“They’re saying that they won’t claim capital allowance for the next few years but they will be able to claim all of it in two years’ time,” said Richard Murphy, founder of the Tax Justice Network. “They’re only deferring the claim, they’re not giving it up.”
And what\’s wrong with claiming capital allowances? Surely even Richard Murphy doesn\’t think that\’s tax avoidance?
Now this is absolutely fascinating. And it\’s a hostage to fortune from Our Retired Accountant from Wandsworth. Here\’s his statement:
Richard Murphy ?@RichardJMurphy
If the General Anti-Tax Avoidance Principle Bill I have written which is now before parliament was passed tax avoidance would be illegal.
So, as we often do, let us take his argument as being true and see where that leads us.
If tax avoidance would be illegal in a world with a GATAP in it, then things which are legal in a world with a GATAP in it cannot be tax avoidance.
So, let us have a little potter through some recent accusations of tax avoidance and see whether they would still be legal after a GATAP came into existence.
Let us say, Starbucks. Paying royalties for the name and brand to a Dutch company. Hmm. From the bill:
Arrangements are not tax arrangements if—
(a) the arrangement was specifically permitted by legislation or regulation
relating to any of the taxes referred to in section 1(3) or is clearly
consistent with principles on which the taxes referred to in section 1(3)
are based whether express or implied, or
So if we\’ve specifically got legislation that allows the practice then it\’s not a tax arrangement that gets disallowed under the GATAP.
Everyone agree so far?
Excellent. So, we\’ve actually an EU law which states that taxing royalties from one company in one EU state to another company in another EU state is illegal. No, really, we do, we\’ve a law that insists that we are not allowed to tax such arrangements. So, given that we have such a law it\’s not exactly a great leap to move onto the idea that such royalty payments are in fact allowed: we\’ve legislation which says so. Great, so, Starbuck\’s royalties are not, by Ritchie\’s own bill, tax avoidance.
Starbucks pays a 20% margin (no, not 20% of gross margin, just a 20% margin) to the Swiss coffee buying company. This is clearly and obviously legal. Paying no margin at all would mean that Swiss company is doing the work for nothing. And yes, we do indeed have legislation allowing companies to charge a margin for their work.
Thus Starbucks seems to be carrying out no tax avoidance at all: by Ritchie\’s own standards.
Boots: The claim there has been that they\’re paying all that interest to Switzerland and that this is tax avoidance. Unfortunately for the Murphmeister this is covered under the same EU law as the royalties. It\’s actually illegal for us to tax such interest payments. Again, such a provision obviously means that the ability to make such payments is enshrined in legislation. This is therefore not tax avoidance.
Vodafone: we\’ve been through this too many times already. But EU law clearly allows a UK corporation to have a Luxembourg subsidiary. And we\’ve even case law (Cadbury\’s) which shows that this is indeed legal. So again, it\’s not tax avoidance.
Facebook, Google, Microsoft, selling from Ireland. We\’ve EU legislation that insists that any corporation can sell right across the EU from any one EU country and pay corporation tax in that one single country of incorporation. We\’ve legislation which says this: thus obviously, by the Murph\’s own standards, this is not tax avoidance.
Amazon selling from Luxembourg: we\’ve a double taxation treaty stating that the use (or possession) of a warehousing or logistics chain does not lead to a permanent establishment and thus to liability for corporation tax. Again, by the very test that\’s being set, this is not tax avoidance.
VAT at Luxembourg rates: EU law. VAT on services (and electronic goods are defined as services) will be paid at the rate of the country of supply, not destination. This is the law as it is written: this is not tax avoidance.
How about the Greens? We do not charge UK income tax on dividends paid to people who are not citizens and not resident in the UK. Lady Green is neither: she does not pay tax on her dividends. This is the law. Even if you want to claim that her ownership of the company is tax dodging: the law states that transfers between man and wife are tax free. This simply is not tax avoidance: the law specifically states that they may do these things.
Have I missed any cases? I don\’t think so.
So to recap. We\’ve got Richard Murphy insisting that his bill will make tax avoidance illegal. Yet all of the examples he\’s been giving us of tax avoidance will remain legal. Which leaves us with two possible conclusions.
1) They\’re none of them tax avoidance.
2) It\’s a crap bill.
Do note that this is not an either or choice. Both can be true at the same time.
Behaving like animals: Students from prestigious London School of Economics get blind drunk at 10am in fancy dress bear costumes
Good to see they\’re still giving it the old school try.
A spokesman for the London School of Economics said that any unacceptable behaviour would be punished.
He said: \’This is an event organised by the LSE Student Union’s Athletics Union.
\’The School will take appropriate disciplinary action in the case of unacceptable behaviour arising from excessive consumption of alcohol.\’
The people who run the place always have been dickheads of course.
And someone\’s just failed their journalism exam:
The LSE Athletics Union was unavailable to comment when the Mail Online tried to contact them.
Err, they\’re the people in the bear costumes over in the park throwing up…..
Not that it\’s important but it is fun:
One entry in her Conservative Party biography is particularly intriguing. It is for 1984, the year, so the biography states, she was married to Paul Dorries (they’d met in Liverpool when she was 17).
But our research has been unable to unearth any trace of a marriage certificate in this country. Some of Mrs Dorries’s relatives, we have been told, were surprised never to have been shown wedding photographs of the happy couple.
In order to agree to an amicable divorce, you have to be married. But just as we could not find any trace of a marriage certificate using the obvious search terms, we could find no record of their divorce, either, in the Central Index of Decree Absolutes at the Principal Registry of the Family Division in London.
‘The system holds all the details of divorces from across England and Wales,’ explained Paul Jarvis, family administration branch manager. ‘If they were divorced, or had just started the action, it would have come on the system.’
It is rather tee hee, isn\’t it?
I ask for this is a description of the sisters they\’ve got on the front page today:
The Delevingne sisters – Chloe (right), 28, Poppy (left), 26, and Cara (centre), 20 – are almost divinely privileged; willowy blondes with easy social confidence, masses of useful friends and pots of money. The sisters (pictured top right as children) were expensively schooled. First at Frances Holland School for Girls near Sloane Square, where they stood out for being particularly skinny, leggy and gorgeous even in a school full of skinny, leggy and gorgeous girls.
\”Leggy\” means long legs, thus discriminating against those of other genetic backgrounds where shorter and curvier legs are the norm. The insistence upon blondes against the melanin enhanced. Skinny against those from cultures where curves are seen as beautiful.
Obviously, the Mail should be closed down by the diversity advisers.
And being slightly more serious even I find that description over the top. Which Mail journo is having a mid life crisis then, lusting over the young so?
At the ASI.
In which I present conclusive proof that the London Congestion Charge works.
Well, Compass, obviously. But still:
Britain is being held back by its ‘strikers’,
‘scroungers’, and ‘shirkers’.
The strikers are the big corporations sitting on
piles of cash which they refuse to invest in Britain.
….
They are the rich, powerful and well connected.
Many use their wealth and influence to ensure the
system works for them. Taken together, they are
depriving the country of at least £750 billion in
potential investment
You what? Sorry? Even \”Eh?\”
In what universe is not investing your money in a damp island \”striking\”? It is, after all, your money. To be spent as you wish not as some idiot writing for a pressure group thinks it should be invested.
I often see this statistic….or at least numbers like it…..and I\’ve always another question I want answered:
Yet all terrestrial life depends on a thin layer of earth, normally just six to 10 inches thick, for survival – and the world loses at least 30 billion tons of it a year, mostly from the drylands that provide nearly half of the world’s food.
OK, yes, topsoil washes away. We know it\’s been doing this forever. Over thousands of years by looking at river deltas, over millions and hundreds of millions by the existence of sedimentary rock.
So we do know that it goes away, off somewhere instead of being in those nice fields. That it has been doing this forever also leads us to the necessary conclusion that there is some process which creates it. Here I\’m thinking of Darwin\’s observation about earthworms and the stony field on the estate. Or it might be humus that collects in what soil is left etc.
What we want to know therefore is the balance: OK, so 30 billion tonnes a year is gently floating downstream each year. How much is being created each year? And I\’ve never actually seen a number for that. P
perhaps my Google Fu isn\’t good enough.
Does anyone know? It wouldn\’t surprise me at all to find out that the balance is negative, that we are eroding that topsoil on balance. But I do think that the net figure is likely to be more useful than the gross one which we\’re continually presented with.
Update, in the comments, so, is 30 billion tonnes a lot or a little?
Hmm, zeros tend to go missing when I do this sort of thing. But cropland (ie, pasture plus arable) is apparently some 4.7 x 107 km 2……. 47 million I make that. Call the topsoil 10 cm, there\’s 100,000 cm to a kilometre, thus there\’s 47million / 10,000 km 3 of topsoil. Am I wrong yet? 4,700km 3 of topsoil.
1 km 3 of water weighs 1,000×1,000×1,000 tonnes, or one billion tonnes. Earth is, to a reasonable approximation, 2x density of water (erm, might be a bit high, mining assumption is that whatever is 1.8x). Call it 9,000 billion tonnes of topsoil among friends.
Gross loss is 30 billion tonnes a year. 0.3% of all topsoil is lost in any one year.
Which leaves us with our final thought. Do we think that the regenerative capacity of topsoil is greater than that? Alternatively, does it take more than three centuries to replace what is washed away?
Richard Murphy ?@RichardJMurphy
When an economic theory encourages policy that increases inequality then it\’s the duty of those committed to justice to say it\’s wrong
Err, no.
The economic theory could be inconvenient, an undesirable outcome of the way our universe works, many things, but it won\’t be incorrect just because it increases inequality. That would be policy based evidence making.
For example, it\’s well known that the industrial revolution massively increased global inequality. It\’s sometimes called the Great Divergence. That doesn\’t mean that the industrial revolution was wrong in either the sense of being incorrect or immoral.
At most we might say that the increased inequality was an undesirable side effect of a very desirable thing: people finally moving to three squares and a change of clothes instead of Malthusian destitution.
China\’s development in the last 30 years has massively increased inequality within that country. Should they have stayed Maoist to avoid that dreadful fate?
“Complying with the UK tax system is not an optional extra,” he says. “A multinational company can’t just decide whether or not to engage with the UK tax system. It’s an obligation. Companies need to pay the tax they are supposed to pay, full stop. End of story.”
A company has two entirely different ways in which it can choose to engage with the UK tax system or not.
The first, obviously, is whether to invest in the country at all. If they don\’t then obviously they don\’t engage with the tax system. Plus,. as we know, we don\’t get the lovely things they produce. Nor the investment, the jobs, Which means that all wages are that fraction lower. It\’s in this manner, the non-appearance of jobs and wages, that corporation tax lowers wages.
The second is by investing, selling here, and obeying the tax laws. For example, Amazon sells into the UK from Luxembourg. The double taxation treaty with that country, from 1968, says that even with all the warehouses etc in the UK, this does not lead to a corporation tax liability.
Similarly, if Google (I have no idea whether they do but if they did) Ireland charged Google UK a royalty then the EU says that it\’s illegal (yes, actually bans the very idea of) for the UK to try to tax that royalty stream. Or Boots and interest on corporate debt: OK, that goes to Switzerland but in many ways that counts as EU. It\’s illegal for us to tax that interest stream.
Companies can indeed decide whether to engage with the UK tax system or not. And even if they decide to they can decide how to so engage.
Just as an example, I\’ve a little adventure starting. And I can assure you that it\’s not going to be a UK corporation that houses that adventure. Not a fucking chance.
Not in quite those words but that is what an actual economist is telling the faux one.
Here.
All tax is ultimately paid by individuals.
As Adam Smith Institute senior fellow Tim Worstall points out, there are no loopholes. The EU tax system was designed so that a company had to have a presence in one EU country if it wanted to sell to all EU members. Tax competition acts as a check on a government’s tendency to overspend, because jurisdictions are penalized if they raise taxes too much to pay for overly lavish expenditures.
Quoted in an editorial no less.
Sippican does his usual excellent job. Dave makes the same pick. And I also chose that very TV recording of Unsquare Dance to illustrate Dave Brubeck\’s passing.
As Ms. Solent once said about this whole blogging thing:
\”One way in which consensus opinion changes is when scattered individuals become aware that many others share their opinions.\”
That the three of us are obviously so hip to the hep that we actually know that there is a Dave Brubeck piece which is not Take Five is of course profoundly unimportant.
But My God hasn\’t there been a communications revolution in the last couple of decades?
There are indeed many lefties who would get a wet gusset from the thought that these policies would be imposed.
And yes, I do know whose policies they are which is what makes it all the more amusing.
The Inland Revenue was abusing taxpayers\’ rights by refusing to issue self-assessment forms, a leading accountant has claimed.
Richard Murphy, senior partner with Murphy Deeks Nolan, said three of his clients, who have always completed returns in previous years, had been told by their local tax offices that they will not be issued with one for the coming tax year. \’The Revenue said that, on the basis of the taxpayer\’s details it had seen, it was not interested in sending out forms,\’ Murphy said.
\’This is an abuse of civil liberties. Even if someone has no tax liability, they still have the right to prove it,\’ he added.
One of his clients, an overseas resident, had losses on rental income he wanted to carry forward, Murphy said. \’He has a legal duty to declare this kind of income, but is being denied the opportunity to do so as a result of the Revenue\’s action.\’
Not being allowed to carry forward your losses is a breach of human rights.
So Starbucks, by not carrying forward losses, will be breaching human rights?
![\"\"](\"https://www.timworstall.com/wp-content/uploads/2012/12/murph.png\" "\\"murph\\"")
Sigh.
Tax evasion is when you righteously owe money but do not pay it.
Tax avoidance is managing affairs so that the tax is not owed. Thus you have not cheated anyone out of tax that is owed. Because you don\’t owe it.
Today, I am announcing changes that will result in Starbucks paying higher corporation tax in the UK – above what is currently required by law. Specifically, in 2013 and 2014 Starbucks will not claim tax deductions for royalties or payments related to our intercompany charges. In addition, we are making a commitment that we will propose to pay a significant amount of corporation tax during 2013 and 2014 regardless of whether our company is profitable during these years.
I have a feeling that this might actually make them liable to shareholder suits.
To pay all the tax you should is one thing. To pay more than that, voluntarily and knowingly, would seem to be risking breach of fiduciary duty.
I\’d like to highlight a few details behind these commitments. To be clear, Starbucks UK will not claim deductions:
• For the royalties it pays
• For the intercompany profit on the coffee it purchases
• For interest paid on intercompany loans
• For capital allowance deductions nor our carry-forward losses
The first three are all changeable by the company itself anyway. Change the royalty rate, change the interest rate etc. But that last is ridiculous. Not claim the cost of fitting out a shop against tax?
One of those numbers to be very careful about:
One in five young men in jail in England and Wales is Muslim, according to a watchdog report published today.
Cue outrage except:
The report provided no information to explain the rapid increase in the proportion of teenagers saying they were Muslims.However, it could reflect the general demographic of the wider Asian community in England and Wales which is a youthful community with a large proportion of youngsters in the peak offending age range.
It could also reflect a trend towards people converting to Islam while in jail or saying they are Muslim to belong to the most influential “group”within an institution.
It could even be used to support the idea that young Muslims are being targetted to be jailed.
But what it doesn\’t prove is that young Muslims are committing more crimes than others….not given that possibility of claimed conversion once nabbed it doesn\’t.
No, no, really, it is all Harold Wilson\’s fault.
Here\’s the double taxation treaty between the UK and Luxembourg:
(1) For the purposes of this Convention, the term `permanent establishment` means a fixed place of business in which the business of the enterprise is wholly or partly carried on.
(2) The term `permanent establishment` shall include especially:
(a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, quarry or other place of extraction of natural resources; (g) a building site or construction or assembly project which exists for more than six months.
(3) The term `permanent establishment` shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.
That pretty much covers whether Amazon has a permanent establishment in the UK or not. And if it doesn\’t then it don\’t pay corporation tax.
And no, it\’s not even tax avoidance. For here we\’ve got a specific clause in the law that outlines exactly that in Amazon\’s situation no tax is payable.
But why Harold Wilson then?
DT12250 – Luxembourg: Agreement
The comprehensive agreement (SI1968/1100) came into force on 12 July 1968 and has effect
a) In the United Kingdom for
i) Income Tax from 1966-67,
ii) Capital Gains Tax from 1966-67,
iii) Corporation Tax from 1 April 1966.
This is old, old stuff. Nowt to do with any politician currently in power.