment, or should. Competition law protects us from monopolists. How many people owe their lives to health and safety laws. Would he drive a car if they did not exist? It’s hard to credit the callousness of what he has written.

Luke Johnson is chair of Channel 4. Channel 4 is a state owned public broadcaster. he was appointed by a labour government. He is not fit in my opinion to hold that office: he shows so by his contempt for society inherent in his article.

It says a lot about Labour that they put him in such a post.