2010 November » Tax Research UK

Banks say they’ll stop avoiding – but actions speak louder than words

Banking, ConDems, Tax avoidance 2 Responses »

Nov 302010

The 15 biggest banks operating in the U.K. have adopted a government code of practice on reducing tax avoidance, Deputy Prime Minister Nick Clegg said.

The code, which until October had only been supported by four of the 15, requires the banks to “follow the spirit of the law in addition to the letter” on tax and to work with the government “to encourage mutually open and transparent relationships.”

“All the top 15 banks have now signed the code,” Clegg told lawmakers in Parliament today.

The 15 banks are Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Lloyds Banking Group Plc, Morgan Stanley, Nationwide Building Society, Royal Bank of Scotland Group Plc, Banco Santander SA, Standard Chartered Plc and UBS AG.

So, fine words have had signatures attached. What I want to know (for now) is:

When these banks will stop selling tax driven products;
When they will close their offices in locations which can have no justification for their presence but tax e.g. BVI;
When they will start country-by-country reporting so we know what they pay, where;
When these banks will lose the use of their tax losses, all of which have already been paid for by the taxpayer;
When they will stop using tax avoidance schemes to pay their staff;
When they are closing their private banking operations;
When they close their tax driven products divisions such as Barclays Capital.

Then I’ll take this seriously.

Northern Ireland corporation tax move slammed

Corporation Tax, Ireland Comments Off

Nov 302010

I was on Radio Ulster this morning. The following article on the local BBC web site has resulted:

A leading tax expert has said that devolving corporation tax powers to Northern Ireland would cost it £300m from the Westminster block grant.

NI business leaders have united in a call for corporation tax to be devolved to the assembly.

Seven leading business organisations have written to MLAs and to NI Secretary Owen Paterson.

Richard Murphy of Tax Research UK said the tax move would not guarantee a single new job.

"The truth is the Irish Republic’s tax system is fundamentally different from the UK, there is absolutely no way on earth that Northern Ireland could reproduce what the Republic offers and as a result this is a gamble that would cost £300m out of the block grant," he said.

"If you are going to spend £300m on attracting businesses into Northern Ireland this has to be the worst way possible.

"The Confederation of British Industry said in evidence to the House of Commons a couple of weeks ago they couldn’t guarantee a single new job as a result of this for Northern Ireland and they are right."

Mr Murphy said he believed it was "extremely unlikely" corporation tax would be devolved to Northern Ireland due to European Union rules.

He added that if there was a different tax rate in NI it would "put a barrier to trade" between Northern Ireland and Great Britain.

Mr Murphy also said that there was already a large number of companies in Northern Ireland who paid the small companies rate of corporation tax which was "significantly lower than the 28% for large companies".

In fairness the article goes on to note that not everyone agrees with me, but not long ago this was a wholly one sided debate, It isn’t any more. .

Tell me why this makes sense

Economics 17 Responses »

Nov 302010

The world’s economies are creaking.

Its bank are failing.

Countries are collapsing.

So what sense is there in this?:

And what happens when these markets fall over, again?

False economy

ConDems, Economics Comments Off

Nov 302010

A new web site has been launched called ‚ÄòFalse Economy’.

As they say on their home page, False Economy is for everyone concerned about the impact of the government’s spending cuts on their community, their family or their job.

I suggest you start by looking at this video by Sam West, and go on from there.

What’s chiselling away at poor countries’ tax revenues (and the UK’s too)?

ConDems, Corporation Tax, Development, Secrecy jurisdictions, Tax avoidance, Tax Havens 3 Responses »

Nov 302010

Award winning Private Eye journalist and former tax inspector Richard Brooks (who is behind the Vodafone tax story, and very much more that is well worthwhile) is co-author of the ActionAd report on SAB MIller I mentioned yesterday. It’s that fact that gives me confidence in the report. And today he’s writing in the Guardian, saying (in part):

So what explains such chiselling at the expense of the poorest? Schemes like this are used by many multinational businesses. Activities and assets to which profits can be allocated, often extremely tenuously, are stripped out of all "normal" tax rate countries and moved to tax havens, including Switzerland and the Netherlands, that cynically adapt their laws for this purpose. Not even the poorest countries are spared.

The rules of the international tax game are set by the developed economies’ club, the Organisation for Economic Co-operation and Development, and are forced on developing countries through "double taxation agreements" they must sign if they are to have any hope of attracting foreign investment. These treaties largely transfer the rights to tax the royalties and fees from the country where they are paid to the one where they’re received even when, as with Switzerland and the Netherlands, that country has no interest in taxing them. Ghana recently signed one such agreement with Switzerland as a very expensive price for Swiss agreement to divulge details of money stashed by wealthy Ghanaians in Swiss bank accounts.

More alarmingly still, in London heavy corporate lobbying has forced imminent changes to arcane "controlled foreign companies" laws that enable Revenue to tax profits diverted by British companies into tax haven subsidiaries. The changes would give UK multinationals carte blanche to siphon profits from developing countries into the world’s tax avoidance hotspots.

It has long been understood that sustainable development can only happen when national economies are strong. Fair tax is at the heart of this equation. It requires multinational companies to turn away from tax schemes and tax havens, treating their tax obligations as part of the "corporate social responsibility" that they are so keen to advertise. Governments, meanwhile, must write new rules of the international tax game – to be played without dice loaded against the world’s poor.

He’s right.

And yesterday George Osborne did three things to make things worse.

First he confirmed a low tax rate on patents to encourage profit to be artificially relocated to the UK.

Second, he’s going to relax the controlled foreign company rules which will make it much easier for multinational corporations to hide profits in tax havens.

Third, he’s going to provide a new election for foreign branch operations in the UK which looks awfully like the US “tick the box” regime which has facilitated massive tax abuse.

George Osborne is doing all he can to undermine our tax revenues and those of developing countries at the same time as a result.

Words fail me (well, at least ones repeatable here do).

What is business going to invest in – and why?

ConDems, Economics 9 Responses »

Nov 302010

The whole premise of he government’s economic policy is that we’re going to grow out of recession and that business is going to rush in to fill the void government spending cuts create in the economy – from which business has been to date “squeezed out” by over-active government.

This is summarised ion this table issued by the Office for Budget Responsibility issued yesterday:

Despite cuts some households are going to spend more.

Exports are going to grow modestly – so it’s clear Ireland, Spain, Portugal and Belgium having woes won’t trouble us.

Government is slashing spending – both on current spending and most especially on investment.

And – most important – although household growth is modest at best whilst trade growth is negligible and businesses biggest customer is slashing spending – especially on investment which it always buys from the private sector – business is going to be investing enormously.

It’s just not going to happen. What it it going to be spending on? And why should it spend? What’s the rationale for doing so without any government stimulus for doing so?

Candidly if Robert Chote believes this he’s lost it. The Guardian clearly doubts he does and is much closer to the truth:

The OBR’s Robert Chote went out of his way to stress the uncertainties. For all the fiendish complexities, at heart forecasting is the art of the ruler: straight lines reconnect a depressed present with a trend extrapolated from a happier past. Thus business investment – which has sunk like a stone – is now predicted to surge. Perhaps it will. If so, the wider economy may dodge the axe being flung at the state. But perhaps business will falter. If so, Mr Osborne will learn the lesson being absorbed by those early cutters in Dublin whom he once admired. Namely, that writing pain into the start of his story does not guarantee a happy ending.

The Irish bail out can’t work because we’re suffering systemic failure

Banking, Economics, Ethics 8 Responses »

Nov 302010

Reports in all newspapers this morning suggest that the Irish bail out has not worked: the markets have reacted without enthusiasm and the talk is, inevitably, of contagion, It’s almost assumed now that Portugal and Spain will follow suit. Belgium is next on the list. And I doubt that will be the end of it. Others will join in due course including, at the very least, the failed tax haven states with massive funding deficits, such as Jersey, Guernsey, the Isle of Man, Bermuda, Cayman and more.

So let’s not pretend any more that this was caused by a rogue bank – as people like to claim of Anglo Irish. It was bad, but it did not pull the system down. And let’s not mistake the fact that the system is going down. The pretence otherwise is simply a time buying exercise, and one that looks like it may not work for long. The truth is that world banking is tottering. The underpinning of money was, in far too many cases, property, and property prices are falling and that means that bankers’ confidence money in the money they created (because 97% of all money is made by bankers) is failing with it.

Bailing out state after state won’t solve this issue. The problem does not belong to one state: the problem is global. As TJN has shown with regard to the Greek crisis – the issue is one of inter-connectivity, at the core of which are tax havens. The pretence is that a state may be bailed out – and its people held responsible for the fecklessness of their banks under the lax regulation that people’s reckless elected politicians permitted – but this is as much a lie as they claim that all this was the fault of Anglo Irish.

No one country, no one politician, no one bank, no one regulator created this mess. This mess came about because we believed three things.

The first was that corporations could be stateless. In the age of globalisation corporations said they floated above the state, its petty constraints and the obligations it imposed on them to comply with regulation and to pay tax. And they persuaded politicians they were right. Indeed they still are. Alistair Darling still subscribes to this view – and it is fundamentally wrong.

Second, we believed that we’d solved boom and bust – and inflation. Actually, all we did was outsource jobs to China to beat wage inflation and suppress the wages of most ordinary people, and then sustained growth through credit based on supposedly rising property values whilst denying many access to the homes they needed. It was and is a ludicrous economic model.

Third, we believed business knew more than politicians about how to run anything. Morality disappeared under the illusion that the market was the ultimate arbiter of right and wrong. Faith in democracy declined as the belief that the ultimate vote was that through the till. And the confidence of most of those with moral conviction drained away with the onslaught of this idea that poured through all media. For the few who still cried out in the wilderness there was almost universal derision.

Each of those ideas are wrong. The corporation is rooted in the state. There is no such thing as a free flow of capital: it always has a cost, and we’re now paying it. The reality is that prosperity is based on work – not finance or asset inflation. And there is a very real need for democracy and moral leadership, especially now in a time of crisis.

Each of these issues is important, vital even. But of the three the biggest issue is the last. The vacuum there is potentially crippling. It is the absence of vision against which the young are protesting. It is leadership they are demanding. And it is leadership they must have – or we move to extremes.

Corporations have to be tamed.

Finance has to be tamed.

The state must re-emerge.

But so too must the politics of social conviction: the politics that says there is a right and a wrong, the politics that says we can by individual effort change the world for the better – not for ourselves, necessarily – but for the sake of humanity at large.

That’s the politics of social democracy – but I mean radical social democracy – not the sop to watered down neo-liberalism that has been a pale excuse for social democracy for far too long.

This blog is a small contribution to that debate – and the need for change: change of the only type that can deal with the systemic failure that’s emerging, rapidly.

Sack him

Corruption, Ethics 14 Responses »

Nov 302010

As the Guardian reports:

Prince Andrew launched a scathing attack on British anticorruption investigators, journalists and the French during an "astonishingly candid" performance at an official engagement that shocked a US diplomat.

Tatiana Gfoeller, Washington’s ambassador to Kyrgyzstan, recorded in a secret cable that Andrew spoke "cockily" at the brunch with British and Canadian business people, leading a discussion that "verged on the rude".

During the two-hour engagement in 2008 at a hotel in the capital, Bishkek, Andrew, who travels the globe as a special UK trade representative, attacked Britain’s corruption investigators in the Serious Fraud Office for what he called "idiocy".

He went on to denounce Guardian reporters investigating bribery as "those (expletive) journalists ‚Ä¶ who poke their noses everywhere".

He’s a diplomat who has broken the rules of diplomacy.

Sack him.

And bar him from further payment from the civil list.

In a time of austerity we have no reason to support liabilities.

The man is clearly without any ethics at all. There is no place for people like him representing the UK. It’s not our job to promote corruption – and that’s what he’s doing.

This isn’t just an EU problem

ConDems 1 Response »

Nov 302010

The FT reports:

Billions of euros of EU funds to promote growth in Europe’s rundown regions are lying idle because cash-strapped national governments cannot find the necessary matching funds to release the money.

But this is not just an EU problem. I was talking to a charity trustee the other day who said fund raising was now near impossible. So many grants are conditional on “march funding” – often secured from local authorities. and there are no match funds now so things like lottery grants are also drying up because they cannot fund projects by themselves.

So much for the Big Society.

It looks more like the Big Scrap Heap for Society to me.