2011 January » Tax Research UK

Of course people don’t blame Labour for the economic crisis

Jan 312011

Liberal Conspiracy have done someone fascinating polling.

Bored by the continual claims that people blamed Labour for the crisis – based on surveys that simply ask people to choose between the political parties they blame – they did a poll that asked who people blamed and included others options including banks and trade unions.

The results are telling:

Everyone blames banks more than Labourt – bar Conservatives, which is fine as they won’t vote Labour anyway.

As Sunny Hundal for Liberal Conspiracy concludes:

The point is this: a significant percentage of voters lost trust with Labour on the economy – not because it didn’t have a “tough” (as Alistair Darling called his) deficit-cutting plan.

Many lost trust in Labour’s handling of the economy because it didn’t regulate banks properly, and let them take the economy down. They blame the banks for the financial crisis, but Labour for letting the crisis happen in the first place.

These people are a significant majority of the voters. How will Labour respond to them? That should be the main question for the party now.

And the answer should be clear. And it does involve rejecting Blairism.

What is HMRC saying about Jersey?

Guernsey, HMRC, Isle of Man, Jersey, Secrecy jurisdictions, Tax Havens 5 Responses »

Jan 312011

H M Revenue & Customs has, as many will be aware, announced a new penalty regime for offshore disclosures.

As they say:

These new penalties come into force from 6 April 2011 and apply to Income Tax and Capital Gains Tax.

The legislation can be found in Schedule 10 of Finance Act 2010.

The new penalty is an enhancement of the penalties for

failure to notify

inaccuracy on a return

failure to file a return on time

Under the new legislation, these penalties will be linked to the tax transparency of the territory in which the income or gain arises. Where it is harder for HMRC to get information from another country, the penalties for failing to declare income or gains arising in that country will be higher.

There will be three new levels of penalty:

where the income or gain arises in a territory in ‘category 1′, the penalty rate will be the same as under existing legislation

where the income or gain arises in a territory in ‘category 2′, the penalty rate will be 1.5 times that in existing legislation – up to 150 per cent of tax

where the income or gain arises in a territory in ‘category 3′, the penalty rate will be double that in existing legislation – up to 200 per cent of tax

So far, so good.

But then note the lists of places that are in categories 1 and 3. Guernsey and the Isle of Man are in category 1.

Jersey is in category 2.

What are H M Revenue & Customs trying to tell us?

And what’s the official response of Jersey to this? Surely they must have one?

Jersey – captured by finance

Corruption, Jersey, Secrecy jurisdictions, Tax Havens, Uncategorized 16 Responses »

Jan 312011

I have often argued that tax havens / secrecy jurisdictions have been subject tio regulatory capture. Wikipedia defines this as:

regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for large firms to produce negative externalities. The agencies are called Captured Agencies.

The evidence became very clear ina presentation given last Friday by Jersey Finance to the members of the States of Jersey. The title slide of their presentation was:

Note what Jersey Finance says of itself in its web site:

So there we have it: a non-profit company whose job is to promote the finance industry.

But then note what Jersey Finance said it had done in 2010:

Hang on – Jersey Finance is saying it developed 18 laws and regulations? That seems to be the case.

And it wasn’t a mistake. This is what it says it wants to do in 2011:

Yes, it’s working hard on developing new lines and regulation.

So there we have it – absolute proof of the fact that Jersey has been captured by finance.

And wasn’t it kind of the real government of Jersey – Geoff Cook and his ex-finance industry team at Jersey Finance (almost none of them Jersey people, please note) to go along to the states and tell them what they’ll be doing when it comes to law making this year? Because this is exaxtly what that meeting was about.

The people of Jersey and the politicians of Jersey please take note – the evidence that your legislature has been captured for the benefit of the finance industry is overwhelming. Now, what are you going to do about it?

Green Bank or privatised bank

Banking, ConDems, Economics 1 Response »

Jan 312011

The FT has two stories telling a tale of importance this morning.

Chris Huhne wants the Green Investment Bank for the UK to be a real bank. The Treasury oppose it – tooth and nail.

The Treasury hope to privatise Royal Bank of Scotland next year despite its dismal record of support to the UK economy.

What does this say?Simply this: that the Treasury is only worried about bankers.

I remember a conversation I had with a very senior person in H M Revenue & Customs in late 2008. She reflected a Treasury and not HMRC background. She said:

“We have to restore Anglo-Saxon Capitalism. It’s all we’ve got.”

That’s the poverty of thinking in the Treasury summarise in one line.

And that’s hy bankers’ are getting their way.

It’s time they opened their eyes, very wide. Because this is not sustainable. It’s shocking that Gordon Osborne has no Plan B. It’s worse that the Treasury hasn’t either. But that’s the reality.

And that’s what has to be challenged.

Who will be getting angry?

ConDems 24 Responses »

Jan 312011

I’ve just noted the dangers that occur when a majority are oppressed by an elite.

Who will get angry? Well, note this from this morning’s Guardian, reporting the Institute for Fiscal Studies:

Analysis from the Institute for Fiscal Studies today reveals that changes in April will drag 750,000 people into the 40% tax bracket. Meanwhile, little-publicised tax credit cuts will push the marginal rates of 175,000 working parents up above 70%. In theory, effective tax rates in Middle Britain could reach 83%, the rate that Labour levied on Britain’s top earners before 1979.

And when UK companies are being offered tax rates as low as 8% you honestly think people are going to say “yes, of course we’re all in this together?”

No they’re not: and they’re not going to be quiet about it either.

When divisions become a gaping void – what then?

Banking 4 Responses »

Jan 312011

Davos has been and gone. As Larry Elliott and so many others have reported, in an event where the basic ticket price is $50,000 the sentiment of the bankers dominated and the message was clear – that they want the ‘banker bashing’ to stop. It wasn’t just Bob Diamond this time, although he was playing the tune, of course. Jamie Dimon of JP Morgan was singing in harmony this time – as if banks were to be thanked for all they have done for us, and it really is time all economic attention was turned to cutting the deficit – which of course the bankers had nothing to do with.

This is not just wrong. It’s dangerous. It’s dangerous because the banks are demanding they be allowed to carry on as they did pre-2007. They’re demanding an economic environment in which from 1980 to date there has been little real growth for any but the very richest – who have benefited enormously at cost to all others. And they’re demanding a world where trickle down has not just not worked, but where the demand for growing living standards in a vain attempt match the increases enjoyed by the very rich led to the most extraordinary boom in credit that was wholly unsustainable.

It’s dangerous because a commentator as right wing as Liam Halligan on the Telegraph can say:

Yet while the grand-standing and finger-pointing should stop, it is absolutely not time to “move on”. The structural banking reforms we so desperately require are still a very long way from being agreed. The chances now are, given the Davos mood music, that they never will be.

And the bankers are trying to make sure that is the case – using every threat in the armoury of repression that they can muster.

Threats? Yes. Take the report from Andrew Clark in the Guardian this morning about the Swiss police using pepper spray on a train from Davos and then holding him in custody for more than three hours for taking pictures of police in riot gear on that train. This is intimidation. As he said:

The police didn’t seem to be charging any of the demonstrators who were hauled off that boisterous train. They were, as one of my fellow captors told me, just trying to scare us: “They had been sent up to Davos and they need to show they’re doing something. This is their way of saying ‘don’t come back to Davos next year’.”

Is this unusual? No, unfortunately. Pepper spray was used on UK Uncut protestors in London yesterday. All reports say their protests were peaceful. The spray was used when a protestor tried to put a leaflet through a letter box.

Is this chance of coincidence? I fear not. The bankers demand privileges and immunity from their actions. They celebrate the fact that George Osborne wants to re-privatise RBS. They want the world of protest kept far from their door. They want the chance to abuse again, and again, and again.

And those who raise their voice in protest are oppressed.

This is not chance or coincidence.

And it worries me, enormously. I do fear that the abuse of the bankers will be maintained by such means. And yes, I do observe Tunisia and Egypt and the oppression of people to support an elite. And no, I don’t see as much difference as I would like to find.

Unless banking is regulated; unless banks are split up; unless investment banking is tamed, unless this elite is brought under control then I fear civil disobedience.

But don’t think this will be by a tiny minority. Expect hospital consultants to be at the front of the protests. And teachers. And social workers. And thousands of others. Because the threat Davos person (mainly man, let’s be honest) now poses is to the very fabric of society.

I want evolution. I always want evolution. But if bankers push us back and if Cameron and Osborne let them do that then we’re into volatility. And I don’t mind saying I find that very worrying, precisely because the prospect seems so very real. An elite can only maintain its abuse for so long. When it challenges too many in the rest of society it collapses. Bankers please note. This is too important to ignore.

93, not out

ConDems, Labour 3 Responses »

Jan 302011

William Keegan in the Observer reports comments by Denis Healy, the former Labour Chancellor, made last week. He apparently said:

I feel sorry for George Osborne, despite his politics [pregnant pause] – and his personality.

Healey has always been the master of the pithy, biting, phrase. He still is, it seems, at the age of 93.

Where 4 art thou?

Accountancy, Big 4, Secrecy jurisdictions, Tax Havens, Tax Justice Network 2 Responses »

Jan 302011

The Mail on Sunday seems to have got it in for tax havens – and those who operate there. And rightly so, of course.

Last week they highlighted the number of subsidiaries UK based multinational corporations have in such places, using methodology I have used in the past.

This week they’re back on the trail – highlighting the role of the Big 4 firms of accountants in these locations. As they note today:

The Big Four accountancy firms have come under attack for maintaining on average more than 20 offices each in offshore tax havens despite countries working together to crack down on tax avoidance.

The four firms – PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young – have 81 offices in offshore tax havens, according to new research by Financial Mail.

MP Chuka Ummuna, who earlier this month confronted Barclays chief executive Bob Diamond over the banks’ 300 offshore subsidiaries, said: ‘There’s a whole industry out there dedicated to helping people avoid tax that will increasingly come under the microscope.’

This work also seems to be based on methodology I have used before now – and I’ve got no complaint about that. Using a broader definition of tax havens / secrecy jurisdictions than The Mail has used I published a paper on this issue last summer, available here. I’d stress that it has been suggested I overstated the number of locations PWC have on Hong Kong: that aside I stand by the research.

And as I said in my paper, there is, I am sure, nothing illegal about what the Big 4 are doing. But as I also note:

[This paper shows] that the [Big 4] act as auditors and advisers to almost all multinational corporations. It is shown that they have prevalence in secrecy jurisdictions that cannot be explained by local commercial need. It is shown that those places in which they are present have much higher incomes per head of population than is to be found in those where they are not present. It is suggested that this is not the result of local characteristics of the places in which they are located but is the result of income being transferred into these locations for accounting purposes, a process which their presence would assist whether directly or indirectly.

And if there is reallocation of income to secrecy jurisdictions in which the Big 4 operate then it has to come from somewhere. That somewhere might be the UK, in which case, as the Mail is no doubt suggesting, it is at cost to the ordinary taxpayes of the UK. And if it is from developing countries it creates poverty – an argument many NGOs who work in developing countries have made. And that can cost lives when necessary resources are denied to the poorest people in the world.

I repeat, nothing illegal may be happening. After all, few tax havens / secrecy jurisdictions have transfer pricing legislation to make such practices illegal so it’s hardly surprising that what goes on in such places can meet legal expectations. That’s not the point though. There is a cost all the same. And one that is unacceptable to the UK, and the people of developing countries.

And the Mail is right to highlight that.

And in the circumstances the refusal of the Big 4 to answer the questions the Mail put to them is all the more telling. It’s time they were held to account for what they do. After all, that’s the very core of what they’re meant to be about, isn’t it?

I’m not applying for the job

Jersey 1 Response »

Jan 292011

There was a letter in the Saturday edition of the Jersey Evening Post from a person who, as far as I know I do not know, suggesting I’d make an ideal Chief Minister for Jersey.

I guess for the sake of the peace of mind of Philip Ozouf, who clearly sees himself as a shoe-in for the job when Terry le Sueur retires from Jersey politics later this year, I should make clear that I’m not interested. Apart from also noting one or two minor logistical obstcales in the path to taking on the task!

Which is not to say I’m endorsing Philip Ozouf – who lacks almost all the necessary qualities to do the job. As the JEP’s correspondent was, I am sure, aware.