2009 September » Tax Research UK

Looking to be worst idea idea of the day

Sep 282009

[Alastair Darling] will attempt to seize back the initiative on the economy – and deflect Tory claims that Labour is reckless with the public finances – by announcing in his conference speech plans for a new law that will force governments to keep the public deficit under control. This year the deficit has soared to 12.4% of GDP, more than four times the level it was in 2006. Next year it will be 11.9%.

As lunatic as decreeing budgets should balance. This is economics from the world of make believe. Deficits are a necessary part of the business cycle. Ban that and we’re really back in boom and bust.

And that will be a nail in Gordon’s coffin.

Perhaps that’s what Darling wants.

Memo to the IASB, from the G20: include stakeholders

IASB Comments Off

Sep 272009

The G20 communiqu?© says:

We call on our international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process, and complete their convergence project by June 2011. The International Accounting Standards Board’s (IASB) institutional framework should further enhance the involvement of various stakeholders.

The International Accounting Standards Board has a long way to go. Their record with civil society on IFRS 8 is dire. Their refusal to recognise anyone but a provider of capital as a user of accounts is a flagrant breach of their public duty.

Memo to the G20, from civil society: bring them into line.

Unemployment will soar

Economics 3 Responses »

Sep 272009

The message is about Germany. But it’s the result of the election of a more right wing coalition.

If it does (and I suspect it will) I hope it’s a lesson the people of the UK note.

Because that’s the one promise the Tories can deliver on here.

Compass warning

Politics 10 Responses »

Sep 272009

The left of centre think-tank Compass has noted:

The Labour party is not just facing electoral annihilation in only eight months time; the people the party seeks to defend don’t just face years of bleak Tory government: the very prospect of re-election, ever, now stands in jeopardy. This is not just because of the scale of the likely defeat and its nature. Much more worryingly three unprecedented factors could come into play if the Tories win:

- First, an incoming Conservative government has pledged to cut the number of parliamentary seats by 10%. This will hit Labour hard because the biggest reduction will be in Labour strongholds such as Wales and industrial and urban areas which have seen population flight. One electoral expert has predicted that of the 65 seats that will go, a conservative assessment would be that 45 of them are Labour.

- Second, the likelihood of the SNP winning a vote on Scottish independence increases considerably with the election of the Tories in Westminster. New polling conducted for Compass shows that 34% of the Scottish electorate ill be more likely to vote for the SNP promise of an independence referendum by the end of 2010. This could be enough to see a Yes vote go through. There are currently 59 Westminster seats in Scotland and 41 of them are Labour. They would all be lost.

- Finally, an incoming Tory government is very likely to introduce new party funding rules, which will break the link between Labour and the unions and further destabilise a party heavily in debt and its declining membership base.

These three factors could then combine to ensure that an already intellectually and organisationally weak party fails ever to recover.

The answer – to save democracy from the ever encroaching threat of a very pernicious form of Tory takeover? PR. Labour has to do it. A majority have to have their say. We might never have that chance again.

I am reminded of a comment Alvin Rabushka, creator of flat taxes made to me:

The only thing that really matters in your country is those 5% of the people who create the jobs that the other 95% do. The truth of the matter is a poor person never gave anyone a job, and a poor person never created a company and a poor person never built a business and an ordinary working class guy never drove economic growth and expansion and it’s the top 5% to 10% who generate the growth for the other 90% who pay the taxes to support the 40% in government. So if you don’t feed them [i.e. the 5%] and nurture them and care for them at the end of the day over the long run you’ve got all these other people who have no aspiration for anything more than, you know, having a house and a car and going to the pub. It seems to me that’s not the way you want to run a country in the long run so I think that if the price is some readjustment and maybe some people in the middle in the short run pay a little more those people are going to find their children and their grandchildren will be much better off in the long run. The distributional issue is the one everyone worries about but I think it becomes the tail that wags the whole tax reform and economic dog. If all you’re going to do is worry about overnight winners and losers in a static view of life you’re going to consign yourself to a slow stagnation.

This seems to me to be what the Tories believe – and they want to claim the right to govern for that group alone.

PR stops that.

That’s why we need it. Now.

Cheating, so common we don’t even notice

Ethics, ICAEW, Tax avoidance 14 Responses »

Sep 272009

Will Hutton in the Observer:

Cheating is ubiquitous. Three sports – rugby, football and Formula One– are on the rack as coaches, players and drivers are discovered flagrantly flouting the rules. The world’s top banks have hidden trillions of dollars of near-valueless securities in offshore tax-havens, deceiving taxpayers, regulators and investors. The consensus is that next year’s rise in the top tax rate to 50% will raise hardly any extra revenue, for high earners will successfully cheat on their obligations.

Cheating is so common we don’t even notice.

Want an example? Take this:

HM Revenue & Customs, concerned that sports clubs and players might be using image rights as a means of tax evasion, are investigating all 12 Guinness Premiership rugby clubs. County cricket and rugby league are also under scrutiny and top football clubs could be the next target.

"It is clear that the Revenue sees this area as a potential tax loophole," said one rugby club official, who asked not to be named. "Some clubs face a potentially large bill if the Revenue finds instances of image rights being paid in lieu of salary, thus avoiding PAYE and National Insurance, but there is a feeling that it is using rugby and cricket to establish ground rules before moving on to the biggest football clubs where the potentially big money lies."

"I think there are instances where a player does not have any value to his image rights but still receives a payment," said Chris Caisley, a partner of the law firm Walker Morris and a former chairman of Bradford Bulls. "There are other examples where the image rights of a player are worth more to a club than his contribution on the field. I’d expect the Revenue to target those players whose image rights are not worth anything."

This whole thing is, let’s be candid, a fabrication. It’s normal to assign the benefits arising from your employment, including copyright and patents to your employer. So in this case, the split is artificial anyway.

And it’s more than that. It creates cheats. Clubs who cheat. Players who cheat. Accountants who cheat. And more. All complicit in what is fraud: not criminal fraud necessarily, but a deception to secure financial advantage nonetheless and fraud as a result.

The clubs say:

"What we need in this is clarification," said the Premier Rugby chief executive, Mark McCafferty. "It is about establishing ground rules, such the percentage of salary that can be paid into an image rights company."

The Professional Rugby Players’ Association are not perturbed by the investigation. "The only issue we would have is if we felt unfair penalties were being imposed," said the chief executive, Damian Hopley. "Rugby union is enjoying a high profile and young players emerging are finding themselves f?™ted in a way their predecessors were not. All we want from HMRC is clarity."

Let’s translate that: they’re saying “What can we get away with?”

Society cannot be built on this type of fraud. It creates cheats. It creates mistrust. It undermines trust.

And let’s be unambiguous about this: much of this is down to accountants still arguing tax avoidance is acceptable. It is not. It is outright abuse. It is getting round the law.

I look forward to the day I hear the Institute of Chartered Accountants in England and Wales, ACCA, and the Chartered Institute of Taxation say unambiguously “tax avoidance is unacceptable and an abuse of society”.

When will it happen? I don’t know. But I’m willing to work for it. Nothing else will do. And it damns the profession that none have done so.

Cayman begins descent into chaos

Cayman 9 Responses »

Sep 272009

Schools talks collapse | Cayman News Service.

Cayman’s government is rapidly descending into chaos. On Friday a major contractor stopped work on two projects.

Cayman, of course, blames the UK.

The UK requires Cayman to show capacity to repay loans – top line, revenue generating capacity called tax. The UK is right to do so. If Cayman goes bust the burden is the UK’s.

Cayman refuses to tax.

The corruption of tax havens / secrecy jurisdictions is writ large here: ultimately the rfusal to tax on behalf of the wealthy hits hardest those most vulnerable in any society. In this case it’s Cayman’s children. But that’s just a metaphor for the bigger picture.

This is an issue the UK has to win and Cayman has to lsoe, for the sake of us all.

Hat tip: Chris Hopkins.

Storm over tax ‘amnesty’ security checks

Amnesty, HMRC 1 Response »

Sep 272009

Storm over tax ‘amnesty’ security checks – Tax, Money – The Independent.

Storm?

Come on – actually a form trying to make excuses as to why the amnesty should not work.

So one or two names will be listed that should not be. Yes, that’s an issue. And at some time in the future they may get a letter asking why they have not followed up. To which the answer will be a copy of this article.

This storm fails to make tea cup status.

TJN USA reaction to G20

G20 2 Responses »

Sep 262009

TJN USA has issued a statement following the G20:

We are heartened by the G-20’s renewed commitment to cleaning up tax havens, building on the progress that it made at the London summit last April. However, we are concerned that the G-20 really needs to do much more to translate this commitment into reform.

While the G-20 communiqu?© states (para. 15) that its “commitment to fight non-cooperative jurisdictions has produced impressive results,” in our view, it relies excessively on the OECD’s Global Forum on Transparency and Exchange of Information. That program, while helpful, has so far been limited to requiring tax havens to agree to provide information “upon-request.” As experience has shown, this approach is costly, time-consuming, and a very poor deterrent.

We would like to see the G-20 apply more fundamental solutions. As discussed in our September 5, 2009 letter to the G-20’s Working Group Two, these include:

ÔÉº Automatic information exchange;
ÔÉº Stricter reporting requirements for the ultimate beneficial owners of trusts and corporate accounts;
ÔÉº Country-by-country financial reporting, to curb the massive global corporate transfer pricing abuses
that are occurring through havens;
ÔÉº Stricter codes of conduct for the “global haven industry” – the banks, law firms, and accounting firms that profit handsomely by actively enabling their clients to evade taxes

We welcome the fact (para. 42) that the G-20 recognizes the importance of dealing with illicit financial flows of all kinds from developing countries. The global haven industry provides the platform for all these flows.

It is important to emphasize just how large and profitable this industry is – even in these hard times. By our estimates, at least $11 to $15 trillion of private assets are sitting offshore, invested by way of tax havens, and paying little or no tax back home.

The recent UBS case in the U.S. demonstrated that wealthy countries are being victimized by the use of offshore havens. But the victims of this under-regulated system also include developing countries, which account for more than half of all untaxed offshore assets – almost all of which have been invested in First World banks and stock markets. This costs developing countries at least $100 billion of lost tax revenue per year.

James S. Henry, Board Member of Tax Justice Network, commented:

“Unfortunately, so far, the G-20’s bold rhetoric on the tax haven issue – “ending bank secrecy” (4/09) and “fighting non-cooperative jurisdictions” (9/09) – hasn’t been matched by its actions. Especially at a time when we are asking developing countries to spend tens of billions a year to reduce their CO2 emissions and mitigate the impact of global warming, we should be seeing much stronger leadership on this issue. So long as the global haven industry is permitted to continue business as usual, the G-20’s business with respect to tax havens will remain unfinished.”

Cayman Islands budget on hold as debt crisis worsens

Cayman Comments Off

Sep 262009

Cayman Islands budget on hold as debt crisis worsens | Business | guardian.co.uk .

The Guardian take:

The Cayman Islands leader, William McKeeva Bush, was today forced to postpone his annual budget as the British overseas territory’s debt crisis worsens.

The situation prompted financial leaders of the Caribbean territory to launch a blistering attack on the British Foreign & Commonwealth Office (FCO) minister, Chris Bryant, for demanding the tax haven introduces an employee tax to ward off disaster.

Anthony Travers, chairman of the Cayman Islands Financial Services Association and its stock exchange, argued: “The move from an indirect to a direct system of taxation is a seismic shift which has not been thought through and which is not justified on the facts.”

Despite its huge wealth, the overseas territory is strongly resisting pressure to levy taxes to escape a black hole caused by the cost of a large public infrastructure programme and dwindling licence fees from the financial institutions.

“I have canvassed senior business players in Cayman and they have indicated that at the first sign of a payroll tax they will have to consider their options,” said Travers. “I believe this will inevitably lead to job losses and it will affect both the highly paid and more junior members of staff and lead not to a revenue increase, but a decrease.”

So it least one person in the world believes in the Laffer curve.

And just for once, it may be right because 0% tax is not sustainable when you have nothing else to offer.

I also note:

Cayman Islands leaders are furious the islands and other tax havens have been blamed by G20 world leaders for helping to bring about thefinancial crisis. But campaigners argue so-called “secrecy jurisdictions” were central to creating financial instability that exacerbated the crash.

Too right we say that.