2010 March » Tax Research UK

Germany sets conditions for Greek rescue

Economics, Europe Comments Off

Mar 232010

FT.com / Europe – Germany sets conditions for Greek rescue.

The FT notes Germany has set conditions on the EU assisting Greece:

If there were to be agreement on a “mechanism” to provide such assistance, he said, it could only be triggered once Greece had exhausted its capacity to raise money on the international capital markets; the IMF had agreed to make a “substantial contribution” to a rescue package; and the EU members has agreed to negotiate new rules to prevent any reoccurrence of such a debt crisis.

The paradox of the last is I presume lost on the Germans.

Recurrance is always going to be likely whilst they insist on running a large surplus.

What are they going to do to stop that is the question?

What’s needed from the budget

Economics 8 Responses »

Mar 232010

Tomorrow’s budget is a massively political event. Unlike almost all pre-election budgets for a long time there are no freebies to give away: the government’s finances are too tight for that. But this does not mean the event lacks interest; far from it – this only adds to the piquancy.

So what is needed? Bu heading, I suggest the following.

The Economy

A programme for growth. The Treasury admit that for every £1 billion invested in the economy more than £1 billion is recovered by HM Treasury. So now is the time for significant public spending. This is the moment for the Green New Deal.

Particular needs:

1) A ‚ÄòGreen’ investment bank

2) More lending to small and medium size business

3) Direct stimulus through short term projects. We still have an enormous back log of small infrastructure projects to do. Now is the time to do them.

The Exchange Rate

Don’t do anything to increase the value of the pound – we have to price ourselves into work.

Cuts

We have well over 2 million unemployed. We don’t need cuts until this number is tumbling.

Then we’ll need cuts.

Until then cutting increases government costs and borrowing. And what is the economic logic of paying a teacher to sit at home when they could be teaching?

So, quite simply – say there are no0ne for now and the budget will be rebalanced by growth – which will pay for itself, as Keynes not only said, but which history has proved.

Savings

Cut Trident.

Cut aircraft carries.

We can’t afford either and don’t need them.

Tax increases

We do need them. This is the only acceptable way to re-balance the books right now ad reduce inequality. We need:

1) 50% tax rate at £100,000

2) Maximum of £5,000 of allowances per annum for all earning over £100,000 to stop avoidance

3) A General Anti-Avoidance Principle

4) Abolition of the domicile rule

5) New rules for tax residency – I favour a passport based scheme

6) Reform of small business taxation to stop income shifting abuse

7) A Robin Hood Tax

8 ) Withdrawal of tax relief on all wages paid over ten times UK median wage – i.e. about £230,000 a year

9) A 2% increase in corporation tax to pay for increased investment in our universities

10) Enhanced tax penalties for tax evaders – the one thing we know we’ve been promised.

11) Capital gains taxed at income tax rates

12) A restriction on bank loss carry forward

13) A 10% additional tax on bank profits

14) Restrictions on ISAs so only green ISAs get relief in future

and most importantly:

15) At a minimum reintroduce the 10% tax band but with no benefit to those on higher rate

We definitely do not need:

a) VAT increases

b) Anything that makes the UK look like a tax haven

c) Corporation tax cuts

Chances?

If Labour wants to win, high.

If they want the Tories to win because they want them to carry the can for the mess their banking friends made, low.

Time to target tax evasion properly

Secrecy jurisdictions, Tax evasion, Tax Havens Comments Off

Mar 232010

The FT has reported:

Alistair Darling will on Wednesday announce punitive fines for taxpayers who hide money offshore in a Budget crackdown designed to protect at least £1bn of revenue under threat from evasion schemes, according to government officials.

The chancellor is expected to unveil plans to double the maximum penalty for offshore evaders to 200 per cent of the tax owed, under a series of measures that extends further a £5bn assault on tax evasion and avoidance announced in December’s pre-Budget report.

“These people with large bank balances who are hiding money offshore should be running scared of this announcement,” one Whitehall official said. “HMRC is becoming incredibly good at finding out who these people are and it’s going to cost [the evaders] a hell of a lot.”

Of course I welcome this.

I wish I was sure that “HMRC is becoming incredibly good at finding out who these people are”. But I’m not.

There are three reasons. First, HMRC does not have enough people. Like it or not IT can’t do all this.

Second, Tax Information Exchange Agreements are the only real weapon available right now – and despite the bluster HMRC know they don’t work or they would not have negotiated the Liechtenstein deal – which was way above TIEA levels. That’s because TIEAs incorporate an inherent problem. A request for information under a TIEA must provide or state:

   (a) the identity of the person under examination or investigation;
   (b) what information is sought;
   (c) the tax purpose for which it is sought;
   (d) the grounds for believing that the information requested is held within the jurisdiction of which request is made;
   (e) to the extent known, the name and address of any person believed to be in possession of the requested information.

The reason for the low number of information requests becomes obvious immediately.

Third – we need automatic information exchange. This is possible and deliverable. I explain how here. As I argue there:

Countries do not need to know the precise details of interest, profits, gains or other income accruing to offshore structures created by, owned by, or which benefit people resident within their jurisdictions to enable them to make an effective enquiry under a tax information exchange agreement. They simply need to know:

   1. That such a structure exists (a bank account qualifying by itself as a structure for this purpose);
   2. What each component (trust, company, or foundation) is called;
   3. Who manages it;
   4. Where it banks;
   5. Who in their jurisdiction benefits from it.

If this data were available it is likely that almost every country in the world could and would substantially increase the number of tax information exchange requests that they might make using the proposed network of Tax Information Exchange Agreements.

This data could be made available easily and quickly – states should already have access to it for anti-money laundering purposes. This is the way to kill offshore tax evasion for good. That’s what I really want to hear.

Mining fails to produce golden era for Ghana

Development Comments Off

Mar 232010

FT.com / Global Economy – Mining fails to produce golden era for Ghana.

As the FT notes:

In the past 18 years alone, miners have extracted 36m ounces of the yellow metal from Ghana’s seams, generating about 40 per cent of export earnings. Fewer Ghanaians live in poverty now. But a third of them still cannot read, and a quarter will not see their 40th birthday.

Tax breaks and other incentives mean that of mining revenues totalling $2.1bn last year, only $146m – or 7 per cent – was paid to the state in royalties, taxes and dividends, according to the Chamber of Mines.

The Tax Justice Network is active in Ghana.

It needs to be – as the FT notes, there is continuing injustice in the country.

Britain has bigger problems than the unions

Conservatives 6 Responses »

Mar 232010

FT.com / Columnists / Philip Stephens – Britain has bigger problems than the unions.

Sound comment in the FT this morning:

So it is back to the 1970s. Or so the Conservatives say. Britain’s present bout of industrial unrest looks like a gift for David Cameron’s party. With a general election six weeks or so away, what could be better for the opposition than the chance to summon up grim memories of the winter of discontent?

The analogy with the crippling strikes that saw Margaret Thatcher sweep Labour from office in 1979 is at very best far-fetched.

I have my doubts, [too], as to whether floating voters will be as impressed by Mr Cameron’s rhetoric as are Conservative footsoldiers. For one thing, quite a few of them work in the public sector.

Teachers, police officers and nurses do not take kindly to being branded militants. For another, most people probably view well-heeled bankers clutching their large post-crash bonuses as better candidates for their ire.

Quite so.

And many – indeed most of those really in middle England – earning about what cabin crew get – know that this recession is being managed to make them pay and let bankers off.

Why should they feel any form of satisfaction at BA bashing people making a reasonable claim for reasonable rights when they know they’re next in line to be abused?

The Tories need to be careful. Not many can remember the winter of discontent now – you have to be in your fifties. And age has left memory of a very different seventies. Cameron’s on dodgy ground. Which is good news.

What is the incidence of ‘enormous’ advisory fees

Banking, Economics 4 Responses »

Mar 232010

FT.com / Companies / Financial Services – ‚ÄòEnormous’ adviser fees spark warning.

City apologists who vist this bloog spend ages talkinmg about he incidence of taxes on companies – claiming they fall on law paid labour and pensioners and so should not be charged. This I dispute.

But I bet there will be silence from them on this report from the FT:

The “enormous” fees paid to investment banks for advising companies on deals might be skewing the outcome of takeovers, the UK’s leading group of institutional shareholders has warned.

The Association of British Insurers said companies and regulators needed to take a close look at the advisory arrangements. The fees were a “deadweight cost” on shareholders that could swallow a significant part of savings derived from mergers and acquisitions.

That means someone bears the incidence of these costs. There’s no doubt who in this case – it is labour made unemployed to try to recoup these costs (note Cadbury / Kraft) and secondly pensioners etc who really own shares.

This charge is intended to shift wealth from the least well off to the most well off – in the financial services sector. That is obvious.

Just as it is obvious that corporation tax is needed as what is, in effect a withholding tax to ensure that capital that hides in tax havens and other untaxed structures makes its fair contribution to society.

But the obvious is not obvious when the self interest of bankers and their apologists is at issue, except to thje extent that we can obviously expect them to create any cock and bull story that disguises the truth.

As evidence – do you remember ‘trickle down‘?

An exceptionally good reason to not vote Conservative

Banking Comments Off

Mar 222010

Summit planned for Jersey ¬ª Business ¬ª This Is Jersey.

As the Jersey Evening Post reports:

THE chief executive of the British Bankers Association will be among the speakers at a prestigious one-day finance summit to be held in the Island in September.

It is possible that by that time Angela Knight will be a UK treasury minister, if the Conservatives are successful in the general election expected to take place in May.

Many commentators believe that Bankers Association head Mrs Knight will be part of David Cameron’s treasury team if the Tories take over from Gordon Brown’s government.

Angela Knight is appalling: an apologist for bankers’ abuse on every occasion possible.

Is this what the people of the UK really want, let alone need?

Credit Suisse customers in German tax crackdown

Switzerland, Tax evasion 2 Responses »

Mar 222010

FT.com / UK – Credit Suisse curbs German travel amid tax crackdown.

Fascinating article in the FT which requires a little deconstruction. To start:

Credit Suisse has severely restricted travel to Germany by private bankers working for rich German clients with accounts in Switzerland, amid fears that such employees could be detained by the authorities across the border.

Now why would CS do that if they did not fear there was nothing to hide?

The move follows the disclosure that authorities in D?ºsseldorf, capital of the German state of North Rhine-Westphalia, have purchased stolen data with the names of 1,100 Credit Suisse clients in Germany with Swiss accounts. The D?ºsseldorf authorities said they would pursue Credit Suisse staff suspected of helping Germans hide assets and avoid paying tax.

But says CS:

“We have made it very clear to relationship managers they must never assist clients evading tax,” said Andres Luther, a Credit Suisse official.

And as they say:

The biggest problem concerns huge sums held in so- called “legacy” accounts, some dating back decades. Here, Switzerland hopes to reach agreements with its neighbours on means to regularise such holdings.

Unpack that and what do they mean? Could it be that they’re suggesting this is a problem of all that money they hid from the Nazis – or that any links left in Germany are with former Nazis? It is, after all, their frequent claim that they only created banking secrecy because of the Nazis – a claim comprehensively de-bunked here.

So we have the Swiss trying to say the problem is all German to start with.

Which shows just how little we should tolerate their abuse. Because that’s completely untrue. The Swiss assist crime as defined by all but corrupt states. That’s the beginning and end of it. And they have to stop it – if necessarily by putting their bankers in jail.

IMF’s Strauss-Kahn casts doubt on transaction tax

Transaction Taxes 2 Responses »

Mar 222010

IMF’s Strauss-Kahn casts doubt on transaction tax.

Reuters reported:

A tax on financial transactions to help pay for bailouts of failed banks would be difficult to devise and easy to avoid, the International Monetary Fund’s managing director said on Wednesday.

Nonsense. His point was:

I have been a big fan of the transaction tax in the 1970s but since then a lot of things have changed. What has changed is the technicality of the financial industry,” Strauss-Kahn told the European Parliament.

What is obvious is it becomes more and more easy to build derivatives to avoid a transaction tax

I have three responses.

First all derivative deals need to be recorded now anyway if we are to regulate finance, so this is just an excuse.

Second, derivative dealing not subject to financial transaction taxes by banks can easily be subject to those taxes – simply do it on gross turnover.

Third, if any derivative deal is recorded in a place where it was not arranged or in the place where the underlying asset was not located make it an offence not to declare it in one of those two places.

Problem solved.