Is Prem Sikka really an accounting professor?

Because he doesn\’t seem to grasp even the basics of business organisations:

Any comparison of the Prince’s direct (income tax) and indirect (VAT) tax contribution with that of an ordinary citizen is difficult, but statistics provide some food for thought. The most recent government statistics show that for 2011/12, direct and indirect taxes added up to 36.6% of the income of the bottom 20% of the UK households, and averaged at 34.6% of the income of all households. The £4.426 million tax payment by the Prince amounts to 23.2% of his income.

So now we know where Austin Mitchell\’s numbers came from.

As The Prince already pays income tax on the Duchy’s surplus, the Duchy does not pay Corporation Tax. If the Duchy also paid Corporation Tax, The Prince would effectively be taxed twice on the same income. Only companies pay Corporation Tax; many other large organisations which are not companies pay income tax.

Yup. Effectively the Duchy is taxed as a partnership with one member.

And partnerships are taxed, rightly, on net income, not gross. The Prince deducts the cost of being the Prince from his income before paying 45% income tax on it. This would be true of an accounting partnership, would it not?

In fact, isn\’t this exactly the way that Murphy Deeks Nolan was taxed of old? Isn\’t it, in fact, exactly the way that Richard Murphy\’s currently extant accounting practice is taxed? Gross income minus expenses to give net income subject to income tax? In fact, isn\’t it how Prem Sikka\’s outside income is taxed? Fees for speaking/writing minus costs of speaking/writing to give net income which is taxed?

What tossery is this?

40 thoughts on “Is Prem Sikka really an accounting professor?”

  1. In your anxiety to have a pot shot at anyone who disagrees with you, you are really showing your ignorance. The Duchy is not a partnership and has never been one. So why are your saying that it is or could be? Even partners in partnerships pay capital gains tax when the gain is assigned to them. Prince/Duke Charles does not and neither does the Duchy. Us lesser mortals also pay inheritance tax. The Duke does not. If you look at the recent FOIA case you will see that the Duchy is a commercial organisation , but does not pay tax because a subservient parliament has given it exemptions. What is wrong with having a public debate about it?

  2. The problem with Prem’s analysis is that he is treating gross income as net – he is assuming that the official costs are not tax deductible. If we treat them as the costs of doing business, then the tax rate is 47.5%. (after throwing in VAT)

    We could describe PoW as a sole trader.

  3. The problem is that the Duchy is not a company, or a partnership, or a trust, or a sole trader, or an unincorporated association, or any of the other things for which there is a known tax regime.

    This is probably why it has a separate agreement setting out how it will be taxed. One-off organisation, one-off tax regime. Under it, it appears that the Prince is paying tax at 50% on the net income from the Duchy, after expenses.

    To assess whether the tax it pays is fair compared to other entities, we therefore have to try to approximate it to one of those other entities. The question is which is most appropriate.

    Some people, the PAC included, have suggested that it should be taxed as if it were a company. The PAC’s logic seems to be that everything else which does business is taxed as a company, and therefore the Duchy should be. This doesn’t stand up logically, as it ignores the existence of partnerships and sole traders; but if you take that approximation then you should be looking at the whole picture: as the Prince gets income from the Duchy, we should look at corporation tax in the Duchy and then dividend tax in his hands. This ends up with total tax of about 50% of the net profit.

    Partnerships and sole traders are taxed in very similar ways, and to the level of detail we’re looking at can be regarded as identical: the profits are charged to income tax at about 50% of the net profit.

    Another way to look at it is to ignore the Duchy altogether and assume that the Prince is doing all this trading on his own account. Again, you would end up with pretty much the same level of tax: 50% of the net profit, after expenses.

    Whichever approximation you use, you end up with the tax due being much the same as is being paid. So if you want to argue that the Duchy and Prince are between them underpaying tax, then you need to find some way of arguing that one or the other should be treated more harshly than an equivalent company, individual or partnership would be.

    The only line of attack I can think of is to argue that the Prince’s expenses should come out of taxed income, rather than being deductible. That however would seem to fly in the face of normal UK tax principles – employees, office-holders and the self-employed would normally get to deduct them – so I can’t see that it holds much promise, even if it is the best I can come up with.

    One thing which hasn’t been much mentioned is that, as corporation tax rates are decreasing, if the Duchy were to be taxed as a corporation in the future the total tax due would probably be rather less than if all the income were subjected to top-rate income tax. So adopting the PAC’s suggestion might actually reduce the Prince’s tax bills in future.

  4. Rabid Murphy, Prof Chicken Tikka, Austin Cvnt Mitchell and Mad Hodge are not stupid people.

    They understand the issues well but choose to be deliberately obtuse or economical with the actualite for their own political ends.

  5. Davinder Kohli

    1. Have another read. He doesn’t say it’s a partnership; he says it is TAXED as a partnership with one member. So; analagous to a partnership.
    2. Your point on CGT and IHT is all yours. HRH is heir to the throne, doesn’t pay CGT or IHT, neither does Her Majesty; simple as that. It therefore cannot be tax avoidance. That is how it is done here. I came here and stay here because I like it like this. You are free to dislike it. You are free to bugger off if you like. But please do so with a bit of honesty. If you don’t like him because he’s royal, say so.

  6. In addition to ignorance about costs, isn’t he also comparing the percentage paid by Chuck in direct tax to the percentage paid by Teh Proles in direct plus indirect tax?

    Of course, that figure for Teh Proles suffers from a variant of Worstall’s Fallacy.. those people are clear net recipients from the tax/benefit system. But as we’re comparing with a member of the Royal Family, any correcting of such happens on both sides and probably doesn’t favor his royalness.

    @ Ironman
    It may be that DK just doesn’t like Charles because he’s a royal.. but some of the criticism of the criticism of Charles does attempt to make it look like he’s subject to the same rules as the rest of us.. when that’s obviously not the case. We can point out the idiocy of Austin Mitchell whilst still questioning whether things are as they should be.

    Leaving the country is one option for people who don’t think Charles pays enough tax… but so is stating an opinion.

  7. @Ironman: What next concentration camps, exile, or firing squads for anyone disagreeing with you, or wanting the monarchy to pay taxes like anyone else, or even daring to air opinions which you find unpalatable? Don’t worry, I’ll still defend your right to speak.

  8. Davinder Kohli

    What a dirty, dirty, dirty way to argue, However, thank you for showing us all what you truly are like. You are a true Richard Murphy disciple.

    I actually said “you can bugger off IF YOU LIKE” (note the option) – you respond by using the Ken Livingstone, standard Marxist retort of comparing your opponent to a concentration camp guard; filthy.

    Right. Having showered myself, to the question at hand: My point, to you and to all, is simple; if you dislike him for being royal, then say so. But please don’t pretend to be concerned about tax avoidance when it is nothing more than the tool you’ve decided to pick up today.

    If you were genuinely concermed about people avoiding taxes you would have been on this blog condemning Livingstone when he got caught bang-to-rights during the mayoral election. You weren’t here though were you. Instead you kept your head down while Ken shouted ‘smear’ and Ritchie warned everyone on his site ‘it’s not about the individual’.

  9. That is how it is done here. I came here and stay here because I like it like this. You are free to dislike it. You are free to bugger off if you like.

    The worst kind of racism.

  10. Surreptitious Evil

    That is how it is done here. I came here and stay here because I like it like this. You are free to dislike it. You are free to bugger off if you like.

    The worst kind of racism.

    Oh, really? Never mind that the sort of racism that rapes, lynches and murders – sod it, what about the sort of racism that merely enshrines lesser legal rights? – would probably be considered, by its victims to be worse than a suggestion, on a blog, that a commentator might not be appropriate integrated, you miss the logic. Which isn’t a surprise, you being the pathetic drivelling WGCE-worshipping cretin that you are.

    “Free to bugger off, if you like”, logically, is also “free to not bugger off if that’s what you want.”

    Now bugger off, please.

  11. On the subject matter of racism, as on so many occasions, Surreptitious Evil really does stand as the last word.

    As a personal response to the charge of racism: what, if anything Arnald, allows you to say that about me? Do you know
    1. Anything about my personal background
    2. Anything about my ethic origins
    3. Anything about the colour of my skin?

    What a prat.

    Now, is anybody prepared to write about Prince Charlie’s tax affairs?

  12. @Ironman:

    You have lost all sense of rationality. Anyone with a different view is now being labelled “a true Richard Murphy disciple” (whoever he is) and “standard Marxist” retort. Rather than engaging in a dialogue you find this desire to label people. Is this supposed t make you feel superior?

    I am not accountable to you for whatever I critique. If you want to talk about the original article and issues, fine, but don’t please unload you psychological baggage on to others.

  13. Davinder Kohli

    You’ve made my day. Richard Murphy is only a tax expert, economist and the country’s No 1 blogger on tax matters. “Whoever he is” Honestly! -‘m sure Prem Sekka could tell you all about him.

    So, now you’ve finished equating me with the holocaust, you’ll satisfy youself with questioning my mental stability. OK, but do you have any thoughts on Prince Charles’ tax affairs? Anything at all that reaches even a teensy bit higher than personal abuse?

  14. Oooh Ironman, you really are touchy. You got owned by Murphy when you accused him of ad hominems yet you come on here and bleat out so much offensive drivel. It’s no wonder he sees you how you are.

    As for the racist thing, the inference I read into

    “That is how it is done here. I came here and stay here because I like it like this. You are free to dislike it. You are free to bugger off if you like.”

    is that someone has “come here” and so is not allowed to criticise it because “that is how it is done here” and that such criticism is dishonest when the target of that criticism is Prince fucking Charles.

    They do it all the time in Guernsey. “There’s a boat in the morning”.

    You need to take some chill, brother.

    Surreptitious Evil is so literal he’s just an arse. Obviously racism when it’s out and out hate crime is “worse”, but I’m implying that within a more enlightened environment, constantly referring to “that’s how it’s done here” is just snide intellectual bigotry based on someone who may have “come here”, and followed usually by “some of my best friends have “come here””.

    Off with their heads!

  15. “Push back” doesn’t include calling Surreptitious Evil and arse; he so clearly isn’t it…oh he does not need my help.

    Shall we have one last go at what we on this blog call ‘debate’? Do you Arnald, davinder Kohli, Prem Sikka, Richard Murphy have anything to say about Prince Charles’ tax affairs beyong shouting ‘Prince Fucking Charles’? And if you do, do you actually have anything to say about the way he conducts his affairs rather than use it as a cover for really saying you are anti-monarchists who believe the Queen and her heir should be charged to tax in the same way as everybody else?

    The Thought Gang

    If you haven’t long since long the will to live:

    Yes, replubicanism is a legitimate viewpoint – I disagree. And you are free to hold it and to argue for it. And you are free – just like me – to bugger off if you find you dislike the way it is here so much that you wish to bugger off. BTW be sure to keep your passport so the Courageous State can still take your money money for all those state occasions attended by Her Majesty..and Lords Prescott and Kinnock.

  16. Ironman’s comments are not racist, but they concern me because I think they are advocating tax avoidance. If Davinder does bugger off, I expect him to continue to pay corporation tax in the UK.

    As far as the Duchy of Cornwall is concerned, if it quacks like a trust, walks like a landed estate, swims like an unincorporated business, it must be taxed at the highest imagineable rate.

    That is all

  17. @ Ironman

    Indeed. But one doesn’t have to be a republican (I’m more of a couldntgiveatossian myself) to argue that one or two of the many privileges enjoyed by the lucky sperm club should be curtailed.

    Although my point wasn’t even that. It was that it’s fair to mention that, notwithstanding the deep flaw in the criticism that is being levelled at Charles, it’s not the case that he has to pay tax the way that the rest of us do. One can point that out even if one has no particular interest in whether it should be that way.

  18. Indeed he doesn’t. And I am happy with things that way, because I am an ardent royalist. You may disagree with me and may think you’re very wrong to do so. However, I will not subject you to the sort of appalling abuse that regretably is the stock-in-trade of some of the contributors today. It is sad that, after one or two insults, they disappear, unable it seems to engage with the subject matter in any sort of genuine way.

  19. @ Ironman

    There was nothing remotely insulting in DK’s initial comment. It was a fair summary which betrayed no anti-royal sentiment and didn’t invite an ‘if you don’t like it then piss off’ response. Given that I’m pretty sure you’re not a huge twat, the tone of that came as a surprise.

    But that’s just my view of it.

  20. Prem Sikka is not only using a rubbish statistic – the data shows that the so-called bottom decile includes a lot of rich people employing servants and buying houses liable to stamp duty and the decile as a whole spent more than its cash income on VATable goods (that’s non-essential stuff excluding food, rent, public transport, children’s clothes …) – but is deliberately comparing Prince Charles’ income tax and VAT against ALL their direct and indirect taxes. For the bottom quintile income tax plus VAT amounted to 12.7%, not 36%. So he is overstating the burden on the bottom quintile by nearly 200%.
    Some of you may think that he is lying rather than, as Tim assumes incompetent: I couldn’t possibly comment.

  21. Oh, yes: I should have mentioned that 11% of the bottom quintile’s “income” is housing benefit which at the time that stats were drawn up went straight to the landlord and never touched their sticky paws.

  22. The Thought Gang

    And, without offering a bromance, I respect your view.

    Almost as an aside, I think Davinder Kohli DID start by trying to play the man, in the first sentence. However, my attitutde comes to me this way: I came to this country, quite young, but still I came here when my family had other choices. I still have other choices. I live in this country, I love its freedoms and love its security, based upon Rule of Law and due process. I do indeed love the Monarchy and this particular monarch. So I feel entitled to say to others, if you don’t like it you can always bugger off. they can of course stay, but |I wish they’d bugger off. Now the dust has settled, I do think it was unfortunate that I expressed this to someone called Davinder, becuase that does lend it a certain flavour that I could have done without. However, my sentiment stands and will always stand; this is a bloody good country.

    I am angered by marxists whose goal is to destroy those freedoms and replace it with a totalitarian or “Courageous” state. Because make no mistake, that is what they want to do. I am angered by their ability to seduce the vulnerable, the yound and impressionable or the plain stupid. I am particularly angered when they sieze an opportunity to attack the counrty’s institutions – as is their internazionale mission – and try to disguise it under a different banner.
    So today Prem Sikka writes ostensibly about The Duke of Cornwall’s tax planning, when there isn’t any evidence of tax avoidance. What he he really wants is to attack the monarchy through its settled, constitutional tax arrangements. His piece is littered with hints at his true sentiments.

    Similarly Davinder Kohl’s opening comment do indeed reveal anti-royalist views.

    Likewise Richard Murphy followed the same disguised path and betrayed the same sentiments. His exchanges with Tim Worstall and Pellinor were ludicrous in the extreme.

    So it is that Richard Murphy will stand on his head within a couple of sentences to argue a point even when, as today, he pretends to be arguing another. So it is that he will apply different standards to different people depending on who he thinks is on his side of the war. So it is that he will not even publicly accept that he is a marxist and insists on the hilarious claim to be a social democrat.

    It isn’t just their views or their analysis; it is their lack of honesty.

  23. Davinder Kohli also claims Prince Charles avoids paying CGT at 28% when he pays income tax at 50% on income *including capital gains*.
    Us lesser mortals don’t pay IHT – that is deducted from “estates” large enough after the individual has died. Prince Charles has not yet died so why should he pay IHT? Because Davinder Kohli says that he should!
    Maybe the Scott Trust should pay IHT every time a new CEO of Guardian Media Group is appointed? If not why should the Duchy of Cornwall pay IHT every time a new Duke is created?

  24. Ironman (Various)

    I’m trying to avoid engaging the Trolls – it only feeds their sense of self-importance. But to your point, the sentiments in Murphy’s piece are utterly deplorable and thinly veiled Republicanism but rather characteristic of him – a low rent thug masquerading as an intellectual. You’re searching in the wrong place for honesty and intellectual rigor. Their beliefs have been shattered by history and once more sober analysis is presented to them, all they are left with is abuse….

  25. Surreptitious Evil

    Surreptitious Evil is so literal he’s just an arse. Obviously racism when it’s out and out hate crime is “worse”, but … is just snide intellectual bigotry

    So, you felching cockweasel, you didn’t actually mean what you wrote? From this point of view, all you came out with is the pathetic leftist cry, meant to stifle all debate but seen by many of its dim-witted wielder as a winning point of “wacism”.

    On the point, one of the things that amazes me about Great Britain is the number of people who come here, escaping oppression, poverty, torture and murder and feel, pretty damn immediately, that the best thing they can do to repay our (relative) hospitality is to turn the UK (note the change of context) into a ersatz copy, with a couple of significant-only-to-them differences, of the hellhole they escaped from.

    You can understand Arnald’s anguish – Guernsey (which is, of course, part of Lesser Britain) isn’t some pox-ridden socialist hellhole where the inmates’ only joy is the knowledge that “all animals are equal”. Arnald, of course, being one of the elect, would me “more equal than others.” So he must strive to change it. Luckily, he appears as effective a revolutionary as he is a debater.

  26. …one of the things that amazes me about Great Britain is the number of people who come here and…feel… that the best thing they can do to repay our…hospitality is to turn the UK…into a ersatz copy…of the hellhole they escaped from.

    The exceptions being some of your best friends, I suppose?

    Or Americans and Irish?

    all they are left with is abuse….

    so you felching cockweasel

    That’s me in my place.

  27. As a rather bizarre postscript: ton a certain other blog there is an extremely tenuous insertion, in a piece on blood services, of a riposte. It is an attempt to condemn “the Cowardly State”.
    Look around you Richard, the Cowardly State is doing just fine. By any real (i.e. Not made up) measure its people are healthier, wealther and happier than any of our ancestors and certainly than those poor souls subjected to the Courageous State through the 20th Century.

  28. If the Prince gets to deduct the costs of being the Prince from his income for tax purposes, why don’t I get to deduct the (much lower) costs of being me from my income for tax purposes?

  29. @ James V
    Ask your tax inspector! As a self-employed individual all my *business* expenses (but not my personal ones) are tax-deductible. It appears that the Comptroller of Prince Charles’ household applies an equivalent practice to income from the Duchy.

  30. JamesV

    He gets to deduct the official costs – so I assume when he travels to open new buildings or events, costs of running his office etc. If you were a sole trader, you could deduct office costs, travel costs (not commuting, but business trips) as well. He pays for his personal costs of being him (hols, clothing) out of “post-tax” income.

    There may well be an argument about where the line between official costs and personal are drawn.

  31. John77

    Sorry, that’s a terrible argument (guardian should pay IHT every time a new chairman is appointed):

    IHT would be payable not by the corporation (guardian or Duchy – treating it as a corp at this time), but by the beneficiaries who inherit the shares in the corporation (or control or however the Duchy is set up).

    You can make the arguments that

    1) The Royals should not be subject to certain laws due to our constitutional settlement (just as the Sovereign cannot vote)
    2) That IHT is an iniquitous tax (tax paid on income already taxed) – a weak reed IMO
    3) That IHT is too high for Laffer Curve purposes (I think this is true) and that it is also too easy to avoid if one is sufficiently rich

  32. @ ken
    I was trying to illustrate the utter ridiculousness nature of the IHT claim
    Since Gifts inter vivos are not liable to IHT after seven years, there has *never* been an occasion when the Duchy of Cornwall would have been liable to IHT in all the period since IHT/Death duties were invented. Go away and check if you doubt me. Yet trolls are claiming that Charles should pay IHT on it. Why? Because they don’t care about inconvenient facts.

  33. @john77

    I agree, but the Grauniad example wasnt quite right. That said, I’ve been going through the stuff on the Duchy and I cannot find an exemption from IHT for the Duchy (imagine a situation where Charles becomes king and then passes away in less than seven years). Does this mean that the Duchy is subject to IHT?

    I suspect that the Royal tax exemption (and its nature as Crown estate) probably trumps IHT, but I’ve not found explicit statements to this effect.

  34. @ ken
    There has not been any instance of a Duke of Cornwall inheriting the Duchy from a previous Duke and said previous Duke dying in less than seven years since legacy duty, the predecessor of Death Duties,the predecessor of IHT, was invented in the eighteenth century.
    So Prem Sikka is arguing that Charles should be paying IHT on exempt inter vivos gifts. Hence my Grauniad example.
    If you are slightly confused thereby, please accept my apologies. At that stage I had I found something different wrong with Prem Sikka’s claims every time I looked and I was struggling with how to deal with a tissue of errors in a civilised manner.
    Firstly PS calculates Charles’ Income tax plus VAT as a %age of the Duchy’s gross revenue not net revenue, secondly he contrasts it with *total direct and indirect taxes* for everyone else (so roughly doubling the average tax rate and almost trebling it for the bottom quintile), thirdly he uses an income figure that is known to be wrong since ONS states that the amount of tax credits paid out by HMRC is 50% greater than that recorded in the EFS survey so the bottom quintile’s income in understated by a significant amount (and the tax rate overstated, fourthly he complains that Charles does not pay IHT when there would be no charge to IHT anyway, fifthly he – no sorry Davinder Kohli – claims Charles does not pay CGT when he is paying tax at 50% on the Duchy’s net income, including capital gains, which is higher than the 28% CGT rate, – what PS claims is that the Duchy is exempt from CGT, so he wants the Duchy to pay CGT on top of Charles paying 50% tax *on the same gains*, sixthly he claims that “This means that the Duchy does not make any financial contribution towards the social infrastructure used by it.” when it largely creates that social structure out of its own income, seventhly he says “Duke of Cornwall, always the male heir to the throne” not George VI, not George V, not William IV – obviously not Her Majesty nor Victoria – a minority of male heirs in the last two centuries and less than one in three of all heirs; eighthly I’m fed up even if you aren’t

  35. I may be wrong on this, but as the Duchy always belongs to the Duke of Cornwall (whoever that may be), I would be surprised if IHT could be due on the death of a former Duke of Cornwall.

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