June 2015


Many businesses aren’t making a full contribution to the country from which they take so much. Starbucks, for example, is a notorious example of this phenomenon”

What phenomenon? Business not making profit does not pay a tax on the profits it isn’t making. This is notorious in what manner?

This was in fact investigated in depth. There were two major claims that Starbucks was sending profits out of the UK by two methods. The first was royalties for the brand to Holland. HMRC had approved their calculation. And a subsequent EU investigation showed that Starbucks UK paid the same royalty as Starbucks franchises in other countries also had to pay. For their not to be doing so would in fact have been a breach of the transfer pricing rules. Something we’ll come to in a moment.

The second was that they paid a 20% margin to Switzerland to the unit that bought the coffee beans. One point is that coffee beans make up perhaps 5 p of that £4 latte. Meaning that it’s unlikely to have much of an effect. However, not to be making such a margin would again be in breach of the transfer pricing rules. For this is how the international tax system works.

If you’ve got various subsidiaries of the one company trading with each other then in order to stop profit shifting they are supposed to price transactions at the “arms length price”. That is, as if they are not co-subsidiaries, but are independent companies. So, Starbucks UK should be buying coffee beans from Starbucks Switzerland Coffee Bean Brokers (whatever they were called) at a similar enough price to what they would buy them from an independent bean broker would demand. And yes, Switzerland is the world’s centre for coffee been brokering and no, none of the independents do offer to trade with you if they make no margin. It would actually be illegal for Starbucks not to pay a margin on such bean purchases because that would not reflect arm’s length pricing. and the same goes for the brand rights and royalties. That they were paying the same amount they charge franchises is right and proper, not to do so is illegal.

Finally, as Vince Cable pointed out, once you added these back in Starbucks was *still* making a loss in the UK. So no tax would have been payable even if.

Companies that don’t make profits don’t get charged a profits tax on the profits they’re not making.

As to why they weren’t making a profit the first chapter of Tim Harford’s “Undercover Economist” gives a lovely explanation. It’s straight Ricardo on rent. Location is everything, so all the profits of the coffee trade go to those who own the properties. And yes, landlords really do pay UK tax on their profits. Starbucks simply paid too much for too many prime properties.

It’s fine for people to have differences on how corporations should be taxed, of course it is, but it does help if people are actually informed. Who knows, next we’ll be told that Vodafone owed £6 billion in UK tax (it didn’t, an invention by Richard Brooks at Private Eye) or that Margaret, Lady Hodge, didn’t use the Luxembourg Disclosure Facility (she did, she’s said she did).

Letter sent to the editor of CapX


Brothers Akira and Rieko Ioane are among a clutch of rising stars of New Zealand rugby included in the Maori All Blacks squad for two games in July.

Is there a similarly race based “non-Maori All Blacks”, as well as the not racially based All Blacks. And if not, why not?

Crowdfunding the Greek Bailout

Not going to work in the least but top marks for effort:

Let’s just get Greece sorted
All this dithering over Greece is getting boring. European ministers flexing their muscles and posturing over whether they can help the Greek people of not. Why don’t we the people just sort it instead?

The European Union is home to 503 million people, if we all just chip in a few Euro then we can get Greece sorted and hopefully get them back on track soon. Easy.

What We Need & What You Get
€1.6bn is what the Greeks need. It might seem like a lot but it’s only just over €3 from each European.

Ban fruit juice now!

Sugary soft drinks kill 184,000 adults every year, scientists claim.
And there could be a ticking time bomb because those under 45 consume more artificially sweetened drinks and are more at risk of diabetes and obesity.
The worldwide study is the first to estimate deaths and disability from diabetes, heart disease, and cancers caused by the drinks.

Fun quiz

20. Which of the following is NOT an American Indian tribe in the United States?


25/25 for me. Obviously one question Elizabeth Warren would be able to get right.

Tee Hee

Erich Mielke says:
June 29 2015 at 12:04 pm
Andrew, you are quite right to pay tribute to the one of the Soviet Union’s greatest achievements! No doubt the usual neo liberals will shortly be here to say this does not justify millions of deaths but this is pure sophistry. Roll on the Courageous State!

So that’s where Heidi Moore went then

At one point (could still be for all I know…ah, checking, no, she’s moved) The Guardian’s US economics editor. Now apparently at Mashable:

Greece said it will close its banks on Monday after a wild weekend in which worried Greeks lined up at ATMs to withdraw their savings, and European banks said they would not extend the country’s economic bailout past Tuesday.

Umm, there are no European banks saying anything at all about extending a bailout. There’s the European Central Bank, saying that it won’t increase the Emergency Lending Assistance. But calling that a “European bank” is exactly the same as calling the Federal Reserve an “American bank”. European banks as banks, just aren’t involved in this. Greek banks, yes, the central bank, yes……

Could it be that we’ve actually found an economic reporter not even good enough for The Guardian?

The European Commission requires Greece to make major cuts to its budget before it can get the final payment. Greece, in turn, doesn’t want to make the spending cuts, which it believes will hurt Greek retirees and weaken its social services.

Umm, what spending cuts? There’s tax rises galore but in the actual document she links to no spending cuts. Tax rises, yes….

Greece has to pay about $1.8 billion on Tuesday to the IMF, which lent it money for the last bailout. There’s a lot of pressure here, since no country has ever defaulted on a loan to the IMF.

Snigger….Sudan, Peru, Liberia, DR Congo, Somalia, Panama, Zambia, Guyana, Yugoslavia, Vietnam, Zimbabwe, Iraq……

No advanced nation has defaulted on the IMF since WWII, true, which means since the IMF was set up. But that “advanced” is a pretty important qualifier.


As with consumer foreclosures or bankruptcies, a default shows a country to be untrustworthy in its intention to pay back its debt, which, in turn, makes it hard to borrow more money. At the least, countries that default have to pay very high interest rates to borrow again — and since they default in the first place because they’re broke, they can’t afford high interest rates, either.

Interest rates are usually lower after a default. For the debt burden is reduced, see?

Greece may not get away so easily, however, because it is not a standalone economy, but is instead integrated into the 19-member European Union.

That’s the 19 member eurozone, not the 28 member European Union. and it’s the EU which is the Single Market into which Greece is integrated.

If Greece leaves the EU — a “Grexit” — then it will undermine the entire purpose of the economic union, which is to see its members through all troubles.

Grexit refers to Greece leaving the eurozone, not the EU.

Importantly, the ECB also said it will not increase its aid to Greek banks to make up for the money lost as citizens keep pulling out their money.

Greece’s banks are already surviving on a financial lifeline from the country’s central bank — an unusual move that the European Union allowed to keep the country from an economic crash while the fate of its bailout is being decided.

The ECB is the country’s central bank. The Bank of Greece is just the local office of the ECB.

To understand how extreme that is, consider the equivalent in the U.S., which would mean that Bank of America and Wells Fargo would survive not by doing business, but only on loans from the Federal Reserve. (That, by the way, has never happened).

What? The Fed has never provided liquidity assistance? What the hell was TARP then? Exchanging cash for qualifying assets…..

Greece fully expects the ECB’s ELA — remember, that is the emergency liquidity — to keep the country’s bank’s afloat.

Hey, we’re all guilty of the grocers’ apostrophe occasionally…..

Alternate Greek Finance Minister Nadia Valavani

Deputy Finance Minister

Not all of these are important corrections of course. But I do think it’s interesting that we’ve managed to find this rara avis. Someone whose economic reporting isn’t up to the standards of The Guardian.

At one point, when she was there, I managed to get Larry Elliott to insist that her stuff was nothing to do with him…..

Snigger along with George

Now let’s picture the alternative. 170,000 people come to an event that proudly proclaims itself meat- and fish-free. They can choose from hundreds of stalls selling vegetarian and vegan food. There is not a bacon sandwich or a chicken kebab to be found. For five days, vegetarianism and veganism become the norm.

For many people, this might be their first sustained exposure to meat-free food. There would be grumbling, I’m sure. But people would quickly become used to it,

Just the thing for a festival held on an animal rearing farm, don’t you think?

Aditya says it’s Greeks versus capitalism

And if the Greeks choose it, the rest of us should support them. Their battle – people versus an impossibilist capitalism – is ours too.

All of which is bollocks of course.

The battle is between an idiot statism as represented by the EU ‘n’ the euro and economic freedom. For the capitalist answer to this has always been just cut the sodding debt, impose a haircut.

Because there’s one thing that capitalism (and or free markets, your choice here) does very well and that’s how it deals with failure.

So, this plan failed did it? You’re bust? Investors and creditors have lost their money? Ho hum, well, it happens, so, write down the debts and let’s try again.

Capitalism dealt with Argentina perfectly happily. The rich creditors lost lots of their money, the economy began to grow again. That this solution was not applied in Greece is not a failure of capitalism it’s an absence of it.

Dear God Joe Stiglitz is naive

Isn’t Europe all about democracy?

Umm, no Joe, it ain’t.

That’s why all the power rests in the not-elected Commission. To the point that the Parliament cannot even introduce a bill into its own deliberations.

The one thing Europe isn’t about is democracy.

We really do value women less than men

Forbes magazine’s annual Celeb 100 list, chronicling the world’s highest-paid entertainers over the past year featured a wide range of talents from all over the globe including a British chef, a Canadian rapper and a Russian tennis star – but only 16 women.

The combined women on the list make $809m, compared with $4.35bn for the men. This reflects the gender pay gap among both celebrities and the wider society, according to Forbes.

So there we have it, the global result of how all human beings value women as against the value all humans apply to men.

Humans appear to value men more highly than women. Shrug. If that’s what we do, well, that’s what we do, isn’t it? Worrying about it is akin to being concerned over bipedalism. Or being viviparous.

Talk about smokeblowing and backfilling

The word Drachma comes from the ancient Greek for “grasp”, which is precisely what a certain sort of Eurosceptic is doing with the chance to focus the narrative surrounding Greece.
Yet the origins of the Greek crisis lie in the dynamics of their economy and the creation of the eurozone. It is a story that tells us almost nothing about our own place in Europe. As poverty, hardship, and economic anxiety beset the world’s oldest democracy, this is not the moment or the chance to craft arguments for our own referendum on membership of the European Union. Eurosceptic attempts to forge convenient political arguments out of this episode are opportunistic and erroneous.

Yes, yes, of course.

That the vanity of the European Union and the fantasies of the federasts have entirely destroyed the economy of an advanced European nation should have no effect at all on our own consideration of the vanities of the European Union nor the fantasies of the federasts.

Of course not: who needs fucking facts when discussing politics?

Hmm…one for p_marca

chances are you used a Swedish company. Skype became Stockholm’s first unicorn when it was bought by eBay for $2.6bn in 2005 – just two years after it launched

Estonia for Skype, not Stockholm?

As a reward for his services to Czech football, two years later he was allowed to move abroad.

So, local boy for the Czechs I work with:

Josef Masopust was born near Most, in north-western Czechoslovakia, on February 9 1931. The fourth of six brothers, he grew up in what was then an important coal-mining region; indeed its resources made it one of the first places to be annexed by Germany when they seized control of the country during Masopust’s early boyhood.
Soon after the end of the Second World War, Masopust made his debut for Banik Mostar, a local side, before moving on to Teplice, a club in the First Division. Then in 1951 he was poached by the most prestigious – and powerful – club in Czech football, Dukla Prague, the team of the Army. Masopust would remain with them for 17 years, playing 386 matches and scoring 79 goals.

OK, and world cup success etc. Then this:

As a reward for his services to Czech football, two years later he was allowed to move abroad.

It’s a reward to be allowed to leave the country.

Socialism really is wank, isn’t it?

Yes, yes it has

It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.

As some of us have been saying for 20 years now…..

Fuckwit idiocy from the usual source

A private sector space mission blew up yesterday. It was not the first: this is the third mission of significance to do so recently. What’s happening?

Has space just got so much harder?

Is more technology more likely to fail?

Or is it that the private sector just can’t do this stuff?

It may be all of those issues. And of course it could just be chance. Except it’s beginning not to look that way.

What seems certain is that it is time for a rethink. Anyone leading that rethink should be reading Mariana Mazzucato: the state does these things best. That’s not opinion. That’s fact. If it’s uncomfortable, deal with it. Progress depends on it.

And via the miracle of Wikipedia we get:

16 May
05:47:39 Russia Proton-M/Briz-M Kazakhstan Baikonur Site 200/39 RussiaUnited States International Launch Services
Mexico Mexsat-1 SCT Intended: Geosynchronous Communication 16 May Launch failure
Proton third stage vernier engine failed at T+497 seconds due to turbopump shaft coating degradation causing excess vibration.[7]


28 April
07:09:50 Russia Soyuz-2.1a Kazakhstan Baikonur Site 31/6 Russia Roskosmos
Russia Progress M-27M Roskosmos Low Earth (ISS) ISS Resupply 8 May Partial failure
Spacecraft lost communications and attitude control soon after separation after damaged by vibration issues during launch.[4] International Space Station docking attempt cancelled.[5] Mission declared a total loss.[6]

And in 2014 the failures were by the Russians (3), Arianespace (the EU), US Air Force, NASA, Delft (?), Orbital Sciences, …..yeah, really showing that it’s all because the private sector can’t do this stuff.

As for Andrew Dickie:

Very noticeable that the rocket that the exploded was not a Russian designed rocket, which have an outstanding success rate, access to which the West got handed to them on a plate by that drunken buffoon, Yeltsin – the West’s convenient placeman.

And, of course, ALL that Russian expertise – actually, Soviet expertise, since the Soviet space programme was a multi-ethnic enterprise – was built up by the financial and human capital of the USSR, without which backing it would have got nowhere.

And all picked up for a song by the West, and still being used by us, almost certainly with no “royalties” being paid to Russia or other former USSR states that were part of that great enterprise.

I was a supplier to the Russian space program for a number of years. Russian industry couldn’t produce the radiation hardened chips necessary so someone, somewhere, had to go buy them from the Americans. Guess who?

And as for royalties, doesn’t he know that NASA pays huge amounts to the Russians to use those rockets?

The insight! The knowledge!

And just as in 2008, when Lehman fell, no one really knows what will happen now that the European Central Bank has declared Greek banks, en bloc, to be insolvent.

No, by refusing to increase the ELA the ECB has declared the Greek banks illiquid if withdrawals continue. Insolvency will follow if the withdrawals do.

There will be counter-parties to Greek banks in other countries who will lose as a result of what is happening. No one yet knows who they are.

We do, trivial amounts in various banks (essentially speculations on Greek Treasuries, of which there aren’t all that many) and €110 billion in ELA and TARGET2. Which are backstopped by the ECB. Or as we might put it, the taxpayers of other eurozone nations.

It was time for the EU, IMF and ECB to say debt write down had to be on the agenda.

The debt has already been written down. Time value of money and all that stuff. 50 year maturities, 1 and 2% interest rates, 10 year payment holidays. The NPV of that debt is nothing like the headline number. Meaning that a debt writedown has already occurred. It’s just that it’s occurred in a manner in which the governments of the other eurozone nations can deny causes a loss to their own taxpayers. Which is why they did it that way.

In that context the argument about ever closer union is meaningless.

And the argument about monetary union is just nonsense.

Well, yes, OK, give you that. But then where’s the congratulations for those of us who have been saying this since 1997?

There is just power. Ugly, brutal, financial power apparently exercise by homo economicus without compassion, as the breed demands.

Homo economicus are the ones who have been saying that it won’t work since 1997. And saying, since 1997, don’t do it. Don’t blame us for this shit.


But it is what we need because politics has to stump economics on days like this even if, paradoxically, the crisis has been created by politics ignoring the economic reality of Greece for far too long.

Dear God, where to start?

The break down of a politically imposed monetary system, one that has long been known to be economically impractical at best, must be trumped by politics again?

So this is how the narrative is going, is it?

‘This is our political alternative to neoliberalism and to the neoliberal process of European integration: democracy, more democracy and even deeper democracy,” said Alexis Tsipras on 18 January 2014 in a debate organised by the Dutch Socialist party in Amersfoort. Now the moment of deepest democracy looms, as the Greek people go to the polls on Sunday to vote for or against the next round of austerity.

Unfortunately, Sunday’s choice will be between endless austerity and immediate chaos. As comfortable as it is to argue from the sidelines that maybe Grexit in the medium term won’t hurt as much as 30 years’ drag on GDP from swingeing repayments, no sane person wants either. The vision that Syriza swept to power on was that if you spoke truth to the troika plainly and in broad daylight, they would have to acknowledge that austerity was suffocating Greece.

They have acknowledged no such thing. Whatever else one could say about the handling of the crisis, and whatever becomes of the euro, Sunday will be the moment that unstoppable democracy meets immovable supra-democracy. The Eurogroup has already won: the Greek people can vote any way they like – but what they want, they cannot have.

That everyone else won’t give the Greeks open access to everyone elses’ wallets is a denial of democracy, is it?