Could some tax beancounter help me out here?

Ritchie\’s tax gap estimations. Just how wrong are they?

As we know, he\’s said that £12 billion is avoided by companies playing dodgy games.

He measures this by looking at the headline rate of tax, subtracting the tax rate actually paid and calls the difference the tax gap.

As I\’ve been saying for some years now, this has a fault in it. That it does not take account of the allowances that Parliament deliberately puts into the tax code to get companies to do what Parliament wants companies to do.

Clearly, one of these is the R&D tax credit. Which, in2010-11 was, according to HMRC, a tax expenditure of £860 million. So there\’s 7% of the tax gap in just that one allowance. For absolutely no one is going to say that using the R&D allowance as the R&D allowance is in fact tax avoidance.

There are other allowances of course. And this is where I need the help, not being expert in these figures. An obvious allowance is capital allowances.

The cost of capital allowances in 2009-10 was £19 billion (of which the annual investment allowance accounted for £1.5 billion.)

Now what does that actually mean? That capital allowances against corporation tax were £19 billion, meaning that we\’ve no tax gap at all as against Ritchie\’s £12 billion?

Or is only that £1.5 billion from corporation tax? Or some other number entirely, somewhere in the middle?

The real question being, we know there are allowances which reduce Ritchie\’s estimation. For his method of estimation did not include such allowances. But how big is that allowances number and thus how small is the tax gap?

Standby electricity use

No, there\’s a mistake here:

The study, which closely monitored the electricity use of 250 homes, found that the households were spending between £50 and £86 on gadgets in a \”non-active\” or standby state, equivalent to 9pc to 16pc of the average electricity bill.

I\’m not sure I believe that but say that we do.

Across the UK, households could be losing £1.3 billion by not fully switching off computers, televisions and other electronic devices, the research from the Energy Saving Trust and two government departments revealed.

Err, no, you cannot do that. For:

The Powering the Nation report revealed that the households studied were using around 10pc more than average UK energy use,

Sigh, you cannot multiply out what you know to be above average use across all households.

What you\’ve possibly found is why these households are using more than average. But you most certainly cannot conclude from your more than average households that everyone is doing this.

Mariana Mazzucato: What the fuck is this woman talking about?

For example, credit ratings that banks give to companies underemphasise their real health, such as their productivity. In research for a Policy Network report launched on Monday, we found that the probability of receiving a bad credit rating is just as high for a highly productive company as it is for an unproductive one. Companies spending more on R&D, for example, will inevitably have a higher risk profile because innovation is so uncertain. Yet risk associated with innovation is about (good) speculation aimed at the production of new products, not simply (bad) speculation for its own sake. The inability of banks to distinguish these two types of risk is partly why, during the credit crunch, the most innovative UK firms are being hit the hardest.

Eh?

A credit rating is a measure of risk. Those performing more R&D are riskier. But banks are bad boys for noting this?

WTF?

In the last decade, Fortune 500 companies have spent $3tn in buying back their own shares; we found that such spending has damaged the willingness and ability of companies to spend on R&D and long-term training. While the usual explanation is that \”buybacks\” are the only thing to do when there are no investment opportunities, the biggest repurchasers are in industries like pharmaceuticals and oil, where there are plenty of opportunities, such as in new medicines and renewable energy.

Why should oil companies invest in renewables? They know how to find, drill for, pump up and refine oil. What does this have to do with their ability to make solar cells for God\’s sake? are we to throw out the entire economics of comparative advantage as it pertains to implicit knowledge in the firm?

And a state owned industrial bank investing in manufacturing under a strategic plan to only invest in the real economy…….snore

 

Something for Jeff Sachs to consider

\”Money matters and especially for the poor. But once you reach a certain level of wellbeing, the additional gains are very small and perhaps not there at all. The US has tripled its per capital GDP over the last 50 years but there has not even been a twitch of the needle in raising wellbeing.

I put this forward as an idea you understand, not as something that has been proven.

That it is not the level of GDP which produces the happiness, but the growth in GDP itself that does.

I think we\’d all be OK with the idea that a falling GDP doesn\’t produce happiness? Possibly even that a stagnating one doesn\’t? Which leaves us with, if there is to be a relationship between the two at all, the idea that it is an increasing GDP which produces happiness.

That accords pretty well with what we know about humans anyway. Things getting marginally better month by month, our being able to see that our children will have it better than we do, this is the sort of thing that we do think will produce general happiness, no?

But if this is true this does leave rather a hole in the GDP doesn\’t produce happiness argument. For they are all measuring level and what needs to be measured is change.

Further, we\’ve just had a nice natural experiment that we can exploit. Most of the western world has seen a reduction in the level of GDP in recent years. Has anyone bothered to go out and check how those happiness surveys are doing?

Is this Dambisa Moyo\’s error?

It\’s all about resources and commodities see, and the Chinese are buying it all up.

She invests her money in technology and innovation, she adds. \”And my sense is that we\’re not close to any big discovery in any of the categories – land, water, energy and minerals – that has made me not nervous about the coming headwinds.\”

That\’s really rather strange.

For we don\’t actually need any big discoveries. We need just gradual and incremental improvements.

Further, we do actually have big changes on the way. Take just one commodity, iron ore. China is driving the price here. It\’s the steel they need to build the cities. There\’s a whole slew of West African mines on the way to opening up. There\’s actually concern that even if China doesn\’t slow down that the market will become over supplied. In fact, given the low costs in West Africa and the high costs of China\’s own iron ore deposits, the thought is that some of the Chinese mines will close down.

You can go through each and every commodity out there and make much the same case.

Margaret Hodge on taxes

She wrote: \”In 2009-10, Her Majesty\’s Revenue and Customs calculated the tax gap as £35 billion — that is nearly 8 per cent of all tax due not being collected. In the same year, HMRC wrote off £10.9 billion in tax as uncollectable.\”

\”There are still people funded by the taxpayer, working in local authorities and for the BBC who avoid paying tax in this way.\”

Umm, Maggie dear. The £11 billion. As HMRC have already explained to you, this is people going bankrupt owing tax. This isn\’t quite tax avoidance, not really. This is just people going bankrupt.

Some people, eh?

PS Tim Worstall doesn\’t recognise the concept of limits to growth … http://tinyurl.com/6whr6zc

That link is to this in the Telegraph where I discuss the concepts of limits to growth. Pointing out that of course there are physical limits to physical growth: the number of atoms available for example. I then go on to point out that as economic growth involves the adding of value then the limits to economic growth are the limits of our ability to add value.

I\’m sure you can disagree with me here. But to state that this is me not recognising the concept of limits to growth in a discussion of limits to growth is an odd one.

Ever wondered why financial reporting is so shit?

Here an ex-Reuters market reporter tells us the sources we should use:

That would involve using multiple sources. Hypothetically, they could include the Telegraph\’s Ambrose Evans-Pritchard, the Guardian\’s Seumas Milne alongside Russia Today\’s the Keiser Report and the Baseline Scenario by ex-IMF chief economist Simon Johnson. There are plenty of others. People could turn off their radio and TV news and turn instead to websites such as the New Economic Foundation and Positive Money. They might also read books by the likes of Ha-Joon Chang and watch documentaries such as Client 9 and Inside Job.

Ha Joon Chang\’s interesting, certainly. Although he does have his faults and there\’s one huge one in what people think he says. For he does indeed say that for a developing country then infant industry protection and government picking winners is a very good idea indeed. Which his readers take as being an indication that we should have infant industry protection and government picking winners.

But actually, his academic work says that these are good for developing countries: he explicitly states, on free trade for example, that already rich countries benefit from free trade, at the expense of those developing ones. So, even if you do follow his arguments, we should be free traders.

Ambrose is great of course: one of the very few who has been pointing to the declining money supply.

But the others? Milne\’s a Stalinist, Keiser (who I\’ve had a few online contacts with) is a paranoid fantasist, Johnson\’s OK, but seriously? Positive Money are frothing lunatics about fractional reserve banking and nef, Dear God, who would use them as an example of anything other than economic illiteracy?

No, if financial reporters really are listening to Keiser, nef and PM then we\’ve our explanation for the entire shiteness of financial reporting right there.

Willy Hutton on Climate Change

Economists use what is called a discount rate to compare income and welfare in the future with income and welfare today. If we forgo just a little welfare today through burning less fossil fuel, even applying a modest discount rate, we can guarantee that there will be no catastrophic loss of welfare in 2050.

That is indeed precisely and exactly correct. It\’s what gives us the Stern Review number of $80 per tonne CO2.

Now it is the right\’s turn. There is climate change. No gardener, farmer, sailor, festival-goer or refugee from floods doubts it – let alone the scientific community. This requires a response from the state that will include taxation and regulation, however much Tea Party activists, Niall Ferguson and Lord Lawson may deplore it. Reality put the left on the defensive for a generation before it came to its senses. The same is about to happen to the right. Lived experience is about to show how wrong it is – and Britain and the world cannot afford the mistake.

And then the fuckwit entirely ignores the point that he\’s just made.

The solution, as all those economists go on to point out, is that we should have a Pigou Tax at $80 per tonne CO2. It is not that we need regulation, the taming of capitalism, the resurgence of the left nor even, whisper it who dares, to live according to the Heorot of Hutton. It is to have the Pigou Tax and nothing else.

And, if you go and do the sums, you\’ll see that we in the UK do roughly, around and about, have a carbon tax of roughly the correct amount. We\’re done: we have solved climate change. There\’s a bit of marginal tinkering to go but nothing major.

Tax avoidance is a human right?

Warren Hyams, a director of WLH Tax, which advises people being investigated by the taxman, said: “Under European law, all citizens have a right to mitigate their tax liability.

“What concerns us is the muddying of the waters between avoidance and legitimate tax planning — which is legal and is actually a democratic right.”

Be interesting to know the details of that law and right, no?

The Murphmeister and the law

In which we subcontract out the necessity of Murphy being taught the difference between Common Law and the Napoleonic code with a damn girt cluebat to the Misanthrope Girl.

Dear God the man can be stupid.

He then tells us that there\’s a common lawe offence of cheating. Which therefore, yah boo sucks, makes him right and the Revenue can prosecute Jimmy Carr and the likes for cheating.

William Harkins said that \”all frauds affecting the Crown and public at large are indictable as cheats at common law.\”[7] This passage was cited in R v Mulligan [1990] Crim LR 427.

So let us take this at face value then. We have two options when considering tax avoidance.

1) The Revenue does not prosecute tax avoiders because it\’s not fraud and therefore it\’s not cheating. Collapse of Ritchie\’s entire case against tax avoidance.

2) Tax avoidance is fraud, is cheating, therefore there is a law against it if the Revenue wishes to use it. Therefore we do not need any more laws about tax avoidance, no not even a general anti avoidance principle, because the law already contains the necessary powers. Collapse of Ritchie\’s entire argument for a change in the law.

There are no other possible arguments. Either tax avoidance is cheating in which case we have a law against it or it is not cheating in which case we do not need a law against it, do we?

Putting Alan Turing on the £10 note

A bit in two minds about this:

Alan Turing is a national hero. His contribution to computer science, and hence to the life of the nation and the world, is incalculable. The ripple-effect of his theories on modern life continues to grow, and may never stop.

The current Bank of England £10 notes are Series E, but Series F notes are already in circulation for some denominations. We therefore call upon the Treasury to request the Bank of England to consider depicting Alan Turing when Series F £10 banknotes are designed.

Very much in two minds.

For Turing\’s thing was for boys, adolescents at best, rather than men.

And we seem to have gone through a rather large change over the decades. Anyone with piccies of his 17 year old girlfriend\’s naked titties (it\’s fine for him to see them, paw them, nibble, bite and squeeze them, just not to have a representation of them) is at risk of going onto the sex offender\’s register. Two men who wish to swap bodily fluids are just fine now.

That latter is of course as it should be. But without going so far as to excuse Gary Glitter perhaps the former is, umm, just a tad excessive?

And Alan Turing, great man he was. Genius. But he does rather seem to get caught under either set of sexual morals, doesn\’t he? Yes, he was persecuted then for being a pooftah. He\’d be done today for paedophilia.

Or perhaps we should entirely separate achievements in one part of life from failures or evils in another? Turing on the bank note, why not? But that would mean that we have to stop obsessing about Glitter or Jonathan King on reruns of ToTP as well.

For there is one set of morals that I\’m simply not willing to accept, the excuse of genius. If, just imagine, Sir Paul McC, the greatest songwriter of modern times, were to be found guilty of kiddie fiddling then his talent would not, should not, be an excuse for that behaviour. And nor would a lack of such genius, say, a talentless no hope coder, should not get a greater punishment for such than a computer genius.

Which is to say that the fact that Turing was a computer genius, in some ways a part saviour of the nation, comes in two parts. We can celebrate that, certainly, quite possibly we should.

But if we do, sweeping his failings under the carpet at the same time then we also have to do the same for talentless beat combos as well. Judge their music as harshly as we like as music but also ignore their evils as we do so.

Turing on the tenner does indeed mean The Sun Has Got His Hat On on ToTP.

Why are the Robin Hood Tax people still lying?

David Hillman of the UK\’s Robin Hood Tax campaign – which backs the financial transactions tax and wants any cash raised to be earmarked for development – welcomed the agreement, but added that \”the UK public will be rightly angry that George Osborne is resisting efforts to make the City pay its fair share\”.

He said that a Robin Hood tax would \”boost growth as well as raising billions to tackle poverty and protect public services at home and abroad\”.

Given that the EU Commission\’s own report into the tax states that it will reduce GDP, how can this be said to increase growth?

Furthermore, leave aside that emipirical evidence at look at it from a theoretical Keynesian point of view.

They\’re suggesting that tax money be raised inside the EU. And then spent outside the EU on Third World development. This is, obviously and clearly, fiscally contractionary to the EU economy.

So they\’re wrong in fact and theory then.

And what I\’d like to know is, why are the cunts lying to us so egregiously?

It\’s entirely one thing to disagree about what makes the good society: and entirely another to just make shit up.

Bleedin\’ \’Ell: a decent Guardian piece on tax dodging

It is not clear from the company\’s accounts how much Hoy could have saved in tax, although a salary of £325,000 would have been liable for tax of about £147,000. But the calculations are likely to have been more complex than that.

Richard Godmon, of accountants Menzies – which specialises in owner-managed businesses – said: \”Directors\’ loans can be a tax-efficient way of accessing funds over the short term.\”

However, he added that if you borrow from your company you are taxed as if it were an employee benefit.

HMRC assumes you would have paid 4% interest on the loan if you had borrowed it on the open market, so a 50% taxpayer has to pay a 2% tax charge every year.

The company making the loan must also pay 25% of the loan amount to HMRC, which is reimbursed when the loan is repaid by the individual. Directors could still technically avoid repaying loans – and therefore tax – by dissolving their company, as once it is struck off from Companies House all balances due to the company cease to exist.

However, HMRC can strike off applications if it feels there is still tax to be paid.

Last year HMRC introduced new \”disguised remuneration\” rules. It said: \”The objective of this legislation is to prevent the avoidance or deferral of income tax and NICs [national insurance contributions] on employment income.

\”It will impact on employers and intermediaries who use trusts or loans to reward employees with a view to avoiding or deferring paying tax and NICs.\”

It rather sounds like this is a \”problem\” that has already been dealt with then.

Without, you know, entirely changing the basis of tax law as certain retired accountants would wish.

On the subject of euphemisms for vagina

This is all a little silly, the idea of washing away the scent of a woman\’s natural perfume. We, the other half of the species (OK, perhaps 98% of the other half of the species) are programmed to be turned on buy said scent after all.

However, on the linguistic point:

As an avid follower of fanny euphemisms I am amazed that not only have Femfresh neglected to call a vagina a vagina but that they have picked a list of words that absolutely no one uses. They may has well have said \”Femfresh is the kindest way to care for your pot plant, brouhaha, wibble, awooga, fnar fnar …\”. Even getting Miranda Hart to read these out for their radio ad campaign doesn\’t make it any more comprehensible.

Such is the English language that actually that would be entirely comprehensible.

\”It cleans yer brouhaha, see, yer awooga. Oh, you know what I mean, the wibble, yer fnar fnar.\”*

Quite why I\’m not entirely sure. Perhaps it\’s because we use so many damn eupehmisms for the squidgy bits that any not understood euphemism is taken to refer to said squidgies.

Is Geoffrey Lean Stupid Or What?

Come on, George: end the pernicious fossil fuel subsidies

While the Coalition squabbled this week over George Osborne’s call to slash subsidies to onshore wind farms, a similar – but very different – demand was taking the world by Twitter storm. #EndFossil FuelSubsidies trended top in the United States and number two globally during a campaign backed by celebrities such as Stephen Fry and Robert Redford.

It made a good point. It is clearly right that the Government should – as The Sunday Telegraph disclosed this week – aim to eliminate onshore wind subsidies by 2020, as costs fall, even if the Chancellor’s plans for a 25 per cent cut immediately may be too drastic. But why do governments do nothing about the far bigger bungs given to polluting oil, gas and coal?

Consumer subsidies for these alone top $400 billion (£256 billion) worldwide and are rising fast. Direct subsidies to producers add another $375 billion. Stir in the indirect military costs of protecting oil supplies and the toll on health services from pollution and the total bill is around $1 trillion. By contrast, global subsidies for wind weigh in at a proportionately puny $66 billion.

And while there is some justification for subsidising wind and other renewables as new technologies until they find their feet, this scarcely applies to the fossil fuels we have relied on for well over two centuries. World leaders have begun to wake up to this massive market distortion; the subsidies were condemned, for example, by the recent G8 summit. So when will Mr Osborne act?

There\’s a significant problem here Geoff me old mate.

Osborne has control of the UK\’s tax and subsidy system. It\’s not the UK\’s tax and subsidy system that provides the subsidies to fossil fuels. Proof here. Thus Osborne can do little about the subsidies in subsidy systems that he doesn\’t control.

Boots Did Not Avoid Tax Says Richard Murphy

That’s not bad, but I prefer to compare tax avoidance, which is hard to define, with tax compliance which I find easier to define. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.

In that case tax avoidance happens whenever someone chooses a course of action which results in the wrong amount of tax being paid, in the wrong place and at the wrong time.

Boots is a Swiss company paying cortporation tax in Switzerland. Where interest is a tax deductible cost of the business. Given that this is what Boots did, deducted interest before calculating profits upon which tax was due, Boots did not indulge in any tax avoidance.

All of which rather amuses. By Murphy\’s very definition of tax avoidance none of the four majoe UK Uncut cases actually avoided tax.

I wonder when the Great Guru is going to let the teenage trots know this?

Barclay\’s Did Not Do Any Tax Avoidance Says R. Murphy

That’s not bad, but I prefer to compare tax avoidance, which is hard to define, with tax compliance which I find easier to define. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.

In that case tax avoidance happens whenever someone chooses a course of action which results in the wrong amount of tax being paid, in the wrong place and at the wrong time.

On the sale of their subsidiary the law says that no tax was due. The law also says that previous losses can be offset against future profits. Thus Barclay\’s paid the correct amount of tax at the correct time in the correct place.

Barclay\’s did not indulge in any tax avoidance therefore.