October 2012

Schadenfreude of the day

For all you hipster large and small towns in the northeast who have taken great pride in banning big box stores like Wal-Mart and Home Depot, good luck rebuilding after the storm. I am sure you are going to be really happy that you banned retail establishments with worldwide logistics resources and that have developed special skills in routing supplies needed for post-storm cleanup. Good luck getting a generator from that boutique hardware store you have been protecting.

If only companies did pay taxes, eh?

I am we\’ll aware that we have a government resistant to tax change in the UK right now, but governments always react to change in society and rarely create it. The demand for corporate tax reform is growing now to the point where change will have to happen: that\’s the key issue here. That, and the fax that the resentment at a government creating 5.5% tax rates for multinational companies will be considerable, and it is such things that persuade people of the commitment of a government to fairness, or not, when voting.

If only all these people campaigning about corporate taxation would tell everyone what we all know about corporate taxation.

That whatever the rate, whatever the system, it\’s not actually the companies that pay it. Once everyone understood that then we\’d be able to have an adult conversation about how and where in the economy we should be raising the tax necessary.

But given that we\’ve got entire armies of NGOs insistent on lying to the public on this point we can\’t have that adult conversation, can we?

Companies don\’t pay taxes. No, not never.

UK Uncut really are ignorant, aren\’t they?

So Seumas has a rant about unpaid tax.

It\’s the usual Murphybollocks.

In it he approvingly links to this UK Uncut press release:

A report in the Times newspaper (20/09/12) outlined how 533 directors of UK companies have registered addresses in Monaco. Despite vetting by HMRC, the government has still seen fit to award several tax exiles with honours. These include the billionaire Sir Phillip Green- who avoided £285million in capital gains tax in 2005. UK Uncut activists have repeatedly targeted Green by occupying branches of his Arcadia fashion empire.

That £285 million figure was of course calculated by Murphy.

But even he wasn\’t stupid enough to think that it was capital gains tax. It was of course income tax on dividends. Income tax on dividends that we don\’t charge to foreigners living in foreign. We don\’t on BP shares, on WPP shares, so why would we on Arcadia? To Lady Green who is foreign living in foreign?

That there is no case at all in any form of tax law (unless we want to claim that women are merely economic chattels of their husbands, something that Murphy has said the tax system should treat them as) for those dividend payments to be taxed by the UK.

But to actually get the tax allegedly being dodged wrong just shows how ignorant the people in this campaign are, eh?

On the merits of a libertarian Somalia

No, agreed, it\’s not a form of libertarian society that I would want to live in. As many Somalis also do not want to live in it. But there are still interesting and useful things that even The Guardian finds it necessary to point out:

In conflict-riven Somalia, for example, fierce unregulated competition has made mobiles affordable and prevalent, whereas internet penetration stands at 1.14% of the population.

\”Fierce unregulated competition\” apparently has its uses……

Has my sister been writing to The Telegraph?

The only person I know who lives there is my sister so obviously this must be her:

I hope you enjoy spending time with them as much as I do every year, following the conversation as it echoes, sometimes answered, sometimes ignored, from Piddletrenthide in Dorset

That\’s re the new book of unpublished letters to the Telegraph.

It\’s just that I can\’t see the Torygraph as being quite her paper. And it most certainly won\’t be for the other half of the family there.

Hmm. Maybe Piddletrenthide is actually large enough to have more than one house in it?

Sounds sensible

President Francois Hollande is pushing through legislation to increase taxes on beer by 160pc to help fund struggling social programmes as France tries to contain a budget deficit hit hard by the economic crisis.

Tax consumption, not incomes. And tax the consumption with the least elasticity of demand to price.

Blimey. Has a Frenchman actually done something economically sensible?

In which I suggest that perhaps the regulators might like to pull their fingers out?

So Hitachi is going to build nukes in the UK.


Hitachi unveils £20bn plan to build nuclear reactors in the UK
Japan’s Hitachi has revived Britain’s ailing nuclear power ambitions with plans to invest £20bn in building at least four reactors in the UK.


And now for the bad bit.

Major obstacles remain before Hitachi can take a final investment decision or begin construction, however. The company has yet to begin the process of securing design approval to use its Advanced Boiling Water Reactor (ABWR) in the UK, which could take up to four years.

\”Securing design approval\”. Those regulations that Heseltine and all to the left of him insist do not affect business in this country. Spotty berks with clipboards insisting that the hand washing sink must be no more than 3 metres from the reactor and no less than 2.

However, sources suggested approval could come more quickly given the ABWR is licenced for use in countries including the US, and Hitachi has four of the reactors operating in Japan, which were built on time and on budget.

Great. They work. Tell the berks to fuck off and send in the bulldozers immediately.

Fun story about Zils.

In a subtle sign of defiance after his cortege was criticised for blocking Moscow traffic on his twice-daily ride to the Kremlin, Mr Putin will ride in the ultimate symbol of Russian power.

\”Limo Number One\”, as the vehicle has been dubbed, was especially made for the head of state and took six years to complete. The six-door ZiL 4112R has a huge 7.7 litre engine, calf-leather upholstery and a video screen to show passengers the road ahead even when shutters are drawn over the windows. It weighs 3.5 tonnes, has a top speed of 125mph and covers about 18 miles per gallon of fuel.

I wouldn\’t want to swear to the truth of this story (I think I first saw it in PJ O\’Rourke, make of that what you will).

To make a car body you need, umm don\’t know the technical word, a mould. A form if you like, which the machine then stamps the sheet steel into the right shape over. This is what makes the body, the bonnet, the roof, etc.

The Zil is actually built using the old Chrysler Imperial forms (err, molds?) from the 1950s. Back then the US body shape changed every year: so new molds every year. The Russians bought one set one year and have been using it ever since.

Obviously, such molds wear over time. It\’s said that you can tell how old or new one is by looking at the crispness of the folds and tucks in the body shape. The cleaner they are the older the car. For the wear and tear of use over the decades has led to blurring of said molds.

Too fun a story to be actually checked of course.

Foreign aid is very important, oh yes!

Some 12 million euros (£10 million) was given by Ireland, Norway, Denmark and Sweden but the Irish government has since been told by Ugandan auditors that the sum has gone “missing.”

The money had been intended for a “peace recovery and development programme” in the north of the country, which has seen decades of conflict and destruction.

No British money was included in the missing fund, but Whitehall officials said that as a precaution they had suspended British aid payments of £4 million-a-year to prime minister Patrick Amama Mbabazi’s office.

A Department for International Development spokesman said: “We take these allegations extremely seriously and have already suspended UK aid to the Office of the Ugandan Prime Minister.

“We have set up an independent audit to investigate alleged fraud.”

Apparently the chief accountant is one of those under investigation.

But of course it\’s the evil multinationals who are really the villain of this piece. If only they paid more in taxes to satisfy the WaBenzi\’s desire for the good life then this just wouldn\’t happen, would it?

Introducing the new Heseltine economy

Pretty much the same as the old Heseltine economy actually.

This is fun though:

In recommendations that are likely to surprise some of his Conservative colleagues, Lord Heseltine says that regulation, particularly from Europe, is not a major problem for British business.

“I reject the premise that regulation in itself hinders growth. Good, well-designed regulation can stop the abuse of market power and improve the way markets work to the benefit of business, employees and consumers.”

There certainly is some subset of regulation that can do that, yes.

However, Lord Heseltine believes that such complaints are unfounded. “If you want to talk about bureaucracy, you should start looking at the bureaucracy that exists. There is enormous bureaucracy today,” he said. “If you want to build a house or build a road or build a school or whatever it is, there are immense checks and form filling and regulations, much of which could disappear under my proposals.”

But it appears that that\’s not the subset of regulation that we actually have.

But I can tell you what the problem is with the general theory that Heseltine is working under. It\’s an adaptation of something from Chris Dillow (pbuh). Heseltine was indeed a successful magazine publisher. And his company (Haymarket?) was, as are all such companies, an example of central planning. For that\’s what companies are in the main, little islands of central planning in the greater sea of chaos that is the economy. Which is the problem that we have with successful businessmen telling us how to run the economy.

They know, absolutely, that planning works. For they\’ve done it. But there\’s two problems with this. Firstly, what works at the micro scale does not at the macro. If this were true then macroeconomics would be very different indeed from what it is. The second is that there is survivorship bias here. We only get to hear from the people whose planning was successful: disregarding all those who planned but failed, knocked off course by that general chaos. Something which does in fact happen to the majority of business enterprises: for all their planning.

Which leaves us in an interesting position. We\’ve the teenage trots on one side, who are adamant that planning should work in theory. And these businessmen on the other, who know that it works in practice. But both are wrong at the level of the entire economy, albeit for different reasons. Or perhaps not so different reasons: sure, you can plan within an organisation but an economy just isn\’t an organisation of a size or level of complexity that can be planned.

Slightly odd middle class we\’ve got

Workers with children who earn just under £50,000, the threshold at which the benefit starts being taken away, would be better off turning down extra work because much of it would simply be clawed back by the Government.

This means that overtime would be a “waste of time”, according to Steve Wade, a director in the tax and pensions division of accountants KPMG.

From January, any household where one person earns more than £60,000 will lose its entitlement to full child benefit. Households where one person earns between £50,000 and £60,000 will lose some of the benefit, depending on how much they earn.

While what he says is true I\’m not all that sure how important it is.

How many people on c. £50k a year get paid hourly and thus qualify for possible overtime payments?

I\’d have thought that pretty much everyone at that level was on a salary and thus not really affected.

Anyone know the numbers?

From the comments and tough to disagree with

There *are* deserving poor – political refugees, the modern equivalent of Huguenots and 1930s Jews. New Labour treated them like dirt, herding them into concentration camps or placing in council flats that Glaswegians from the Gorbals would not take, and simultaneously refusing to allow them to earn a living and setting benefits at half the level for UK/EU citizens.

I endorse this vituperation.

The Amazing Mr. Murphy

Looking at the front page of his blog today.

We have a description of unitary taxation:

Imagine a Swedish company with 25,000 employees in Sweden, 25,000 employees in France, and five tanned accountants throwing paper aeroplanes in a sweaty booking office in the Cayman Islands.


Now, enter Unitary Tax!

Unitary tax involves taxing multinational corporations according to the real economic substance of where they actually do business.

Where is their workforce based? Where are their assets actually held? In which country do they really make their sales?

Under unitary taxation, France and Sweden would get to tax (almost) half of the corporation’s overall profits at their own tax rates, and only tiny weeny amounts of its profits would be allocated to Cayman to be taxed at its zero percent rate.

OK, that is indeed unitary taxation.

Couple of posts down we have country by country reporting.

It’s often said that tax havens are a part of life and there’s nothing we can do about them. That’s not true, as a new series on the Tax Justice Network’s Tackle Tax Havens web site shows.

Take as an example, one of my favourite topics, which is the fact we simply can’t find out what multinational corporations do in any particular country in which they trade. As Tackle Tax Havens puts it, suppose a U.S. multinational corporation mines natural resources in Africa and sells them in the United States and Europe and it sets up a complex array of subsidiary companies, each with a different name, in tax havens across the world to do this.

In that case that corporation could shift billions in profits to those tax haven subsidiaries, avoiding tax in countries with stronger tax regimes in the process.

When it publishes its annual report, the multinational rolls up all the information from each country – trading, profits, tax payments and so on – into one big lump.

No-one – governments, the public, even investors and shareholders – knows what happened where in that case.

With this piece of accounting trickery, a huge black hole has been created in corporate accounts that the use of tax havens makes doubly impenetrable because no accounts can ever be obtained from those places.

Then enter Country by Country Reporting!

Under country by country reporting, the multinationals would have to break their information down by country of operation – including in each tax haven – so that citizens and authorities can see what the corporations are doing in their countries.

With this single accounting measure, countries, rich and poor, will be able to call multinational companies to account at last.

Countries could tax the companies properly. They could fund the schools, roads and hospitals their citizens need, without having to beg for aid.

That makes country by country reporting a blast of transparency that could change the world.

And indeed, that is country by country reporting.

But the bit that our Amazing My. Murphy has missed. But we shouldn\’t be too hard on him, he is after all a retired accountant from Wandsworth, one more used to aiding luvvies claim for their greasepaint than advising governments or major corporations. The bit he has missed.

If you have unitary taxation you do not need country by country reporting. You do not need to know where the profits are made. Because you\’re not going to tax the profits where they are made. Instead, you\’re going to allocate the profits by formula. In which case you don\’t give a damn where they are made: you just look at the headline number in the accounts and apply your formula.

And yes, the tax authorities already do know where your staff and sales are. Because you\’re already collecting tax from them (PAYE and VAT respectively) in those jurisdictions.

Ritchie is now proposing a taxation method that makes entirely irrelevant everything he has been campaigning for for the past decade. Ain\’t that cute?

Err, Ritchie, other countries have different laws you know

The Swiss banks made available an opportunity for organised crime to take place, and did so very deliberately. Tax evasion is crime: it is theft just like any other theft. Tax evasion in a Swiss bank account also never occurs by chance: it is a pre-meditated act.

Tax evasion ain\’t a crime in Switzerland.

And yes, there is good reason that we don\’t insist that a sovereign nation gets to have laws imposed on it. For example, in 1934, Germany did not get to say that all Jews in England must wear a yellow star.

In fact, that\’s what being a sovereign nation means. That the place gets to make its own laws. When Capitalism was outlawed in 1930s Soviet Union it was not outlawed in Britain. You see how this works?

Dean Martin silly!

As Frank Sinatra put it (probably after a few sherberts): \”I feel sorry for people who don\’t drink. When they wake up in the morning, that\’s as good as they\’re going to feel all day.\”


Martin also giving us the line \”I\’m not drunk if I can lie on the floor without holding on\”.

No, just say no

Russia offers to build Britain\’s nuclear power stations
Moscow has offered to help Britain build nuclear power stations in partnership with Rolls-Royce, Russia’s deputy prime minister Igor Shuvalov has said.

God alone knows what Rolls Royce is doing with this deal. But no, just no, for two reasons.

1) If you think the Russian oil and gas business is bad then you just wait and see what the nuclear side is like. A ghastly, appalling, money pit of bribery and corruption. I do know, I have been involved with it.

2) You\’d never get any reactor built in Britain if it had the word \”Russian\” associated with it. Doesn\’t matter if they\’re the finest engineers on the planet (they\’re not, although they\’re good), all you\’ve got to do to close the entire programme or idea down is to utter one single word.