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Category Archives: Tax

Frankie Boyle leaps to Vodafone’s defence

Remember the furore a few weeks ago, when Vodafone posted healthy profits but paid – gasp – no UK corporation tax?

Well, that left wing comedian firebrand Frankie Boyle – of all people – has come to their defence.

Granted, he probably wouldn’t see it that way.

However, let’s suppose that Vodafone’s CEO tweeted the following about the reasons for the zero tax bill:

We incurred the capital expenditure for reasons separate from tax and our accountants applied for tax relief on this.

You see, the main reason for Vodafone paying no corporation tax is that they had set a significant amount of capital expenditure against their taxable profits, by way of capital allowances and related reliefs*. Unless Frankie really thinks that all that investment in new tech and so on was just an elaborate tax dodge, then it is clear that Vodafone’s tax bill was reduced entirely legally, indeed using provisions set in place by Parliament.

Vodafone could have chosen not to claim the allowances, but why should they do that?

It’s a bit like Entrepreneurs’ Relief, which reduces the capital gains tax rate to 10% on distributions of reserves on the dissolution of a qualifying company – such as Frankie’s.

Frankie could have chosen to distribute those remaining reserves in his company as a dividend (paying around 36% income tax net) or even as salary (that’s just under 60%, including employer’s NI). But why should he do that?

Oh yes you do, mate. Go back a few years and you might remember the venture capitalists who pointed out that they were paying tax at a lower rate than the office cleaners. Yes, that was through treating income as capital (as you have) and using Business Asset Taper Relief – a forerunner to today’s Entrepreneurs’ Relief.**

So I applaud his use of legal means to reduce his tax bill – starve the beast and all that. The problem, for him, is that he is now clearly a hypocritical b-tard. Therefore I trust we’ll hear no more nonsense from him about tax dodging (blurring the distinction, as he and his fellow travellers do, between tax avoidance and evasion).

Pigs have evolved into a rather aerodynamic shape these days, haven’t they?

* See Christie for his usual excellent precis of the situation and demolition of yet another bunch of ‘financial’ ‘journalists’.

 

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7 Ways In Which Polly is Wrong

She’s at it again, giving the Grauniad all £110,000-worth of her wisdom. This time, it’s …

The tax and finances of every citizen must be open to public scrutiny

…Taxes are the price we pay for civilisation: soon that price must become a public declaration for all.

So, let us count the ways in which Polly is wrong. This might take a while…

1. The idea that confidentiality of tax affairs is somehow a ‘cheat’s charter’ is akin to the authoritarian’s ‘nothing to hide, nothing to fear’ argument – with all the corresponding ‘guilty until proven innocent’ and legal crystal ball gazing that it involves. Do we have to keep the bedroom curtains open when indulging in you-know-what, just so that everyone can see it’s consensual?

2. Exposing everyone’s tax affairs is a good thing because, quoth Polly:

Transparency underpins a culture of social justice and civic duty.

Rubbish – it underpins a culture of envy and spite and stirs up (often unjustified) antagonism, fuelled by financial and economic ignorance which is, of course, what socialism feeds off. It reinforces the sneering culture that would rather vandalise an expensive car than aspire to own it.

The ‘civic duty’ bit is code for embarrassing – or, more accurately, bullying – people into paying more than the law requires. Well, I am happy to make a prediction: that the number of Toynbee cheerleaders who publish their own tax affairs (in full) will be around the same number as those UKUncut followers who voluntarily sent extra dosh to HMRC.

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Competition Is Bad And Must Be Stopped, Says @RichardJMurphy

This ‘competition’ thing really must stop. We need a level playing field. It cannot be right that car maker A who produces, say, a better quality vehicle for the same price as car maker B, can then take so many of B’s customers. Or that maker C produces a less well-appointed car than maker D, charges a lot less for it, and again takes so much more market share.

What about, instead of buying a car from our choice of dozens of manufacturers, we simply acquire a car from any one of them and then the price we pay is ‘fairly’ apportioned between all the makers – regardless of who you actually ‘bought’ the car from?

Of course, the method of calculating this apportionment ‘would be a huge task’.

Yet we could then apply the same logic to, say, the supply of and payment for state-run services. Maybe something like this intellectual colossus of the economic firmamentsuggests:

… we can recalculate what Amazon should pay here in the UK using the unitary apportionment formula method of taxation …. We split the profit in accordance with a formula.

…we need radical corporation tax reform in the Uk and worldwide. IUnitary apportionment formula taxation stops tax haven abuse of countries like the UK.”

Multinational siting HQ in low tax country shocker!

By ‘tax haven abuse’ Murphy means, of course, tax competition, and naturally the EU leans towards the view that while competition in the private sector is a Good Thing (and it is), when it comes to themselves tax competition between countries is a Very Bad Thing. We must create and maintain the cartellevel playing field and all that.

Ritchie does have it right, briefly, here though:

… we need radical corporation tax reform in the Uk …

We do – we need to abolish it.

P.S. Christie, as ever, has also had a swipe.

The 30% Granny Tax Trap Osborne Could Set for Labour

Well, Conservatives can take heart that at least incompetence isn’t restricted only to their own side, as a top Labour spin-doctor admits that they screwed up when they failed to vote against the cutting of the 50p tax rate.

However, it may well be too late now to repair the damage done by the incompetent handling of the gradual withdrawal of the age-related allowance (ARA) – the so called ‘granny tax’. The incompetence, however, was not to decision to withdraw it; it was a sensible move given that the significant increases in the standard personal allowance is making the ARA redundant. No, the incompetence is to miss the biggest win resulting from the move: the abolition – not imposition – of a granny tax.

The biggest negative side-effect of the ARA was the abatement mechanism: the gradual withdrawal of the allowance as the pensioner’s income approached the income limit (currently £24,000 for 2011/12). With £1 of allowance being lost for every £2 in extra income, the abatement added an extra 10p effective marginal tax rate on top of the existing 20p.*

Yes, George Osborne last week abolished the 30% granny tax.

However, thanks to the government’s slow-witted spin operation, it became regarded as the imposition of a tax. How useless does a PR operation at the highest level of domestic government have to be to manage such a disastrous inversion of the message?

Those pensioners who are only on the state pension will not be affected by the ARA withdrawal, as they will be nowhere near that abatement band. Those on more than £24k would similarly be unaffected, as they will not be benefiting from the ARA anyway. Those in the middle are being relieved of a 30% marginal tax rate. What’s not to like?

There is, at least, an opportunity here to salvage what little advantage may be left, to embarrass Labour and perhaps belatedly shore up some of the wavering support among the age bracket that is most likely to vote.

Labour will surely be tabling amendments on the ‘granny tax’. If the government spin-doctors can remove their shortest digits from their posteriors for a few minutes, then this could be legitimately presented as Labour trying to re-impose a penalty on age, a slap in the face for those who spent their working lives … blah blah blah…

I wouldn’t bank on it though. Frankly – and I shudder just typing this – Mandelson would have done a far better PR job.

* (It’s the same effect that creates a 60% rate, plus NI, between £100,000 and £114,950.

Tax Avoidance Creates Jobs And Boosts The Economy – Livingstone

Yes, that’s today’s excuse from Red Ken about why he avoided £50,000 of tax/National Insurance by channelling his earnings through a limited company rather than as an employee of is various ‘engagers’, or as a Schedule D* self-employed taxpayer.


OK, so it might not have been as much as £50,000 – it may have been more – but this figure was not calculated by a Ken-bashing swivel eyed right winger like me. It was Richard Murphy; he who, if you asked him if tax avoidance was worse than paedophilia, would have to pause and think about his answer.

Anyway, speaking on Nick Ferrari’s LBC show this morning, Ken said that the £50,000 saved enabled him to give jobs to two people. Clearly Ken isn’t an accountant or economist, but it seems he implicitly recognises the phenomenon of tax incidence and the extent to which much business taxation ends up being borne by the employees – his reasoning for his tax avoidance pretty well says as much. So, his tax avoidance helped create jobs. He could have added the observation that this was an example of him choosing how to spend that £50,000 rather then the government doing so, but let’s take that as read.

His response also acknowledges that fact that tax removes money from the economy. Again, this is a significant departure from the conventional nonsensical leftist line that reducing public expenditure (and thus, by definition, reducing taxation now or in the future) is ‘taking money out of the economy’. Not that Livingstone would see it this way, but when you’re still digging in as deep a hole as he is, I’m surprised he can see anything.

* Showing my age now. Heck, I still find myself talking about SC60’s** sometimes.

** My fellow accountants will understand.

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’.

How the Council Tax Freeze Could Become to a Quick Thaw

Among the (intentional) headline-grabbers at last week’s Conservative Party Conference was the underwhelming news of the council tax freeze being extended for a second year; news that had been known to local councillors and council officers for some months already.

Puddle

Council tax freeze ... and for next year?

However, it now seems that all was not quite what it seemed, and that the announcement is indeed a surprise to local government, and not in a good way.

The nasty surprise was tucked away, as they so often are, in the smallprint, in the notes at the bottom of the Treasury’s media release.

If an authority sets its basic amount of council tax (i.e. its Band D council tax) in 2012-13 at a level which is no more than its basic amount of council tax in 2011-12, it will receive a one-off grant equivalent to a 2.5 per cent increase.

Did you spot it? “One-off grant” – words so inoccuous they passed by deadline-watching journos.

“So what?”, you may ask. It means, quite simply, that the residents of any council taking advantage of the extra money to freeze their council tax could be facing a stinging double hike in the tax in 2013. Let me explain….

This current year’s freeze was funded by money that was given as an increase in the annual (recurring) grant to councils. This makes sense, since council tax is a recurring annual revenue stream. It would be like someone saying they’ll protect you from next year’s increase in your fuel bills by paying you an ongoing regular annual income equivalent to the increase in next year’s costs.

Now suppose someone made that same promise, but to do it they would give you a pile of cash equal to the extra costs next year, but that was it. For that next year, all would be well. The following year, though, you would still face not only the higher prices from the year just gone (which had been offset by that pile of cash), but also the following year’s increase. While you have been protected from the increase in year one, you now face a double whammy because the gift only lasted for that one year. All that it has done is put off the inevitable, so now you have to pay for both increases at the same time.

And so it has turned out to be with the money for the second year’s council tax freeze. Like this year, it will be paid to councils bringing their budgeted increases to 2.5% or less, but if they want to avoid the ‘bounce-back’ in council tax next year, they actually will have to cut their budgets to a 0% increase anyway, before getting the grant.

As a proponent of low taxation, I don’t necessarily see that as a bad thing. However, Osborne and Pickles are playing the same media game as Labour by suggesting that the freeze has been extended for another year when, in fact, all that is being offered to councils is a reward grant for keeping the tax down, by their own devices, for a second year running.

Perhaps more damning, it is the sort of faux-localism which was so beloved of Labour, complete with the moral blackmail of raising the public’s expectations.

I’ve nothing against tax cuts – one form of fiscal stimulus that actually works – put please, Eric Pickles, call a spade a spade; it’s what northerners are meant to be renowned for isn’t it?

‘Fessing up: George Monbiot in Receipt of the Proceeds of Tax Dodging.

en: Picture of George Monbiot at the Make Pove...

George Monbiot: Putting his head above the parapet

George Monbiot, hero of the watermelon greens and other trendy lefty causes, has published his ‘registry of interests‘.

Credit to him, as he is seeking to avoid accusations of hypocrisy by doing what so many of those he criticises should do. After all the environmentalist movement, for example, are often quick to discount opinions opposed to their own, on the grounds that such critics are in the pay of ‘big oil’ or ‘big business’ or whoever else is the bogeyman-du-jour. (Conveniently ignoring how many in their own ranks, supporting green taxes and regulation, are often in the pay of ‘big government’.)

Hypocrisy is a dangerous and infectious condition, though. George’s main income, unsurprisingly, is from the Grauniad – £62,007 to be precise, in the year to 30th September 2011. Nothing so remarkable about that. Equally unsurprisingly, a quick trawl even through George’s own archive reveals some very recent attacks on tax avoidance, something that many of his Farringdon Road colleagues also pontificate on.

So what? Well, let’s not forget that the Grauniad itself is something of an authority on the practice of tax avoidance – a.k.a. among the Left as ‘tax dodging’ – having practised it itself.

Nevertheless, one assumes George is happy to take money from this tax-dodging organisation. As the likes of UKUncut and their fellow left-wing travellers would regard this as a moral crime, is George really happy that he is benefiting from the proceeds of such activity?

Are his followers happy that he is in the pay of ‘big tax-dodgers’?

Yet perhaps we are being harsh on George. I’m sure he has levelled his criticisms of tax avoidance at his own newspaper as well, hasn’t he? After all, a man of principle would not be afraid of biting the hand that feeds him, would he? As Geroge himself says:

… I believe that journalists should live by the standards they demand of others

So, if anyone can find links to any relevant article, I’d be happy to append them here, lest it be thought that I’m accusing him of hypocrisy.

Confused Chris Huhne Guilty of Distraction Theft

Chris Huhne, still currently Energy Secretary, is indulging in some distraction theft:

Energy Secretary Chris Huhne has said he is determined to “get tough” with the six biggest energy companies, in his speech to the Lib Dem conference.

Chris Huhne, British politician, at the Health...

Chris Huhne, not at the wheel

He said he wanted to help people save money by making it easier to spot cheaper deals and switch providers.
And he denied telling a newspaper that consumers were too lazy to shop around for lower prices.

Ah, yes, because Mr Huhne has never told a lie … just ask the former Mrs. Huhne.

“It is just that consumers still think that they face the same bill whoever they go to.”

We know the feeling, Chris. We seem to face the same watermelon environmental policies whoever we elect.

As well as promising to take action against the “big six” energy companies – British Gas, Scottish Power, Scottish and Southern, Npower, E.On and EDF – Mr Huhne said he wanted to encourage new, small firms to enter the energy market.

And he criticised those firms which kept prices high for millions of existing customers while offering cut-price deals online to attract new business and deter potential competitors from setting up.
“That looks to me like predatory pricing. It must and will stop,” he said.

No, it’s called attracting new business, which by definition must mean that those new customers are switching from other suppliers, which is what Huhne is supposed to be wanting, isn’t it?

So, either it’s terrible because all the companies are charging much the same, dissuading people from switching, or they’re adopting policies to encourage people to switch which apparently is, errm, terrible.

Of course, Mr Huhne and his friends in the Lib Dem-led Coalition are already doing their bit to keep energy prices high which, by his own admission it seems, stop smaller suppliers from entering the market and makes ‘predatory pricing’ all the more possible. The pointless ‘climate change’ levies and taxes could well fall into the category of a predatory charge, regressive in its nature as are most fuel taxes, and very difficult to avoid, since switching governments is evidently very difficult these days.

Of course, as many have pointed out (though, naturally, you won’t find it in any of the talking heads carefully selected by the BBC above) it is rather convenient for Huhne to be attacking the energy companies while governments of all colours have been guilty of their own brand of profiteering. It is a form of distraction theft: “see that bloke, he was trying to rob you … oh, you’ve had your pocket picked? No, not me, it was him, I told you….”

And yes, some of us are as livid about that as Mr Huhne is about the behaviour of the energy companies, or others might be about, oh I don’t know, speeding drivers?

(Pic. credit: www.acumenimages.com)

Admiral @RichardJMurphy: “I See No Laffer Curve”

Richard Murphy in an earlier life: "Ships? No such thing. What am I standing on? Oh."

It’s a long way yet from a flat rate tax, or even the flatter tax system that George Osborne mentioned some time ago, but the runes on the future of the ’50p’ tax band are promising.

The Treasury already know that it can be cut to 45% with little lost revenue. If that’s a carrot, the stick is the evidence that the high tax rates, both personal and corporate, are leading to emigration abroad, particularly from the City.

Now we would expect the news that bankers are leaving to be greeted with joy by the economically illiterate, but it seems even those who claim to be quite good with numbers and stuff are saying things like this:

It made him smile. That’s nice. Like seeing a Curry’s looted might please someone who has an ill-thought out gripe against the evils of corporate retail … until one day they realise that such businesses employ people and yes, even pay various taxes for schools’n’ospitals and things.

A Murphite then helpfully demonstrated their ignorance with this response:

That’s the trouble with Twitter; it’s short, quick and easy to post your thoughts without proof-reading or checking your logic. The 50p rate isn’t raising much … those liable to pay it are leaving to avoid it; perhaps the two are related?

As a dweller of the reality-based community then pointed out:

Now, where have we heard of that effect before? Raising taxes so far that they actually raise very little in additonal revenue, as people who can move do so, and others avoid it through other legal means (even including working less, since the marginal increase in take-home pay is worth less than the opportunity cost of the time spent earning it).

I’ll give Mr. Murphy a clue. This phenomenon starts with an ‘L’ and ends with ‘affer’. He won’t guess it though because, as he reminds us regularly, the Laffer Curve doesn’t exist. Strange, then, that even he and his union paymasters aren’t campaigning for a 100% flat tax to cure the deficit.