Richard Murphy

Banks and regulatory compliance

May 222012

I’m chairing a panel session on shadow banking at Copenhagen Business School this morning. In the circumstances the revelation of email from Goldman Sachs, Morgan Stanley and others in the US about their compliance with naked short selling regulations is telling. Perhaps the best quite on the issue is this, from Rolling Stone:

Now, through the magic of this unredacted document, the public will be able to see for itself what the banks’ attitudes are not just toward the “mythical” practice of naked short selling (hint: they volubly confess to the activity, in writing), but toward regulations and laws in general.

“Fuck the compliance area – procedures, schmecedures,” chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.

In other words, we’ll do what we like, we don’t care about the rules and we’ll deny what we’re doing, using the most expensiev lawyers money can hire if need be to do so .

I think that sums banking up.

It should be an interesting session, just as yesterday was on regulation, offshore and related issues.

Hat tip: Robert Palmer at Global Witness

Key assumptions in the Taxpayer’s Alliance tax report all say poverty is their aim

Uncategorized 17 Responses »

May 212012

I have only had time to scan the New Taxpayer’s Alliance report on tax in the 21 Century, and will be in a conference all day today, but it is clear that key assumptions are:

1) Inequality not only does not matter, but inequality is good

2) Equality of opportunity is not really worth paying for – so there are limits to the value of education for all

3) Unemployment and other benefits are bad – people should be forced to work for whatever is available in wages

4) Most currently public services should be paid for

5) There is some reason for providing universal healthcare – but only some

6) Charity should replace benefits

7) Markets work – and externalities such as pollution, health and safety and catastrophic failure are not the business of government.

It’s a horrdi world view.

It also makes the claim that the average family will be better off horribly untrue. This is a plan to deliver them to grinding poverty to support the rich.

The Taxpayer’s Alliance – supporting tax havens to undermine democracy

Uncategorized 3 Responses »

May 212012

The Taxpayer’s Alliance and IoD’s new report on tax is amazing in many ways – mostly for the obvious abuses it wants to promote in society. Take this example, of obvious interest to me:

So le’s ignore the tax evasion and the crime and instead say these are moral places.

Why are they moral? Because they subvert the will of democratially elected governemtns to impose taxes their people ask for. That’s why they’re moral.

This is the perverted and fundamentally anti-democratic morality of the far right in action.

And that’s what this report is about – ignoring the wishes of people and imposing the wishes of the minority – even if, and maybe especially if, it helps money launderers and tax evaders.

It’s the Taxpayer’s Alliance worldview – where the rich get richer and all the rest gone go to……

Tax Payers Alliance 13 Responses »

May 202012

I note the Taxpayer’s Alliance are publishing a report in the morning on their ideas for the UK tax system. I haven’t got a copy yet but the Guardian summarises its main recommendations as follows:

The most eye-catching proposal in the 417-page report, which is jointly published by the Taxpayers’ Alliance and the Institute of Directors, is a call for a “single proportionate income tax rate” of 30%.

This would be achieved by cutting the ratio of spending and taxation to 33% of national income, forcing Osborne to maintain the current level of spending cuts until 2020.

In his original fiscal mandate, outlined in his emergency budget in June 2010, Osborne had expected the austerity plan to continue until 2015. But in his autumn statement last year Osborne announced that the cuts would be extended for a further two years.

The report by the Taxpayers’ Alliance says that a single income tax could be introduced in six steps:

• Cut taxes to 33% of national income. Taxes currently account for 37.5% of national income.

• Ensure that marginal tax rates do not exceed 30% and the personal tax allowance should rise to £10,000.

• Taxes on capital and labour income “disguised” as business taxes should be abolished and replaced with a tax on distributed income.

• Transaction, wealth and inheritance tax should be abolished.

• Consumption taxes should remain for the moment but transport taxes should be cut.

• Local authorities should raise half of their spending power from local taxes.

The immediate temptation is to dismiss this as madness, and that would be appropriate except for the fact that we know these people have the ear of many people in the Tory party from David Cameron downwards.

So let’s summarise what this means. First, all wealth taxes go. So the rich get richer.

Second all taxes on business profits go. And since businesses of any substance are owned by wealthier people that means the rich get richer. How will they do that? By retaining their income in companies and selling shares in them free from capital gains tax: that’s how. The tax on corporate distributions they’re suggesting has a built in massive loop hole contained within it. How convenient for those who can defer their income because they’re already wealthy until a time of their choosing when it will be tax free!

The personal allowance will increase very modestly to £10,000 and then 30% tax will due – which will hammer low earners and pensioners in particular, whose tax rates will rise considerably as a result, as will the tax rate for most on less than £45,000 of income a year. But of course the tax rate on the 10% eaening over both that will fall, in some cases considerably. So the poor, will lose and the rich will win. Now, there’s a surprise.

And that will also be true for local taxes because forcing local authorities in poor areas to increase their tax yield from local communities will massively increase local taxes in these areas by reducing redistribution to them from richer areas, where the rate may well fall as a result. You’re not going to be surprised that as a result the rich will get richer and the poor will get poorer and services in poorer areas will be massively curtailed, just where they are needed most. That’s not chance: that’s deliberate cold hearted callousness.

And now let’s guess which services are going to be cut to reduce state spending by well over 10%. There are only a few where this might be possible. The first massive cut will be to beenfits, so the poor will get poorer. The next will be to pensions. So the poor will get poorer. After that there’s international aid, so the world’s poor will be poorer. And then there’s the NHS, so those who can’t afford to pay will die. And then there’s education, where those who can’t pay will be denied further education and no doubt many children will also lose out on nursery places so any prospect of social mobility is eliminated so that the rich stay rich.

This is not a serious tax proposal. This is a propsoal to radically restructure society in the UK so that wealth is massively redistributed from the poorest to the richest.

But that means this is a deliberate recipe for social division.

Just as it is a recipe to create massive unemployment, no doubt with intent to force down wages to subsistence levels.

And it is deliberately designed to ensure the poorest die young.

It’s designed to deny any hope to most people.

But most worrying of all, I think the whole reason for this is that it’s intended to drive a wedge through society as a pretext to creating a draconian state when people would quite reaonably object, as they would if this were ever to be seriously proposed.

Is that possible? Oh yes, I’m afraid. There are many in the Conservatives now plenty mad enough to embrace this. And they hate most people in this country enough to want to deliver it. That’s what’s really worrying, because let’s be clear what this is: it’s a policy built on the basis of hatred of ordinary people.

EU – in or out?

Europe 13 Responses »

May 202012

Ed Miliband is, according to the Observer, contemplating an EU refredum poll.

That’s a big issue.

In or out?

I’ll come back to you on that one.

The FT – and my “dangerous” work on the tax gap

Tax gap 4 Responses »

May 202012

The FT reported on HMRC’s rebuttal of my work on the tax gap yesterday, saying:

Revenue & Customs slammed claims that tax-dodging costs the country £120bn a year as “misleadingly high” in a report to MPs on Friday that sought to reassure the public that over 90 per cent of liabilities were collected.

It said its own £35bn figure for the tax gap – the gap between revenues that should be generated by the tax system and those actually collected – was “much more realistic” than the £120bn estimate that has been adopted by trade unions and activists, including the UK Uncut group.

It said the inflated figure was “dangerous” if left unchallenged because it gave a misleading impression of HMRC’s effectiveness and would encourage non-compliance by suggesting it was the norm. Richard Murphy, a campaigner who calculated the £120bn estimate, rejected HMRC’s criticisms. He called on HMRC to increase staff levels and crack down on small companies that were not filing tax returns or company accounts.

Mark Serwotka of PCS, a union representing HMRC staff, said: “The tens of thousands of staff in HMRC know that Richard is not overstating the tax gap, and they know that as well as it being an issue of political will, the problem is one of staffing.

“With 10,000 more job cuts planned by 2015, the government stands no chance of tackling this, when even a modest dent in the billions lost to our exchequer would change the debate about public spending overnight.”

I’m grateful to Mark.

His comment highlights all that needs to be known on this issue. When HMRC are dedicated to decimating their staff they’re not going to admit that doing so is going to massively harm the tax yield, are they? Whilst we have HMRC’s policy set by a board dominated by people from big business who have undertaken the most perfect example of regulatory capture of a public institution for private benefit as a result of which they demand that it cuts the resources available to collect the tax due to this country at benefit to large corporations they’re bound to describe my work that challenges their approach as dangerous.

I sincerely hope my approach is dangerous to their best interests: it is meant to be. But it is in the best interests of the UK and for HMRC to say that my campaign to collect more tax using more staff to do so in pursuit of those who currently break the law without fear of prosecution is dangerous because I’m encouraging law breaking by showing how easy it is can only be described as disingenuous at best, and Orwellian in tone.

It does not help that, as I have shown their own estimates are so riddled with errors, inconsistencies and straightforward wilful misstatement that anyone can see through them.

I stand by my estimates - acknowledging that that is what they are – and all the more, I stand by my demand that they take real action to close the tax gap – which is what they are refusing to do.

Could the Observer be clearer, please?

Economics 4 Responses »

May 202012

This comes from today’s editorial in the Observer:

The economic conditions through which Britain is living reflect a disgraceful abdication of responsibility by a government that has consigned millions of lives to unnecessary and avoidable hardship and great anxiety about their future prospects. It is simply wrong to blame this on the economic tsunami sweeping through Europe. Clearly a break-up of the euro would hit the UK hard and add greatly to the peril we face. But that has not happened yet and might still be avoided. What is clear is that Britain confronts this risk from a position of great weakness in substantial measure because of the economic strategy being pursued by the coalition government, whose leaders shamelessly blame an event that has not occurred for their mistakes. The true problem is that the framework in which economic policy is cast is 100% wrong.

I wish they’d be a little clearer about what they think. Then I’d know whether to agree with them or not.

We’ve created a society for non-doms, but not for children in our schools

Ethics 2 Responses »

May 202012

There’s a great article under the above title by Peter Lampl in the Observer this morning.

As he says:

What was painfully apparent from talking to the head and visiting secondary schools was that few bright children from areas such as Wakefield now have a chance of making it to top universities. From the outskirts of Liverpool in the north to the coastal communities of Kent in the south, large swaths of the country have become educational wastelands – where children, despite their talents, face the bleakest of life prospects.

In London, meanwhile, where I now live, a very different phenomenon has transformed the capital’s most sought-after postcodes. The latest figures suggest that the rich from outside the UK now purchase the vast majority of super-prime property in London. Belgravia, Mayfair, Knightsbridge, Notting Hill, Chelsea and even exclusive enclaves in the home counties are becoming non-British zones.

It is not London’s weather that attracts the wealthy from overseas; for many, it is its non-domicile tax status. Among major countries, only in the UK do we allow wealthy foreigners to be permanent residents and not declare their worldwide income and pay tax on it. Instead, they make a one-off payment of £30,000 a year and pay tax on UK source income, which many do not have. At the same time, the UK is renowned for having the best private education money can buy.

This is a description of the failure of social policy written large in tax policy; and vice versa.

When we have policy intended to favour the rich we get a divided society that hamrs us all.

Which is precisely why we need to get rid of the domicile rule and introduce strongly progressive taxation, especially on wealth.

Tax evasion – why HMRC’s estimates are wrong

Tax evasion 2 Responses »

May 182012

HMRC dedicate a lot of time in their response to my work on the tax gap saying why my estimate of tax evasion might be wrong. What they fail to acknowledge are the very obvious deficiencies in their own work, which they have admitted elsewhere in 2009, saying (page 22):

At present tax gap estimates are available for the main sources of revenue loss in Income Tax, National Insurance Contributions, Capital Gains Tax and Corporation Tax.

Direct tax gap estimates are produced using “bottom-up” methods. This means that components of the tax gap are estimated using departmental sources, such as surveys, administrative and operational data. The bottom-up method is less comprehensive than the top-down method used for indirect tax gap estimates because by its nature much of the gap arises from activities that are deliberately concealed. In addition because the bottom-up methods are based on compliance activity which can, in some cases, take years to complete the resulting tax gap estimates typically apply to earlier periods than those from the top-down methods.

They neither admit this to parliament, or acknowledge that my work overcomes these deficiencies. Instead they seek to dismiss it on grounds that are spurious, as I will show when I have time. But its the sheer dishonesty of their not admitting their own work is seriously deficient when they know that to be true that annoys me right now.