Vir Cantium

I'm right, you know …

Category Archives: Financial illiteracy

The Archbishop Wades In With Irony and Ignorance

It seems that a man whose career is built on faith in the supernatural and thinks Sharia Law is a good idea now supports the ‘Robin Hood Tax’.

I could just end the post there, really, but as I haven’t blogged for a week or so, I’ll carry on.

The Archbishop has clearly been taken in by the ‘it’s all the bankers fault’ fallacy. Need I point out yet again that for an irresponsible lender there must be an irresponsible borrower? I assume Dr. Williams is not in a forgiving mood. He has obviously had some divine gift in actually being able to ascertain exactly what the St. Paul’s squatters are on about. In his view, the answer is our old friend, the Robin Hood Tax.

This means a comparatively small rate of tax (0.05 per cent) being levied on share, bond, and currency transactions and their derivatives, with the resulting funds being designated for investment [sic] in the “real” economy [sic], domestically and internationally.

The Tobin Tax / Financial Transactions tax / Robin Hood Tax is unworkable, as to be truly effective all countries would need to impose it. That is not going to happen as there will always be those who see an opportunity to capitalise on other nation’s masochistic tax regimes.

Even as far as it does get imposed, the cost of such a ‘small’ tax – it would take £30bn out of the UK economy – will ultimately fall on us, not the bankers. That’s us, through our pensions, bank charges, insurance premiums, energy prices, in fact almost every day to day commodity uses the sort of financial instruments that the tax would hit. I’ve blogged before on it (look for the first comment on there – a good technical demolition of the tax). Furthermore, naturally, the better qualified Timmy has had a go this morning.

So that’s the ignorance dealt with, now for the irony. Let’s look at the irony of the Archbishop supporting a tax.

If we want to take seriously the moral agenda of the protesters at St Paul’s, these are some of the ways in which we should be taking it forward.

Moral? Tax is immoral. Yes, it is a necessary evil; it is the most practical way to fund certain indivisible public services, but far beyond that it is used as a (largely ineffective and counter-productive) tool of ‘social justice’ through the forced redistribution of wealth or supporting one group’s view of deserving causes. That’s the “investment in the ‘real’ economy” cobblers the Archbishop is coming out with. Let’s face it, if you were mugged it wouldn’t make the crime any less immoral if the mugger then donated his ill-gotten gains to the local homeless shelter, would it?

The fact is that if the Archbishop truly understood the issues that the so-called ‘anti-capitalist’ squatters claim to be concerned with, he would recognise that it is not capitalism that is the problem, it is corporatism, and more tax and regulation will simply push us towards more of the same.

As further reading I can recommend Alistair Heath‘s piece today, but for my part I will leave you with one last thought for the day. Previous high profile supporters of the Robin Hood Tax have included actors, Bill Gates (the visionary who failed to foresee the rise in popularity of the internet and smartphones) and, naturally, politicians (so no vested interests there then). With the exception of the last, these supporters hardly have any real influence on matters. If you think the Chief Executive of the Church of England falls into the same category, and that it doesn’t really matter if he wants to come out with such economically illiterate socialist cobblers, then I will just say this: ‘faith schools’.

#UKUncut Scores an Own Goal and Takes Inspiration from the Kray Twins

Well, didn’t UKUncut do well? Intimidating low laid shop staff into closing their stores, criminal damage, and a magnificent own goal when they occupied a shop owned by a charity. Barring the injuries which clearly no-one – except the protesters – would be pleased about, it was a good day for the government.

Fortnum & Mason, Piccadilly, London, England

What do we want? Nice chocolates! Who do we want to pay for it? Someone else!

The Fortnum & Mason attack was supposed to be the highlight of the UKUncut/TUC/[insert leftist cause of choice]’s day, yet within minutes of the ‘secret target’ being revealed and the unwashed hordes descending on the evil purveyor of the devil’s tea and rather nice chocolates, those who actually know something about business pointed out that the owners of F&M are a charitable trust that has donated millions to good causes.

So much for the march “bringing to Big Society to London”.

Ah, say UKUncut, but the owners also have 54% in Associated British Foods, who are alleged to have “dodged” £40m in tax. Now you can be sure that the ‘dodging’ is legal tax avoidance, but let’s go with it for now.

The logic here is that you are going to beat up a vicar because his half-brother didn’t pay more than was asked by the protection racketeers last week. Actually, I think tweeter @cassiustweets summed up the general strategy rather well:

#ukuncut ARE peaceful. Like the Kray brothers, they only smash up shops that don’t pay up.

That might work for the plot of a Mafia or Gangster movie, but the F&M action confirms that the UKUncut/tax ‘justice’ movement lacks access to quality tax and business expertise. Then again, we’re taking about a movement which only refers to accountants as a pejorative term, when explaining how the evil rich don’t voluntarily pay more than either the letter or the spirit (back to the Westminster doctrine) asks them to. It really wouldn’t be very ‘right on’ to consort with us*, the foot soldiers of the devil’s regiment of bean-counters now, would it?

* P.S. Just to be clear, UKUncut, don’t bother calling me.

Debt, Theft and Job Losses: The #UKUncut Manifesto

Suppose you were chronically financially inept and you regularly spend more than you earn. Now for a few years things work out OK; you figure out that you can get over the income shortfall firstly by selling the family silver gold, then by extending your mortgage every year – the bank’s happy to do it and interest rates are relatively low.

Then the banking crisis hits. Interest rates, driven by a sudden spike in oil prices, burst the bubble and suddenly the bank clams up. You also have to take a pay cut. What to do?

You could aim to cut back on your spending so that you’re living within your means. Yet there is an alternative: you’ve gotten by for years with a big mortgage without any issues, so why should it be a problem now? All these tiresome know-it-alls who say otherwise are just lying.

Sure, so some of your neighbours have had the bank repossess their places, but that won’t happen to you will it? Anyway, you know that the bloke in the big house round the corner is worth a few bob, and so, egged on by your dodgy backstreet accountant, you go round there, break in and nick some of his stuff – that’ll keep your head above water for a bit. After all, it’s not as though he’s your employer who might just up sticks and move to the next town is it? Although now you come to think of it, he did look sort of familiar….

Well, no guessing which is UKUncut’s preferred option.

So, let’s examine the world according to UKUncut.

Read more of this post

How to Solve That Barclays Tax Issue

Barclays on Queen Street, Morley, West Yorkshire

A Branch of Barclays Bank. Spawn of the devil, apparently.

So yesterday various indignant people who are not regular readers of the Telegraph were rather chuffed that they had closed a number of branches of a private business that had, in their opinion, not paid enough corporation tax. Strangely though, as far as anyone can tell, no tax inspectors took part and the action was not sanctioned by HM Revenue and Customs.

These non-core customers of the soap industry were very upset at the news that Barclays Bank had only paid 1% of its profits in corporation tax. Apparently the bank had used an evil slippery tax loophole whereby they had set some losses against tax. Yes, the same principle that allows any business to gain tax relief for years in which business is poor, or where they’ve taken the government up on their incentives to invest in equipment, or on the extended loss relief rules introduced when the recession was looming.

In fact, and predictably (on both counts), the Grauniad have made a number of other errors in compiling their figures, and the actual reasons behind the apparently low figure are more complex. We are indebted to others such as Christie for taking chargeable time out to summarise these.

Yet of course, the protesters are hardly motivated by esoteric arguments informed by the pages of Tolley’s. It’s an evil bank*, so anything short of publicly flogging the girl behind the counter is fair game. I mean, these people have such a tenuous grasp of business, the economy and the public finances, that they actually believe the banks were to blame for Gordon Brown notching up over £1 trillion in public debt.

Anyway, there is a simple solution to this whole messy problem. It will ensure that no corporation will be able to fiddle their taxes, legally or otherwise, and so the protesters can go and do something constructive for society find another excuse to cause criminal damage and avoid growing up.

It is this: abolish corporation tax. After all, all corporate profits will eventually end up in the hands of individual taxpayers, trusts, pension funds, etc, where they will receive an appropriate tax treatment. It may be in the form of salaries, dividends, other forms of debt servicing, etc, but all such income is taxed, so why have the complication of siphoning off some of the tax earlier in the process when a massive simplification could be achieved by scrapping the corporate tax framework? Then think what it would do for the UK’s attractiveness to foreign investment.

I’ve not looked at the detailed figures, of course, but it must be possible to adjust the personal tax rules to make the changes revenue-neutral to the Treasury (and that’s without considering the Laffer curve effects on future revenues). For example, without corporation tax, the implied tax credit that is carried by dividends will finally become redundant. One could envisage dividends being taxed at the marginal rate of tax of the recipient, as they used to be. One would imagine that the additional tax incurred would be negated by the higher dividend rates being paid as a result of higher distributable profits.

Not that I can be sure without any detailed analysis being carried out, but in that respect the idea is still some stages ahead of the economically and financially myopic activism of the ukuncut mob. They will naturally be horrified that someone could suggest that ‘big business’ be given such a tax break. Need I point out however, that any business, regardless of size, is ultimately a collection of people earning a living? That by definition they must be doing something that is contributing to the economy and thus society? Perhaps some of the ukuncut acivists should try it sometime.

* As opposed to nice fluffy banks like the Co-op, who paid a whopping … err… 1.9% (h/t Christie again).

How The Left Don’t Get It (Part 94)

Q: “Why did the chicken cross the road?”

A: “The only reason the chicken had to cross the road is because of the crisis caused by the financial markets. Why should our members cross the road when it’s the bankers who have created this mess? It may be that the road is a lot narrower than the one the private sector chickens have to cross, but so what? It’s just not fair.”

So, in a way, goes any interview with trade union bosses at the moment. (Of course, it goes a little differently when they are asked about their own pay and benefits.)

Let’s try and get this straight, and not for the first time: the annual public deficit has been running for years, even in the good times. Thus the public debt was increasing, even in the good times (especially when you factor in all those PFI deals). The debt relating to the bank bailout will, in time, be repaid. However, the problem of government spending more than it gets in is a longer running problem which would have come to a head sooner or later.

If we’re looking for causes of the financial crisis – and there are many to varying degrees of culpability – then a basic knowledge of contract law would inform us that for an irresponsible lender, there must have been an irresponsible borrower on the other side of the deal. That, then, would bring into the dock many ordinary people, a for more uncomfortable prosecution in the court of public opinion than the easy targets of the banks.

Yet the point is that the financial crisis was only the spark that lit the forest fire of the bigger and deeper rooted fiscal crisis, growing from the seeds of short-termism, of wanting it all now and pay for it sometime later – if not on someone’s mortgage then let’s have it on the PSBR. How many such unsustainable instances of growth in public spending were rejected by the comrades in the trade union movement?