More Unherd

A one percentage point increase in wealth taxes – a very large increase indeed – reduces growth by just 0.02 to 0.04 percentage points. Not insignificant, but certainly not the picture of economic doom painted by critics.

Our star editor at the new Unherd appears confused here.

A 1% of GDP increase in wealth taxes would indeed be large. But that’s not what this paper, which she refers to, says. Rather, a 1% increase in the revenue from a wealth tax reduces GDP growth by 0.02 to 0.04%.

The countries studied have wealth tax revenues as % ge of GDP of 0.1% to 1%. Call it, say. 0.3% as an average. We increase the revenue from that by 1%, to 0.31% of GDP. Future GDP is lower by 0.03% of GDP. Marginal tax take is higher than average, of course. So a reasonable guess is that tax revenue would have been 50% of that marginal 0.03% of growth we’re not having. Which is higher than the 0.01% of extra tax we did get.

We’re over the peak of the Laffer Curve already…..

There could be a reason for this

A crackdown on offshore tax cheats has only recovered about a third of the £1bn that the government had predicted, according to estimates.

Possibly, the government has swallowed the campaigners’ insistences about how much dodging there is going on.

And those insistences prove to be wrong?

Daily Mail and union tax avoidance

Unite’s accounts for the year ending December 2016 showed that despite having a share portfolio of more than £50million, which regularly reports a healthy profit, it paid no corporation tax.

For years, Unite has used a loophole that allows it to offset large sums against costs — such as sick pay, accident compensation and employment tribunal costs.

McDonnell told his embarrassingly small audience in Davos that major auditing companies should have the equivalent of a doctor’s Hippocratic oath so they don’t encourage firms to avoid tax.

A dose of such medicine might prove handy for Len McCluskey and his fellow brothers and sisters in Unite.

Offsetting costs against revenues is a loophole these days, is it?

Jeebus.

Although I’ve little doubt that one or more among the Ritchie, Prem Sikka etc set have made exactly the same claim at some point.

Trump’s tax reform and the EU’s tax demand on Apple

A little comment by Ben S has triggered a thought.

The EU’s tax demand on Apple in Ireland was based upon he idea that no tax was being paid anywhere. Verstaeger herself has said this. That if Apple paid US tax then that would change the Irish tax case.

One point would be that this shows what bollocks the tax case was in the first place. The other is that apple has just announced that it will be remitting that money into the US nd will be paying US corporate income tax upon it.

Collapse of EU tax case concerning Apple and Ireland, no?

I wonder what Spud is going to say about this? Especially since it pulls the rug from under the feet of most of the whining about tech giant taxes…..

Like this is going to work

Internet giants could be penalised through taxes if they fail to cooperate with government efforts to fight terrorism and online extremism, the minister of state for security has said.

I thought the main complaint was that we can’t tax these internet giants in the first place?

Apple’s profits, tax and transfer pricing

So, Apple has had to pay more tax in the UK:

Apple has paid £137million in backdated taxes after a probe by UK authorities.

The iPhone maker handed over the cash after an investigation into how much it paid the taxman from 2011 to 2015.
….

Inquiries centred on London-based Apple Europe Ltd, which has nearly 800 UK staff and provides business support and marketing services to Apple’s other companies. HMRC argued it was not paid enough commission for these services, meaning its profits ended up being lower than they should have been.

Apple Europe reported sales of £644.7million and profits of £51.1million for the years 2011 to 2015 but paid no UK corporation tax. It was instead due a £7.3million tax credit.

No, this isn’t as a result of campaigners. It’s not a result of new rules. It’s simply the application of the old rules.

The key here is “transfer pricing.” All a bit complex but essentially, subsidiaries of the same company should price transactions between them as if they’re not subsidiaries of the same company. The “arms’ length” principle. What’s the price a truly independent business would charge for this? That’s what the price should be.

HMRC has the current right to, and has for some time, challenge the prices which people do charge themselves internally. A few years back Starbucks changed the royalty rate it charged itself for example. HMRC was looking cock-eyed at the one they were using (from memory, 6%) and “suggested” that a lower rate was a good idea (4% again from memory) in the sense that nice business here, be shame if something happened form of “suggestion.”

This is what has happened here. HMRC has suggested that Apple Inc (or some part of it) isn’t paying Apple Europe Ltd enough for the services it provides and that a true market price would be a little higher. Thus leading to more profits in the UK and a higher tax bill.

No, this is nothing about selling from Ireland, scooping the money off to Bermuda or anything like that. This is straight transfer pricing stuff, all entirely and wholly already in HMRC’s power.

As shown, obviously, by the fact that they’ve just won, eh?

£30 million a year too. We can pay for a lot of Corbyn with that, right?

Ignorance, ignorance

Not everyone who uses offshore vehicles is a crook. But the main takeaway from the Panama and the Paradise Papers, published again by the Guardian and media partners in November, is that the offshore industry is not a minor, shadowy part of our economic system: it is the system. The burden of taxation has moved away from multinational corporations and the rich to ordinary people. Offshore has made this happen. We – those of us who pay our taxes – are the dupes.

No, it’s the other way around., The vast majority of those who use offshore are not crooks. Instead, they’re – if they’re from the more turbulent areas of the world – those trying to protect their property from their own government. Or, as with those funds of David Cameron’s father, people struggling to make sure that people from different tax regimes can all obey those different tax regimes.

You know, they all were paying tax?

As to the burden of taxation moving away – corporation tax has never been a large portion of the economy in the first place. A few percentage points of GDP, no more. It’s been a larger portion of the tax take, true, but then that was back when the tax take was a smaller amount of GDP. And as to taxation moving away from the rich – the portion of income tax coming from the rich is at record highs in both the US and UK currently.

Amazon’s tax settlement with Italy

They’ve settled for 100 million euros. None of the reports go into the details of what was alleged and so on. So, anyone know?

Excessive royalties perhaps? Over claiming investment breaks? Not arms length transfer pricing?

I ask because varied will start to insist that this shows dodging – which, obviously it does. But is it dodging that’s been rooted out under the rules they would like, or what is dodging under extant rules?

What is this idiot talking about?

Any sufficiently advanced technology is indistinguishable from magic, and the accountants of Silicon Valley have proved Arthur C Clarke’s third law to be as true of tax avoidance as it is of tech. The most recent outrage is Apple’s $252bn offshore cash pile, as exposed by the Paradise Papers investigation. More valuable than the foreign currency reserves of the US or the UK, it represents all the money that the world’s most valuable company has siphoned out of the global financial system for the benefit of its shareholders.

You what?

Money invested in T-Bills an the like (which is where Apple’s money is) is siphoned out of the global financial system?

How does this shit get published?

Isn’t this just the most horrendous scandal?

Theresa May’s husband’s investment bank employer has paid no UK corporation tax in the past eight years, it was revealed today.
Philip May, 60, works as a relationship manager for Capital Group, an American financial services company with assets of £1.1 trillion with offices in Belgravia.
Since 2009 the company has turned over £467million but made losses of £125million meaning they don’t have to pay corporation tax – a levy on profits.
Despite the huge losses it directors were paid £43million in salaries, pensions and other benefits – but it is not know what Mr May earns.

Company making losses doesn’t pay a tax upon profits. And the workers keep being paid all the same!

British Leyland wasn’t paying profit taxes – and the workers still got paid too.

And what the fuck is this idiot saying?

While tax expert Prem Sikka added: ‘It’s very odd a business can pay substantial amounts to directors while not turning a profit.’

No it’s fucking not.

We’ve an 8 year period here. How many directors? 10 say? No, dunno either.

£500 k each? For directors of a wealth management company in the City? That’s not actually large by the standards of the place an time you know.

Then there’s this idiocy:

Labour MP John Mann told the Mirror: ‘It is fundamentally un-British to avoid tax. The Prime Minister should raise this at the breakfast table immediately.’

Paying people a salary or a bonus gains twice (actually, more than that) the tax of making a profit an paying corporation tax instead.

Well, dunno

A Guernsey finance chief has claimed that the release of the Paradise Papers was ploy by left-wing media to influence the first ever tax haven blacklist.

It was most certainly a part of the campaign, that’s for sure.

What a wonderful whine this is

Setting aside the fact that HMRC has already begun to review certain tax arrangements on the Isle of Man, it’s a question that seems as ridiculous now as it was in 2013. Because if there is one big lesson from the Paradise Papers, it’s that currently legal tax avoidance by certain companies and individuals has been shown to be as antisocial, immoral and unfair as many of the arrangements that are banned.

The correct reading of this is “I believe that” antisocial, immoral and unfair and “I’m seriously pissed that everyone else doesn’t.”

Especially as this is from the Guardian’s head of investigations who has just spent a year trawling through those Paradise Papers to find nothing of any great moment.

Denise Coates and that £200 million pay packet

I’m just wondering who is going to chunter over this:

Denise Coates, the billionaire founder and boss of gambling firm Bet365, paid herself £217m last year as her company made a £525m profit from a record £47bn of bets.

The 50-year-old, who started Bet365 in a Portakabin in a Stoke car park 17 years ago, is now the best-paid boss in Britain, dwarfing previous titleholder ad man Sir Martin Sorrell on £48m.

Coates’s £199,305,000 pay this year is more than 1,300 times that of the prime minister and more than double the wage bill of Stoke City, the Premier League club owned by Bet365. On top of the £199m, Coates collected £18m in dividend payments.

That would seem to indicate that it really was pay. So, employers NI, income tax in the top band, that’ll be at least 50% tax paid then. Not even using Ritchie’s dividend trick.

Do we expect to see anything about how much she has contributed to he Exchequer then?

Cadbury’s taxes

Hmm:

A British subsidiary of Cadbury’s American owner paid no tax last year, despite making a £2.1bn profit.

The accounts for Vantas International, ultimately owned by the Toblerone-to-Ritz maker Mondelez, show that £442m of income — about what it would have paid in corporation tax — was not subject to tax. Mondelez declined to elaborate on why there was no levy on the income.

Meanwhile, the company’s main operating subsidiary in this country, Mondelez UK, paid corporation tax equivalent to a rate of 0.6%.

It paid £122,000 on pre-tax profits of £22m. If the subsidiary had paid the standard rate of 20%, the bill would have been £4.4m. It lawfully avoided paying the tax thanks to “compensating interest deductions” of £11.9m during the year.

On that second, “lawfully avoided” is a hell of a phrase for the fact, a plain and simple one, that interest paid is a cost of doing business. We even have laws about people taking the piss which HMRC obviously don’t think they are.

On the first, the opening comment on the piece is fun:

Bad journalism again from the Times. I just had a look at the accounts at Companies House. This company doesn’t trade. It just holds shares in Cadbury group companies, along with some inter-company balances. During the year it moved some of them around and booked profit on some of the intra-group transactions. Quite normally, transactions like that aren’t taxable, because nothing really happened – they’re just rearranging the shareholding furniture within their own group.

It had no sales and no trading in the year. Nothing to see here.

Idiocy, idiocy

The way we tax companies needs to be turned on its head. Abolish taxes based on a company’s profits and replace them with taxes levied on their turnover.

Apple makes a 45% gross margin, Facebook a 50% net margin near enough. Walmart, Target, Sears, make 2%, 1% or so and sometimes negative margins.

Yep, taxing turnover’s the right way to go.

Idiot.

Ed Conway is economics editor of Sky News

Jeebus.

So, the Paradise Papers haven’t created revolution then

The street-level response to the Paradise Papers, the mighty follow-up punch to last year’s Panama Papers, has been curiously tepid. This is probably not what many activists, and the 100 media organizations involved in the leak, expected to happen.

In striking contrast to the bombshell release of the Panama Papers in mid-2016 that immediately triggered a 10,000-person-strong protest in Iceland leading to the resignation of Prime Minister Sigmundur Davíð Gunnlaugsson, the Paradise Papers have thus far made many headlines but no uprisings.

There’s a reason for this you know.

The fundamental lesson of the Panama and Paradise Papers is twofold. First, the people everywhere, regardless of whether they live in Russia or America, are being oppressed by the same minuscule social circle of wealthy elites who unduly control our governments, corporations, universities and culture.

We now know without a doubt – thanks to the incontrovertible evidence provided by the Panama and Paradise Papers – that there is a global plutocracy who employ the same handful of companies to hide their money and share more in common with each other than with the citizens of their countries. This sets the stage for a global social movement.

Second, and most importantly, these leaks indicate that our earth has bifurcated into two separate and unequal worlds: one inhabited by 200,000 ultra high-net-worth individuals and the other by the 7 billion left behind.

The reason being that’s not what they show. Rather, the vast majority of all of these people are obeying the law and paying their taxes. Sure, there’s a few actors trying it on with their pay for a TV show. A jet lease looks a little odd. And everyone else is coughing up as hey should do.

This is not the stuff of which revolutions are made.

As has The Guardian

The universities of Oxford and Cambridge, and nearly half of all Oxbridge colleges, have secretly invested tens of millions of pounds in offshore funds, including in a joint venture to develop oil exploration and deep-sea drilling, leaked documents from the Paradise Papers reveal.

The files show that both universities have committed significant funds to multibillion-dollar private equity partnerships based in the Cayman Islands, a tax haven popular with American and British hedge funds.

Tee hee

Jeremy Corbyn was accused of hypocrisy yesterday after an investigation found that two authorities controlled by his party avoided paying more than £12 million in stamp duty on the purchase of commercial properties.

On Monday Mr Corbyn hinted that the Queen should apologise if the offshore investment of £10 million of her personal wealth — as revealed in the leaked Paradise Papers — was designed to avoid tax. Yet in May Sefton council in Merseyside bought the New Strand shopping centre in Bootle via a Luxembourg-registered company for £32.5 million, saving £1.6 million in stamp duty. The council also bought insurance against the possibility that the taxman might chase it for payment.

In July Warrington council agreed to pay more than £200 million for Birchwood Park, a business centre in Cheshire, via an offshore company, saving almost £10.5 million in stamp duty. By agreeing to the purchases, the councils may also have helped the sellers to avoid capital gains tax.

I look forward to Snippa telling us that the State not paying taxes biases markets, makes them unfree.