2010 August » Tax Research UK

Deserving a mention – to show the unthinkable is now thinkable

Aug 172010

I’m not sure I buy into this by Greg Philo and in yesterday’s Guardian yet, largely because it is probably too simplistic, but it has to get a mention:

How can the sixth richest nation in the world be contemplating cuts inschool meals services and regressive forms of taxation? In the political and media commentaries on the national crisis and the need for cuts, there has been very little discussion on how much wealth there is and why "we" as a nation are apparently so poor. Actually the economy keeps growing, and we are becoming richer than we were before the financial crisis.

The total personal wealth in the UK is £9,000bn, a sum that dwarfs the national debt. It is mostly concentrated at the top, so the richest 10% own £4,000bn, with an average per household of £4m. The bottom half of our society own just 9%. The wealthiest hold the bulk of their money in property or pensions, and some in financial assets and objects such antiques and paintings.

A one-off tax of just 20% on the wealth of this group would pay the national debt and dramatically reduce the deficit, since interest payments on the debt are a large part of government spending. So that is what should be done. This tax of 20%, graduated so the very richest paid the most, would raise £800bn. A major positive for this scheme is that the tax would not have to be immediately paid. The richest 10% have only to assume liability for their small part of the debt. They can pay a low rate of interest on it and if they wish make it a charge on their property when they die. It would be akin to a student loan for the rich.

Simplistic it may be – but as evidence of the absurdity of claiming we cannot afford public services it is powerful.

Who gains from the closure of the Audit Commission, and why?

Accounting, ConDems 8 Responses »

Aug 172010

I noted the demise of the Audit Commission on Friday, and said:

The audit functions of the Commission will be moved to the private sector. Its research activities will simply cease.

So, rich pickings for the Big 4 firms who spent so much supporting the Tory because before the general election there then. How good of Dave to send such a nice “thank you”.

A commentator on this blog commented as follows:

“A quick search of the Electoral Commission website shows that in the period from Q2 2005 to date, non-cash donations to the Conservative Party consisting of staff secondments and consultancy services includes:

Firm Sum donated

Deloitte

£323,501.75

Ernst & Young

£63,989.08

Grant Thornton

£15,000.00

KPMG

£435,973.00

PWC

£533,063.68

Total

£1,371,527.51

Money, influence and politics. Nothing more need be said.”

I fear that’s true.

PFI rebate needed

Economics Comments Off

Aug 172010

Jesse Norman MP writing in the FT says:

[W]hat we need now is a new voluntary code promising a modest across-the-board rebate [on PFI costs]. PFI consortia have played their part in rebuilding Britain’s infrastructure. But they must play their part in rebuilding the nation’s finances too.

I think he understates the case for reform – but it’s a good idea.

Aviva should say no to RSA, for Norfolk

Economics 1 Response »

Aug 172010

Insurer RSA is bidding to buy Aviva’s general insurance business.

Aviva is, of course, the daft name for Norwich Union. It is still heavily based in Norwich – county town of Norfolk, where I live. It should never have abandoned the name association – for that city is the place that gives the company its identity. It is also, I think, the biggest employer there. I can imagine that the local workforce will be decimated if RSA win their bid. Cuts are always the way in which these bids are paid for.

The result is obvious – the people of Norwich will pay for the enormous bid costs that this move which will add no value to anyone bar City manipulators will impose.

Aviva’s directors should have kept their original name – and should continue to say said no now, for Norwich.

Where there’s muck there’s……

Banking, Ethics 21 Responses »

Aug 172010

The FT notes:

Barclays has agreed to pay $298m to US authorities to settle investigations relating to transactions that the bank facilitated between countries facing US sanctions including Cuba, Iran, Libya, Sudan and Burma, reports the FT. Barclays is the latest European bank to be hit with such charges. Lloyds, its UK rival, and Credit Suisse have reached similar settlements over the past year. The Telegraph adds that Barclays is understood to have voluntarily disclosed information on the dealings to the authorities.

Does banking have any ethics at all?

Standing upon money as upon islands

ConDems, Ethics Comments Off

Aug 172010

This came to my attention from the Christian web site Ekklesia, largely I admit because I am mentioned in it, but that’s not the reason it’s worth reproducing in a much shortened form here:

“Money pads the edges of things”. EM Forster puts these words in the mouth of the wealthy Margaret Schlegel in Howards End. They sprang to my memory this week as the Con-Dem coalition’s plans for for removing security of tenure of council tenants, and for cracking down on benefit fraud hit the headlines.

It seems that wealth not only eases the sharp edges of life, it may also serve as a baffle on the moral antennae. Eighteen of the 23 members of the present cabinet are reported to be millionaires and presumably will never have to face the possibility of being removed against their will from a home they love, where they have long felt themselves members of a community and where they have flexibility in accommodating those whose presence gives them pleasure and support.

According to David Cameron, £1.5 billion is lost annually through benefit fraud. A ‘crack down’ will doubtless be popular. But it would have more moral credibility if the Prime Minister had not neglected to mention the £70 billion lost through tax evasion – a deceit generally practised by those rich enough to avail themselves of creative accountancy. Richard Murphy, the Director of Tax Research and an advisor to the Tax Justice Network, estimates that tax evasion industry to be worth £25 billion a year and points out that in the year to March 2010, HM Customs and Revenue laid off one in eight of the front-line staff who could be tackling this issue.

I turned to Howards End to refresh my memory of Helen Schlegel’s comment and putting it in context, found that she had continued with this observation: “you and I…stand upon money as upon islands. It is so firm beneath our feet that we forget its very existence.”

The claim that “we are all in this together” should be revisited by the politicians whom that describes. With apologies to George Orwell, it seems that some of us are more in it than others.

Well said.

A very good description of ConDem ethics.

Any coincidence?

Tax gap, Tax justice Comments Off

Aug 172010

From the Guardian’s letters page this morning:

I note that £238m of PAYE was overpaid in 2009-10, up 148% on the previous year. This couldn’t have anything to do with HM Revenue & Customs sacking one in eight of its frontline tax staff in the same year – more than 5,000 – could it?

Richard Murphy

Director, Tax Research

Country-by-country reporting would help the IRS tackle the tax gap

Big 4, Secrecy jurisdictions, Tax avoidance, Transfer Pricing 1 Response »

Aug 162010

I have suggested before, and I will suggest again, that transfer pricing is contributor to the tax gap.

Oddly (!) the tax profession – and especially those parts with links to secrecy jurisdictions – deny this.

Many are not convinced by such arguments. Take this testimony given by the IRS to Congress in July:

               Testimony of Stephen E. Shay
               Deputy Assistant Secretary (International Tax Affairs)
               U.S. Department of the Treasury
               Before the U.S. House Committee on Ways and Means July 22, 2010

Chairman Levin, Ranking Member Camp and members of the Committee, thank you for the opportunity to testify on the important topic of transfer pricing. I will focus my testimony today on Treasury’s analysis of the available data relating to the issue of whether profits are being shifted abroad out of the United States for tax purposes through the mechanism of related party transactions or, as the mechanism is more commonly known in the tax policy community, through transfer pricing.

We conclude, based on our analysis of available data, that there is evidence of substantial income shifting through transfer pricing.

My emphasis added.

And as they note – there’s a very odd correlation between tax rate and profits in MNCs. As the tax rate of a jurisdiction goes up reported profit in relation to sales goes down – and the IRS do not believe that is because of costs, very clearly.

The answer, of course, is clear – as the evidence on evidence also showed. Country-by-country reporting would help enormously in tackling this issue.

When is an interview not an interview?

Blogging Comments Off

Aug 162010

The Independent has reported this morning:

However, Richard Murphy, the director of Tax Research UK, estimates that Sir Philip saved £285m in tax by paying a £1.2bn dividend in 2005 directly to his wife. Mr Murphy said: "I’m not disputing for a moment that Sir Philip Green is a first-rate retailer of cheap fashion… But, with the very greatest of respect to those who appointed him, what do they think this has to do with the appraisal of government spending?"

“Hang on a minute”, I thought. “When did they call me?”

Others have. The Indy hasn’t.

Then I realised “said” know means “wrote on his blog”.

OK. Fair enough!