2010 March » Tax Research UK

Which Islands where they looking at

Guernsey, Isle of Man, Jersey 24 Responses »

Mar 312010

The House of Commons Justice Committee has published a report on the Crown Dependencies. It’s a weird and very confused document in a great many ways but then a friend in Jersey sent me an email which summarised the issue better than I could have possibly done, asking:

What do you make of this please?

"…the Crown Dependencies are democratic, self-governing communities with free media and open debate. The independence and powers of self-determination of the Crown Dependencies are, in our view, only to be set aside in the most serious circumstances…."

"…that it should be used only in the event of a fundamental breakdown in public order or of the rule of law, endemic corruption in the government or the judiciary or other extreme circumstance, and we see no reason or constitutional basis for changing that formulation…"

Which Islands are they looking at?

Should we recommend Specsavers?

It’s worse than that. This is myopia of the willing. And I know of no cure.

Forced bank break-up makes sense, says Bank of England

Banking Comments Off

Mar 312010

Forced bank break-up makes sense, says financial stability chief | Business | The Guardian .

Breaking up the UK’s banks into smaller and more resilient units was floated by the Bank of England today as one of Threadneedle Street’s top officials warned that tougher regulation might not be a strong enough response to the crisis of the past three years.

Yes! Yes! Yes! Do it.

For this reason:

Andrew Haldane, the Bank of England’s executive director for financial stability said there had been permanent damage to the global economy caused by the banking crisis and that if all of it persisted the loss could be as high as $200tn , of which Britain’s share would be £7.4tn.

“Banks would not have deep enough pockets to foot this bill. Assuming that a crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5tn per year. The total market capitalisation of the largest global banks is only around $1.2tn. Fully internalising the output costs of financial crises would risk putting banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite.”

Quite.

I’ve argued for this for a long time.

And if ever evidence was needed of why we need financial transaction taxes to retrain bank trading this is more to add to the existing pile in its favour.

GDP up – thanks to public spending

Economics 23 Responses »

Mar 312010

GDP up – thanks to public spending and car scrappage | Business | The Guardian .

The Guardian reports:

Alistair Darling‘s insistence that the economy would still be stuck in recession without a leg-up from the Treasury was boosted today by news that public spending and the car scrappage scheme had been essential to generating a recovery in the final quarter of 2009.

While GDP growth at the end of last year was a better than expected 0.4%, according to the Office for National Statistics – up from its previous estimate of 0.3% – analysts said the detailed new figures revealed that taxpayers’ support had been critical in generating the first quarter of expansion since spring 2008.

Of course that’s the case.

The private sector cannot make up the slack in the economy at present. Only the state can. Which is why cuts make no sense at all and a Green New Deal does.

The reality is simple: we need more state spending now, not less. There is no other way out of this situation.

Just when you need a Labour party there is none in sight

Election 1 Response »

Mar 312010

I long for a real Labour voice to slam this City-fearing trio | Simon Jenkins | Comment is free | The Guardian .

Simon Jenkins has written in today’s Guardian:

Same old problem. Just when you need a Labour party there is none in sight – and clearly not one in the coming election. On Monday eveningthe parties’ three economic spokesmen went head to head and stroked each other to a draw. They nattered away like cleaning ladies over how to clear up after the great bankers’ ball. There were smashed derivatives, defaulted swaps and toxic turds strewn everywhere – and who, they said, was going to pick up the £170bn bill?

None of them discussed whether the party should have been allowed in the first place. I suddenly craved some good old Labour blood and guts, an Arthur Scargill, a Tony Benn, a Michael Foot, a Nye Bevan, someone to shout in their faces: “You blew it! When those petrified, knock-kneed smoothies from the City came pleading for help, you caved in and gave them the people’s money. You panicked, you bunch of creeps.”

I’m sure he’s not alone.

But let me also say why hgis wish may at present be forlorn. Step outside the accepted paradigm and I can assure you the whispering campaign against you is very powerful and very strong indeed.

I know. I’m well aware of the whispering campaign against me from big business, vested interests in academia and more besides. The Old Boy network – or maybe the New Money network, likes to have things all its own way. A real Labour politician would upset that.

Which is why we need the likes of Jon Cruddas to take a much more prominent role in the next parliament – a man who knows who he is and what he stands for. Far to few politicians have that insight.

The reality of unlimited liability

Banking, Ireland 13 Responses »

Mar 312010

FT.com / Europe – Irish banks face shortfall of €32bn.

The FT notes:

Ireland’s banks face a capital shortfall of up to €32bn, the country’s regulator and finance ministry said on Tuesday, with the Irish government liable for up to three-quarters of that figure.

The black hole, equivalent to about 20 per cent of gross domestic product, is far bigger than expected.

The peoiple of Ireland are discovering, as have the people of Iceland before them, the reality of limited liability. The upside belongs to shareholders. The down side is public.

There is no chance of building the new economy that is needed unless the asymmetry of this situation is reformed and yet almost no thinking has been done on the issue.

It’s one I want to work on because quite clearly this cannot persist.

Are votes saying ABC?

Election 1 Response »

Mar 312010

Gordon Brown likely to stay as PM in hung parliament | Politics | The Guardian .

A hung parliament is increasingly likely.

Are votes aying “Anything but Cameron”?

Time to face tax realities

Tax avoidance, Tax management, TUC Comments Off

Mar 302010

I have just got a transcript of a hearing before the House of Commons Public Administration Committee where Liam Byrne MP, Cabinet Office and HM Treasury was being cross examined by Labour MP Levin Hopkins, who asked:

Q159 Kelvin Hopkins: That sits alongside the fact we have a weaker economy than Germany and a massive trade deficit with Europe and the rest of the world. Let us look again at revenues. The statistics that came originally from Richard Murphy and others suggest that tax avoidance loses us £25 billion a year; tax evasion loses us £70 billion a year; and uncollected tax amounts to £27 billion to £28 billion. Half of that is not collected by HMRC simply because it does not have the resource to chase it. The estimate of the tax gap is £125 billion a year. Obviously, we will not collect all of that, but if we just addressed the tax gap and went for, say, one fifth of it‚Äî£20 billion or £25 billion‚Äîthat would solve all our problems. We also have tax relief on savings to the rich which amounts to £20 billion and £30 billion. If we cut back on some of that we would have a massive increase in income and solve all our problems, but we refuse to face up to it. We never talk about revenues; we always talk about spending. Is that not the solution to our problems?

Mr Byrne: I strongly agree with your point about the tax gap. It is a constant job of work and in part is the reason we were so keen as part of the G20 accords to go further in closing tax havens. I believe that will remain an important feature of HMRC’s policy reform work over the years to come. We have to be constantly on the look out for new ways to approach this. For example, the TUC has proposed some general anti-avoidance principles which warrant serious study, but on the point about tax reliefs for the well off what we have tried to do in introducing £19 billion of tax increases over the next three or four years is load over half of that new tax take on the top 5% of earners in the UK. That has been accomplished to some degree by the introduction of a new 50p rate, but in addition a lot of money comes in by way of the introduction of reform of pension relief. We have conducted a degree of rebalancing though perhaps not as much as I suspect you would like, but we have sought to introduce these new taxes in a fair way.

Q160 Kelvin Hopkins: I would like to go further than that. Apart from corporation tax, I am not talking of changing tax rates but about collecting the tax that could be collected and which would solve all our problems.

Mr Byrne: I agree that remains a problem.

Kelvin is, of course, referring to The Missing Billions and my recent report for PCS. My emphasis added, of course.

Liam Byrne refers to successive TUC requests for a General Anti-Avoidance Principle, I admit at least in part inspired by me.

And I am pleased to note Liam Byrne agrees both raise important issues. Someone is going to have to tackle both very soon.

Is the People’s Bank on its way?

Banking Comments Off

Mar 302010

Post Office told to cut Bank of Ireland ties as it expands banking services | Business | The Guardian .

The New Economics Foundation has campaigned for some time for a People’s Bank, and I have supported it in doing so.

Now it looks like it may be on its way – based in Post Offices.

There are three pre-conditions:

1) Cut the existing contract with the bakrupt Bank of Ireland – on the grounds that it is bankrupt

2) Make this bank a state owned entity

3) Train high quality staff to work for it. This must be no second rate operation.

We need it, now. It’s a scandal that even now vast numbers of people in this country have no proper access to properly regulated and reasonably priced financial services.

How widespread is fraudulent accounting?

Accounting, Ethics Comments Off

Mar 302010

FT.com / Companies / Banks – SEC launches ‚ÄòRepo 105’ probe .

The FT has noted:

US regulators on Monday asked more than 20 financial groups whether they engaged in transactions along the lines of “Repo 105” – an accounting device that helped Lehman Brothers conceal its high leverage ratio during the financial crisis.

The corporate finance division of the Securities and Exchange Commission wrote to chief financial officers of “close to two dozen” large foreign and domestic banks and insurers, demanding details of repurchase agreement deals.

The SEC probe includes whether companies booked repos as asset sales for accounting purposes over the past three years, and whether these deals were concentrated with certain counterparties or certain countries. Regulators also asked companies to quantify the amount of repos that were disclosed as asset sales and to explain the “business reasons” for use of these structures.

It is very obvious regulators do not think the Lehman case was an isolated one.

I too would be surprised if it was, but I say so without any enthusiasm. In my opinion this accounting ruse – for that is all it was – is fraudulent. I stress, I use the word fraudulent without implying criminal action. Fraud means:

deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.

That seems an entirely appropriate description of what happens in repo transactions. They may be legal. They may even comply with accounting rules. They’re still fraudulent in my opinion for the precise reasons that the definition makes clear: they are deceitful, trickery, sharp practice and a breach of confidence perpetrated for profit or to gain an unfair or dishonest advantage.

And that says a lot about accounting rules, those who set them and those who go out to abuse them. It says even more of those who seek to exonerate such behaviour, which reminds me of a comment in the Guardian last week by Mike Warburton of Grant Thornton who said when commenting on the budget:

Clamping down on offshore tax avoidance is like catching a bar of soap. I’m always sceptical when chancellors say it will bring in millions of pounds because fertile minds always find their way around the rules.

Which doesn’t stop such behaviour being fraudulent, as I define it here. And doesn’t stop the behaviour of the tax and accounting professions when engaged in such activity being profoundly anti-social at best, and decidedly harmful to the well-being of society at worst.