2010 April » Tax Research UK

HSBC wants to abuse the banking levy for its own gain

Banking Comments Off

Apr 262010

FT.com / Companies / Banks – HSBC seeks bank levy plan backing.

HSBC is seeking support for a plan to direct any industry-wide bank levy into government-sponsored venture capital agencies, as part of a rearguard mission to change the terms of the ongoing bank regulation debate.

I have no problem with ventue capital bar four things.

The first is I’ve run a venture capital backed company and I’ll happily say that some supposedly very good VC funds I dealt with knew nothing at all about running businesses. They’ve got wonderful MBAs. and not a clue how business works. Read Obliquity by John Kay if you want to know why. Entrepreneurs are foxes. VCs are hedge hogs – and poor ones at that.

Second VCs screw entrepreneurs into the ground. There are few people on earth betting at devising disincentives than VCs.

Third, they charge the earth for this privelige, and so requitre rates of return that usually prevent any useful business getting funding.

Fourth, the vast majority of returns end up with the VC managers.

No doubt HSBC see a great profit opportunity in this.

I, on the other hand, think a Green investment Bank run by competent people on sensible salaries would be a vastly better bet.

And I also think much of the funding should go on infrastructure – they very thing banks, by seeking to deny tax to governments, deny to society.

Goldman Sachs insists it made $1.2bn loss on sub-prime market | Business | The Guardian

Banking, Corruption Comments Off

Apr 262010

Goldman Sachs insists it made $1.2bn loss on sub-prime market | Business | The Guardian .

Goldman is spinning for all its worth (which is quite a lot).

It’s also being disingenuous. It’s perfectly obvious now that for it to bet against society, its clients and its own products that it had sold was at the core of its business model. It is a corrupt organisation acting corruptly that needs to be forced out of business as a consequence. The frauds it perpetrated may have been legal. That’s not the point. They involved deception designed to benefit Goldman Sachs at cost to all others. That deception is fraud, whether legal or not.

And never doubt that people of courage can effect change when faced with corruption. Senator Carl Levin is doing that. By enabling the questions that need to be raised he is delivering a massive benefit to society.

I look forward to the demise of Goldman Sachs. I also predict it. In a world where confidence matters being exposed as a trickster is enough to bring an edifice crashing down.

A manifesto for accountants

Accounting, Auditing 7 Responses »

Apr 252010

Accountancy Age has said:

[We are] putting together a manifesto from the profession and we want your ideas. Send your manifesto proposals, it doesn’t matter which specialism you work in or whether you’re from practice or the business world. We want ideas that would have a direct impact on the working lives of accountants, wherever they are.

Once we have a list we’ll ask Accountancy Age readers to vote on their top ten issues which we can then present to the new government as a manifesto from the profession. We’ll also publish the result online.

These are my ideas, quickly assembled, under appropriate headings.

Auditing

1. A ban on auditors providing any other services to their clients

2. Mandatory audit rotation after five years

3. Auditors to be liable to individual shareholders and other users of accounts

Accountants

1. The term “accountant” to be regulated and restricted in use

2. All accountants to be required to subscribe to a Code of Conduct requiring that they comply with the spirit as well as the letter of all law and that they always make full disclosure of all transactions to which they are party in any way to all relevant authorities as required by law, at risk of significant penalty if breached

Company law

1. Companies to have a duty to stakeholders equal to that of shareholders

2. Abbreviated accounts to be abolished

3. Striking off fee from Companies House increased to £10,000 to prevent fraud and abuse

4. All small companies transformed into LLPs unless having a capital of at least £50,000, with income tax payable on account at basic rate, this to save small company admin and tax complications.

5. Prevent an accountant assisting the application for striking off of a company without it having first filed all accounts due with the Registrar of Companies and secondly it having filed all tax returns due and thirdly paid all its tax

6. Require that all accounts disclose the full ultimate beneficial ownership of an entity as recorded for anti-money laundering purposes, indicating the means of control if this is not direct

7. Adopt country-by-country reporting

Tax

1. Introduce a General Anti-Avoidance Principle

2. Deny tax reliefs of more than £5,000 a year to any person earning more than £100,000 a year to prevent wasteful tax planning

3. Require that an accountant registered with a UK based institute disclose all contacts they have with offshore entities, including requirement that they disclose beneficial ownership of all such entities as recorded for anti-money laundering purposes to HMRC each year

Trusts

1. Require that all trusts be recorded on a public register or that they be unenforceable in law, such record to include the trust deed, the name and address of the settlor, the name and address of any enforcer and the names and addresses of the trustees

2. Require all trusts file accounts on public record unless they have income of less than £25,000 a year and assets of less than £100,000 and file on public record:

a. A copy of the trust deed and any letters of wishes

b. The name and address of the settlor

c. The name and address of any enforcer

d. A description of the trust property

e. The names and addresses of the trustees

f. A list of all beneficiaries of the trust in each year sufficient to identify them with certainty

g. A statement that trust income was less than £25,000 in the year

h. Confirmation that trust assets are less than £100,000

i. This statement to be certified by an accountant or lawyer who is liable for its accuracy.

3. Trust accounts must include full details of all distributions in each year sufficient to accurately identify the persons in question.

4. Any trust with a UK resident settlor, enforcer, trustee or beneficiary to be subject to these regulations.

When will Jersey realise zero ten is dead?

Jersey 3 Responses »

Apr 242010

Jersey ‚Äòwill have a level playing field over zero-ten’ ¬ª Business ¬ª This Is Jersey.

It’s reported that:

The president of the Jersey Society of Chartered Certified Accountants, Wendy Dorman, said she believed it was inconceivable that the Ecofin Code of Conduct group would allow a zero-ten structure in one island but not in the other Crown dependencies.

Let’s get this straight: Jersey’s zero ten has never been considered by Europe (Ecofin). Nor will it ever be becasue the UK won’t put it forward because it’s agreed it’s not compliant.

The Isle of Man has been considered and knocked back once.

It’s not guaranteed it will survive another scrutiny.

So zero ten is dead. Buried. Gone.

But Jersey does not like realities.

Then, since offshore is a world of make believe that things happen where they clearly do not that’s not surprising.

Jersey’s warning shot over man who may be next UK chancellor

Jersey 5 Responses »

Apr 232010

Warning shot over man who may be next UK chancellor ¬ª Business ¬ª This Is Jersey.

The Jersey Evening Post says:

A LONG-term critic of Jersey could be the next UK Chancellor, according to a former UK Treasury economist.

An audience of finance professionals heard David Page predict that there was a strong chance that Liberal Democrat Treasury spokesman Vince Cable would be Chancellor in a coalition government with Labour after the general election.

And then it printed this picture:

with the caption:

Vince Cable has repeatedly criticised the role played by offshore finance centres

well at least they didn’t say:

Vince cable has been known to meet Richard Murphy

Although just for the record, he has.

In fact he’s even said in Parliament:

Richard Murphy, who has rightly been praised for his practical work on the matter, has estimated that HMRC is losing something in the order of £18 billion specifically through tax havens.

That should set some pulses racing down in St Helier.

And probably even get a few cheques going George Osborne’s way in the hope that he might just save them from the tyranny of Vince.

And Jersey says it isn’t a tax haven

Jersey 2 Responses »

Apr 232010

The following is a written question exchange from the States of Jersey:

DEPUTY T.M. PITMAN OF ST. HELIER OF THE MINISTER FOR TREASURY AND RESOURCES REGARDING CLARIFICATION OF THE NUMBER OF 1(1)(k) RESIDENTS WHO PAID TAX FROM 2005 TO 2008:

Question

Given that with 123 such residents there is no possibility whatsoever of any individual being able to be identified will the Minister clarify the number of 1(1)(k) residents, if any, by year for the period 2005 to 2008 inclusive, who paid tax within the following brackets:

(a) less than £5,000

(b) between £5,000 and £10,000

Answer

(a) 2005 – 7 2006 – 8 2007 – 4 2008 – 10

(b) 2005 – 11 2006 – 14 2007 – 10 2008 – 8

Jersey likes to say it’s not a tax haven.

Jersey also says that the 1(1)K residents – who basically come to live in jersey under fixed contribution tax agreements – pay £13.5 million a year to the States.

Given that ten of them paid less than £50,000 between them in 2008 and another eight less than £80,000 between them this is pushing credibility.

But sure as heck, it proves Jersey is still a tax haven, set up at cost to local people.

The abuse goes on.

And the whole idea that Jersey is also a secrecy jurisdiction is also sustained.

Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

Bottom Lines, Better Lives?

Corruption, Development Comments Off

Apr 232010

Donors such as the World Bank are spending billions of dollars on projects whose effects on poverty and the environment are uncertain at best, warns a new report.

Bottom Lines, Better Lives? has been produced by Christian Aid in collaboration with the Bretton Woods Project, ActionAid, Eurodad, Campagna per la riforma della Banca Mondiale and Third World Network. It raises serious questions over the ways that multilateral aid donors, including the World Bank Group, try to boost private companies in developing countries.

‚ÄòMultilateral development banks’ funding of private companies has risen ten-fold, from around $4 billion a year in 1990 to more than $40 billion today,’ said Jesse Griffiths, coordinator of the Bretton Woods Project. ‚ÄòBut their seeming inability to assess or prioritise the social, environmental and poverty reduction benefits of their investments means that it is difficult to see how these huge sums can be justified.’

Alex Cobham, Chief Policy Adviser at Christian Aid, said: ‚ÄòOur experience of development on the ground shows just how important it is for local companies in poor countries to have access to finance. It is this which will create the jobs that are needed to beat poverty once and for all.

‚ÄòSo it is shocking to see that this tidal wave of lending, which could have done so much good, has not been carefully designed in order to maximise its development benefits. And it is hard to see how these multilateral development banks, as they currently operate, can be an effective way for a country like the UK, which does have a clear desire to eradicate poverty, to distribute its aid money.’

The new report criticises three main aspects of multilateral development banks’ (MDBs) operations:

¬? Their approach is based on existing private finance approaches, emphasizing the importance of attracting foreign investment rather than developing the domestic economy.

¬? Project selection, monitoring and evaluation techniques have tended to prioritise commercial rather than social or environmental returns. Internal evaluations have regularly found that MDBs have failed to demonstrate sufficient ‚Äòadditionality’ for their financing – meaning that they run the risk of merely replicating the activities of private lenders, rather than driving investment towards businesses or sectors that have the greatest sustainable development benefits. Multilateral lenders’ monitoring and evaluation methods have also been insufficiently focussed on poverty reduction, while their transparency and disclosure of information has been weak.

¬? The rapid growth of ‚Äòarms-length’ investments in the financial sector, through financial intermediaries such as private banks and private equity firms, is a particular cause for concern. The MDBs’ failure to clearly define the development objectives of their investments is particularly worrying in this case, where operational decisions are delegated to financial intermediaries.

The report’s recommendations include:

¬? Clarification of MDB mandates, to ensure they focus on development and poverty reduction;

¬? Greater transparency around the rationale for investment decisions, which should reduce the use of financial intermediaries – especially those based in opaque tax havens; and

¬? A focus on ‚Äòadditionality’ and development returns, so that MDBs target areas and countries where existing private financing is weak. This would make their contribution more valuable, and put the emphasis clearly on development benefits rather than financial returns.

The findings are in many ways similar to the problems I have highlighted in my recent report on Development Finance Institutions, such as the UK’s CDC. The capturing of the aid budget for private gain is at cost to the poorest people in the world and of benefit to a very few in private equity. This has to change.

Senate inquiry faults ratings agencies

Banking, Corruption Comments Off

Apr 232010

FT.com / Companies / Financial Services – Senate inquiry faults ratings agencies.

Senator Carl Levin is on the warpath:

The top two US ratings agencies – Moody’s and Standard & Poor’s – were unduly influenced by investment bankers who paid their fees and wilfully ignored signs of fraud in the lending industry in the lead-up to the financial crisis, a congressional investigation has found.

E-mails and other documents released on Thursday by the Senate subcommittee on investigations, ahead of a full report due on Friday, showed that positive ratings for complex mortgage-backed securities and collateralised debt obligations were sometimes used as a negotiating tactic between the firms and bankers.

“The credit rating agencies allowed Wall Street to impact their analysis, their independence and their reputation for reliability,” said Carl Levin, Democratic senator who heads the Senate panel.

As example:

In 2007, a Moody’s analyst told a Merrill Lynch investment banker that a rating could not be finalised until the “fee issue” was resolved.

The banker responded: “We are OK with the revised fee schedule …‚ÄâWe are agreeing to this under the assumption that …‚Äâyou will work with us further‚Äâ…‚Äâto try to get some middle ground with respect to the ratings.”

And again:

The same year, Moody’s chief credit officer told Ray McDaniel, chief executive, in an e-mail that pressure from bankers, issuers and investors, and “internal emphasis on market share”, constituted a “risk to ratings quality”.

And yet these are the same people who can apparently force the UK to cut essential public spending.

What nonsense.