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.
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Richard, I am a little puzzled by this entry in your blog.
The Jersey company was only created on 14 March and will not become the parent company of the Glencore group until certain other events have actually confirmed before listing. The existing parent company of Glencore is Glencore International AG, a company incorporated in Switzerland that will become a wholly owned subsidiary of the
Jersey at UK Admission. I would assume that the reason a Jersey company will be the new parent is because it is easier to list a Jersey company than to list a Swiss AG. I would be very surprised if it had much to do with tax. As the prospectus makes clear the existing parent company only owns shares it does not trade. Even if a UK plc had been chosen as the new parent company (for example), it would have made very little difference to the tax consequences of future activity of the Glencore group. I am puzzled therefore that you refer to it as a “tax dodge”. Why do you suggest this?
Secondly, I do not understand why you think “it’s the ordinary people of Jersey who will pay for Glencore’s presence with higher sales taxes”. How will this happen? The Jersey company will hold shares and dividends will pass through it to shareholders. How will this increase sales tax in Jersey?
Further details on how you reached your view would be most interesting.
I can only presume that you are intending to be perverse, and perversely stupid, in making your observations.
The simple fact is that the Glencore IPO is a guaranteed success because it is underwritten. Therefore there is no conditionality in the outcome. That dismisses all your initial comments.
If this was not to do with tax, why isn’t the parent company in the UK? Hasn’t all the evidence that I need already been put on my blog? If you can see another reason, please explain, including why one of the world’s largest companies would want to subject itself to almost unknown and untested company law and the considerable uncertainty that using Jersey law as the basis for its offering presents, not least because right now Jersey’s taxation laws have been decreed illegal by the European Union, with the full backing of the United Kingdom. Why has it taken at considerable risk if it wasn’t for 0% taxation?
At your second question, the cost of this falls on the people of Jersey because when UK and other lawyers based their impose upon the island a tax system which relies on 0% corporation tax the obligation that Jersey has provide services to local residents falls, inevitably, on sales tax when profits cannot be subject to taxation. Isn’t that glaringly obvious?
Richard,
I am not perverse. You really do have a different way of responding to comments that does not become you. You did not label me perverse when I asked about your concern that Glencore was not complying with Rule 18 of the HK listing rules. Why now?
You said “anything but a tax dodge”, I said it easier to float a Jersey Plc than a Swiss AG. How is that perverse?.
If a UK Plc had been used, with the dividend exemption in the UK and the substantial shareholding relief (and remember the operating companies are a number of layers down the structure) what tax would be raised in the UK. Indeed what tax difference (not company law difference) would it have made if a UK plc had been used?
You said ” people of Jersey [ ] will pay for Glencore’s presence with higher sales taxes”. How will this happen? If the tax position for Jersey residents is the same before and after Glencore makes use of the Jersey Plc how do higher sales taxes arise? Why am I perverse in asking this?
I am not aware that Jersey company law has been declared illegal by the European Union even if its tax laws have. I am suggesting in my comment that the reason for the Jersey Plc is company law (easier to float a plc than an AG). I did not say it had nothing to do with tax, I simply suspect it is not the main reason whereas you might think otherwise.
Isn’t trying to work out what is going on important rather than labelling somebody ” perversely stupid”, particularly as you have some idea of what I do.
I used the term deliberately because I suspected, and still suspect, you’re being disingenuous
I note you have not answered my points
I have answered yours
Who is being perverse in that case?
Your point: why isn’t the plc in the UK. Neither you nor I know the real reasons(s) but a possible and reastic reason is that Jersey company law is more flexible. As you know when applying Jersey company law, the cases etc that will be used to interpret the Jersey statute will include the UK cases, How is this using “almost unknown and untested company law” when it would be interpreted using UK precedents. You don’t really believe that a state like Jersey only has a company law to the extent that the Jersey courts have worked it out? Read a UK textbook on company law and, as you know, there will be Australian cases, NZ cases etc quoted. It is no different in Jersey. You really think that that is a considerable risk?
Yes, Jersey’s 0% tax rate might be relevant but I asked what difference it would make tax wise if the plc had been in the UK.
Your point: as to the evidence on your blog. I must admit I cannot read it all but, based on your recent blog about Glencore being a “mineral company” (as defined in Rule 18) I am not sure that you have answered everything.
Your point: about sales tax in Jersey of course you are correct, if a state needs revenue and there is no corporate tax then sales tax will be higher that it otherwise would be … that is stating the obvious. I did not question this. I was questioning what you said not what you had no need to say.
I think that the above answers your points.
You say “I have answered yours”, you haven’t and I really am not sure why you respond the way you do, do you take pride in such responses?. I am not being perverse or disengenous with you when responding to your blog, I am trying to find things out.
In respect of the question about the tax position of a UK plc and what difference it would have made. I am not aware of you answering that point.
Nor have you explained how Glencore using a Jersey plc increases the sales tax in Jersey . I can understand how it would if for example all dividends received by a Jersey company from outside Jersey were subject to tax. Such tax would result in better services in Jersey or possibly reduce sales tax. But that is not how Jersey’s tax law works. So in respect of the people of Jersey paying for Glencore through higher sales taxes … how do you work that out? I am not aware of you answering this point.
So, am I missing the obvious in not seeing your answers and yet I somehow manage to see my answers when you cannot or are you just being awkward?
I responded as I did for one very good reason: against my better judgement I do occasionally allow your comments on this site even though it seems very clear that the comments you post are designed to promote the neoliberal agenda that I reject, and which is sufficient grounds of itself to contravene the comments policy of this blog. You may not like me pointing out that neoliberalism is designed to be abusive, but it is, and I think that gives me the right to point out that those who promote it are pursuing a policy of abuse.
That said, I’ve made some very straightforward points, which are glaringly obvious to anyone who has some sense. The first is that Glencore is using Jersey law for what you claim to be its flexibility. I am making the very obvious statement that in practice very few people have any real understanding of what the Jersey law is, because it is almost entirely untested. If it has any credibility it is because it is based upon an appeal system to the UK, but it remains nonetheless apparently outside the UK, for the obvious reason that this gives Glencore, and its professional advisers, the opportunity to mould that law to suit their own purposes as time requires. This is not good law. I’m not saying it’s not law. I’m just saying it’s not good law. But that means it is not in the interests of shareholders. It is not in the interest of the world at large. It is abusive in my opinion as a result. That is why Jersey law was chosen, I suspect.
Jersey taxation was chosen for the same reason. It is supposedly guaranteed to be at 0%. That need not be true of the UK holding company, even under the new regime. If you can argue that the holding company of one of the world’s largest trading organisations, holding its board meetings in the UK, makes no profit, then I think you are going to have some considerable difficulty in satisfying tax authorities that this is true. Head office operations should, by definition, be highly profitable because it is there that the synergistic benefits of the group having an existence should be earned. That would mean considerable profit should be allocated to the parent company of a group, and tax should be due. That would certainly be my argument if I was a tax inspector in the UK if Glencore had been incorporated in this country. As a consequence tax would have been paid, without a shadow of a doubt. Jersey seeks to guarantee otherwise. That is, I suggest, why it was chosen. The fact that jersey currently has an illegal tax system is an enormous risk for investors in Glencore which no one seems to have noticed. I confess it would amuse me enormously if Jersey had to introduce a tax and Glencore was profoundly embarrassed as a result, but that is a side issue on which to speculate at some time in the future.
Finally, and as the last comment in this exchange because I will not be allowing you to reply, now or in the future, since that is my right under the terms of the comments policy, you completely ignore the fact that the State of Jersey has been captured by financial interests seeking to guarantee that corporation tax cannot be increased above 0% meaning that there is no prospect of either local or international profits being taxed in the island in an effective manner, passing the burden of tax onto those with least opportunity or means to make settlement. That is, no doubt, entirely consistent with your neoliberal aims, but I despise the inequity within it and I’m quite willing to say that this is a tax system that is profoundly unethical.
Thank you. Of course it is your choice. I believe you are mistaken to make such a choice, but no big deal.
I do believe however that it would be very difficult for John Hasseldine to work with a neoliberal so either (i) he has been fooled by me for many years or (ii) in labelling me a neoliberal you are doing what you do so often, which has many similarities to the most famous proponent of such behaviour:
“When I use a word,” Humpty Dumpty said, in a rather a scornful tone, “it means just what I choose it to mean–neither more nor less.”
I have no doubt we will exchange comments in the future, after all your work overlaps with mine. I accept it may not be on this blog. There is always twitter if I knew how it worked.
It is a great pity for the work you do that you do not expose yourself to academic criticism, not necessarily by those you automatically disapprove of (such as Judith Freedman and her colleagues at Oxford) but by academics that even you would have to acknowledge seek truth and act with integrity (perhaps such as John Hasseldine). If you work is robust you would only enhance your reputation and advance your cause.
On a human level I wish you all the best.
Kind regards
Gregory
a) As far as I can tell you’re a graduate teaching assistant at Nottingham. Wow. Bowl me over.
b) Sure I know John, but the work I was offered by Nottingham was really horribly neoliberal, let me assure you. I discovered that it’s CSR when funded by BAT really did mean it sought to ignore real CSR issues, for example.
c) I do expose my self to academic criticism – Prem Sikka approves of what I do at Essex and Ronen Palan at Birmingham for example. And I have guest lectured several times for the British Accounting Association as well as doing quest lectures at Cambridge, Yale, Edinburgh, Bradford, Manchester, Sussex and Portsmouth. Of, and in Norway and elsewhere.
d) The real issue with UK accounting and tax academics is, to be candid, why they’re so utterly ineffectual. Read the BAA journal and you’ll see what I mean – it’s a continual exercise in irrelevance in my opinion. The only thing half of them can think to research is how to teach at university, or so it seems.
Sorry – don’t play the academic high ground: I’m very secure where I stand.
Which is precisely why your comments aren’t needed. They’re too weak to both with.
There was nothing high ground about my comment, unlike you.
Rather than writing “you’re a graduate teaching assistant at Nottingham. Wow. Bowl me over.” you could have simply written “what have you published?”. The answer nothing as yet. I do not mind your scorn, it reflects on you not on me, but surely no need to pour scorn on graduate teaching assistants, many of them turn into fine academics in time. Isn’t your reaction rather like some of the reactions you find so dispicable when the real neoliberals talk negatively about those less favoured by the rewards that are available to some in society.
You will know that John is a tax man not a CSR man. So I fail to see the point of your reference to CSR in connection with John. In respect of CSR at Nottingham I would have thought that one of Jeremy Moon’s more recent books on corporate citizenship would have appealed to you and Professor Palan notwithstanding the funding. Its contents will stand as they are and can be subject to criticism and development, surely the funding does not impact on the contents of the book.
OK so you have Prem and Professor Palen as academics that approve of you. I cannot say that I am impressed that much, given the range of topics you opine upon. Prem and I have our differences but he publishes in international journals and is prepared to allow his publications to be criticised (both positively and negatively) in such academic journals. The last time I discussed this with Prem, he welcomed criticism and debate. To my face he did not label me a neoliberal (it might be otherwise behind my back).
In respect of your guest lectures, well done. Would you allow your transcripts to be read and subject to criticism? Or if questioned is the s/he who questions a neoliberal and dismissed?
Unfortunately the BAA journal is not listed on the list of worthwhile journals, ask Prem if you do not believe me, and I assure you that is not my list. I would be discouraged from submitting articles to that journal so perhaps you are correct in thinking that the BAA publishes articles of irrelevance and that is why it is not on the ABS list.
I am too old and uncertain to take the academic high ground, I simply try to find out what is more relevant and appropriate that something else (I would actually say true, but you would possibly dismiss the notion). As for you being very secure, rather than simply opine and then label individuals when questioned (is Glencore a minerals company (as defined in rule 18?), submit something to a proper journal like Prem does, see how it goes.
As ever, kind regards
Gregory
Let me come back to the core of this issue. First of all, I am more than happy for people to disagree with me here. I have a long track record of getting on with some people who disagree with me. John Whiting, formerly of PricewaterhouseCoopers and now at the Office for Tax Simplification at the heart of the government, is a perfect example. We agree on little, but get on well. this good reason that. Although John and I disagree with each other first of all we respect each other; secondly we treat the other’s opinion as of worth, and thirdly there is absolutely no BS factor about John, whether I like what he says or not. There are others who I can similarly shared disagreement with. For example, Mark Lee and I frequently disagree, but I like Mark as a person, and he gives every sign of doing the same in reverse even though he quite candidly disagrees with me on occasion. So let’s drop, once and for all, the stupid argument that I am somehow dismissive of all opposition. I am not.
I am, I readily admit, quite intolerant of those who are, let me put it politely, disingenuous. They appear here in the first instance with an apparently innocuous question, but they actually have a serious neoliberal agenda that they’re promoting. Some of them, and you seem to fit into this category, don’t even understand what you’re doing. Your claim that a major business school, at which you teach, is not neoliberal, is risible. Heaven help those who have to be taught by you is all I can say. And for the record, the CSR work that I was asked to be involved with was to be associated with Jeremy Moon, and quite candidly I view his approach, and that of many CSR academics, as being fundamentally neoliberal by providing the option for ‘soft regulation’ tthat removes obligation from business under the excuse of social responsibility. I don’t believe in that. I believe in obligation. No wonder the whole CSR is so utterly discredited, it has provided the perfect excuse the business to run rampant over society.
At the core of your latest comment is absolutely fundamental error of judgement, and that is that academic accounting has had anything whatsoever to offer to British society for many a long year. as a consequence you think that I should somehow seek academic approval for what I do, and divided it would have greater status. Why on earth would I want to do that? With the notable, and singular, exception of Prem Sikka Academic accounting’s track record over the last 30 or more years has been dire, and that probably being kind to it. can you suggest one innovation in accounting that originated in the U.K.’s academic accounting network in that period? Can you name one accountant who was framed public debate in any way, apart from Prem? Is there an academic accountant who is in any way contributed to tax debate, apart from saying cutting it might be a benefit, without reason given?
Imagine what would have happened if I had submitted my work for peer review of the sort you suggest. Would country by country reporting exist? Would it now be on the agenda of the European Union, International Accounting Standards Board, Organisation for Economic Cooperation and Development, and others? Of course it wouldn’t. Peer review would have prevented me publishing a paper on the subject. Academic accounting is about quoting from existing ideas, not developing new ones. That is the poverty of intellectual thought in the UK, exemplified in a discipline that has no history of thinking.
Would the debate on the tax gap, now prevalent in politics, have survived peer review? I very much doubt it. Methodology would been torn apart forever, but the reality is that because I wrote about the tax gap for the TUC the government was forced to address the issue, whether it likes it or not. We still disagree about methodology, but the debate was created. That did not happen as a consequence of academic accounting.
And what about tax havens? Is the fundamental distortion of markets that they create an issue at your business school? Is the opacity that hiding accounts from public view that they encourage highlighted as an economic distortion? Is the opacity within consolidated accounts that ensures that large corporations can shift their profits without being subject to public scrutiny treated as a fundamental failure of our existing accounting framework within your department? Are academic accountants everywhere jumping up and down saying tax havens must be abolished to ensure that effective markets operate on behalf of all participants, large and small, and whether they’re in business or its stakeholders? If not, why not? What corruption has led to this absolutely absurd position where you teach that markets are the solution to all problems and yet fail to highlight any of the abuses of markets that are promoted to ensure that the ordinary people of the world are exploited?
I will tell you what it is that ensures that these issues aren’t raised. Firstly it is the appointments process. If you disagree with the system, then you won’t get a job. If you do not buy into the absolutely fundamental (and absurd) underlying assumptions of neoliberal economics, even if you are an accountant, then you have absolutely no prospect of a career in a UK university business school or academic accounting department. Second, peer review ensures that this is the case. You must quote the opinions of those in authority, and approve them. If you do not your papers are not published. If you do not publish your career does not progress. The system has been set up to ensure that is the case. The neoliberal hegemony is enforced. Third, funding ensures that this is the case: far too many departments are dependent upon raising money from business or large firms of accountants. Their independence is, as a consequence, fundamentally threatened. Fourthly, and essentially, business wants to make sure that this is the case. It suits them very well have people like you placed in academic departments to suggest that people like me, who question the system, aren’t up to the task of preparing an academic paper. How convenient it is to question my credibility. But they, and you, miss the whole point. I’m not choosing to play that game. I’m questioning the whole system, and the U.K.’s business schools, in particular, exist for one reason, and one reason only, and that is to reinforce the neoliberal dogma which is destroying the capacity of UK business to think about anything but short-term trading. That is in turn destroying both our society, and by the destruction of the environment, the world at large.
If that means I treat your interventions with contempt, so be it. That’s what they’re worth.
Richard you ask: – Has anyone asked by how much the ordinary people of Jersey gain by having the world’s largest commodity trader use their law? And “Gregory” claims that a possible explanation for Glencore’s presence in Jersey is because Jersey company law is “more flexible”.
The Jersey government (infamous for having the attention span of a gnat and unaware of the basic precepts of long term planning) fails to grasp that “finance” neither knows nor understands the concept of “fidelity” – and that as soon as any company determines that the convenience of Jersey law no longer suits its purpose it will up-skittles and go — overnight.
Bringing further ruination to the “ordinary people of Jersey”.
But then we know this already — well most of us that is!
[…] have been in debate on another post with a UK accounting academic.  I admit that the debate would not make an edifying read.  I have found the commentators’ […]
Richard, what an absolutely brilliant ‘rant’. Please publish. I’m going to put it on my FaceBook wall.
Oh, I see you have done that!
The profits these Jersey based corporations make is phenomenal. The spare change they leave behind for Jersey people is shameful.
The island is one step away from bankruptcy, and in real terms is probably already bankrupt – when you consider that Jersey is trying to make public spending cuts on services which were already failing badly, before any cuts.
[…] I’ve also noted recently, Glencore, the world’s largest trader in commodities, has launched itself onto the world’s stock exchanges through a Jersey company.  It has the right to do so, of course. But as I […]