Sunday, 17 June 2018

Your taxpayers' money, hard at work.

From the BBC:

The NHS in England is to get an extra £20bn a year by 2023 as a 70th "birthday present", Theresa May says. It means the £114bn budget will rise by an average of 3.4% annually - but that is still less than the 3.7% average rise the NHS has had since 1948...

The five-year funding settlement covers just front-line budgets overseen by NHS England. About a 10th of the overall health budget is held by other bodies for things such as training and healthy lifestyle programmes, including stop smoking services and obesity prevention programmes. The BBC understands these will be protected, but beyond that it is unclear what will happen to them.


?!? One-tenth of £114 bn is £11.4 bn, which is approx equal to our net contributions to the EU budget.

Would anybody like to chip in for a battle bus, with "We spend £220 million a week on stop smoking services and obesity prevention programmes. Let's fund the NHS instead." written on the sides?

Friday, 15 June 2018

"The Missing Profits of Nations"

Via a Resolution Foundation email newsletter, this fine study which confirms what we knew all along:

By combining new macroeconomic statistics on the activities of multinational companies with the national accounts of tax havens and the world’s other countries, we estimate that close to 40% of multinational profits are shifted to low-tax countries each year. Profit shifting is highest among U.S. multinationals; the tax revenue losses are largest for the European Union and developing countries...

Our findings have implications for policy. First, they suggest that cutting corporate tax rates, as the United States did at the end of 2017, is less likely to generate quick positive effects on wages than textbook economic models suggest. For wages to rise, productive capital needs to increase, which can happen fast if capital flows from abroad, much less so if paper profits—not productive capital—is what moves across countries.

'Rents' get an honourable mention:

Second, profit shifting raises new challenges for tax policy. It reduces the effective rates paid by multinationals corporations compared to what local firms pays. Whatever one’s view about the efficiency cost of capital taxes, this seems difficult to justify—especially if part of the profits of multinationals derive form rents, which standard models suggest should be taxed.

Having examined the evidence, the authors make a surprising claim:

We show theoretically and empirically that in the current international tax system, tax authorities of high-tax countries do not have incentives to combat profit shifting to tax havens. They instead focus their enforcement effort on relocating profits booked in other high-tax places—in effect stealing revenue from each other. This policy failure can explain the persistence of profit shifting to low-tax countries despite the sizable costs involved for high-tax countries.

Their explanation is on page 23:

To ensure profits are taxed where they have been made (i.e., the prevailing internationally agreed rules), tax authorities in high-tax countries routinely audit large companies. They check that intra-group transactions are conducted at arm’s length (i.e., as if the subsidiaries of a given multinational group were independent entities). When they find it is not the case, they can attempt to ask multinationals to correct their transfer prices, which results in a relocation of taxable income across countries.

In the current international tax system, tax authorities have incentives to relocate profits booked in other high-tax countries—not profits shifted to havens. Take the case of France. e1 relocated to France is worth the same to France whether it comes from Germany or from Bermuda. But it is easier for the French tax authority to relocate e1 booked in Germany, for three reasons.

First, it is feasible, because information exists on the profits booked in Germany (from Orbis), while no or little information typically exists on the profits booked in Bermuda. Second, it is more likely to succeed, because firms are unlikely to spend much resources opposing this transfer price correction: for them, whether profits are booked in France or Germany makes little difference to their global tax bill, since the tax rates in France and Germany are similar. Third, if there is a dispute between France and Germany, it is likely to be settled relatively quickly.


Seems plausible to me.

The answer is to simply disallow all expenses paid to businesses abroad unless the company claiming the deduction can:
a) prove that they have no connection with the other company,
b) explain exactly what the payment was for, and
c) show that this is an arm's length, market price.

No pun intended?

From the BBC:

Mrs Cilliers, a highly-experienced parachuting instructor, suffered near-fatal injuries when both her main and reserve parachutes failed in a jump at the Army Parachute Association... Her husband, who was an experienced parachute packer, [had] tampered with equipment he knew his wife was going to use.

Her survival was described as a "near-miracle". It was put down to the soft soil of the ploughed field where she landed.

Mr Justice Sweeney said Mrs Cilliers, although recovered physically, had sustained serious and long-lasting psychological damage.

"This was wicked offending of extreme gravity", he told Cilliers.


Thursday, 14 June 2018

Lewisham East by-election result and YPP (London) meet-up tomorrow

1. Watch out for the Lewisham East by-election results tomorrow, with a bit of luck our candidate Thomas Hall won't come last (which would be a first for us!). Honourable mention to Richard G who has delivered thousands of our leaflets over the past couple of weeks.

2. We'll be at the Brewmaster nr Leicester Sq tube, exit 1, turn left and left again, from 5.00 onward for an hour or two to celebrate/commiserate the by-election result. We'll put a yellow leaflet on the table so you recognise us.

They had it coming

From City AM:

Big Four accountancy giant PwC has been slapped with a record £10m fine from the Financial Reporting Council (FRC) for its work auditing retailer BHS prior to its sale for £1.

The PwC partner who conducted the audit, Steve Denison, is also facing a personal fine of £500,000 from the FRC relating to his work on BHS in the year to 30 August 2014. Denison is said to have left the UK’s largest accounting firm last week after more than 30 years on the job, according to reports from Sky News.

A statement from the FRC said that PwC and Steve Denison have admitted misconduct, and accepted "substantial fines and non-financial sanctions".


From experience, auditors will pick up low level fraud sooner or later, i.e. people robbing the petty cash, forging invoices and so on, and so we can assume they deter it to some extent, even though detecting/deterring fraud is not one of the main purposes of an audit. (The actual stated purposes of an audit are so vague and lofty as to be meaningless.)

When it comes to higher level fraud, auditors are either so useless they don't notice it; or they are actually complicit in it.

BHS wasn't like Enron, it went out of business because it was badly run, not because of actual malice or dishonesty on the part of the directors, that's not fraud. But auditors turning a blind eye to a potential bankruptcy after the event, in order to bank the big fat audit fees, is IMHO an actual fraud in itself.

Tuesday, 12 June 2018

End Unfair Evictions Campaign Launch (Generation Rent)

Generation Rent are launching a campaign to scrap Section 21, also known as no-fault evictions.

Wed 13 June 2018
18:45 – 21:00

Karakusevic Carson Architects
Unit E03, The Biscuit Factory
100 Clements Road
London
SE16 4DG

Book a free ticket here

https://www.eventbrite.co.uk/e/end-unfair-evictions-campaign-launch-tickets-45968987479

Boo hoo, frankly.

Something tax related was in the news a bit last week, the most recent/relevant article I can track down is a six months old Daily Mirror article, which refuses to load properly so lets go with the Daily Mail's version:

Hundreds of workers risk bankruptcy after using alleged £13m tax avoidance scheme

... The scheme, which was entirely legal, allowed AML contractors to become staff and were paid via its base on the Isle of Man.

They appear to have been paid a low salary with the rest of the cash paid as a loan with zero or little interest from its 'employee benefit trust' on the Crown dependency. Staff would then pay as little as three per cent income tax.

One client John Dickinson was paid a £11,826 salary in 2009/10 with £85,718 in the form of interest-­free loans, according to the Mirror. At the time he paid just under £9,000 in income tax - but HMRC has now asked for almost £27,000.


More crocodile tears.

Clearly, it is morally and economically wrong for employment income to be taxed at the highest rates of all forms of income, but HMRC has spent the last decade cracking down on 'workers' (i.e. employees) being paid in the form of soft/non-repayable loans, whether directly from their actual employer, or via an 'Employment Benefit Trust', an umbrella company or some even more bizarre offshore trust/company arrangement.

A couple of years ago HMRC made it quite clear that all outstanding loans would simply be treated as employment income, earned and taxable on a certain cut-off date.

The sensible thing to have done is to take money out of an umbrella company as dividends, that gives you slightly lower rate than taking it out subject to PAYE. You can always argue that in reality you were self-employed rather than employed, so you might have got away with it. Pretending that you were receiving a loan and paying next to no tax was taking the piss and was bound to blow up in people's faces later on.

As to "entirely legal", of course it is perfectly legal for an employer to lend an employee money, but there is also tax law that says how the loan will be taxed. And the law is the law, whether unfair or not, and there is no point whining now IMHO.

Monday, 11 June 2018

It's going to be one heck of a closing down sale...

From the BBC:

Discount retailer Poundworld has appointed administrators, putting 5,100 jobs at risk.

The move came after talks with a potential buyer, R Capital, collapsed leaving Poundworld with no option other than administration.

Poundworld, which serves two million customers a week from 355 stores, also trades under the Bargain Buys name.



Friday, 8 June 2018

Friday Night Gearchange

The Scorpions, "Tease me, please me" (yes. it's as gloriously awful as you would assume), they chuck in a nifty gearchange after 4 mins 8 seconds:

Daily Mail on top form.

Unusually, you have to plough through several paragraphs before you get to the money shot:

The court heard the couple had been married for ten years but had a turbulent relationship and Mrs Clark had taunted her husband about having a 'small d***'. She had also had a lesbian affair with one of their friends' daughters which they were arguing about on the night she was stabbed.

Mrs Clark, who had four children from a previous relationship, was pronounced dead at the scene 12 minutes into the New Year. Just minutes later her two sons Sheldon, 22, and Slade, 19, returned home from a party to find police swarming over their home.

Clark was arrested in blood-soaked pyjamas on his birthday at the three-bedroom, £200,000 semi-detached home in Cloverdale, Bromsgrove, Worcester.