Tee hee. And give that man a pat on the back.

From the FT 9 October 2010:

Sir, The FT report on hedge fund managers moving to Switzerland (“Hedge fund shift costs UK £500m”, October 2) gives the impression that there will soon be a glut of empty offices in Mayfair and the City of London as hedge fund managers stampede to move to Switzerland.

In reality, this is not the case.

Frstly, immigration requirements in Switzerland are complex and not everyone from London will be eligible to work there. Secondly, for the principals of the business, relocating to a new country will be fraught with family and domestic considerations notably spousal consent, continuation of schooling arrangements for children, etc. Thirdly... the actual rate of tax savings on attributable non-Swiss earnings, on a marginal basis, is unlikely to be more than about 15 per cent [etc]

Joe Seet, Senior Partner, Sigma Partnership, London EC3.

From the FT, 12 July 2015:

Brevan Howard is moving some of its most senior traders back to London from Geneva, reversing a high-profile decision by the $27bn hedge fund to leave the UK and bucking concerns that the City’s status as Europe’s leading hub for the industry was under threat.

The decision comes as a number of other large hedge funds are also planning to expand or launch in the British capital, in a sign that international investors continue to gravitate to London.

Hedge fund managers and investors argue that low tax rates have failed to win over traders to the merits of life in Switzerland, with many leaving their families behind in London.

Fun Online Polls: Tax havens, world hunger, Syria and cynicism.

The responses to last week's Fun Online Poll were as follows:

Would shutting down tax havens help end world hunger?

Yes - because we'd have more money to spend on Third World aid - 2%
No - not unless Third World countries collect and spend their own taxes 34%
Third World countries should just collect their own taxes from land and resource rents - 57%
Other, please specify - 8%

I must admit, those responses cheer me up no end :-)

"Yes" is clearly missing the point and thus the wrong answer, "No" answers the question and is sort-of-correct, but as JQ pointed out in the comments, "Option 3 is correct, but option 2 answers the question."

In other words, it was a trick question. The full "correct" answer is something like this:

"It's the wrong question - if the governments of Third World countries were straight enough to collect the right kind of taxes in the first place, and by implication spend the revenues half-way sensibly, then there'd be a lot less hunger* in the first place, and nothing for the kleptocrats to stash away in tax havens."

* Either because they'd be using land more efficiently to grow more food, or because the absence of taxes on earnings and output means that private enterprise would flourish, so they be producing more "stuff" which they can exchange for food.
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Now, this whole idea of sending weapons to the Syrian "rebels" troubles me greatly on many levels.

A simple Fun Online Poll would ask whether you think it's A Good Idea or A Bad Idea. But your (and indeed my) opinion depends on which factors you take into account and on how idealist/utopian or self-interested/cynical you are feeling at the time.

For example, sending them loads of weapons will clearly lead to a lot more killing and destruction and might even spark a regional civil war. An idealist sees that as A Bad Thing; an Über-cynic sees that as A Good Thing.

And so on, so I've made this week's Fun Online Poll a multiple choice, you can come back a day later and vote again if you change your mind.

Sow confusion here, or use the widget in the sidebar.

Much ado about nothing

From yesterday's FT:

The legal move marks the opening salvo of the Revenue’s effort to extend its crackdown on evasion to all the 500 foreign banks and building societies with a UK presence. It expects to raise £500m over the next four years by prompting holders of undisclosed accounts to come forward... The move follows similar legal sweeps in 2006 and 2007, which forced five British high street banks to disclose details of secret offshore accounts. That crackdown, accompanied by the offer of a partial amnesty, recovered about £400m in unpaid taxes at a cost to the exchequer of just £6.5m.

OK, that makes an average take of about £100 million a year, which sounds like a lot but represents about, er, 0.02% of all UK government revenues. I don't condone tax evasion as such, but I find it a bit difficult to get excited about it in absolute terms. To the extent that we have to tax incomes at all, it does seem fairer to make everybody pay the same flat rate, rather than the honest paying a slightly higher rate than would otherwise be necessary, but isn't it more important to have a system that doesn't encourage tax evasion in the first place?
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Step One is to reduce income tax rates as far as possible to reduce the temptation, of course. The above article refers to tax on interest income. This only works if a UK bank pays interest to an offshore subsidiary (and obtains a full tax deduction) and the offshore subsidiary then credits that interest to its UK-based depositors tax-free, so...

Step Two is to have withholding taxes on the interest that banks pay to offshore subsidiaries (and don't forget that this is a requirement for payments to most tax-havens anyway), or even better*, by disallowing interest payments as an allowable expense for UK businesses or banks and making the corresponding interest income (whether paid to a bank, to individuals or to another company) tax-free.

This is exactly what happens when a UK company pays a dividend out of post-tax profits to a basic rate taxpayer or to another UK company - there is no additional income/corporation tax liability on the recipient** because that income has already suffered corporation tax. On Planet Wadsworth, there will be a single flat tax rate on all corporate or personal income, so by definition there will be no higher rate tax on dividend income or a 'marginal' corporation tax rate*** that is any higher than that.

For sure, there will still be people who keep money offshore (for slightly more sinister reasons), but we could go one better and subject that to income tax as well (to the extent we can track it down), so the effective rate on such income would be nearly twice as high as if they had kept it in the UK in the first place.

That's that fixed. Next.
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* Under various double tax treaties and EU rules, the UK can't deduct withholding tax from interest paid to most non-tax haven countries, so it's a question of either re-negotiating hundreds of treaties or just amending UK domestic law. While I'm on the topic, we could also do away with this nonsense that interest on UK gilts is paid gross but still liable to tax at the year end - why not just pay a slightly lower rate and make it tax-free?

** Unless the recipient is entitled to an age-related allowance which is reduced pro rata if the recipient's total income goes above a certain level.

*** With companies, although the dividend itself is tax-free, it can increase the marginal rate of corporation tax from 20% to 30%, slightly more than the large companies' rate of 28%.

"Ireland's corporate tax take last year"

Letter in today's FT:

Sir, You reported ("Taxing time for Lisbon's supporters", June 12) that "Ireland's corporate tax take was €6.4bn last year, representing a little less than half total tax revenues".

This would be rather remarkable if it were true. Corporate tax take in Ireland was indeed €6.4bn last year, but total Exchequer tax revenues were €47.2bn, rising to about €56bn with social security taxes included.

Colm McCarthy, Department of Economics, University College, Dublin.

My letter to the FT of five days ago:

Sir, Your article "Taxing time for Lisbon's supporters" (12 June) includes the statement "Ireland's corporate tax take was €6.4bn last year, representing a little less than half total tax revenues".

The Irish Revenue Commissioners' Statisical Report 2006, Table TR1 shows that corporation tax receipts were €6.7bn, which is just under fifteen per cent of total revenues of €45.5bn.

*stamps foot petulantly, walks away grumbling*