2010 November » Tax Research UK

People are coming to London

Nov 232010

Overseas investors are moving back into the UK financial services sector, easing fears that London is losing its lustre as an international centre for the industry.

Foreign-owned businesses accounted for 9.1 percent of new authorizations by the Financial Services Authority in the first half of 2010. That is up 40 percent from 2009.

This is in spite of a crackdown on bankers’ pay and a 50 percent top rate of personal income tax.

Quite so.

And as I’ve always said would happen.

To put it another way, the talk of exodus is pure fantasy by those who would like it to happen.

Contagion – the need to address the issue of bank failure – and the importance of putting people first

Banking, Economics, Politics 3 Responses »

Nov 232010

I note several people have passed critical comment because I suggested that the Irish bailout was failing yesterday.

This morning that seems to be the consensus view. The Guardian reports:

We know now what €100bn buys you these days. It buys you a rally that lasts a morning. Then the selling resumes.

[The] announcement that Ireland was seeking a bailout from the International Monetary Fund and the European Union was supposed to be the moment the policymakers fought back against the bond traders.

News of the emergency package was supposed to boost confidence that Ireland could pay its way in the world and provide enough capital to resuscitate its zombie banks. It was supposed to provide a firewall that would prevent the crisis spreading to other weak members of the eurozone.

And so it did, but only until lunchtime.

And as the FT notes, the attempt to stop the spread looks like it is failing:

Spanish and Portuguese leaders, with reinforcements from Brussels, are fighting a rearguard action to convince investors that there is no need for further eurozone bail-outs after the €80bn-€90bn ($109bn-$122bn) rescue agreed for Ireland at the weekend, the FT reports.

And, of course, it’s already brought down the Irish government – which will fail any day soon.

So what’s happening. Steve bell summarised it incredibly well in the Guardian (I rarely copy such things, but this is too pertinent to miss):

Burying the Duke forever

Tax avoidance 38 Responses »

Nov 232010

I have been asked this morning:

As a major proponent of a GANTIP, how do you regard the Duke of Westminster principle in the modern environment?

For those in doubt the Duke of Westminster principle says:

Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.

Or so said Thomas Tomlin, Baron Tomlin, in the UK House of Lords case, IRC v. Duke of Westminster (1936) 19 TC 490, [1936] AC 1.

I reject this notion. It is bad law. It is poor jurisprudence. It has no statutory basis. It is as outmoded as much else that was accepted in the 1930s as being socially acceptable.

The modern alternative is:

Every person has a duty to be tax compliant. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.

That’s what I believe.

Osborne sticks with his conviction

Conservatives, Ireland 4 Responses »

Nov 222010

George Osborne has been under immense pressure in the House of Commons. His move to lend £7 billion to Ireland is deeply unpopular. MPs rightly worry that it may not have the capacity to repay.

But the Guardian then notes this:

The chancellor also rejects a call from another MP that Ireland should be forced to raise its 12.5% corporation tax. It would not be in Ireland’s interest to force through tax changes that "lead to an immediate flight of international businesses."

Osborne, the tax dodger, the believer in the Celtic Tiger, sticks to his principles. Ireland couldn’t lose international business he says. No way. Google and Microsoft might then have to pay tax in the UK on the profits I think they make on their sales into this country – currently recorded in Ireland. And that would never do, would it? In Google’s case I have estimated this loss at £100 million a year to the UK. Well that would be a useful loan insurance premium on the Irish loan risk, I think. But not according to George Osborne, who clearly does not understand these issues.

Jersey, you have nothing to be afraid of – well except Murphy & Christensen

Jersey 8 Responses »

Nov 222010

This letter in the Jersey Evening Post is too funny not to reproduce:

From John Boothman.

I READ with interest the attack by ex-Senator Ted Vibert of the Jersey Democratic Alliance on Jersey’s zero-ten corporate tax regime (JEP,16 November), guided he tells us by Richard Murphy of the Tax Justice Network.

Local politicians who sup with Mr Murphy and his colleague John Christensen should use a long spoon. The TJN has dedicated itself to destroying Jersey as an international finance centre, and their assault on zero-ten is just one part of this greater campaign.

If they are successful in their larger objective, the Jersey economy will be laid waste and many thousands of Islanders, both those directly employed in the industry and those dependant on it, will face ruin.

Evidently the JDA’s brief flirtation with political moderation is now at an end – something for voters to bear in mind when next year’s elections take place?

I haven’t supped with Ted Vibert since 2005, I think – and then it was a pint of bitter at most, as I recall. And after this distance in time I can’t now recall whose round it is next.

It’s interesting that Jersey lives in such fear of what I and the Tax Justice Network are doing: the endorsement for our effectiveness is gratefully received. But whistling and hoping we’ll go away is, let me assure Mr Boothman, a forlorn policy. The momentum for change is overwhelming, and suggesting two of us are behind it all is amusing but wrong. I really think he should equate himself with Plan B. The altenative is now required and those who will suffer are those who don’t prepare for the inevitable.

The EU Code of Conduct: an update

Europe, Guernsey, Isle of Man, Jersey 13 Responses »

Nov 222010

Several people have asked me to do an update on what I know aboutprogress with the Crown Dependencies and the EU Code of Conduct.

First, I gather that the EU recommendations the code of conduct group that met last week was as I predicted: Jersey and the Isle of Man have both failed three of the five tests laid down by the code of conduct.

The Response of the three Crown Dependencies was, I gather, quite different. As is widely known,Guernsey has given up without a fight, having accepted that the zero / 10 system is not compliant with EU requirements. That is why its tax system was not subject to review, and as such it did not technically fail.

Jersey has, I understand, offered to give up its enforced dividend distribution system for locally owned companies, which means that Jersey owned companies have to, in effect, pay taxes on dividends whilst those companies owned by non-Jersey residents do not This is the major ring fence to which the EU is taking objection, and always was. Jersey has, however, as a result done two things. The first is that it is agreed that it is failed tests one and two with regard to the EU code of conduct, and presumably it hopes as a result to get away with part three (which cannot be guaranteed). Second, it has created an enormous hole in its finances. Now any Jersey resident has a complete and perfect opportunity to avoid taxwhenever they live by simply holding their income in a company. How Jersey, already running a deficit of 20% of its government spending, things it can afford to do this is hard to imagine. I am aware that Jersey’s Philip Ozouf is calling this a “minor issue” today: I think he is spinning for all it is worth.

Finally, the Isle of Man has reacted very differently. It has apparently objected, and perhaps quite strongly, to the review findings. It has then this is consistent with reports I’ve had of earlier, quite belligerent, correspondence from the island to the EU.

All three reactions appeared to confirm the opinion that I previously offered. I gather even the Isle of Man have admitted that “concerns” have been raised. In that case I am satisfied my source of information was correct a week ago, as is my understanding of the varying reactions now.

The variety of those reactions does, of course, play into the hands of the EU. Guernsey has effectively given notice that except that zero 10 does not work. Philip Ozouf may wish to spin it otherwise,but in practice if Jersey’s reaction is as I have noted then it too has given up the game: it has admitted that the ring fence it has created has to go under EU pressure,and that means that zero / 10 has failed because there is no way Jersey can survive on a 0% corporation tax for domestic business.

With two admitting defeat will the EU then give in to the Isle of Man? I really don’t think so. This one is a 3 – 0 win for the EU. Each island now needs to go back, scrap a decades tax policy, all of it based on a deception, and offer the world an honest, open and transparent tax strategy, which also meets the domestic needs of their population.

It will be interesting to see what happens.

Ireland’s bail out looks like it has failed

ConDems, Ireland 10 Responses »

Nov 222010

The Guardian has reported:

The Irish bailout has failed. That’s the stark verdict from Zerohedge, the financial blog, after the euro slipped into negative territory today.

Having rallied early this morning to a high of $1.3785, the European single currency is now down to $1.362. Zerohedge’s verdict is clear: "The market now believes the Irish bailout has failed," it said.

Looking around the market, the FTSE 100 is now down by 45 points at 5688. RBS and Lloyds are the biggest fallers, reflecting their exposure to the Ireland banking sector

Government debt is also being hit, particularly that of Portugal. The cost of insuring Portuguese debt has now risen – with five-year credit default swap contracts 40 basis points wider at 452bp (see 10.33am for more detail).

Listening to traders, the new political uncertainty in Ireland appears to have alarmed some in the City. Reuters are quoting an unnamed independent government MP who has said he is unlikely to support next month’s budget.

The ruling coalition only has a majority of three at present. If it loses the budget vote, the whole IMF/EU rescue package could unravel.

If this fails we get contagion.

It looks like Portugal is already heading for it.

And this is not just Ireland’s fault. It’s Osborne’s too. he’s the man who led the charge against brown’s approach at unified action to bail out Europe. And this is what it has led to.

George – a moment for reflection

Conservatives Comments Off

Nov 222010

George Osborne’s enthusiasm for Ireland has been captured for posterity.

Very amusing:

Probably the best explanation of Keynes there is

Economics 2 Responses »

Nov 222010

Day after day the economically illiterate, whether of the neoliberal or Austrian varieties, turn up on this blog blathering utterly false ideas based on utterly false premises.

They need to understand what Keynes really wrote, and just how preposterous are the ideas they promote.

The best explanation I’ve come across at reasonably short length to date is this: