2010 December » Tax Research UK

Middle Britain and the tax protests

Tax avoidance, Tax justice 7 Responses »

Dec 162010

The Daily Mail is a paper I usually read to see what the other side of the debate is thinking.

But then this week it shows a dimension that is surprising. It did a survey on student protests and found (if I recall correctly) that 76% of people supported the students.

This morning it goes a step further and publishes one of the lengthiest reviews of the causes for the UK Uncut tax protests in the major pres to date (although I suspect there will be a lot more this weekend if the number of interviews I am doing is anything to go by). And the analysis is good, as you would expect from anything written by Michael Gillard.

The headline is typical Mail:

To service Britain’s terrifying debt, the middle classes are paying ever more tax. Yet a group of the country’s biggest firms are moving offshore – and denying the UK exchequer hundreds of millions

I do, of course, disagree on the debt issue, but the message on tax is quite simply right. This is what is happening. The conclusion is also clear:

So the shameless strategy of tax avoidance continues in the world of big business, and the losers are the millions of hard-pressed taxpayers who are left to take up the slack.

Topshop and Vodafone will have repaired the shop windows that were smashed in the riots last week. Their reputations may take rather longer to mend.

This is also right: the tax avoidance is shameless, ordinary people are paying, UK Uncut is quite right to protest and their message will have impact.

This is the fastest developing alternative narrative there is to the cuts. I’m delighted it’s happening and I have no doubt it will continue. For those in doubt, these are the locations where protests are planned on Saturday:

That’s amazing for a new group with almost no infrastructure.

It shows the importance of the message – and the message here is right.

Country-by-country reporting – TJN submission to the European Union

Country-by-country, Europe, Tax Justice Network Comments Off

Dec 152010

The European Union is undertaking a consultation on country-by-country reporting, the closing date for submissions being 22 December.

At their request I have prepared a quite lengthy submission which elaborates and advances the case for country-by-country reporting by multinational corporations in a number of significant ways. This has been published by the Tax Justice Network:

As the summary says:

This report is a full response to the questions posed by the European Commission in public consultation on country-by-country reporting by multinational companies, published in October 2010. The submission elaborates the summary responses posted on line to the European Commission and is an integral part of the overall submission.

In summary the submission argues that:

¬? Country-by-country reporting is financial reporting data;

¬? Country-by-country reporting data is essential information likely to have significant impact on economic decision making by investors and other users of financial statements;

¬? As such country-by-country reporting requirements should be included in International Financial Reporting Standards, or failing that in the European Union Seventh Directive on Financial Reporting;

¬? This information is material without exception for the users of financial statements located in the jurisdictions in which multinational corporations trade (as indicated by their having a taxation permanent establishment in that location) and as such must be published for all such jurisdictions, with the sole exception being that some trading data may be omitted when immaterial to the jurisdiction in question.

¬? Most country-by-country reporting data should be audited but this should not impose significant additional cost on multinational corporations, all of whom must already have all the necessary data if they are to fulfil their legal obligation to maintain adequate internal control systems capable of determining their assets and liabilities at any point in time.

¬? Country-by-country reporting data would substantially enhance taxation governance within multinational corporations, jurisdictions and internationally;

¬? There are significant benefits to full country-by-country reporting for the extractive industries and that this requirement complements and does not in any way undermine the disclosures required by recent US legislation and the Extractive Industries Transparency Initiative.

¬? Whilst country-by-country reporting by all multinational corporations would be invaluable, greatest benefit is secured from this disclosure by what are defined as ‚Äòvery large’ corporations and some other quoted companies.

¬? That all these users need country-by-country reporting data because this data;

    o Adds essential information for the effective operation of capital markets to that available in existing financial statements.

    o Emphasises the duty of directors to exercise sound governance over the assets of which they have stewardship, including the decisions they make as to where to invest those assets and to undertake trade.

    o Ensures that all users of accounts receive the information that they require to appraise the performance of the reporting entity.

    o Provides essential information required by users of accounts which is not made available by existing International Financial Reporting Standards.

    o Provides that information, if delivered consistently across Europe, on as basis that ensures that comparison can be made between reporting entities, which is a key attribute essential to successful interpretation of financial data.

    o Will increase the well-being of the people of Europe as a consequence of the enhanced return likely be made when directors of multinational corporations are held accountable for locating corporate investment in those places where their use is likely to be most advantageous.

We would, of course, be delighted if people would like to support this submission.

Welcome to the police state

ConDems, Ethics 21 Responses »

Dec 152010

Welcome to the Police State:

Scotland Yard will consider asking the Home Secretary to ban further student marches should the levels of violence which have marred the recent protests continue, Britain’s most senior police officer said yesterday.

Labour were bad on civil liberties. And in the wrong hands their legislation is being abused.

Goodbye to freedom of association and the right to protest then.

Except the truth is people will protest if they want to, whether the police like it or not – and nothing will stop them. Police states always fail in the end. But do we really have top test this hypothesis in the UK?

Lansley – likely to kill you, the NHS, or both

ConDems, NHS 3 Responses »

Dec 152010

The Guardian has reported in the last hour or so:

Andrew Lansley, the health secretary, announced today that the government will push ahead with radical plans to shake up the NHS – the biggest shift in power and accountability in its 62-year history – despite opposition from almost every part of the health service.

Among those raising the alarm in the 6,000 responses to the white paper – about the size and scale of the planned reforms – were the Royal College of GPs, trade unions, and the respected health thinktank the King’s Fund.

The British Medical Association described the timetable for the reforms as "foolish" and warned that patient care could suffer as a result. Lansley said critics’ claims were unfounded.

Let’s not beat about the bush: this is in breach of all election promises not to “top down” reform the NHS, it’s most extraordinarily unwise and it will kill you, the NHS or both unless it kills the ConDems first.

The NHS is much beloved for good reason. It works. I know. I’ve spent much of this morning in a hospital with my son for yet another in his litany of broken bones (how one manages it, seemingly often and the other never baffles me). As ever, I remain in awe of the fact that as nation we supply such an amazing service at lower cost than most nations on earth free to all comers. It’s a staggering achievement spoiled only by the fact that if organisation as centralised, the market was removed from the equation and the NHS concentrated on supplying health care without all the bureaucracy that PCTs, Foundations and so on all impose when a few regional strategic health authorities could do the job so much better.

Instead that beauracracy is to get so much worse:

At the heart of the change is the shift of £80bn of taxpayers’ money into the hands of England’s 35,000 family doctors who operate as essentially private businesses. Lansley admitted that he had conducted no surveys of GPs before launching the white paper – despite outright opposition from one in four GPs.

I must declare an interest: I am married to one of that35,000 but the views here are mine, not hers.

GPs are (by and large) considered just about the most successful professionals in the UK with the highest approval rating of any profession and, by and large that’s for very good reason. Most work very long days at considerable intensity often making the sort of decisions most of the rest of us would really rather avoid (life and death stuff) or facing harrowing situations that again most of us would run a mile from. Sure tey deal with sniffles too – but that’s a minor part of the job that makes the rest possible by giving time for a rare cup of tea.

But to say they run small businesses is ludicrous. They get 97% plus of their income for being there. They employ staff on pretty much NHS terms. Their premises are provided, as is their IT. They work to protocols set by others. A few do some minor ops and think they’re really entrepreneurial. No doubt they’re the ones advising Lansley. They’re deluded. From what I’ve seen of GPs the average one hasn’t the business ability to run an ice cream van in August. More important, they have no spare time at al and they’re not going to be given any to run the NHS.

So the claim that they’re going to do so and maintain front line services is a lie. And a blatant one. We’ll have fewer GPs or an NHS run by contractors, and probably both.

And the culture they’re already being told to follow is one of competition – compete on price to knock down hospital prices. Compete with hospitals on providing services. And more of the same.

This completely ignores the fact that the NHS only works as a whole. GPs can’t work without hospital backup. Hospitals would fail without GPs seeing more than 90% of all NHS contacts so stopping A&E being inundated. This is an integrated service that Lansley wants to destroy – and destroy it he will.

I support the students and sixth formers in their fights with this government.

I hate the unemployment this government will suffer as a result of the callousness of George Osborne. but the collapse of the NHS will bring this government down. And it will collapse because a great many GPs are old enough to retire if put under pressure, and retire they will – and already young doctors are not training as GPs because it looks such an undesirable option again. This is going to be the frontline. And rightly so.

Huhne makes a mockery of the “greenest government ever” as O’Donnell smells the coffee

ConDems, Economics 3 Responses »

Dec 152010

Chris Huhne has betrayed his own Green principles and shown the true colours of the ConDems by willingly sacrificing green investment to the financial crisis. How on earth can we get a green economy or new jobs if we are not willing to invest in it? The opportunity will pass, we will not beat climate change and we will not end the recession either. Huhne once fancied himself as an economist. God knows what sort – because he clearly is clueless based on this performance. The reality is we need a Green New Deal.

Gus O’Donnell on the other hand, as head of the civil service, seems to have seen the light. As the Guardian notes:

Britain’s top civil servant has urged the Treasury to prepare contingency economic stimulus plans, including fresh capital spending on infrastructure, in case economic growth falters in the new year.

The paper drawn up by Sir Gus O’Donnell, head of the home civil service, was prepared in the last few weeks and is circulating inside Downing Street.

It came as it was confirmed that the business secretary, Vince Cable, is concerned by the direction of Treasury policy, describing officials as "thirties fiscal fundamentalists". The Liberal Democrat’s remarks suggest there may be an economic policy dispute developing inside the coalition.

There ought to be.

They’ve got it fundamentally wrong.

Unemployment rising – inevitably

ConDems, Economics 4 Responses »

Dec 152010

As the Guardian has noted:

UK unemployment has risen back over the 2.5 million mark, fanning fears that Britain is suffering a "jobless recovery".

The number of people out of work in Britain rose by 35,000 in the three months to October, pushing the unemployment total up to 2,502,000. This raised the UK’s unemployment rate to 7.9%, from 7.8% in the previous quarter, the highest rate in six months.

City economists had expected a 15,000 drop in the number of people out of work, which would have lowered the unemployment rate to 7.7%.

The rise was mainly due to a drop in public sector employment, where 33,000 jobs were lost over the period.

Those economists are wrong. They assume that a retreating public sector will promote private sector growth. It doesn’t. It means private sector stagnation or worse.

And those who worry about a jobless recovery are also wrong.

A recovery without jobs is not a recovery.

And we’re not going to get new jobs. The government is guaranteeing that will be the case. And we’re just seeing the first signs of it.

Heads in the sand in Northern Ireland

Ireland 11 Responses »

Dec 152010

The Belfast Telegraph has a story today that says:

Another group of Northern Ireland business leaders has waded into the row over the proposed lowering of the corporation tax rate.

The Northern Ireland Economic Reform Group (NIERG) has refuted claims that the Republic of Ireland’s low corporation tax regime "yielded very few real net jobs" and that Northern Ireland’s adoption of the 12.5% rate would add nothing to the economy here.

The statement came after tax commentator Richard Murphy, who runs the website Tax Research UK, told the Belfast Telegraph that lowering the rate would simply be "a clever marketing tool" and that such a move would turn Northern Ireland into a "tax haven".

The UK rate is currently 28%. The NIERG said that the results of the policy pursued by the Republic of Ireland speak for themselves.

You would have thought that would be enough to end the argument! But they wade on none the less:

"Foreign direct investment has generated more jobs per head of population in the Republic than in any other country," the group said in a statement.

"At a time when global foreign direct investment flows were down 30%, the decline in the Republic was just 4%.

"There are nearly 150,000 jobs currently in the Republic that come from foreign direct investment.

"The evidence from the Republic of Ireland is irrefutable that the ability to adopt a low corporation tax rate would put a powerful new economic tool at Northern Ireland’s disposal.

"It is vital that we equip ourselves with a proven means to boost economic growth."

The NIERG produced a report earlier this year which said lowering the tax rate could create up to 90,000 jobs over a 20-year period.

With apologies to the Belfast Telegraph for borrowing quite a lot of their story, but since they in turn quote most and attribute blame to me I hope I will be forgiven.

And the truth is that this logic is quite extraordinary. Ignore for a moment that I have explained why the experience of the Republic cannot be replicated in the North in my report for the TUC and Irish Congress of Trade Unions entitled “Pot of Gold or Fool’s Gold"?” and instead go behind these extraordinary claims.

First there is the assumption that the EU will agree to this change, and there is considerable doubt that it will. I have a track record on being right on such things.

Second, if the tax rate is cut the block grant to Northern Ireland will be cut by up to £300 million. As I’ve written before:

But this factional view is an inappropriate basis for determining tax policy – which has to be based on the interest of the community as a whole. And as experience in the Republic has convincingly proved, when the state recedes – as it would have to if this proposal were adopted – the private sector does not rush in to fill the void. It flees in the face of falling demand. As a result you might get smaller government – the Taxpayer’s Alliance’s sole interest – but you also get an impoverished society.

Of course those proposing this change don’t care about that – they’ll make anyway.

Third though, note that all the evidence presented to the House of Commons on this issue was unrelated to jobs. They all said that jobs related boosts for the Northern Ireland economy were based on treating it as a cost centre – but they all said they wanted to make Northern Ireland a profit centre – a conduit for profit irrespective of jobs created in other words. That’s in ordinary language a tax haven and gives complete lie to their real objectives. It takes only a moment to realise how in truth this has hollowed out the economy of the Republic.

But worse, note the extraordinarily limited thinking on display. It is that of the rational economist which assumes that the future is entirely predictable on a probabilistic basis, that the past is a certain guide to the future and that uncertainty does not exist as a result. So, they argue, because for a while (and using selective evidence until 2008) a policy seemed to work in the Republic it is bound to work for Northern Ireland in the future. That, however, is not true. The world now is not what it was. An uncertain event happened. And therefore the past cannot predict what will happen – and most certainly Northern Ireland’s future cannot be predicted on the basis of the Republic’s past – although the risk that the Republic’s present might be reproduced is clearly significant.

My conclusion? These are economists and accountants pursuing a policy in pursuit of their own aims based on outdated and inappropriate methodologies for thinking that is bound to be counter to the best interests of Northern Ireland as a whole. Northern Ireland would be very wise to give them a very wide berth.

Europe heralds new era of tax transparency

EU STD, Europe, Tax avoidance, Tax evasion 2 Responses »

Dec 152010

The following blog is by Alex Cobham, policy manager at Christian Aid, It first appeared on the blog of the Task Force on Financial Integrity and Economic Development. The issue to which he refers is really important, and I agree with his interpretation on the issue. I do so having checked my facts. I am aware that many right wing tax abusers think that the initiative he refers to spells the end of the European Union Savings Tax Directive. They are wrong. I have checked with sources in Europe and not only does the change have no effect on the European Union Savings Tax Directive, there appears to be remarkable confidence that it will be extended next year. But, over to Alex:

“While the headlines are full of information that governments did not intend to release, European ministers of finance including UK Chancellor George Osborne last week agreed to a draft directive outlining a powerful new basis for the automatic exchange of tax information between jurisdictions – a directive which, if it does what it says on the tin, would be a dramatic step towards the end for European tax havens.

This Tuesday 7 December there was a meeting in Brussels of the Economic and Financial Affairs council (EcoFin, effectively Europe’s council of finance ministers). The press release (still provisional) shows an agenda that covered everything from the Irish bailout to climate finance, but importantly included the following: “political agreement on a draft directive aimed at strengthening administrative cooperation in the field of direct taxation so as to enable the member states to better combat tax fraud. [The Council] will adopt the directive without further discussion at a forthcoming Council meeting, after finalisation of the text.”

The significance of this agreement should not be understated. The additional press release devoted specifically to this item contains further detail. The draft directive will “overhaul‚Ä¶ directive 77/799/EEC, on which administrative cooperation in the field of taxation has been based since 1977.” And how! According to the Ecofin press release, the changes represent nothing less than a fundamental rethink of the approach to information exchange.

As a first step, the OECD model tax convention on income and capital [3MB pdf file] will be implemented. This is a valuable step, but the Council makes clear, however, just how weak the convention is in terms of information exchange, by explaining how the draft directive will exceed the convention’s requirements.

First, the exchange of information on request will be made much more effective. New measures include extending cooperation to taxes of any kind; imposing time limits for jurisdictions to respond to requests; allow officials from one jurisdiction to participate in investigations in another; and ease the process through standardisation, including importantly of the format for information to be exchanged.

A major aspect will be to reduce the burden on the requesting state. The OECD model of information exchange ‚Äòon request’ has been criticised for effectively requiring the requesting state to know all the information already about the specific case of tax abuse. Unsurprisingly, the quantity of actual information exchange resulting has been low. The new draft directive will apparently only require requesting nations to provide “the identity of the person under investigation and the tax purpose for which the information is sought”, which could dramatically increase actual information exchange.

The second and‚Äîif anything‚Äîmore powerful way in which the OECD convention will be exceeded by the new European arrangements is in the automatic nature of some information exchange. Specifically, “The Council agreed on a step-by-step approach aimed at eventually ensuring unconditional exchange of information for [the eight major] categories of income and capital.” This will involve automatic exchange of five of these categories by 2015, with a view to a proposal by 2017 to extend to all categories. The categories are as follows: income from employment; directors’ fees; dividends; capital gains; royalties; certain life insurance products; pensions; and ownership of, and income from immovable property.

There can no longer be any question that automaticity is the new standard for information exchange to combat tax abuse. Including developing countries in this system, to stem their massive tax losses, must now be the priority.

Quite apart from the benefits that the draft directive would have for citizens of the EU in terms of greater revenues and less corruption in the form of tax abuse, the potential benefits for developing countries are huge. Leading international figures such as the OECD Secretary-General now share Christian Aid’s view that developing countries’ revenue losses to international tax dodging are substantially in excess of all aid receipts. For that reason, the last UK government led the way and ensured that the London G20 meeting of 2009 committed to including developing countries in a new climate of transparency and cooperation in the field of tax – a commitment which has yet to be meaningfully realised.

The draft directive does not herald the absolute end of European tax havens, for some issues of secrecy will (of course) remain, and there remain weaknesses about the expectation on states to hold information for exchange‚Äîa problem for a number of U.S. states too. It is, nonetheless, a dramatic step towards tax transparency.

European finance ministers have laid down some clear markers: that multilateral information exchange agreements are necessary for tax transparency; that the OECD standard for information exchange ‚Äòon request’ is unfit for purpose in a number of ways; and that automatic exchange is the future. The critical issue now should be about establishing a process and a schedule to further ‚Äòmultilateralise’ the agreement so that developing countries can finally benefit from greater cooperation as the G20 committed.”

Just don’t get ill, whatever you do

ConDems 10 Responses »

Dec 142010

As the Guardian notes:

The government has no "credible plan" to make NHS savings of £20bn by 2014 aa committee of MPs warns today.

The figure would represent "unprecedented" efficiency gains if the quality of care is to be maintained, say the MPs.

Stephen Dorrell, the former Conservative health secretary who chairs the select committee, said the NHS chief executive, Sir David Nicholson, had warned that the 4% productivity improvements required by the £20bn cut had "never been achieved in the history of the NHS or any healthcare system in the world".

Let’s put it another way: the government is tasking NHS GPs, who are wholly unskilled to do the job, with the task of producing the greatest increase in efficiency in the history of world health care.

They’ll fail, as the government intends they should.

Then they’ll try privatisation on very long contracts that they hope no future government will dare reverse. That will fail too – but it won’t matter by then, they think – billions of public money will have been captured for private gain in perpetuity, which is what they want.

And in that way in full privatisation of the NHS will happen.

Except it won’t. Rioting –or violence will have stopped it well before then. When the President of the Royal College of GPs is already warning its members to expect to face anger and threats from their patients at their role in seeking to impose these impossible cuts the situation is going to implode long before we reach this situation.

But people will die on the way.

And that’s unnecessary.

And a ConDem choice.

The words “callous” and “bastards” come to mind. Nothing else does. They know what they’re doing.