2011 March » Tax Research UK

Time for a National Investment Bank

Conservatives, Economics Comments Off

Mar 212011

Robert Skidelsky and Felix Martin call for the creation of a National Investment Bank in the FT this morning.

Call it the mechanism to fund a Green new Deal if you like.

Provide it with its capital out of a compulsory 25% investment pension funds should make out of their tax funded income that they should invest in new employment creating opportunities.

And that’s it: a policy for growth.

One that is bound to deliver the result we need in our economy, for growth, for unemployment, for tax revenues, for closing the deficit.. It’s not hard.

But Osborne won’t do it.

Why not? Is it he doesn’t want growth?

And doesn’t want to tackle unemployment?

Or deal with the dficit?

All because he hates tax revenues so much?

It’s hard to explain any other way.

The big issue in the Budget is growth

Budget, Conservatives, Economics Comments Off

Mar 212011

I’ll be in Radio 2 on Wednesday talking about the budget. It’s always slightly challenging to talk straight after the Chancellor has sat down because the devil is always in the detail when it comes to what he has to say. And of course, that’s not issued until he sits down.

But to some degree this week that can be ignored. There will be some suprise tax announcements – many trailed already. Personal allowances for a year’s time will be trailed and will go up. The rate of corporation tax reduction will be sped up; the abusive changes that will permit companies to move their earnings offshore and not pay UK tax on them will likewise be rushed through. And some sort of announcement of a review on meging income tax and national insurance will be made – although it will only be a review (and more on this, anon). It’s even rumoured the non-doms might be hit – a rare welcome move if it happens.

But this is not the real deal. The real deal is that tax revenues in the year will be as much as £4 billion more than expected – 75% of it income tax. In other words, Labour’s policy for growth, in place when it left office, worked.

And the rest of th deal is that this won’t recur. As the FT says this morning:

Government spending cuts have hit the UK’s largest building companies earlier than expected, with the shelving of school, hospital and prison building programmes halving the value of public sector work.

The 10 largest companies were awarded £2.7bn of new work during the six months to March, down from £5bn for the same period a year ago, according to data compiled for the Financial Times by Barbour ABI, the construction information service.

£2.3 bn of lost revenue means maybe £1 bn of lost tax (government spending is always in part self funding, of course it’s a reason why it’s multiplier effect is so strong). And that’s before the knock on effect in the economy of the spending of the balance of £1.3 bn or so.

With a government dedicated to withdrawing spending from the economy the chance of similar tax growth is small.

With limited chance of tax growth the outcome is obvious – the deficit will not fall as planned.

This is the big story in the budget – that it will offer no way out of the situation we’re in.

That’s the result of Osborne’s failed thinking.

War

Ethics 2 Responses »

Mar 202011

Tornado jets landed at RAF Marham a few minutes ago. I live on the flight path.

They never fly on Sunday night.

But this is war.

I explained to my children that they’d probably been bombing.

“Will people have died?” they asked.

“Probably” was the only fair answer.

They’re horrified.

They need to be. The price of oil needs to be explained.

We didn’t do this for the people of Zimbabwe. Or so many other countries.

Nothing forgives what Gadaffi is doing. And Labour and others (Cameron too – he’s an arm’s salesman, after all) must take responsibility for arming him. But can we really solve this from the air? And, as ever, what is the stated desired outcome? So how will we know when to disengage? And when we disengage – what then? Is there a plan?

Have we learned nothing from past experience? Or does Cameron hope for, and already need, his Falklands?

I still think the blunt reality on my children’s faces – that war is happening for all practical purposes very near where they live – is something people need think about.

It will be even more real somewhere in Libya tonight.

Despite having been a Quaker for a number of years – and still being much in sympathy with Quakers – I am not a pacifist. But yet again I fear we are at ware without really knowing the reason because the goal is not known. And in that case I have considerable doubts about the validity, direction and legitimacy of this conflict.

Banks – sneaky thieves

Banking, Economics Comments Off

Mar 192011

Just when banks thought they might be getting away with things again along comes a new line of attack.

There has been massive speculation in the Yen since the Japanese earthquake / nuclear disaster began to unfold just over a week ago. A massive surge in the Yen, on the assumption that Japanese companies will be bringing assets back to Japan so will be in et selling mode.

But Japan is also a net exporting nation so the move would also be massively harmful to its economy just at a moment when it is already in deep trouble.

As the Guardian reports the reaction has been coordinated, and appropriate:

The world’s richest nations have rallied behind Japan in a bid to calm markets over the devastating earthquake and its aftermath.

The G7 group, whose members include the United States and the UK, joined the Bank of Japan in stepping into the currency markets to curb the soaring yen. Recognising the damage that a rising national currency could do to an export-dependent economy, the Bank of England, Germany’s Bundesbank, the Bank of France and the European Central Bank joined the BoJ on Friday morning in the first co-ordinated intervention by the G7 since the launch of the euro a decade ago. The US Federal Reserve is also expected to participate.

It’s vey good news to see international coordination to beat those who use the ruthless amorality of neoliberal markets to exploit.

It’s also good to see that reflected in the language used to describe those doing so:

The Japanese authorities blamed speculators for the dramatic surge in the yen since the earthquake struck a week ago. Dubbing them “sneaky thieves”, Japanese deputy finance minister Fumihiko Igarashi said in an interview with Reuters: “G7 countries agreed that if we caved in to such speculators that took advantage of people’s misfortunes, the Japanese economy would be ruined and the whole world economy would be harmed.

“Our stance remains unchanged that we will take decisive steps against speculators who act like sneaky thieves at a scene of a fire.”

I don’t tjink that understates it.

Anyone like to name the banks involved?

People need to know.

Has Labour got it on the Tax Gap?

Labour, Tax gap Comments Off

Mar 182011

This comes from the Left Foot Forward blog, shamelessly borrowed, I’m afraid:

Ed Balls, speaking at the Unions 21 conference this morning, said that George Osborne’s cuts could spell a “rock and roll” period for tax avoidance.

In response to a question on the £44bn tax gapcaused by increasingly blatant methods of tax avoidance, the shadow chancellor said:

“There are two issues: tax evasion which is illegal and tax avoidance‚Ä¶ Companies involved in tax avoidance employ thousands of highly skilled people working all the time to find ways round our tax system.

“The only way to stop them is for HMRC to employ lots and lots of highly skilled people to work to try and anticipate and second guess what these people can do to avoid tax.

“Now if I was working for a company involved in this and I saw George Osborne cutting workers from HMRC I would think this is a real opportunity; I would think rock and roll, this is my moment.”

Mr Balls said that many tax breaks designed to encourage long term investment in the UK are abused by people who simply pretend to be making such investments.

He said:

“An incentive to good behaviour can sometimes also be an incentive to bad behaviour.”

This follows hot on the on the heels of reports of companies disappearing from our tax systemaltogether as well as the persistent issue of tax heavens and the super rich who pay lower tax levels than their cleaners

This only gives more incentive for progressives of all shades to back bills to reform the tax system – like Caroline Lucas’s, which Left Foot Forward reported on yesterday – and provide proper regulation on this issue.

Precisely.

Now go for it relentlessly.

This is a gift for Labour.

Channel Islands VAT abuse is killing business in the UK

Guernsey, Jersey, VAT Comments Off

Mar 182011

This letter was published in the Guernsey Press today (but I can;t find a link as yet)

Dear Sir

In your article “becoming a target of convenience” (4th March 2011) you seem to imply that the Channel Islands LVCR fulfillment industry has become some kind of imaginary scapegoat for the demise of independent UK music retailers. You say that “research” has shown that supermarkets are the problem. Presumably the research to which you are referring to is the boldly titled report Setting The Record Straight, which was announced with much fanfare in the Channel Islands press a couple of weeks ago but which the Guernsey Government seem to be very reluctant to let anyone see.

Needless to say I have been dealing with objections like this for a very long time. They are exactly the kind of thing that people with a vested interest in seeing this immensely distortive and unjust practice continue have been feeding to HMRC for years. So, for the record: supermarkets entered the music market 15 to 20 years ago, serving an entirely different part of the market (top 40 chart CDs aimed at young people or those with a passing interest in music) to that served by most of the independent sector (music for serious music consumers, leftfield and experimental bands, new upcoming independent artists, back catalogue and collector music). Supermarkets have not significantly changed their position in the market in the last 10 years. However, online sales (of physical CDs, not downloads, which still remain marginal in the albums market) have risen from 11.6% of the UK music market in 2006 to 29.6% in 2009. 2006 is a pivotal year because that was when HMV’s opening of a distribution centre in Guernsey (in order to compete with Play.com) caused a stampede to the Channel Islands. This increase has been disproportionate to the rate at which online sales were growing before 2006, and far disproportionate to the growth in online sales of books, an important control group because their exemption from VAT within the UK removes any incentive to send them offshore.

A business like mine – Delerium Mail Order, a much respected specialist online CD retailer – should have benefited from this shift to online, because it was a purely online business. However, there are no independent online stores left onshore in the UK, save for a few that are attached to high street stores in high footfall areas or selling exceptionally niche product. Why? Because they have to charge VAT. My business saw nothing but growth until 2006, then HMV opened its centre in Guernsey, all my competitors went offshore, and I shut down at the end of 2007 as it became impossible to retail CDs and charge VAT. According to the CEO of thehut.com, by 2009 96% of the online music market was offshore.

But even so, there are now many other product sectors experiencing the same market distortion caused by the abuse of LVCR. Retailers Against VAT Avoidance Schemes (RAVAS) represents retailers from across many sectors who have the identical tale to tell of VAT free Channel Islands based websites undercutting them purely through the avoidance of VAT. The distortion in the market for CDs and DVDs and the destruction of UK online retail is just an example of what happens when a tax avoidance scheme gets out of control.

LVCR was never intended for the purposes of avoiding VAT and distorting competition in favour of tax avoiders, a fact that whilst denied by those with a vested interest was recently confirmed to me directly by senior HMRC officials. In a way, I feel some sympathy for the Channel Islands in that that the islands’ position has been unscrupulously exploited in this way by large retailers and its economy made dependent to a large extent on an immoral industry that has completely misrepresented the central tenants of the European Law that governs LVCR. To that end, even though neither I nor my employees received any compensation when the UK government’s incompetence and inaction destroyed my business, I would certainly not be against the UK government helping the Channel Islands out if and when it chooses to end the exploitation of LVCR via the islands. The UK Treasury will recoup the £100m-200m in VAT that it is now losing. It would be appropriate if, for as long as is needed for the Channel Islands’ economy to readjust, some of this money could be used to provide some economic aid to the Channel Islands population that was directly affected i.e. those who are least able to defend themselves from the consequences of this kind of logistical tax deception. The main benefit to the UK economy from ending LVCR is in stopping the distortion of competition and the main benefit to the Channel Islands is to have a fulfillment industry free from the spectre of tax avoidance.

It can fairly be argued that there would be an impact on the Channel Islands economy if LVCR were to end. I would like to see the UK government address this in order to repair the damage caused by its inaction in preventing the development of a Channel Islands economy partly based on tax avoidance.

It cannot be argued that LVCR is a target of convenience.

Yours sincerely

Richard Allen

Founder, Retailers Against VAT Avoidance Schemes

Representing UK online retailers across many different mail order sectors.

There are those who like to say that tax campaigning makes no difference.

Richard’s work is living proof that they’re wrong.

As has been the zero / ten issue in the Channel Islands.

So too is country-by-country reporting’s progress.

And so much else.

But there will always be those who’re on the side of abuse and who will seek to deny the change that has been created.

Comments – or the lack of them

Blogging Comments Off

Mar 182011

Today, like many other days of late, has seen a few individuals post large numbers of comments on the blog, many of them demanding answers, most of which have already been provided many times before on this site, which they cannot be bothered to search for.

Other comments have simply required deletion because they have added nothing to debate.

There are also, of course, a few commentators whose presence I appreciate, and who have added pertinent, insightful, and relevant contribution. I wish all would do the same.

The sum total of this is though that I’ve undertaken far too little of my own work, and spent far too much time dealing with comments, which, as I note, have added far too little in terms of value to debate, understanding, or the general well-being of those who wish to use this blog.

Since I cannot at this moment fulfil my obligations to undertake work and deal with those comments I have therefore, regretfully, decided for the time being to turn the option to comment off. I simply cannot try to do everything, and this is the best option I have available to me.

I offer my apologies to those for whom this might be annoying, but this activity is done as just one small part of my work, and I cannot give several hours to it each day, which is what it is demanding at present. There are, quite simply, better things to do right now, but if and when I catch up with them I may well restore the option to comment.

The Lords debate the Tax and Financial Transparency Bill

Accountancy, Companies House, Corporation Tax, Country-by-country, Tax avoidance, Tax compliance, Tax evasion Comments Off

Mar 182011

This exchange took place in the Lords yesterday (and I have edited to highlight the relevant sections):

Lord Haskel (Labour)

Caroline Lucas MP is today introducing in another place a Presentation Bill about disclosing the amount of corporation tax paid and the profits made. Will the Government support her?

Lord Phillips of Sudbury (Liberal Democrat)

I entirely agree with what the noble Lord, Lord Haskel, said in relation to the Bill just introduced in the other place by Caroline Lucas. If companies domiciled or paying tax here had to disclose year by year where else they were operating, what the turnover was, how many employees they had there and what tax they paid, it would be a huge disincentive to the ludicrous exploitation of tax havens. Let us look at Barclays. It has admitted to some 150 subsidiaries in tax havens-I think that the true figure is more than 300-and that is true of so many organisations. There is no morality or sense of fairness in corporate tax-paying in so many instances. So let us have that.

Lord Sassoon (Commercial Secretary, HM Treasury; Conservative)

The noble Lord, Lord Haskel, raised the question of Caroline Lucas’ Bill in another place. My understanding is that the Second Reading of that 10-minute rule Bill is scheduled for June. The Government will decide at that stage whether to support it. I understand its import.

Good news to have such an impact in such a short period of time, across parties.

Now, will the government support a bill aimed at tax evasion and seeking tax transparency? And if not, why not?

When will HMRC stop digging the hole and do the job it’s meant to do?

Uncategorized 11 Responses »

Mar 182011

Private Eye has been digging into the affairs of multinational corporations again. And what it’s now dug up is quite a shocker. We will let the article speak for itself:

Three years ago parliament’s public accounts committee was critical of the taxman’s failure to extract penalties from tax dodging multinationals after learning that it penalised companies dealt with by it large business service “in only 19 cases, totalling £15 million”. This was around 0.6% of under-declared tax and HMRC promised to try harder in future.

Figures obtained by the Eye under freedom of information laws show the position is now dramatically worse. In 2009/10 just 6 penalties were charged totaling £442,000 or less; and as this financial year draws to a close “fewer than five” penalties have been charged for just £322,000. These figures represent less than 0.01% of tax under-declared. The rate for smaller businesses is about two hundred times this figure.

Treasury select committee chairman Andrew Tyrie said last week that HMRC was “close to being a failing institution” in light of other cock-ups. When it comes to taxing big business, it’s already there.”

This is, quite frankly absolutely pathetic. And this, let’s not forget, follows news of proposals for what one commentator rightly called “the biggest and crudest corporate tax cut in living memory” for the UK.

Oh, and there is more in the latest edition of the Eye. We hope they don’t mind us quoting them at length again: there is a huge public interest issue at stake here:

“On his now infamous trip to a meaningless three day conference in Mumbai in December, HMRC tax boss Dave Hartnett stopped off in New Delhi to meet senior Indian Treasury and Revenue officials. One purpose, the Eye understands, was to lobby on behalf of Vodafone over a disputed £1.6bn tax bill that has no bearing on the company’s UK tax position.

So since HMRC has no stake in the matter, why was the tax boss lobbying? HMRC claimed that laws covering the confidentiality of its “functions” prevent it commenting, proving that it considers lobbying abroad for the same big companies who back home are given sweetheart tax deals (Eyes passim), to be a part of its job.

The Foreign Office, meanwhile, has intervened on behalf of Tullow Oil in a similar tax argument following an acquisition in Uganda, the Daily Telegraph reported recently. Both Tullow’s and Vodafone’s tax bills arise because developing countries tax gains on sales of shares in their countries and come after the buyers with a bill if necessary.

This is generally recognised as a legitimate way for poor countries to raise much needed tax and preventing them doing so could prove costly. In Tullow’s case Uganda would be around £175m worse off, over twice the £80m annual UK aid to the country. And Vodafone’s £1.6bn Indian tax bill is around six years’ worth of Britain’s £280m aid to the country.”

Yet more disgrace. Worth taking to the streets for.

NB reposted from Tax Justice Network with permission