All belongs to us

The tax policy gap is the tax not paid in a country as a result of the decision made by a government not to tax a potential tax base, such as wealth. Additionally it is the value of the tax reliefs, allowances and exemptions given by a government for offset against a source of income that might otherwise be taxable.

Seriously? A potential tax base is all incomes of everyone. Not taxing all incomes at 100% is therefore a tax policy gap?

The definition of tax avoidance has also changed, no?

Tax avoidance is taxpayer determined behaviour where the taxpayer decides to submit a tax return and declare their tax liabilities based on an interpretation of the applicable law of the jurisdiction that the taxpayer knows may be unacceptable to the tax authority of that country. They do so knowing that the risk of their potential misinterpretation of the law being discovered is limited and so the chance of appearing to reduce their liability in ways they claim to be legal, whether that is true or not, is sufficiently high for them to justify the risk of doing so. The scale of this issue is related to the complexity of the tax system and the degree of uncertainty that might exist as to the proper interpretation of the tax rules that it creates.

No, that’s an attempt at tax evasion.

I stress that tax avoidance does not ever include making use of tax reliefs and allowances provided by the law of a country: the cost of these is included in the tax policy gap.

Therefore Vodafone wasn’t avoiding tax, was it? Because the law in place at the time specifically stated that the money piling up in Luxembourg was not taxable in the UK.

He’s changed his definitions. Which means that his numbers or the tax gap should be much lower. But will they be?

In that case not agreeing with a tax authority’s interpretation of tax law is not wrong. Disagreement can be honest.

Well, yes, Vodafone, Boots, Starbucks…..

Does tax avoidance dishonestly appropriate property belonging to another? I would suggest not. I would say it knowingly exploits uncertainty in the law to secure a pecuniary advantage, but that most of those doing it will have secured an opinion from a professional adviser before doing so that the action in question was legal, even if it had an uncertain consequence. And those opinions (which will not be publicly available, but which will be in the possession of the tax avoiding taxpayer) will be more than enough to show that the tax avoider had no intention of being dishonest, precisely because they had gone out of the way to make sure that they had an opinion to say they were acting legally, even if with dubious ethical intention.

And ain’t that a change? It wasn’t long ago that asking for a legal opinion was proof perfect of avoidance. For why ask if you’re not trying to avoid?

Logic failure

But what does this mean? I suggest three things.

The first is in economics. This subject still assumes, and so teaches, that businesses profit maximise. They don’t. Because they can’t. Because they don’t have the data to do so. And because the truth is they know that this is the surest way to destroy long term value. So they have other goals instead. Like growth. Or product innovation. Or stability. Or customer satisfaction. But never profit maximisation. So it is time economics stopped teaching soemthing that is false. Not just wrong. But false.

Sigh. Profit maximisation is the goal. The strategy. Quite what the tactic is to gain this is is arguable. But that’s still the goal.

Which is what economics currently teaches. Peeps try to maximise, now, how do they do this, let’s go have a look, shall we?

This calls for Peoples’ Quantitative Easing!

The crisis-hit Crossrail project has been delayed indefinitely as bosses warn that the project could require an extra £1.7bn funding injection, according to transport executives and politicians.

The flagship new Elizabeth Line that will run east-west through London was originally due to open this month. Now the company has admitted it does not know when it will open.

“It has now become clear that more work is required than had been envisaged to complete the infrastructure and then commence the extensive testing necessary to ensure the railway opens safely and reliably,” Crossrail said in a statement.

The financial services company KPMG, which was called in by the Mayor of London Sadiq Khan to…

Snigger.

The bit Ritchie and the like really don’t get being that where the money comes from isn’t the point. It’s whether we should have the State running engineering projects.

Umm, no.

Rilly?

And what we know is private capital has ceased to be available for active investment it is now almost solely directed to rent seeking. In that case it is only state created funding that can create this process of change.

Oh:

Main points
Gross fixed capital formation (GFCF), in volume terms, was estimated to have fallen by 0.5% to £85.2 billion in Quarter 2 (Apr to June) 2018 from £85.6 billion in Quarter 1 (Jan to Mar) 2018.

Business investment was estimated to have fallen by 0.7% to £47.5 billion between Quarter 1 2018 and Quarter 2 2018.

Between Quarter 2 2017 and Quarter 2 2018, GFCF was estimated to have fallen by 0.6% from £85.8 billion; business investment was estimated to have fallen by 0.2% from £47.6 billion.

The sectors that contributed to the 0.5% GFCF fall between Quarter 1 2018 and Quarter 2 2018 were public corporations’ dwellings, business investment and private sector transfer costs.

The asset that contributed most to the decrease in GFCF over the same period was transport equipment.

Back to table of contents
2. Things you need to know about this release
The estimates in this release are short-term indicators of investment in non-financial assets in the UK, such as dwellings (residential buildings), transport equipment (planes, trains and automobiles), machinery (electrical equipment), buildings (non-residential buildings and roads) and intellectual property products (assets without physical properties – formerly known as intangibles). This release covers not only business investment, but asset and sector breakdowns of total gross fixed capital formation (GFCF), of which business investment is one component.

Business investment is net investment by private and public corporations. These include investments in transport, information and communication technology (ICT) equipment, other machinery and equipment, cultivated assets (such as livestock and vineyards), intellectual property products (IPP, which includes investment in software, research and development, artistic originals and mineral exploration), and other buildings and structures.

Business investment does not include investment by central or local government, investment in dwellings, or the costs associated with the transfer of non-produced assets (such as land).

£50 billion a quarter. £200 billion a year, maybe 10% of GDP. Private capital has ceased to be available for active investment. Hmm.

The Potato Planner Speaks!

The UK is a relatively lightly taxed country – and it shows

Oh aye?

The UK is much less lightly taxed than, say, Germany, the Netherlands and France.

As the OECD notes:

The OECD average tax-to-GDP ratio rose slightly in 2017, to 34.2%, compared to 34.0% in 2016. The OECD average is now higher than at any previous point, including its earlier peaks of 33.8% in 2000 and 33.6% in 2007.

OK. So, UK taxation?

Britain is on track this year for the highest tax burden since 1969-70, at 34.6 per cent, according to forecasts released by the Office for Budget Responsibility alongside last month’s budget.

Aren’t we, err, averagely taxed?

The questions are obvious. The first is whether our light taxation is worth it: we are getting dire services and poor social protection as a result.

Actually, if we’re paying about the same and getting worse shouldn’t we be having a vociferous work or two with the fuckwits doing the spending?

Even by the OECD slightly different definition we’re still mid-list.

Tax isn’t the French problem

Civil war is a strong term to use. I suspect John Lichfield knows that. I presume he uses it wisely as a result. And where France goes, who knows who might follow?

I have a concern. As Lichfield notes, France rioted 50 year’s ago and rising prosperity deflected the anger. Now no one thinks that will happen. All increases in prosperity go to a tiny handful in society. People are oppressed, and they know it.

We need to be clear about the cause of the oppression. The superficial anger is in tax. I am well aware of it. But the cause is inability to make ends meet.

We cannot do without tax.

And we need green taxes.

So the problem has to be tackled another way.

The problem is excess rents.

And maybe excess interest costs.

And a lack of a living wage.

The problem is not tax.

The problem is the failure of a society where enough is made for all to make sure all can partake.

No, really, the problem is not tax. In France. Where tax as a percentage of GDP is 45.3%, compared with the OECD average of 34.3% (which is pretty much where the UK is).

No, tax definitely isn’t the French problem.

Sounds like the system is working then

Third, it is that the accounts that the profession produces are not fit for most purposes, precisely because they are only designed to assist those deciding whether to supply capital to a company or not, and nothing else is considered.

They’re designed to do this, they do this. What’s the problem?

That a Senior Lecturer at Islington Polytechnic does not like this isn’t a problem with the system now, is it?

The political extinction of a plurality of the population

Isn’t this a lovely thing to wish for?

One is Flip Chart Rick who wrote this yesterday:

I will never get behind Brexit. I will have to accept it if it happens but I will never be reconciled to it. It is a stupid idea. I will never forgive the people who took us down this road. I will do whatever I can to bring about their political extinction.

That seems like a fair summary to me.

Isn’t that nice? A plurality of the country should be politically exterminated? Because wrongthink, you know.

No government at all is ever a functioning one

What is extraordinary about this is that the UK has not even got the option of crashing out of the EU whilst keeping any pretence of having a functioning government, if the ability to enforce the law and collect tax owing is indication of that, on which I think most would agree.

So, to the man who insists that the tax gap is £120 billion. Being able to collect tax due is the definition of a functioning government. Which the UK government currently does not do. Therefore, by this definition, the UK government is not a functioning one.

And Brexit is going to change this how?

Sure, there’s an answer to this. Which is that a functioning government is one which collects the tax due which is worth collecting. But that inevitably means a tax gap. Which isn’t something Spudda is likely to agree should happen either.

An accountant might be able to understand this

“Rent-to-own” retailers such as BrightHouse will be banned from charging vulnerable customers over the odds for household goods under new rules proposed by financial regulators on Thursday.

Rent to own involves customers obtaining products such as washing machines or electronics under hire-purchase agreements before taking ownership when they have completed all the payments.

Under the proposed rules, which will come into force in April, firms will be banned from charging more than 100 per cent interest on items.

The implication is obvious: would appear that 100% interest rates are considered fair. This is what it is like to live in the UK in 2018.

No, the ruling is that total charges over the lifetime of the agreement not exceed 100% of the cost of the item.

20% interest rates per year over 5 years would meet this. 10% over 10 years. 3% over 30 years.

Wonder what the interest rate was when Spudda bought his first flat back in the 80s? Did he, over the years, pay more interest than principal? And would he describe that as a 100% interest rate?

Now, change the subject of the question. Would an accountant so describe?

Brexit means Caroline Lucas will become PM.

From the Sage of Ely:

What then? I’m told on the grapevine that Leavers will not accept this outcome: civil disturbance is likely. I think that is possible. Hence the route to a coalition; a national government after an almost inevitable general election as the Commons fails to agree again – or is pulled down by such a coalition acting to do so. Then there will be the fundamental reforms to make sure that UK politics will never again present people with three options in England and Wales that almost no one finds especially palatable. The Scots are in a different place, of course.

And I should add, in all this the move towards another Scottish referendum is almost inevitable, and likely to pass – just to escape the mayhem.

Who will lead that Coalition? Caroline Lucas, most likely. Precisely because she would not be from any major player in it.

As far as I’m aware Poe’s Law is not involved here.

To define civil society

They say of the project:

The Coalition for Inclusive Capitalism is a global not-for-profit organization that was founded in 2014 by Lynn Forester de Rothschild, the Chairman of E.L. Rothschild LLC. The organization was established to engage leaders across business, government and civil society in their efforts to make capitalism more equitable, sustainable, and inclusive. The Coalition develops practical thought leadership and convenes the Conference on Inclusive Capitalism to bring together renowned leaders from the world’s largest and most influential asset owners, asset managers and corporations to positively influence the future of capitalism. The organization works with other like-minded groups through our Allied Efforts program and extensive public outreach.

Note those words ‘and civil society’. I checked their website. There is no hint of a single civil society organisation involved.

So, err, what is the definition of civil society?

Amazingly, it’s not only those groups which have a mate of Ritchie’s in them. It’s, umm, any gathering of peeps in society. The Cub Scouts are civil society. The FA – to the extent that it’s not enshrined in legislation – is civil society.

Snigger

I have been reading ‘Several short sentences about writing’ by Verlyn Klinkenborg this week. It was recommended to me by my Copenhagen Business School colleague, Professor Len Seabrooke. The book is easily the most radical I have read on writing. For that reason alone I recommend it, presuming you are open minded about how English should be written.

Who is it advising us on clear and elegant writing?

He;s at CBS as an external examiner on a unit about tax. “My colleague at” sounds bit grand for that. Still, it does open the question, has the colleague read some Ritchie and, gaspingly, reached for the first thing on how to write better he can find?

The problem with a Curajus State

Dominic Raab has admitted he only realised that the Dover – Calais trade route was fundamental to UK economic well being after being appointed Brexit Secretary.

I’m not going to doubt his sincerity.

Nor am I going to question his timing.

I am just going to ask how anyone with such a lack of curiosity that they cannot appreciate something so basic made it to selection as an MP, let alone got to have Cabinet rank on an issue where this mattered.

The problem with a Curajus State is that those who would run it are know nothing toads. An no, e can’t insist that only those who know stuff get elected – that’s up to the peeps, isn’t it?

A musing, no more

Just a thought:

In fact, Stockholm is something of a unicorn factory, producing the second-highest number of billion-dollar tech companies per capita after Silicon Valley. In Sweden overall, there are 20 startups per 1,000 employees, compared to just five in the United States, according to data from the OECD. In the 2018 Bloomberg Innovation Index, Sweden tops the list, second only to South Korea.

Income taxation is so viciously high that the only way to make enough to get out is to start up a business?

Actually, it’s probably that capital gains and corporate taxation are significantly lower than labour income taxation. The same point but with a different gloss perhaps. But an interesting illumination of Spud’s point that income and capital tax rates should be the same, no?