The Education Maintenance Allowance to ensure sixth formers could aford to stay at school cost the UK £560 million a year. 600,000 students benefited. The Tories have axed it for all practical purposes.
Alliance Boots announced their financial results today.
They made pre-tax profit of £944 million.
But the government gave them a £75 million tax credit by cutting their tax rate. No strings attached. No benefit to the UK to be offered in return. No jobs to be created. They were just one of hundreds, maybe thousands of large companies to benefit in this way.
So we can afford to give £75 million to Boots, a Swiss controlled private equity operation - which will go straight to its wealthy investors. But we can't support education.
What sort of bankrupt economics is that?
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They’re looking after the interests of their fellow financial elitists over and above those of the electorate. Mind you, who’s surprised?
BB
You’ve hit the nail on the head there, Bill. As the High Pay Commission notes, we’ll be back to Victorian levels of earnings inequality soon enough, so this is just one way of ensuring that happens.
Just how did the coalition government give Boots 75 mill by cutting their tax rate.
Was it a discretionary cut and what was their tax rate cut to?
Page 15 here http://www.allianceboots.com/App_Portals/AllianceBoots/Media/Financial%20Information/AllianceBootsPreliminaryResultsPressRelease2011.pdf says
The exceptional tax credit related to the net reduction in deferred tax assets and liabilities resulting from the two
percentage point reduction in the rate of UK corporation tax applicable from April 2011.
So, Boots tax bills will be cut by £75 million as a result of current tax rate fall
And that means by £35+ million in next three years as well, presumably
And that’s a tax credit in the accounts giving rise to immediate shareholder value
At cost to all the rest of us, so a reallocation of wealth in the economy, upwards
This is highly disingenuous, Richard.
Firstly, you have long railed against deferred tax saying that it is a conspiracy made up by accountants for some reason or another (I’ve forgotten the exact reason, perhaps you could remind me). You can’t then use the concept of deferred tax to criticise or to somehow “prove your point” about the government’s priorities.
More importantly, you are confusing the term “tax credit” as commonly understood. Most people understand the term “tax credit” to mean a payment by HMRC to an individual or company which is either physically paid or can be used to offset a forthcoming liability.
This is completely different to the double entry concept of crediting a ledger in the books of account, which is what has happened here.
All that is happening here is that the government are implementing the Budget passed last year. If the government reduced your tax rate by 2% then, assuming identical profit, you would expect next year’s tax liability to be lower. Hardly rocket science. You have plucked an absurd example of Boots out of the air to try to prove something and failing.
Absolute nonsense
It’s a tax credit because that’s what it’s called in the accounts
And it’s a tax cut that goes straight to the bottom line and to so-called shareholder value
In which case my story is 100% right
Your interpretation is from fairyland – like almost all stuff from the right wing. You’re simply seeking to excuse abuse. I won’t.
I’m not surprised.
If you told me the a certain Monsieur Cameron was on the boards of all the companies to profit, I would still not be surprised…..every other polo and his wife seems to be on the [gravy] train.
Wasn’t the FY 2010-11 corp tax rate set by Labour?
And it is not a “tax credit”.
a) No – we’re talking 2011-12
b) This is a tax credit – that’s what it is in the accounts
The difference is it is Boots’ money. The government has no ‘right’ to it. EMA is tax payer’s money.
Absolutely wrong
Tax owing to a government is the government’s money
No one else’s
The right to profit is conditional on paying the resulting tax due: there is no unconditional right to it at all
“No — we’re talking 2011-12”
Aren’t the results just announced by Boots for the year 2010-11?
A 2% tax cut for profits in excess of £1.5m has been announced as has a 1% cut for profits below £300k (assuming a single company of course). But that depends on there being profits. Isn’t it a bit early to be saying that Boots have had a tax cut of £x? They might make a loss next year.
Deferred tax is a balance sheet item, nothing more. You could equally argue that any company currently carrying forward losses has had a tax “increase” because the tax value of that asset has decreased. Are you arguing that?
I don’t have to argue that – I’m right to say what I have done
And of course deferred tax is not just a balance sheet item – movements in it go through the P &L, which means that this change does change reported profit, and rightly so – but it alos means that it increases distributable reserves and so represents a shift from ordinary people to those with wealth
Exactly my point.
And I’m 100% right in my accounting when I make it
“but it alos means that it increases distributable reserves and so represents a shift from ordinary people to those with wealth”
The largest single investor in KKR is the Oregon state retirement system. The beneficiaries are state governement employees, teachers, firefighters, cops, etc. I fail to see how this alleged transfer of wealth is from the needy to the wealthy.
I’m sure your last sentence is true. I doubt you would see any abuse wherever you looked.
But let’s get through your myopia – it is undoubtedly the case that some pension funds have invested in private equity over the last few years, although I think that a serious error of judgement on their part.
Even that being noted, they are a minority of this company, and in addition those who had pension fund interests are a minority in society, however you look at it.
Finally, why the heck is the UK giving a subsidy to the Oregon State retirement system when it should be subsidising UK sixth form students? Such questions never appear to occur to you. Why is that?
Richard – you don’t know that pension funds are a minority of this company, do you? I don’t, and my line of business is much closer to private equity than yours.
The UK is not subsidising Oregon. On the contrary, Oregon and other international institutional investors do the UK a favor by investing here. Like it or not, since the buyout by Pessina/KKR, Boots has invested in new stores, increased sales, built market share and (critically) added employees in the UK. Nobody is forced to shop at Boots (there are plenty of other pharmacies around), so obviously Boots is offering something that British consumers value and which they did not have before. And the new employees are grateful for the employment opportuinities in the current tough labour market.
Now over to you. You obvioulsy would rather have less satisifed customers and fewer people in employment. Why is that Richard?
Over to me?
All of those things may be true
But that doesn’t in any way invalidate my argument
They didn’t need a tax subsidy to do those things
And they certainly need to undermine the education of those they might employ to achieve their goal
But you used to say that deferred tax was accountants’ gobbledegook. But when it appears as a credit in the accounts you are keen to show it as a transfer from the needy to the wealthy. Either deferred tax is useful as a concept, or it is not. You can’t use it to suit your argument.
It may be gobbledegook, but it sure as heck distorts reporting none the less – and reflects in this case real reductions in liability, which is a transfer of wealth to the wealthy. No other interpretation is possible.
So of course I can use it in my arguments, whenever I like, as seems fit at the time
I have interpreted data completely correctly
Only a desperate person would argue otherwise on any of these points
Richard – how do you know it is a subsidy? There is no way of telling if, in the absence of tax relief on interest, Boots would have opened new stores, hired staff and developed products that appeal to consumers. I don’t know and neither do you.
The fact is that Boots has gone ahead with all these things, and so the additional staff pays income tax (or ceases to claim benefits), consumers pay VAT on Boots’ expanded products range, business rates are paid on the new stores, etc. etc. I am willing to take a bet that all these additional taxes represent a lot more than the alleged £75 million “subsidy”.
Back to you then.
We do know that none of those decisions were predicated on that tax cut – which they did not know about in full
In that case they’re independent and therefore it is a subsidy
And since you’re simply wasting my time you have now qualified as a troll = expect a blanket ban on future comments
How is this “abuse”?
My guess is that if I need to spell that out your won’t understand the answer
“Tax owing to a government is the government’s money
No one else’s
The right to profit is conditional on paying the resulting tax due: there is no unconditional right to it at all”
Richard,
I’m curious as to what rate of corporation tax you’d like to see. Your headline suggests tax reduction is a “Tory” thing but during their last term of office, Labour reduced the main rate of corporation tax from 33% to 28% and now the coalition have reduced it further to 26%. Were Labour wrong to reduce the rate from 33%? Should they have put it up? If so to what?
I think Labour was wrong to reduce the rate to 28%. Unambiguously that was an error. It should have raised tax at that time – George Osborne, I note, has made the same argument
Well this is remarkable. A reduction in the headline rate of corporation tax is actually a “subsidy” according to R Murphy.
“Well this is remarkable. A reduction in the headline rate of corporation tax is actually a “subsidy” according to R Murphy.”
This seems to be the logical conclusion of Richard’s remark that “The right to profit is conditional on paying the resulting tax due: there is no unconditional right to it at all” which seems to imply that Richard believes that all profits belong to the Government and it is only by dint of their good grace that we are allowed to keep any of it at all. Is that your view, Richard?
I do not think that all profit belongs to government: I do thank that the right to enjoy profit is conditional on having p[aid the tax due on it. The claim to the property right that profit represents is, like all others. conditional: in this case conditional on the tax being paid. The unencumbered right is, therefore, to after tax profit. in
I think you’d find it hard to sustain any other argument
This argument seems to be being approached from a legal viewpoint. Law can be bought so I’d suggest this is the wrong approach. It needs to be understood from a philosophical viewpoint, you can’t reap unless you sow. Unless you spread a certain amount of your profits back into the community from which you make them, that community can’t survive and without it neither can you. Social obligations are sensible because the rich are part of society just as much as the poor are. Making profits and keeping all of them without reinvesting in the community you make them from is like cutting off your nose thinking it will profit your face – it just doesn’t work like that.
BB