Shouldn\’t a tax piece know about tax?

This is because British law allows relief on a quarter of the money spent on items including debt interest payment, spectrum purchases and installing equipment such as masts and radios. The relief is equal to the tax rate – an average of 25% in recent years.

What?

Hang on, you buy something to make the business work. This is a cost. If it\’s something that makes the business work for a long time then you get a piece, not all of it, as a cost each year. That cost is obviously deducted from your income before calculating tax. Because profit, the thing being taxed, is income minus costs.

It\’s not just the alarmingly cack handed way in which they\’re describing this process: they really do seem to be arguing that you cannot deduct the costs of doing business before you calculate your profit.

Ah, Prem Sikka is involved: we know that it won\’t make sense then.

But critics say that its ability to send large sums abroad while making no corporation tax contribution to the Exchequer highlights the unfairness of British laws.

Cash made here should be taxed here. A fair enough idea in isolation. And then in the companion piece we have:

Vodafone has ceded just £156m in UK corporation tax, but paid £6.7bn to other countries during the past three years.

And, err, profits made elsewhere should be taxed here? Again, fair enough in isolation, but you really cannot go around believing both.

12 comments on “Shouldn\’t a tax piece know about tax?

  1. What they believe is that all money belongs to the UK government, and it should have first dibs whatever. The rest just follows.

  2. The lack of basic knowledge of economics and particularly tax laws in our so called opinion formers is truly astounding. Do you have to be an incompetent moron to get into such a position or is this something that can be learned?

  3. I wasted five minutes of my life following your link and reading the article in the Guardian. The ignorance about financial matters, basic issues like: Sales, Cost of Sales and Expenses is astounding. I cannot but agree with you Arthur, this bleating heart lefty journalist is a very incompetent person; thick as pig shit actually.

  4. it’s not as if there aren’t left wingers who understand accounting, economics etc. – The Economist and the FT employ a fair few of them – a slim majority of academic economists self-identify as left-wing – it’s just that The Guardian has not interest in hiring them, because it would interfere with the production of moral outrage that panders to their readers. Much like the Daily Mail has no interest in hiring people who think carefully about immigration and house prices, and the Telegraph’s economics writers are (often) witless right wing hacks.

    but I do find it galling. I wish the Guardian would either hire a new editor or new economics editor who would clear out some of the rubbish and hire some people who actually know their onions.

  5. Sorry guys, just don’t see the problem. These days you can be a Tax Expert and Economist and get to become a national opinion-former without knowing the first thing about either. So why bother with people who do actually know something?

    And of course the truly knowledgeable cost money, which the Guardian doesn’t have.

  6. “So why bother with people who do actually know something?”

    Exactly. Even those who should know a lot more, I suspect, play to the crowd simply because it’s profitable in political terms.

  7. ken,

    yes, thanks for that link – I didn’t have it to hand plus I was unsure about UK versus US, so erred on side of understatement.

  8. “Even those who should know a lot more, I suspect, play to the crowd simply because it’s profitable in political terms.”

    Unfortunately for the Grauniad being “profitable in political terms” won’t pay the bills, which is why they are gradually going bust.

    I wish they would bloody get on with it!

  9. Hi Luis

    Of course, it’s difficult to say – I’d probably fall into the right of the Democratic Party in the US (or the socially liberal bit of the Republicans), whereas in the UK, there is no way I would lump myself in with Labour, even the Blairite bit.

  10. I followed some of the comments below the article – I must admit that the wilful ignorance of many of these was quite an education.

    There were one or two others patiently trying to explain some simple basics, for example as to how tax allowances work – and hence why the article was completely misinforming its readers – but frankly, they might as well have been “pissing off the bow directly into a force 10″.

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