2010 May » Tax Research UK

Tax Superhero 2010

May 202010

Christian Aid today (Thursday 20 May) announced the winner of its Tax Superhero of the Year award, which recognises outstanding individual work on the potential of tax to change the world.

Eva Joly, an activist, European politician and former judge, has beaten other nominees including the comedians Ricky Gervais and Graham Norton and is the winner of this year’s Award.

Norwegian-born Joly was elected as a Member of the European Parliament in 2009 for the Europe Ecologie list and represents Ile de France. She also chairs the Parliament’s Committee on Development. Her work has shifted the terms of the international debate about the vital importance of tax revenues to developing countries.

As a judge in France, Ms Joly famously investigated a half-billion Euro corruption scandal involving the state-owned oil company Elf-Acquitane, and received death threats as a result. Thirty people were eventually convicted in connection with the affair.

‚ÄòEva Joly has a proud record of championing the vital role that tax revenues play in both rich and poor countries – and also of successfully fighting corruption,’ said Helen Collinson, Christian Aid’s Campaign Manager, Economic Justice. ‚ÄòShe is an outstanding ambassador for tax justice and good governance.’

Christian Aid will officially announce Ms Joly’s award outside the Royal Exchange building in the City of London during its Alternative Tax Awards 2010 ceremony, from 9.30am on Thursday, 20^th May. The date coincides with accountants’ own awards bash at London’s Park Lane Hilton.

In addition to Ms Joly, Christian Aid also received nominations for comedians Ricky Gervais and Graham Norton, for tax justice campaigners John Christensen, Richard Murphy and Alvin Mosioma and for investigative reporter Denis Roberts. Other nominees were the singers Billy Bragg and Katie Melua, the novelist Rhidian Brook and the Christian Aid board member Phil Hodkinson. Another nomination was for the organisation Blood:Water Mission, which works on HIV/AIDS and water.

Christian Aid launched its Alternative Tax Awards in 2009, to highlight its campaign about the vital importance of tax for developing countries. The organisation estimates that they currently lose around $160 billion a year as a result of tax dodging by unscrupulous companies trading internationally. This is a vast sum, equal to roughly one-and-a-half times the amount of money that they receive in development aid each year.

‚ÄòThe money urgently needed to pay for education, medical care, sanitation and other public services which we in the UK take for granted,’ said Helen Collinson.

Christian Aid is campaigning for the introduction of a new accounting standard, country-by-country reporting, which would require multinational companies to publish the profits they make and the taxes they pay in every country in which they operate. It is also working towards the automatic, multilateral exchange of tax information between countries, to help governments more effectively counter tax dodging. In addition, the organisation supports the strengthening of poor countries’ collection of tax domestically, to help strengthen their governments’ accountability to their citizens.

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Eva’s great.

I’m more than happy to lose to her!

Taxes on Rich Rise Around the World

Ethics 31 Responses »

May 202010

Taxes on Rich Rise Around the World – The Wealth Report – WSJ.

A familiar pattern is emerging around the world.

A country has a financial crisis or deep recession. Government revenue shrinks and budget deficits soar as politicians are reluctant to cut spending or raise taxes on the mass of voters. So they are left with one solution: raise taxes on the wealthy.

Quite right too.

1) They caused the crash

2) They benefited most from the bail out

3) They have the capacity to pay.

Your problem is?

Letters: Tax havens no game for poor countries

Development, Secrecy jurisdictions, Tax Havens Comments Off

May 202010

Letters: Tax havens no game for poor countries | Business | The Guardian .

From this morning’s Guardian:

The scale of debt under which many of England’s top football clubs now labour (Questions over health of Premier League, Sport, 19 May) is indeed a matter of concern. So too is the number of top-flight football clubs now based offshore. Owners using tax havens have been able to hide the financial meltdown of a number of clubs from view until too late. Stakeholders, club supporters in particular, have been betrayed and the football authorities caught napping.

Christian Aid recently sought to establish the true ownership of every club in the four top English leagues, the Scottish and Welsh Premier leagues and the Irish League in Northern Ireland. We discovered that 14 English Premier League clubs and a further five in the Championship, together with one in League One and two in the Scottish Premier League, were now based offshore.

In the developing world, that same secrecy leads to tax dodging on a truly massive scale. We estimate that every year, the revenue lost to developing countries amounts to $160bn – around one-and-a-half times the size of the international aid budget. If available to use, it could save the lives of some 350,000 children under five every year. Financial secrecy comes at a price. For football fans, it can jeopardise the existence of their clubs. In developing countries, financial secrecy costs lives.

Alex Cobham

Chief policy adviser, Christian Aid

Inflation

Economics 20 Responses »

May 192010

Inflation: mercury rising | Comment is free | The Guardian .

Aditya Chakrabortty writes the economic leaders in the Guardian with considerable skill, style and perception.

As he, I presume, says today on inflation:

[I]nflation that continues around [current] levels is a major headache for the new chancellor. For a start, he wants to freeze or cut public-sector pay, which is hard enough at the best of times, but will be near-impossible if shop prices are rising at 5% or more. Second, the whole Conservative justification for cutting back on government spending is that it allows the Bank of England to keep rates at record lows. Again, high inflation makes that hope a no-no. Come 2011, the UK could be in the middle of the biggest spending cuts since the second world war (which is what the Tories have got pencilled in) and mortgage rates and business borrowing costs could be heading north. Put those together and you have an economy that is flatlining.

The funny thing about this situation is that a burst of higher inflation for an indebted, recession-bound economy is not that bad a thing. Adopting a higher inflation target would not only help burn away some of the UK’s outstanding debt; it would also enable rates to be kept low to stimulate economic activity. Couple that with direct lending to productive enterprises, and you have a plausible recipe for growth. Even the International Monetary Fund, those sentinels of economic orthodoxy, have suggested something similar. The trouble is that George Osborne is from the party of sound money, and spent much of his time as shadow chancellor warning about higher inflation and a falling pound. Now he faces the same dilemma as his predecessor: allow a little burst of inflation, or get hawkish and choke off any recovery? Not an easy choice.

Not if you’re George Osborne.

If you were possessed of economic wisdom the chocuie is glaringly obvious: go for inflation, low interest rates and let growth happen, put people into work, allow debt to write down its own value and create the basis for well being.

You’d have thought it a political no-brainer. Except, I suspect, for the bankers’ friends now in the Treasury.

Germany moves against short sellers

Economics 10 Responses »

May 192010

FT.com / Europe – Germany moves against short sellers.

I wrote about short selling and the danger it causes a few days ago and the right wing blogosphere – blinkered to a man (are there any right wing women?) – led by Tom Worstall (as usual) responded with the usual clkaims that a) I had no clue on the issue b) there was no problem c) there were no consequences.

They are, of course, completely wrong. If you assume markets are efficient and allocate resources perfectly – as these bloggers do – then of course the outcome is always perfect. The reality is that markets are hopelessly inefficient much of the time – because they work on imperfect and not perfect information – and as a result the damage caused is substantial.

I’m pleased to se that despite the alleged error of my ways Germany agrees. As the FT notes:

German authorities on Tuesday night cracked down on what Berlin views as destablising speculation in the financial markets by implementing a partial ban on naked short-selling of certain stocks.

The German action against naked shorting – or selling securities such as shares and bonds that are not owned or borrowed – comes amid heated discussion in Europe of regulatory curbs on speculative trading, which has been widely blamed by politicians for exacerbating the Greek debt crisis.

Bafin, Germany’s financial regulator, said the ban was needed because of the “exceptional volatility” in eurozone bonds and the considerable widening of spreads on credit default swaps. Large-scale short-selling could have “endangered the stability of the entire financial system”, Bafin said.

Quite.

I rest my case.

Job vacancy: Program Director, Economic Transparency Initiative

Task Force on Financial Integrity Comments Off

May 182010

The Task Force on Financial Integrity and Economic Development (the Task Force) seeks a Program Director to lead its Economic Transparency Initiative. The Task Force is a unique global coalition of civil society organizations and more than 50 governments working together to address inequalities in the financial system that penalize billions of people. Launched by Global Financial Integrity in January 2009, the Task Force advocates for greatly improved transparency and accountability in the global financial system. The opacity of the current system facilitates the flow of approximately $1 trillion in illicit capital out of developing countries each year through corruption, criminal activity and commercial tax evasion. Current international financial statistics do not provide sufficient data for analysis.

In its Economic Transparency Initiative, the Task Force seeks a program director who will work with international institutions, governments, central banks, commercial banks, tax authorities, national statistics offices, and other organizations to generate and release more comprehensive data on cross-border financial flows affecting developing countries. This is an analysis and advocacy position and requires significant travel and excellent communications skills.

The specifics of the position are as follows:

Responsibilities:

serve as the primary public policy advocate, engaging in regular direct communication with multilateral institutions, governments, central banks and other institutions in support of the Task Force agenda;
serve as an expert information resource on financial flows, data gaps and related policy issues for policymakers, financial institutions, the media and others;
travel, as needed, to enlighten advocacy targets of the need for additional data in this area, establish a dialogue with target audiences and ensure further discussion;
liaise with senior officials and their staffs to acquire financial statistics and data which will be used as the basis of future analysis by the Task Force;
write and edit education and advocacy materials for multilateral institutions, governments, central banks and others;
oversee the development and implementation of the Task Force’s organizing and advocacy work plan;
maintain and deepen relationships with Task Force key organizational allies and partners;
represent the Task Force in meetings with policymakers and officials, at conferences and in coalitions; and
write a detailed quarterly report on activities conducted and progress made on each data set.

Qualifications:

a Ph.D. in macro economics, preferably with extensive experience in economic statistics;
fluency in English and one other language, preferably French;
excellent writing skills in English and preferably French;
an ability to interact with a multitude of high-level stakeholders, and deliver outcomes;
an ability to work with poise and professionalism using judgment and tact; and
possess exceptional interpersonal, relationship building, presentation, and partnership development skills.

The Task Force offers competitive salaries and benefits. To apply, candidates should send a cover letter, resume and references to etijob@financialtaskforce.org. The deadline to apply is June 4, 2010.

Disclosure: Tax Research LLP is a member of the Task Force on Financial Integrity and Economic Development.

UK inflation surges to 3.7%

Economics 1 Response »

May 182010

FT.com / UK / Economy & Trade – UK inflation surges to 3.7%.

Just wait a few days and Osborne will be demanding interest rate rises.

After all – he’s got to keep his banking friends happy.

Memo to the Isle of Man: try tax

Isle of Man 15 Responses »

May 182010

BBC News – Isle of Man government review to save money.

Many on the Isle of Man blame me for the fact they have a massive black hole in their government’s budget.

I am entirely happy to accept the blame.

Now I note their prime minster, Mr Brown (not, not that Mr Brown – they have one too) has said:

Government is rising to the challenge of its revenue shortfall with a series of practical, co-ordinated and pragmatic measures.

There has to be a realisation at both political level and within the public sector that many difficult decisions will have to be made if we are to secure our extensive public services and secure employment within the public sector.

The solution is called tax.

I really recommend they try it.

Tories are foolish to line up Northern Ireland as a tax haven

Ireland 4 Responses »

May 182010

From Comment is Free – by me – today:

The new Conservative Northern Ireland secretary, Owen Paterson, has announced that he intends to turn Northern Ireland into a tax haven.

I agree, he did not put it quite like that. As the Guardian noted on Saturday, what he has said is that an inquiry should be established to decide whether the rate of corporation tax in the province should be set at 12.5% – the same as that in the Republic of Ireland. That would though, however described, be an inquiry in all but name into setting up Northern Ireland as a tax haven. After all, tax havens deliberately offer low tax rates to artificially induce transactions to their shores, and this is exactly what this inquiry would be about.

Seen in this way it is a staggering reverse of policy on this issue from that adopted by the Labour government – and that also espoused by Vince Cable, perhaps more so than any other MP in the last House of Commons.

At the G20 in London in April 2009 Gordon Brown correctly identified tax havens as one of the major problems in the world economy, and began a steadfast attack on them – including those in the UK crown dependencies and overseas territories.

Vince Cable’s close Lib Dem colleague Lord Oakeshott went further. When talking of the low tax rates offered in the Republic he called Dublin“Liechtenstein on the Liffey”, adding: “If you set out to attract mobile money from around the world, you run much bigger risks when things go wrong.”

Matthew Oakeshott was right in his description of Dublin and right in his analysis. And yet the first new policy initiative for Northern Ireland that the Tories have set in train for Northern Ireland is to copy the disastrous tax regime of the Republic.

For Northern Ireland the problem will be that of all tax havens: fly-by-night companies that have no intention of creating real jobs, and whose sole aim is to park profits in the province before moving them on to another tax haven as quickly as possible will be those attracted by this policy.

In addition we’ll see plenty of notional head offices set up, as abound in Dublin docks, many of them with no employees at all.

On top of that there will be plenty of artificial transactions relocated to the province, such as the repackaging of goods with minimal labour content added undertaken, all for the sake of shifting profit into Northern Ireland.

But this artificiality will not be the end of the problem. Copying the culture and failed policies of the Republic will be the biggest disaster for Northern Ireland. As the Republic has now resoundingly proven, building an economy on the basis of corporate tax rate competition does not work. That policy has virtually bankrupted the Republic. Why on earth would anyone want to replicate it?

And why would they want to do so when under EU rules cut-rate tax deals are allowed only on condition that the public subsidy for services in the region offering them has to be reduced to match the loss in tax revenue, pound for pound. That would create a double whammy for Northern Ireland because there’s no evidence that reduced tax rates would result in a penny more tax being paid. The resulting impact on lost revenue for Northern Ireland could be catastrophic for its public services.

There may also be a significant loss of tax revenue in the rest of the UK as a result of the change for a number of reasons.

First, tax-avoiding businesses are risky businesses, imposing a cost on all the rest of us when they fail – as surely some will. Just remember DeLorean Cars – another new Tory administration debacle of a generation past in Northern Ireland.

Second, corporation tax admin burdens in the UK will sky rocket. Every single transaction between the UK and Northern Ireland will have to be subject to transfer pricing rules to make sure profit is not being shifted into Northern Ireland. The extra accounting costs will be astronomical.

And lastly, despite the very best efforts of HM Revenue & Customs, business will shift profit out of the rest of the UK and into Northern Ireland and pay less tax overall as a result. There is just one inevitable consequence of this folly and that is that the ordinary people of the UK will pick up the bill for this when every pound of revenue is critical in the fight to close the UK budget deficit.

Add this catalogue of problems together and it is astonishing that the major political parties in Northern Ireland have proposed this policy, but propose it they have. And now the Tories are listening – in the process sending out a message to the world at large that they think tax havens are good for society.

It’s hard to imagine a worse start to Tory policy on tax or Northern Ireland.