In an insane world, it's possible for both sides of an argument to be wrong.

Spotted by Joe M in the NY Times:

A small but growing number of American corporations, operating in businesses as diverse as private prisons, billboards and casinos, are making an aggressive move to reduce — or even eliminate — their federal tax bills. They are declaring that they are not ordinary corporations at all. Instead, they say, they are something else: [Real Estate Investment Trusts] that are typically exempt from paying federal taxes.

This is wildly misleading at best. As Randy from Colorado explains in the comments:

The conversion from a corporation to a real estate investment trust, does not create a windfall profit for anyone, it merely shifts the profit, and the taxation of that profit, from the corporation to the shareholders/taxpayers. The amount of income taxes paid to the government is not reduced either. This is the same way that subchapter s corporations, partnerships, limited liability companies, and sole proprietors are taxed; their owners are the ones who receive all the profits, and pay all the taxes.

This must be one of the most dishonest articles I have ever read. Any freshmen level introductory business or accounting course will teach you this, or any of the thousands of books ever written on the types of business entities, or how to start your own business. It is a disservice to the readers. This article seems to be just another brick in the wall of envy placed by those who want to perpetuate this awful class warfare between the presumed haves and those who think they have not.

It appears that instead of taking this line of defence, these corporations themselves are giving the game away:

One of the bedrock principles — and the reason for the tax exemption — was that the trusts do not do any business other than owning real estate. But bit by bit, especially in recent years, that has changed as the I.R.S., in a number of low-profile decisions, has broadened the definition of real estate, and allowed companies to split off parts of their business that are unrelated to real estate.

For example, prison companies like the Corrections Corporation and the Geo Group successfully argued that the money they collect from governments for holding prisoners is essentially rent. Companies that operate cellphone towers have said that the towers themselves are real estate... The I.R.S. released its latest decision, allowing a data and document storage company to convert, on April 5. The letter did not include the name of the company, but several data storage companies, including Iron Mountain and Equinix, are in the process of converting.

A few days later, a strategist at the Wall Street firm Jefferies wrote in a report: “It is not a far stretch to envision REITs concentrated in railroads, highways, mines, landfills, vineyards, farmland or any other ‘immovable’ structure that generates revenues.”

Exactly.

To a large part their income is just rent (in the literal or economic sense), which in any sane world would be taxed at higher rates than earned income from a business or employment. We live in an insane world where rental income is taxed at lower rates than earned income (that certainly applies in the UK). In a sane world, these corporations would be desperately arguing that their income is not rental income at all.

Fun Online Polls: The Clash, R-Patz & K-Stew

How time flies when you are having fun! I've just noticed that this is the 8,000th post on this here 'blog. My thanks to BobE, The Stigler and Lola for contributing to this magnificent total.
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The results in last week's Fun Online Poll were as follows:

Which is your favourite Clash albums?

London Calling - 38%
The Clash (UK version) - 21%
Give 'em Enough Rope - 6%
Sandinista! - 4%
Cut The Crap - 2%
The Clash (US version) - 0%
Cost of Living EP - 0%
Combat Rock - 0%
None of the above - 29%

It was a low turnout for a fairly specialist topic, but thank you everybody who took part. If you are into The Clash, it's difficult to choose just one, but this were a Dessert Island Discs* type scenario where you can only take one Clash album with you, I'd choose "London Calling" as well.

* That's not a typo. Their drummer was called Topping Headon.
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To those who prefer the UK version to the US version, in the words of Prisoner Fooble:


Here's the track listing for the UK version:
Janie Jones
Remote Control
I'm So Bored With The U.S.A.
White Riot (the crap mono version)
Hate And War
What's My Name
Deny
London's Burning
Career Opportunities
Cheat
Protex Blue
Police And Thieves
48 Hours
Garageland

Here's the track listing for the US version:
Clash City Rockers
I'm So Bored With The U.S.A.
Remote Control
Complete Control
White Riot (the great stereo version with the guitar solo)
White Man In Hammersmith Palais
London's Burning
I Fought The Law
Janie Jones
Career Opportunities
What's My Name
Hate And War
Police And Thieves
Jail Guitar Doors
Garageland
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And lo, to this week's Fun Online Poll.

Click at random on the widget in the side bar.

BBC Boss Defends UK Tax Record to Google

From Google:

The BBC's director general, Tony Hall, has defended his company taking at least £3bn in UK license fee tax revenue.

His comments came after a lot of TV viewers denounced the BBC - who take a fortune from people, as "immoral".

In an interview to be broadcast on Google+, Mr Hall said his firm spent lots of money on their staff.

He conceded that "Britain has been a very good market for us".

"We pour literally billions of pounds into the pockets of our pals, making 2nd rate shows and so forth" he said.

"And we're a key part of the establishment in Britain, which is holding back economic growth"

He added that the BBC were uniquely funded, which means they can make all sorts of stuff like errr.. David Attenbourough, yeah, that's the ticket.

You've obviously confused me with someone else who was on trial at the same time, I wasn't in the dock for that long ..

but I'll happily pay a quarter of what you are demanding - I expect the ex will happily volunteer to cover the rest ...

Chris Huhne offers to pay quarter of £100,000 legal costs in speeding case

The former Liberal Democrat MP, 58, who is serving eight months in prison for perverting the course of justice for asking his then wife to take three speeding points, believed £25,000 was "just and reasonable", his lawyer told Southwark crown court in London.

Daily Mail Estate Agency Crime Reporting Popular Culture triple -whammy special !

Police Officers today swooped in an 6am early morning raid on two large detached luxury homes in the leafy village of Tetney, near Grimsby  - estimated to be worth more than £1million between them - owned by Sean Henderson, 47, and Michelle Henderson, 49, the father and mother respectively of  "came sixth" X Factor 2012 star Ella Henderson and arrested her parents in a major money-laundering investigation.

It is believed the officers, who arrived with springer spaniel sniffer dogs and armed with search warrants for both premises, took time out from their arduous seven hour search of the £650,000 family home to take pictures of it on their tax-payer provided smart phones for e-mailing to the Hull News and Picture Agency; and also took advantage of all the state of the art culinary facilities in the ultra modern kitchen to keep themselves fully refreshed and alert.

Detectives raid family home of X Factor teenage wannabe Ella Henderson as parents are held on suspicion of money laundering

"Stonehenge general manager sought"

From the BBC

The prehistoric stones of Stonehenge are to be cared for by a general manager for the first time.

English Heritage says it needs "a dynamic and inspirational leader" to look after the site in Wiltshire. Duties for the £16,500-a-year job include liaising with the Wiltshire monument's two or three volunteers and ringing up Farmer Jim to ask him to pop round with his tractor to pull cars out of the muddy car park.

Other responsibilities include overseeing arrangements for summer and winter solstices. English Heritage's Tim Reeve said it was "important to ensure we keep the dignity of the stones".

"You could drinking tea in the drizzle one minute and shouting "FOR FUCK'S SAKE! STOP CLIMBING ON THE STONES!" the next. Then you can be back in a state-of-the-art visitors' caravan flogging fridge magnets," he added.

"The next time you could be in a boiler suit, trying to unblock the portable toilets."

He said it was also important to make sure "solstice celebrations aren't in some way compromising the mystery and integrity of the stones". Our interview was interrupted briefly while he shouted "FOR FUCK'S SAKE! STOP CLIMBING ON THE FUCKING STONES!" several times, followed by "YES YOU! I CAN SEE YOU, YOU KNOW! Jeez."

English Heritage has called for only "the brightest and best" candidates to apply for the position. Preference will be given to people with experience in explaining to American tourists that the nearest hotel is several miles away, that there are no rides for the kids and yes, this is the real thing, not a scaled down model.

"Childminder Eliza Bethtruss attacks unruly politicians"

Spotted by BobE in The Guardian:

Childminder Eliza Bethtruss has criticised "chaotic" proceedings in the Houses of Parliament for failing to prepare MPs for a life after politics. The nursery assistant said she had "seen too many chaotic settings, where MPs are running around the corridors".

She said that by allowing unruly behaviour in Westminster, MPs are unable to sit still. She said: "We want politicians to learn to listen to their voters, learn to respect an manifesto pledge and work regular hours, so that they are ready for life in the productive sector. This isn't about middle-aged white men trying to run the country properly – it's unstructured play which doesn't teach our elected representatives to be polite and considerate through activities which benefit the electorate."

In comments to the Daily Mail, Bethtruss – who has two children – called for a more traditional approach similar to the French system, where actual voters supervise newly elected MPs.

"What you notice in the French parliament is just how calm they are. All of their debates are structured and led by somebody who knows what he is talking about. It's a requirement. MPs get into the habit of waiting their turn, of saying hello to the Speaker when they come into the debating chamber," she said. "They learn to socialise with each other, pay attention to the wishes of the public and develop good manners, which is not the case at Prime Minister's Questions. Who'd want to employ people who behave like that when they are supposed to be working?"

Bethtruss came under criticism on Twitter for her comments, which the Daily Mail précised as: "In an interview with the Daily Mail, she said sttings in Parliament were filled with self-interested meddlers 'running around with no sense of purpose'." Anand Shukla, chairman of the Labour backbench committee, tweeted: "Just what sense of purpose does she expect politicians to have?"

Life copies satire

Hot on the heels of my post about Michael Gove criticising the short working hours and long holidays at Westminster in the education system, BobE spotted this in The Guardian:

MPs risk accusations of laziness and poor value for money because the number of hours they work in Westminster appear to be shrinking, according to the senior MP responsible for scrutinising public spending.

Margaret Hodge, who chairs the public accounts committee, said the coalition should lengthen the parliamentary calendar because MPs were spending less time in Westminster scrutinising policy.

In an interview with the Guardian, Hodge warned of a growing "democratic vacuum" and said that parliamentary sessions were so short "it feels as if we are hardly working".

"They had everything to live for"

From The Daily Mail:

It was initially believed that the women, who had been carrying out renovation work, may have succumbed to carbon monoxide poisoning, but that possibility was soon ruled out.

The corresponding paragraph in yesterday's paper edition is slightly different:

Initially, after a friend found their bodies a fortnight ago, it was feared that the two women, who had been renovating their £110,000 house in Macclesfield, Cheshire, may have been overcome by carbon monoxide poisoning.

Bonus points for having five commas in one sentence.

Mansion Tax Lite: Killer Arguments Against LVT, Not (303)

1) It is quite true that there are certain taxes relating to UK land and buildings which can be avoided or reduced if they are registered in the name of an offshore company and certain other conditions are met, primarily Inheritance Tax, Capital Gains Tax and Stamp Duty Land Tax. To some extent, registering UK land and buildings in the name of an offshore company is also handy for money-launderers and other ne'er do wells, but let's gloss over that.

2) This does not really apply to income tax or corporation tax. The liability on "investment properties" can (in some circumstances) be reduced or eliminated if land and buildings are held by an offshore company or a pension fund, which applies in particular to commercial land and buildings. In other circumstances, a non-domicile can generate an income tax liability out of nowhere if he transfers ownership of his main residence into an offshore company. And as far as arm's length rented land and buildings are concerned, it doesn't make much difference, income tax (or flat rate 20% corporation tax) is payable, even if they are owned by a non-UK person.

3) None of this applies to annual recurring taxes on land and buildings (Council Tax or Business Rates) which are payable at exactly the same rate whoever the registered owner is, and collection rates for these two taxes are the highest of all major UK taxes.

4) In an outbreak of common sense, the UK government has now decided that rather than re-write the whole legislation relating to IHT, CGT and SDLT, they will take three measures regarding "non-natural persons" ("NNP") who own"high-value residential property" ("HVRP", meaning homes with a market value of £2 million or more):

a) From April 2012, if an NNP acquires HVRP, the SDLT is 15%. You would expect receipts to plummet as a result, but I read recently that the Treasury were pleasantly surprised to see that more SDLT is being collected than ever (I can't find the article at the moment). This does not apply to HVRP already owned by NNPs.

b) From April 2013, capital gains made by an NNP on high-value property will be liable to CGT at the normal rate of 28%. I wouldn't expect this to increase tax revenues, because the revenue-maximising rate for CGT is only about 10%, but we will see.

c) From April 2013, HVRP is liable to a "Mansion Tax Lite" ("MTL"), which is £15,000 per annum for a HVRP in the £2 million to £5 million band, going up to £140,000 per annum for a HVRP worth more than £20 million. It remains to be seen how much revenue this will raise, as there are fewer than 100,000 such homes, of which only half (?) are owned by NNPs. And the idea is not really to collect more tax than if it were all owned by UK-resident and domiciled individuals, it is to try and reduce the "tax gap" caused by people avoiding IHT, CGT and SDLT.

d) If somebody uses an NNP to own HVRP, he can easily avoid the MTL by transferring ownership back into his own name. But this will almost certainly increase the amount of IHT that will be payable and probably increase the amount of SDLT payable (future sales will be liable in full rather than being avoided completely by selling the NNP rather than the underlying HVRP). It might reduce the amount of CGT payable (CGT is not payable on an individual's main residence). It is a very tricky calculation deciding whether it is better to take the MTL on the chin or to take your chances with IHT, SDLT and so on. In many cases, people will be better off just paying the MTL each year and so the correct tax planning is "do nothing".
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So much to the actual background and hard facts.

Let us now turn to two of the supposed "killer arguments" which go something like this:

A. "Wealthy individuals will avoid Land Value Tax by registering land and buildings in the name of an offshore company."

We already know that you cannot avoid annual recurring taxes like Council Tax or Business Rates by putting land and buildings into an offshore company, so the argument is fatuous anyway as it flies in the face of known facts.

If the "killer argument" is correct, then the receipts from any annual tax payable only by NNPs, primarily offshore companies will always be precisely £nil, i.e. according to their non-logic, an offshore company can avoid a tax payable by offshore companies by re-registering the land and buildings in the name of, er, an offshore company.

So we will see, won't we? Given the political will, I reckon that the collection rates from this tax will be exactly 100% (apart from a bit of arguing about precise valuations at the lower and upper limits of the bands, which serves them right for making the bands so wide).

There is sometimes little point in chasing small Council Tax of a few hundred pounds, but HM Land Registry know exactly who is the registered owner of what, and if they don't know, then the Council Tax people know who the occupants are. But with at least £14,000 up for grabs from each HVRP each and every year, it is well worth HM Revenue & Customs' time chasing up non-payment and starting a court action etc.

B. "If we have LVT, then all the wealthy people will sell up and go abroad."

Again, this remains to be seen, doesn't it?

People who can afford to snap up houses for £2 million and have reason to register it in the name of an offshore company (to avoid IHT or minimise future SDLT liabilities, to assist with money laundering or just in order to keep their true level of personal wealth as secret as possible) are almost certainly the sort of people willing and able to cough up £14,000 a year to maintain the status quo, this tax is still a lot less than £30,000 or £50,000 a year per-person "non-dom levy" which several thousand of the very richest ones are paying.