2011 May » Tax Research UK

Is the Glencore float the sure sign that the commodities bubble is about to burst?

May 162011

Fascinating argument by Larry Elliott in the Guardian this morning:

Every bubble in recent years has had its signature deal that marks the point when the frenzy peaks; the purchase of Time Warner by AOL during the dotcom boom; the RBS takeover of ABN Amro just as the financial crisis of 2007 was breaking.

His suggestion is the Glencore listing may be the precursor to a commodities crash, at least in the short term, reflecting current over pricing.

I have no doubt the market is laden with unrealised gains that don’t reflect economic reality right now. So I agree with Larry. Expect a crash.

All of which makes me wish we had a form of capitalism that could learn to use money constructively (like government) by investing in the things people really need.

I fear we’re a long way from that yet. So instead capitalism limps from one speculative gain to another.

It’s the Reagan/ Thatcher de-regulation legacy.

We can’t afford to support education but Tories give Boots £75 million

Conservatives, Economics, Ethics 29 Responses »

May 162011

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?

Why is Glencore in Jersey?

Jersey 16 Responses »

May 162011

Glencore is always spoken of as a Swiss company.

That’s not true. The prospectus says:

Is there anyone who thinks that’s anything but a tax dodge? If in doubt the prospectus says:

Jersey taxation legislation provides that the general basic rate of income tax on the profits ofcompanies regarded as resident in Jersey or having a permanent establishment in Jersey will be zero per cent and that only a limited number of financial services companies shall be subject to income taxat a rate of 10 per cent. There is no capital gains tax in Jersey.

But has anyone asked by how much the ordinary people of Jersey gain by having the world’s largest commodity trader use their law?

No wonder, reading this, that the Jersey elite of lawyers is desperate to keep zero/10 tax. But it’s the ordinary people of Jersey who will pay for Glencore’s presence with higher sales taxes.

Just as ordinary people the world over are abused by the higher prices commodity traders create, and the profit they extract on the way, so too are the ordinary people of Jersey being abused.

I believe in trade.

I don’t believe in this form of globalisation.

The challenges the Tories have to face

ConDems 3 Responses »

May 152011

Tim Horton of the Fabian Society wrote this on the Left Foot Forward blog today, and it’s too good not to borrow, so I hope they’ll forgivve me:

After yesterday’s failed Rally Against Debt – attracting around 500 attendees, despite the benefit of aTimes opinion collumn and coverage across the newspapers - we thought it was time to turn the tables on the Tories by using the No2AV posters they funded to campaign against the Coalition’s cuts.

These posters, you may recall, courted controversy during the referendum campaign with a claim that the Alternative Vote system would cost £250 million alongside a picture of a baby, arguing the money would be better spent on maternity units. Another poster carried the picture of a soldier, arguing for more spending on bulletproof vests.

It was ironic to see a campaign funded by Conservative backers and run by the Chief Executive of the right-wing Taxpayers’ Alliance – who organised yesterday’s rally - championing public spending. It must have been a refreshing change for them to be able to harness people’s love of public services, rather than trying to do them down all the time. But, in the process, the No campaign have given us a great way to campaign against the cuts.

Thanks to Clifford Singer of the Other Taxpayer’s Alliance, the creative force behind theMyDavidCameron.com phenomenon, we have transformed these iconic images into arguments against the Coalition’s programme. And, now the referendum’s over, we’ll keep using these posters to remind the Tories of popular support for our services.

In the meantime, I’ll be writing to the Taxpayers’ Alliance to ask if they’ll join with the Fabian Society to call for higher spending on maternity units and soldier’s equipment, rather than their current focus on even deeper cuts to corporation tax.

Could this be the week we get a new European Union Savings Tax Directive?

EU STD, Europe, Tax evasion 24 Responses »

May 152011

European Voice reports:

Officials are hoping that next week’s (17 May) meeting of finance ministers will at last see movement on the EU‘s plans to harmonise savings taxation, and the issue of banking secrecy that has become the stumbling block in the talks.

Amazingly, a new obstacle has emerged after Austria and Luxembourg appear to be allowing progress:

But just as these two countries appear ready to allow progress, a new obstacle has arisen from a threatened Italian veto. Italy’s concern is of a different nature – relating to its wish for changes in the way that savings taxes recovered from member states are distributed. Officials from Hungary have written to the Italian government urging it to back down before the meeting on May 17.

My suspicion is the publicity suggests there is a belief a deal can be done.

If so this will be a good week for tax justice.

And a bad week for tax cheats.

And an especially bad week for tax havens.

Fingers crossed.

Jersey horticulture

Jersey, VAT Comments Off

May 152011

A while ago I reported stories in the Telegraph concerning the arrangements made by some major UK horticultural companies to supply plants to the UK from the Channel Islands.

They no doubt had their sources.

I quoted other sources to add to the story – providing sources that seemed perfectly reputable.

However, I have now received a note by email saying some emphasis was wrong with regard to the story about Mr Fothergill and its Jersey supplier. I have no idea what the person sending me the information wanted me to do with it. They certainly did not ask me to publish it. But I think it only fair to do so, in full since they are aggrieved:

Good morning Mr Murphy,

Somebody has recently brought my attention to your recent blog post with regards to Blooming Direct & Mr Fothergills and I have read this article with interest, and with a great deal of frustration at the sheer number of inaccuracies & false statements that you make. I would like you to address these with immediate effect please.

Mr Fothergills has a contract of “cultivation & supply” with the Horticultural business J.R Jersey Horticulture Ltd, not Blooming Direct. J.R Jersey Horticulture is a specialist grower of young ornamental plants. We own our own large scale modern nurseries equipped to grow top quality plants. We are locally owned, managed & produce great quality produce.

Blooming Direct was set up as an independent retailer before Mr Fothergills arrived on the scene, and the concept was formed 2 years previous by myself. My partner & myself do indeed have “many years” experience in this sector, contrary to your questioning. We have over 25 years of plug plant growing & distribution with the Jersey firm, Flying Flowers.

Mr Fothergills approached J.R Jersey Horticulture to grow their plants because they were having big quality issues and wished to have their product grown & packed by the nursery that produces them. As soon as we agreed to produce plants for Mr Fothergills we agreed that it best to de-merge Blooming Direct to avoid any potential conflict of interests what with being a wholesaler as well as a retailer.

J.R Jersey Horticulture Ltd & Blooming Online Ltd (t/a Blooming Direct) are both 100% Jersey owned by Jersey residents.

You state that Mr Fothergills “bought a Jersey business”. This is incorrect.

I note you thank your Jersey sources for their research, perhaps they should get their facts straight before you publish.

I hope that this has given me the opportunity to give you the facts.

Kind regards,

Joel Richardson

JR Jersey Horticulture Limited

I think my second story did, to be honest, show an understanding of all these issues, and certainly made clear that there was a contract for supply with Blooming Direct in place and that it undoubtedly had a business of its own. None the less, I am happy for the clarification to be published. I think if there was error the Telegraph might have made it, but I’m not sure I did. Anyway, I hope matters are put right now.

Equally, I note that answers to two fundamental questions, which were the reason for my blog, have not ben addressed. The first was this comment made by Mr Fothergill’s to the Telegraph:

John Fothergill of Mr Fothergills, one of the handful of large horticultural companies with packing sheds operating out of neighbouring Jersey, accepted that the company was based there purely for tax reasons.

“To be blunt we are here for the VAT benefit and we would have to rethink things if this changes.”

I think that justifies my concern whoever owns the business.

Second, I noted of Blooming Direct, based on a report here, that :

The company is a family run horticultural business and is totally committed to maintaining high standards of quality. Blooming Direct attracted funding support from the States of Jersey (local government) by way of a “Rural Initiative Scheme” aimed at promoting diversification and enterprise within local agriculture and horticulture. This funding has enabled the company to bring quality garden products to their customers in and out of Jersey.

As I then said:

So the States of Jersey went out of its way to help establish a business that would exploit the VAT scheme when local ownership became a condition of its use? And Fothergills reorganised their business by chance at that same time to make sure the ” preferable VAT arrangements already in place were not compromised”? All very odd. And just a coincidence? Or indication that the States was going out of its way to encourage business that exploited this loophole?

I’m not disputing for a moment that the business undertaken is legitimate. But the questions asked are appropriate, I think, given what was going on at the time and the comments made by Mr Fothergill. So clarification is good, but answers to the broader issues raised would be good too.

There are no mysteries about poverty – Labour just has to want to deal with it

Conservatives, Economics, Labour 2 Responses »

May 142011

Good for Polly Toynbee:

There are no mysteries about poverty, neither its causes nor its cures – which are more jobs, more money, more education and more Sure Start. What works has been studied by researchers for a hundred years. We know it all, and yet we grow closer in inequality to America and further from the rest of Europe. The government’s astonishing trajectory of cuts means that, according to Professors Peter Taylor-Gooby and Gerry Stoker, by 2013 public spending will be a lower proportion of GDP in Britain than in the US.

The only great mystery is how to construct a politics where people trust that remedies will work and that wealth can be more fairly shared to the benefit of all. That requires a Labour party that itself believes it wholeheartedly, before it can start persuading others.

Bang on.

Labour lost this faith.

It’s what the left is about.

Labour has to believe it, and deliver it.

Chuka Umunna’s right: there is one rule for big business and another for the rest

HMRC 6 Responses »

May 142011

As the Guardian notes:

Labour MP Chuka Umunna fears HMRC’s handling of the Goldman Sachs deal will lead the public to believe that there is ‘one rule for some companies and another for individual taxpayers’s

He’s right to think that.

Almost every accountant does too.

Because it’s true.

And it’s wrong.

Big companies are not above the law. But HMRC treats then as if they are.

Labour repaid much more debt than Thatcher

Uncategorized 18 Responses »

May 142011

This (from the Guardian) is the history of deficits since 1980. Labour repaid more debt than Thatcher by a long way and for a longer period. Major never repaid debt.

Those marching against debt today should reflect on that.

And realise the debt we now face was created by the private sector when the banks crashed.

That’s the true story of debt in this country.