2011 March » Tax Research UK

For the armchair participants on Saturday – who can’t make it to the march

TUC Comments Off

Mar 242011

From Twitter:

Suggested email addresses for #Armchairarmy media bombardment from 11 am #Mar26 for pps who can’t march . Plse read & RT SHOW YOUR SUPPORT OF THE MARCH ON 26 MARCH BY EMAILING THE FOLLOWING PEOPLE. TELL THEM WHY YOU ARE SUPPORTING THE MARCH & WHY YOU CAN’T GO ON THE MARCH.

This is a list of email addresses we would like people to send their emails to. The more people that send to the same recipients, the more impact we’ll have. But, of course, you may have other people you want to tell. Please, please take this chance to vent your feelings. Let’s hope we can have an impact.

TV PROGRAMMES

1 BBC mike.sergeant@bbc.co.uk

2 Have your say bbc.co.uk/haveyoursay

3 ITV Tonight mailto: tonight@itv.com

4 Channel 4 News news@channel4.com

5 Five studio@five.tv

6 Sky news@sky.com & newsonline@bskyb.com

7 Newsnight newsnight@bbc.co.uk

8 Politics Show politicsshow@bbc.co.uk

9 Andrew Marr show http://bbc.in/hVyxCy (Leave comment)

10 form for This week with Andrew Neal http://bbc.in/i0FwQp

NEWSPAPERS:

11 The Sunday mirror scoops@sundaymirror.co.uk (Sell your story)

12 The Sunday Times Editor in Chiefonline. editor@timesonline.co.uk

13 The Sunday Mail news@mailonsunday.co.uk

14 The Independent
News:editor@independent.co.uk
Letters: letters@independent.co.uk

15 The Guardian
News: home@guardian.co.uk
Letters: letters@guardian.co.uk

16 The Morning Star
News: morsta@geo2.poptel.org.uk
Letters: morningstar@fsmail.net

17 The Evening Standard
Letters: letters@standard.co.uk

18 The New Statesman
Letters: codone@newstatesman.co.uk

19 The Telegraph
Letters: dtletters@telegraph.co.uk

20 The Mirror
Letters: mailbox@mirror.co.uk

21 The Times
News: editor@the-times.co.uk
Letters: letters@the-times.co.uk

22 The Sun
News: editor@the-sun.co.uk
Letters: talkback@the-sun.co.uk

23 The Daily Mail
News: editor.it@dailymail.co.uk
Letters: letters@dailymail.co.uk
24 The Observer
editor letters@observer.co.uk

Osborne: seeking an end to the taxation of capital

Conservatives Comments Off

Mar 242011

Martin Wolf’s column on the budget has much to say that is wise. Not least that he fears things will be much worse than George Osborne thinks. That is almost certainly true, given what George Osborne is doing. But I want to concentrate on another issue Martin Wolf adresses, which is this:

Now let us turn to the “plan for growth”. This has four elements [the first of which is to] to create the most competitive tax system in the group of 20 leading countries.

Should one accept these aims? Are the means chosen sensible?

On the first of these questions, the answer is: predominantly, yes. The biggest concern is over the unbridled tax competition. It may well make sense for each country to enter into a bidding war for mobile capital. But the aggregate impact of such competition could prove highly adverse. At worst, incomes from capital might emerge untaxed.

Curiously Wolf offers no upside, only the down side.

What he ignores is that the downside is the intention of those proposing this policy. Osborne, I have no doubt, wants to abolish the taxation of capital. His actions speak for themselves.

The new tax avoidance strategy is reiteration of old policy – to disguise the massive boost for tax avoidance inside Osborne’s budget

Budget, Conservatives, Tax avoidance Comments Off

Mar 242011

I’ve read the government’s new anti-avoidance strategy for tax. It’s not a good read. For that reason I think a translation is needed.

First of all, as I’ve already noted, the government has a massive problem in agreeing how big this issue is. That does not help them politically, and undermines much of the forward.

Whatever the issue then is, the strategy is laid out in four parts, each being allocated a chapter in their paper.

Chapter one says there is a strategy. It’s a little hard to work out what it is due to use of a weird graphic, but in summary HMRC says it will (to quote the report):

‚Ä¢ prevent avoidance at the outset where possible;

‚Ä¢ detect it early where it persists; and

‚Ä¢ counter it effectively through legislative change or challenge by HMRC.

And if I’m candid I’m having real problems spotting the changes from anything I’ve heard in the last decade or so.

So. Let’s move to chapter 2. This says HMRC will work on:

‚Ä¢ a new proposal to reduce the cash flow benefits that taxpayers can gain from using high risk avoidance schemes;

‚Ä¢ a new rolling programme of reviews on high risk areas of the tax code;

‚Ä¢ work in hand on a GAAR; and

‚Ä¢ the targeted tax measures that sit alongside this strategic work to address specific avoidance risks that have emerged.

The first is good – it basically says a taxpayer can’t string a dispute out to simply avoid paying. That’s neat – but is it compliant with natural justice? Wait for that to go to court, I suggest.

The second one simply means there’s going to be more consultation.

The third is a consultation already in progress – but indicates welcome support for a general anti-avoidance principle which I have long argued for and which is in the Coalition programme partly at least because I persuaded the Lib Dems of its merits, whilst the fourth means that, as ever, loopholes will be closed as spotted.

So in this chapter the only real change is bullet point one. Worthy, but not exciting and open to dispute, in summary. And all a long way off in legislative terms by the way. Years away in some cases.

Does chapter 3 offer more? No, none at all. It says H M Revenue & Customs will challenge avoiders and litigate where necessary. I won’t mention the word V***f**e in this context. OK, there’s welcome stuff about working on high risk cases. But let’s also be blunt, this has been going on for years with the result that those working on medium and small business have been deprived of resources – with consequent increases in tax evasion. I really don’t see much new and the fact that much of the chapter is used to summarise the focus of past litigation suggest the authors don’t either.

Finally, there’s chapter 4. And this says the government will publish as much of the Finance Bill as early as it can to allow for consultation – something they’re already doing. And it says they’ll try to limit the number of changes to the law made between budgets – restricting them solely to cases where it is necessary to protect revenue, just as now.

In other words, bar the first, rather minor and challengeable bullet point in chapter 2 there is nothing new of any consequence whatsoever in this so called strategy.

Instead what the government did do yesterday was provide a massive boost for the tax planning industry. It really makes me think Osborne really should rename the Treasury the Ministry of Truth.

The budget: the biggest boost in the arm for the tax abuse industry that it’s had in a long time

Budget, Conservatives, Tax avoidance Comments Off

Mar 242011

From the Guardian this morning:

George Osborne has been accused of making “token gestures” in his attack on tax avoidance after the chancellor pledged in his budget speech that a crackdown would boost receipts by £1bn.

Richard Murphy, a director at Tax Research UK, said: “I can’t remember a chancellor who didn’t say in a budget that he was going to raise £1bn by tackling tax avoidance. £1bn is the average raise. These are token gestures. If he was really serious, he would give HM Revenue & Customs a couple of billion a year to tackle this. I reckon they could raise £20bn.

In the 2009 budget, the then chancellor, Alistair Darling, said: “We have identified loopholes and schemes which, when closed, will result in £1bn of extra revenue over the next three years.” In the run-up to last year’s general election, the Liberal Democrats promised to find more than £12bnby cracking down on tax concessions and loopholes.

Tax avoidance cost HMRC £14bn in 2008, Osborne said as he announced a clampdown on tax avoidance by the better-off. Measures to bring in higher tax revenues to close Britain’s budget deficit include plans to close down three forms of stamp duty land tax avoidance, reforms to capital gains tax and an assault on rarely repaid lifetime loans handed out by companies to their key executives.

The chancellor told the House that his measures would “raise £1bn and £4bn over the parliament” in the harshest attack “on tax avoidance in any budget in recent years”.

The £1bn figure follows Osborne’s announcement in December that he would boost tax receipts by £2bn over the next four years. He now believes tougher enforcement by HMRC and additional measures will double that figure.

Tax experts say there are many areas in which HMRC could claw back duties. In a report published this month, Tax Research UK stated that the country is missing out on £16bn in taxes because little is known about more than 500,000 companies that were dissolved in the year to March 2010, which often “disappeared forever”.

To quote another part of the Guardian this morning:

Chancellor George Osborne has been accused of providing a “boost” for the UK’s tax avoidance industry despite announcing a crackdown on the practice that would raise tax receipts by £1bn.

Richard Murphy, a director at Tax Research UK, said: “Will this budgethelp beat tax avoidance? No, it won’t. It’s the biggest boost in the arm for the tax abuse industry that it’s had in a long time. Osborne knows who his friends are. I can’t remember a chancellor who didn’t say in a budget that he was going to raise £1bn by tackling tax avoidance. A billion pounds is the average raise. These are token gestures. If he was really serious, he would give HM Revenue & Customs a couple of billion a year to tackle this. I reckon they could raise £20bn. I am completely underwhelmed.”

Murphy fears that “tax planning opportunities” will have increased almost “endlessly” because of changes in the budget such as the taxation of money being brought onshore by non-doms and tax cuts for businesses’ foreign operations.

To list the new opprtunities:

a) Massive will rewriting required for gifts to charities to abuse Inheritance tax;

b) There will be a proliferation of small new charities – and HMRC and the Charity Commission have no resources to monitor them. Expect evasion to increase dramatically – it’s already a problem;

c) Increase in enterprise incentive scheme allowances – and a big new marketing push for them (which helped create the dot.com boom);

d) New rules for non-doms to bring in cash;

e) Massive overseas opprtunities for planning under new controlled foreign company rules;

f) A rush to exploit the new 5.75% offshore treasury function rules for companies.

Oh, what happy days George has made for the tax avoiders.

As Ireland comes under pressure to end its abusive tax rate Northern Ireland plans to join it in the sin bin

Conservatives, Corporation Tax, Ireland Comments Off

Mar 242011

The FT notes this morning:

Ireland saw a leap in its cost of borrowing on Wednesday as peripheral eurozone economies came under pressure because of worries over the risk of sovereign bond defaults.

Dublin has come under pressure because of fears Germany will refuse to back down over its demands that Ireland must increase corporation tax rates in return for lower interest rate costs for bail-out loans.

I support Germany on this issue. It is absurd that Ireland should demand concessions on anything when it sets out to undermine the corporate tax revenues of its neighbours who it has expected to bail it out.

But the fact that Ireland’s corporate tax system is seen throughout the international community as being highly abusive makes the Tory move to replicate it in Northern Ireland all the more ludicrous. A paper paving the way for this to happen will be published this morning.

I am a vociferous opponent of this (and will be on Radio Ulster this morning discussing the issue at about 9.30). My reasoning is in the paper ‘Pot of Gold or Fool’s Gold?’ published last year for the TUC and Irish Congress of Trade Unions. In summary the reasons why this will be a disaster for Norther ireland are:

1) NI will lose £300 million of block grant – a cost to the ordinary people of NI who will have to pay for the tax haven that will be created;

2) It may be illegal under EU law;

3) Unless NI abandons controlled foreign company and transfer pricing laws too (and I really can’t see that) the tax environment of the Republic cannot be reproduced in NI;

4) Transfer pricing will have to operate into and out of NI from the rest of the UK – bad news for many businesses working in both places and adding massively to costs of locating in NI – which will be bad for jobs;

5) Intra-group activity cannot attract the low rate under EU law but it the most likely to relocate;

6) Under EU law finance activities cannot attract the low rate – blocking much of what Dublin does.

All of this makes it a complete non-starter and further evidence of Tory anti-tax madness over-ruling any common sense in government, or consideration of the needs of ordinary people.

Thankfully Sammy Wilson, DUP NI finance minister sees all the problems. I can’t see him doing this. That’s my hope.

This mornings email from the FT damning George

Budget, Conservatives Comments Off

Mar 242011

I loved the email summary of the budget from the FT this morning. It said:

In spite of rising inflation, lower short-term growth and higher medium-term borrowing, Mr Osborne said his plan to cut the deficit was on track

So that’s what the FT thinks – Osborne has blind faith in the face of the evidence of his failure.

I suspect there are many who share that view this morning.

Does the Treasury have any clue how big the tax gap is?

Tax gap 5 Responses »

Mar 232011

I’m wading my way through the tax avoidance announcements in the Budget today – which are as clear as mud and about as useful.

When doing so though some very obvious issues have arisen on the government’s estimates of the tax gap.

Take this from the Chancellor’s speech:

HMRC estimate that £14 billion was lost through avoidance and evasion in 2008.

That is as recent as it gets. And it’s much nearer my estimate of £25 billion of avoidance than anything they have admitted before.

Then move to the document on tax avoidance, published today:

HMRC’s latest estimate of the tax gap (for 2008-09) is £42 billion. Avoidance by using the tax law to get a tax advantage that Parliament never intended is estimated to account for 17.5 per cent of the overall tax gap.

Hang on. George has already said it’s £14 billion. That’s 33% of £42 billion in my maths. Who is right?

But from the introduction by my old friend David Gauke I note says:

We inherited a tax system with a ‚Äòtax gap’ of around £40 billion. More than a sixth of that is due to tax evasion – that is, illegally understating tax liabilities. But a further one sixth is estimated to be due to tax avoidance – that is, reducing tax liabilities by using the tax law to get a tax advantage that Parliament never intended.

So a slightly different tax gap – only one third of which in total is explained now by tax avoidance and tax evasion – which really does leave you wondering what the rest is.

And Gauke is saying just £7 billion is avoidance – which puts him in direct conflict with his boss.

All of which makes the following comment in the report quite interesting:

Others have suggested that both the overall tax gap and the amount attributable to avoidance are a lot higher. The Government believes that those higher estimates are based on flawed methodology. Calculating the tax gap is not an exact science, but HMRC’s estimates are based on detailed taxpayer information, are in line with international comparators and make allowance for use of tax reliefs as intended by Parliament. What is clear, even allowing for a degree of caution about the estimates, is that tax avoidance is one of the biggest elements of the tax gap and needs to be tackled.

I think that’s pretty personal – and that I’m the “other” in question.

I say the tax gap excluding unpaid debt is about £95 bn.

Well if George is right and avoidance is £14 billion (and I’m not arguing with the Chancellor) and Gauke is right that that’s one sixth of the whole that suggests a combined total of £84 billion – close enough to my estimate to make no difference. Immaterial as we accountants would say.

And a lot more consistent than anything the government could say today.

Which amuses me, well, quite a lot.

It’s really hard isn’t it guys? Especially when you’re going out of your way to seriously understate it persistently, even if inconsistently.

A budget for tax avoiders everywhere but the Channel Islands

Budget 4 Responses »

Mar 232011

I have the following comment on the Guardian site this afternoon:

George Osborne said this was a budget to tackle avoidance. How wrong he was. Lawyers and accountants all over the country must be jumping for joy this afternoon – unless they’re in the Channel Islands.

Employee benefit trusts – often based in Jersey – are going to be hit hard by this budget, and rightly so. These are last remnants of the age-old pursuit of avoiding PAYE. If they’re consigned to history Osborne’s done at least one thing right.

And Osborne gets full marks* for tackling another abuse long overdue to be abolished – which is the absurd industry shipping CDs, DVDs, computer memory and other items from the UK to the Channel Islands and then straight back again simply to avoid VAT. At least £200m a year was lost in this way – and countless fuel wasted. This is a reform that will cost consumers a little, cost Jersey and Guernsey a lot, and which will put jobs back on the high street.

But after that it was almost all good news for tax avoiders. The new charity rules sound open to massive abuse – and the Charity Commission and HM Revenue & Customs will need massive resources to police them, which they haven’t been given.

The inheritance tax rules on gifts will be keeping will writers in business for years.

A new 5.75% tax rate on the treasury functions of large corporations in tax havens (yes, you read that right – 5.75%) will see corporate money flowing out of the UK faster than it will be possible to count.

And big business gets more tax cuts for its foreign operations which will increase their tax planning opportunities almost endlessly.

The same will be true for non-domiciled people – now able to bring money into the UK tax free through a new loophole for investment.

Will this budget help beat tax avoidance? No, it won’t. It’s the biggest boost in the arm for the tax abuse industry that it’s had in a long time. Osborne knows who his friends are.

* Written before I’d read all the detail – now reduced to 5/10

Extraordinary 6% growth assumptions in government revenue in the Budget

Conservatives 1 Response »

Mar 232011

I’ve just churned a few numbers, as follows:

NewImage

These come from table C6 of the budget.

To get his forecast of borrowing down Osborne is having to assume growth in government revenues of 6% plus a year when real growth this coming year will be less than 2% and historically average growth is not more than 2% pa.

That’s why you’re going to be feeling hard up over the next few years. You’re going to be fleeced to repay the debt while big business pays less and the tax planning industry has a bonanza with the massive range of new loopholes announced today.