This is absolutely fascinating

From someone wibbling in a guest blog at Ritchie’s:

Ignoring for a moment Barclays role in the recent LIBOR scandal and its impact on public finances, the real public procurement issue appears when we explore Barclays corporation tax profile, and the implications of tax avoidance on public sector finances.

Local government is reliant upon central government grants for its survival, so you might think that Barclays paying a shockingly low 1% effective tax rate on £11.6bn UK profit in 2010 may be cause for alarm within public procurement circles. You would be wrong.

Justin Thompson, Director of Social Inclusion, Knowsley Metropolitan Borough Council said that: “if you can’t measure it, from a procurement perspective, it doesn’t exist.”

Justin is correct. Through my procurement research, I knew council banking procurement is completely silent on tax avoidance and the use of tax havens. As councils do not measure corporate tax avoidance within procurement, they effectively pretend it does not exist.

As the session was opened up to questions from the floor, I asked Nick Starkey how we could take social value commissioning seriously, whilst public procurement frameworks continue to ignore the glaring issue of corporate tax avoidance by firms like Barclays, which robs councils including Oldham of the taxes required to fund basic services including schools?

Starkey’s response was that he would need to take the issue up with HMRC.

With brutal 34% austerity cuts to council funding since the 2008 banking crisis and 2010 budgetary review, anger at the banks runs deep within local government.

A motion for a UK Robin Hood Tax on financial transactions has now been passed by 46 UK local authorities, where the proceeds of the Robin Hood Tax would fund struggling public services impacted by austerity cuts stemming from the banking crisis.

In the past fortnight, a new campaign known as the ‘Fair Tax Mark’ has launched to attempt to reframe the tax debate, by promoting the payment of fair taxes as a badge of honour, and point of differentiation vs tax avoiding competitors.

There is no industry where a Fair Tax Mark is more urgently needed than the UK banking and financial services sector, where corporate tax avoidance is not only the modus operandi for the banks themselves, but a highly profitable consulting business.

I well recall that Barclay’s tax bill.

The reason that the bill was low was because Chuka Umunna (yes, it was he) was comparing the UK corporation tax bill against global profits. And there were a few adjustments that needed to be made. For example, Barclay’s made a vast profit (some 50% of all of them) by selling off a subsidiary. On which they gained the substantial shareholding exemption (SSE, the same thing used by The Guardian more recently). Something specifically brought in by Gordon Brown so this was within both the letter and the spirit of the law. There were also tax losses from previous years to bring forward: again, entirely spirit and letter of law stuff. Further, there were taxes paid to other governments abroad where Barclays had made profits abroad.

All leading to Barclays having a small liability of UK corporation tax. And the thing is none of this was about evasion, avoidance, tax abuse or anything else. It was the straight and strict application of both the spirit and letter of tax law.

Which leads to an interesting conclusion. That Barclay’s tax bill would almost certainly pass the Fair Tax Mark. Yet it is that very bill itself that is being used as the justification for why there should be a shakedown operation Fair Tax Mark in hte first place.

32 thoughts on “This is absolutely fascinating”

  1. And another thing …

    Why are they relying on 2010 figures? The 2013 figures are out.

    Except, of course, they show an overall profit of £5.1bn and just over £2bn in tax charge (although I’m not sure how much of that was paid to HMRC and I can’t really be arrsed spending the time to find out.)

  2. On a side note, if Knowsley Metropolitan Borough Council can afford to employ a ‘Director of Social Inclusion’ it must be absolutely awash with cash.

  3. What MC said.

    “anger at the banks runs deep within local government.”

    Parasites are angry at their hosts, so give them all your money.

    Those fact finding trips abroad, diversity and inclusion strategies, and chief executives earning more than the Prime Minister don’t pay for themselves.

  4. “Justin Thompson, Director of Social Inclusion, Knowsley Metropolitan Borough Council”

    Aah, that’ll be the monkeys at Knowsley Safari Park then. You’ve not got a non-job Justin

  5. I see the ICAEW has endorsed the Fair Tax Mark – presumably as it means some fees generated for its members. However my point on this is that, unusually, Ritchie records his appreciation of the ICAEW for its approval of his new pet project, rather different to the very critical comments he generally makes about ICAEW being captured by the Big 4, all pinstripe mafia etc etc.

    Justin Thompson
    Director of Social Inclusion, Knowsley Metropolitan Borough Council
    Justin Thompson is Knowsley’s Director of Social Inclusion. His area of responsibility includes the borough’s Social Growth agenda, Early Help, Stronger/Troubled Families, the Youth Offending Service, Community Safety and he is lead commissioner for the recently established Knowsley Youth Mutual. The role around the Social Growth agenda involves providing support to the growing social sector in the borough, finding ways to make individuals less dependent upon the state and encouraging council commissioners to consider social sector solutions. He has been responsible for corporate policy and performance, neighbourhood management, the Knowsley Partnership and a range of other services.

    Not all bad then – no mention of diversity or gender issues.

  6. Re; Justin Thompson

    Having read some of that, I think, er, I think it’s fez up time for me. i have a tangential knowledge of some of what is described…and yes, some of those things are indeed useful, even important services. some of it is meaningless bullshit of course. I’m willing to bet though that the real stuff takes up enough of his time for us not to bother with the typical “inclusion” stuff.

    I also note his contribution to this particular piece is “if you can’t measure it, from a procurement perspective, it doesn’t exist.”

    Well, to be honest that is the only bit of common sense there isn’t it.

  7. That said, let’s look again at what Ritchie is proposing here. A local council is supposed to forego the best tendered bid and lose a lot of money because the bidder has failed a test imposed by someone else (Tax Research UK?). That council will OF COURSE receive full compensation, Full Compensation, no quibbling, no dodgy formula applied. and please note, the saving to Oldham Council in the example was 26%. So we are talking considerable savings lost to the council in question and considerable central compnesation.

    Then that authority that ruled on the bidder’s tax worthiness will absolutely not face any legal challenge. Because the disqualified bidder will accept that, despite not suffering any penalties and doing nothing more in Law (please note: IN Law!) than disagree with HMRC ( and maybe not even that), it has been bad and evil and looked sort of Barclay’s-like.

    I’m sorry; another complete dog’s breakfast from The Lord High Tax Denouncer.

  8. Hopefully that interchange is safely cached should some credibilty be inadvertently attached to the shitemark in the future

  9. Yes, Adrian was excellent. He also gave another example of Ritchie’s Law, a very singular varient on Murphy’s Law: the more dispassionate and objectiive you are, the more illogical, abusive and downright nasty Ritchie gets.
    A slight gear shift: I personally possibly need to change my moniker to ‘Broken Record’ because I’m returning to a favourite theme, tax incidence. Lee T on Ritchie’s blog noted that he would welcome some reference to tax avoidance in public procurement because he finds it near impossible to compete with tax avoiding competitors. Ritchie offered no objection to this (because it supported THIS present argument).

    Now, how can tax avoidance possibly lead to a competitive advantage if, as Ritchie claims loud and often, the incidence of CT is only, ONLY, on Capital?

    To illustrate by example (entirely theoretical you understand): a professional person, with outstanding talent and experience in their field (shall we say accountancy?) Would like a life change, to move to the country and start writing a blog. His/her problem is he/she needs to make a living, which he (I’ll drop the she; sorry Frances) just can’t achieve from blogging, at least he can’t AFTER TAX. To rub salt into the wounds, as he is trying work his way around this problem he finds somenody else has stolen the niche he thought he had carve out. This interloper has got a real sweet deal from a trust with an ‘educational’ arm. He declared the money he was receiving to write a blog (which must adopt a certain line whilst purporting to be independent) to be an educational grant for research. Our talented would-be blogger is terminally undercut.

    Now, does this (entirely fictitious bearing no relation to any real-world case study at all) example seem so very far-fetched?

  10. ” The [EU] Treaty is neoliberal”. R Murphy

    The man needs to start wearing a peaked black hat and a moustache – he’s behaving more and more like an insane Witchfinder General.

  11. This fresh in today:

    “This then is my first point about ‘fair tax’: it is not a purely objective view of what is legally due, or not. There is much more to it than that.

    For example, it is impossible to say that there’s a right amount of tax that every company must pay.”

    Impossible is it? But completely possible to take the ‘not purely objective’ opinion of somebody unconnected to a tender for a public contract and use it to disqualify a bidder from the process?

    Mr Murphy, do you actually think about anything before you write?

  12. So Adrian has his answer. The Fair Tax Mark is a subjective seal of approval given by Mr Richard Murphy to whoever he sees fit, applying whatever criteria he fancies on any given day.

    Immitation is not always the sincerest form of flattery; it can be theft of intellectual porperty. To that Mr Murphy Richards may wish to consder legal action to protect the integrity of the Mark of Fair Tax.

  13. Ironman, I’m not sure that’s true. Murphy did say, in response to a direct question from me, that if a company got 14 points out of 20 they’d have to give it the mark:

    “Your points will be in the criteria soon

    They will change and develop – but if a company meets them we have to give the award – assuming they pay”

    Note that the criteria may change, but as the company needs to re-register each year it will presumably be tested against the ones in force at the time. Murphy has also said that the bar may be raised, and there are some relaxations for companies in their first year which will naturally raise the bar when they disappear in the second and subsequent years.

  14. I notice that Murphy’s done a new post to say that there has to be subjectivity in assessing fairness, which is interesting as the criteria are almost entirely objective at the moment. Presumably the changes he talks about will be to introduce the subjectivity.

    Though there is a real tension here: to be an acceptable kitemark the criteria need to be clear and useable by outside assessors, but to be fair they need to be subjective. I think Murphy has to come up with a clear and detailed definition of “fair” if he’s going to reconcile this position.

  15. Pellinor

    You have a point. I think though that I am falling into the same trap as a few others, including Adrian and including – probably – Murphy.

    As I understand it the Fair Tax Mark applies to SMEs. Well, these won’t be the only entities tendering for public contracts. Indeed they quite probably won’t comprise the majority of parties tendering. So the large companies, the LLPs, the individual traders, will all be subjected to a different test, a test of ‘fair tax’ rather than the “The Fair Tax Mark”. That test, as Ritchie does make clear (in as much as anything can be clear as his sands keep shifting from day to day) cannot be wholly objective because it is impossible to say that there’s a right amount of tax.

    I think he needs to press the “it’s a pilot” button and bail out of this one.

  16. I think Murphy’s trying to run before he can walk. Some of what he’s doing there could be very valuable, but at present I think he’s failed to present a clear message about why the Fair Tax Mark does what it says on the tin. He may have some success with the media and other campaigners, so long as they don’t look too closely, but I’m very worried with his definition of “fair” as meaning “I can explain how I’m cheating on my taxes” (if one caricatures it – but only slightly), and flagging “I am doing what Parliament wants me to” as being potentially unfair.

    His language is also very perturbing. He explicitly talks about companies buying the mark, rather than paying an admin fee. He almost seems to be playing up to the caricatures people are putting about, and the parallels with selling indulgences. It’s certainly not what I was expecting: and I’d have thought the public would expect the mark to be something that is achieved or awarded, not “bought”.

  17. How can it be impossible to say there is a right amount of tax? Would HMRC not chase someone who was paying anything less than the right amount of tax.
    Admittedly I’ve only ever had small businesses, pretty sure I was paying the right amount of tax.

  18. Bearing in mind we are talking about SMEs here, this is a serious concern and, in case he’s wondering, not at all funny. These references to paying for the Fair Tax Mark beg all sorts of questions:

    How much are we talking about?
    To whom are payments made?
    What legal form will the recipient take?
    Will ‘surpluses’ be chargeable to tax?
    What ‘expenses’ will be paid from these fees and to whom?
    How much work does Mr Murphy envisage obtaining from these activities?
    How much income does he expect to derive?
    Does he believe his income will be chargeable to tax?
    Given his implicit support for the aggressive tax profile of certain high profile individuals (ken Livingstone), why hasn’t a certain satirical magazine never asked questions about Richard Murphy? Certainly it doesn’t display this degree of charity toward anybody else!

  19. The market can sort this out, surely.

    The Mark of Fair Tax and the Fair Tax Mark do precisely the same job but the Mark of Fair Tax is easier to understand and to obtain. I would think that Murphy can pitch his product at a significantly higher price point on that basis.

    A multi-year version would be simpler to administer and even more popular. I almost want one right now.

  20. By ‘Murphy’ I mean Mr. Richards and not his parodic doppelgänger, the downmarket ham.

    Apologies for any confusion.

  21. He’s now stated that he’s using “fair” in the accounting sense of “true and fair”.

    I really don’t think that anyone at all would, if you pointed at a Fair Tax Mark in a shop window and asked what it meant, reply “the tax accounting has been done properly”.

  22. Ritchie’s thinking and logic is at the level I would expect of a new graduate or trainee working for me (and probably the level I was at that point in my career).

    Unfortunately, whereas my trainees all take the challenge and feedback and learn from it (and thus improve their own knowledge and the quality of subsequent work), Ritchie just responds by shouting “how dare you question me”. It’s a very juvenile way of dealing with things and most people grow out of it. Perhaps this is why he never made progress at Peat Marwick.

  23. I also see that he has been posed the question that I raised: how will they cope when he has to look at the complex tax affairs of large multinationals or when he is deluged with applications for his little badge?

    His response? “we’ll worry about that when we’re deluged. We have a plan”

    So the companies who are dealing with the rent-a-mob at their door will have to say “sorry, we’re waiting for Ritchie to get round to dealing with our application”. Perhaps an additional fee will grease the wheels and ensure quick approval?

    Also, I’ve noticed that he has a pretty short attention span and dumps things when he gets bored (or realises how ignorant he is – remember his attempt to devise a new economics with all of those squinty graphs? That didnt get very far). What happens when he gives up on the fair tax mark? I doubt the rent-a-mob will take “Ritchie got bored and isn’t issuing it any more” as an excuse while they trash another shop.

  24. @ Glendorran
    As a formerly new graduate (and the father of a recent new graduate) I take great offence at your statement that Murphy’s thinking and logic is at the level you would expect of a new graduate (unless you operate a sewage farm so the “working for me” is a major adjustment factor.
    I have repeatedly pointed out errors to Murphy, to which his response is invariably denial and almost invariably insults. On a few occasions he has admitted off-blog that I was, as always, right, but he has never apologised: the nearest he has come to that was to delete some of his lies after I threatened to sue him for libel since there was a 0.00…00% chance that I might fail to win and be awarded costs.

  25. GlenDorran – in conjunction with Ironman you detect the issue the man has. On February 17th (just after an earlier change on 14th Feb) the catch – all ‘Section 5 of the comments policy’ was brought in- As Ironamn says, many commenters have adopted a resolutely ‘straight’ reasonable style pointing out the innumerable illegalities and logical fallacies in Murphy’s approach – this elicits more opprobrium than evn a full frontal attack – The man doesn’t have a clue- one only hopes UKIp and the Tories combine to prevail in 2015 and implement the Selective Higher Income Tax (SHIT) for Ritchie and the likes of Owen Jones and give him the choice of exile or 97% base rate…..

  26. John77

    Apologies, you are completely correct, I will amend my statement.

    His logic and thinking are not at the level of a new graduate (you’re right, I do expect better of my trainees than Murphy exhibits).

    His technical knowledge of the areas he attempts to cover are at the level of a trainee. That’s acceptable for a trainee – hell, that’s why they are called that! For a man attempting to rewrite society then it’s unforgivable.

    His refusal to listen to and learns from people who are clearly experts in their field is, candidly, embarrassing and a sign of both a huge ego and also a real insecurity.

  27. And his latest response to questioning about his capacity to issue his indulgences in any great numbers:

    “How long does it take to read some tax notes and look at an annual return?”

    I look forward to him acknowledging the implication of this statement and telling his chums at the PCS that the Revenue staff should stop whining about workload – or even that their numbers can be cut?

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