Maggie Hodge really is an idiot, isn’t she?

Labour MP Margaret Hodge, former chairman of the Commons Public Accounts Committee who now chairs a cross party group promoting responsible taxation, said: ‘This is like putting two fingers up at the British public and taxpayers.

Facebook claims to not be making any money in the UK and yet it is giving huge bonuses to its staff in London because they are apparently doing do well.’
She added: ‘What drives me completely potty about this stuff is the company says it’s doing one thing but in practice it is doing another thing.
I can’t for the life of me see why HM Revenue & Customs does not challenge this in the courts.’
Although its annual UK sales more than doubled to £105million, Facebook was able to slash its tax bill by reporting an accounting loss of £28.5million last year.
This was because it handed out £35.4million to its workers through a share bonus scheme last year.

Just none of that is true, is it?

But this gets even better from the Mail:

Facebook was last night accused of insulting British taxpayers as it emerged staff in London have been lined up for a £250million shares jackpot.
The huge windfall will be paid out over the next three years if the US social media firm, which paid just £4,000 in corporation tax last year, hits its targets.
Details of the lavish awards, worth £690,000 for each of the 362 staff employed in the London office last year, are contained in Facebook’s UK accounts.

If that £250 million jackpot gets paid out then the Treasury will get some £125 million as a result.

They just don’t know what they’re talking about, do they?

51 thoughts on “Maggie Hodge really is an idiot, isn’t she?”

  1. The level of ignorance (and I am being nice) and the level of incompetence is amazing.

    If I thought she just wanted to stick it to that type of company and be seen by her parish as going for it, I could understand it.

    But the realiy is that she has no idea. Stupidity doesn’t do it justice.

    And don’t even talk to me about Stemcor. My morning was going well till I read this!

  2. “I can’t for the life of me see why HM Revenue & Customs does not challenge this in the courts.’”

    Because the courts decide based on what the law says, not what you would like it to say. The woman is a legislator after all. If she doesn’t like the law she should work to change it, not tell HMRC to run up costs on futile cases.

  3. Hmm, company makes a loss because it pays it staff a lot of money.

    Seems like the ideal Labour-type company to me?

    She certainly sound a more obvious twat for stating her argument in a different way; “! want Facebook to make lots of profit. Its workers should take an immediate and substantial pay cut in order to make this happen.”

    Sounds like a great vote winner, doesn’t it?

  4. I wonder how much of this is just plain jealousy from the media and political class about how much cash Facebook employees are making out of this.

    If you think you are the elite (lol) but are getting £25k a year, just think how fucked off you’d be that someone who works for Facebook was getting much, much more than you.

  5. I think Rob’s near the money.

    I also think clickbaiters are an issue. Whatever we think of the Mail, and even the BBC/Graun, there are people there who do know and understand that this is nonsense.

    I think they are working on the basis that the monster they are creating with this drivel will be controllable; I’m not sure they’re right.

    The living wage bullshit is a classic case. We all know that this will make it harder for poor young people to get work, and yet it’s been presented for so long as the answer to poor young people’s problems that it’s probably now impossible to tell the truth (or tell it and have it believed).

  6. Details of the lavish awards, worth £690,000 for each of the 362 staff employed in the London office last year, are contained in Facebook’s UK accounts.

    Wasn’t the Left all for rewarding the poor downtrodden workers? Yes, it was.

    Is there any clearer sign that the Left couldn’t give a shit about the workers, and are now solely interested in feathering their own middle class, government-paid nests, than this?

  7. Hodge wants to get her name in the papers and stir up resentments that will be of political benefit to her party. The staff of the Daily Mail want a shock-horror story to attract readers. There’s no reason to assume that any of them care whether their claims are factually correct or not. Truth is entirely irrelevant to their purposes.

  8. Tax isn’t anywhere near my area of knowledge, but… wouldn’t this result in higher tax receipts through Income Tax, NI and (indirectly) VAT than if Corporation Tax had been paid on the bonus amount?

  9. So a company pays its staff so well it makes no profit.

    Isn’t this exactly what the not-for-profit sector does all the time ?

  10. I read it that because FB paid their staff so much then they must, just must, be hiding profits because they are an evil coorporation after all.

  11. The next argument will be that they aren’t “real” employees and are part of a Double Irish/Dutch Sandwich/Luxembourg Felcher porn-themed tax fiddle.

  12. TIm

    To paraphrase Lord Sugar:

    ‘They haven’t got a bloody clue’

    The fact that she is so beloved of Murphy really ought to have led to her removal as chairman of the CPAC (before she had an opportunity to stand down) – that he thought her worthy of this fulsome praise suggest Facebook has it right..

    —————————————————————————

    “She sees over and beyond that,” Murphy says. “That is where she has been amazingly effective. Companies and HMRC rely on the detail to say they have stayed within the letter of the law. But Margaret points out that the outcome is not what parliament intended and therefore something must be wrong. She has upset the cosy relationship between HMRC and big business.”

    “Yes, she does a bit of grandstanding,” says Murphy, “but there is an innate sense of justice and outrage to her questioning that strikes a chord with the public watching.”

    And people have been watching across the world. There is a story that she was asked for a selfie by a director of the Organisation for Economic Co-operation and Development (OECD) at a conference in Paris on the grounds that she is now a “tax rockstar”. That’s true, says Murphy: she has literally rocked the world of tax’

  13. Forgive me for being thick but would someone explain to me why HMRC will get 50% of the bonus? I would have understood 40% assuming all the employees were already in the 40% income tax band but not 50%.

  14. Worker salaries or bonuses are a distraction though. The real issue is that Facebook are booking their sales through Ireland. I wish more companies tried this on: can you imagine going to your local car showroom to buy a car, and at the final step the dealer hands back your paperwork, and prompts you to use the office fax machine so that you can fax your order to e.g. Vauxhall Ireland.

  15. “To paraphrase Lord Sugar”

    It’d help DelBoy’s credibility if he hadn’t spent years smarming up to the Labour Government, then dropped them like a dodgy kebab when they lost the election.

    There’s a lot needs doing to him & paraphrasing’s the least of them.

  16. I think the problem here is that people like Margaret, Lady Dodge, think that corporation tax should be assessed before salaries*.

    *Unless it’s some kind of Left-approved structure like a worker’s cooperative**. Which is totally different to distributing profits to workers in the form of bonuses in a limited company.

    **Unless that worker’s cooperative is John Lewis, since they sell stuff to posh people***.

    ***Who are probably suburban and insufficiently left-wing.

  17. There is a story that she was asked for a selfie by a director of the Organisation for Economic Co-operation and Development (OECD) at a conference in Paris

    So our elites behave like teenage girls? That fills me with confidence.

  18. Paul Coombes

    http://www.bakertilly.co.uk/publications/realrateincometax.aspx

    For salaries, employers’ National Insurance contributions (NIC) is payable at 13.8%. Employee NIC of 12% is also payable up to about £42,500 with 2% due beyond that.

    Therefore, if an employer has £100 available for a bonus to an employee already earning £30,000 per annum (a basic rate taxpayer), the employee receives £59.75. Effectively, the marginal rate of tax is 40.25%.

    With the same £100 available for a bonus but this time payable to an employee who has already got earnings of £50,000 (a higher rate taxpayer), the effective marginal tax rate is 49.03%.

    A top rate taxpayer will have an effective marginal tax rate of 57.82% on the same £100.

  19. “Isn’t this exactly what the not-for-profit sector does all the time ?”

    This.

    But the “non-profit” sector is where Lefties go to earn large salaries, so is NOT THE SAME THING AT ALL. Oh no.

  20. @Ken “A top rate taxpayer will have an effective marginal tax rate of 57.82% on the same £100.”

    Top rate of tax is now 45% not 50%

  21. @Andrew C, @ken:

    £100 available for bonus.

    13.8% employer’s contribution = £13.80. Leaving £86.20 “gross” paid to bonusee.

    On this £86.20, the top rate taxpayer will pay 45% top rate + 2% NI, i.e. 47% total. This is £40.51. So he sees, finally, 86.2-40.51= £45.69.

    So, of the 100 quid available for bonus, the taxman takes £54.31, and the bonusee takes £45.69. Effective tax rate thus 54.31%.

  22. @Abacab

    No, because you start with £100. So the employers’ NIC comes out of that first.

    Employers’ NIC = £12.13
    What’s left = £87.87
    Total £100

    Tax = £39.54
    Employees’ NIC = £1.76

    Gov take = £53.43

  23. ‘Details of the lavish awards, worth £690,000 for each of the 362 staff employed in the London office last year, are contained in Facebook’s UK accounts.’

    No details are provided in the article, nor where I can find them.

    What is a “shares jackpot?” Are the employees actually being given OPTIONS on stock, which have ZERO value at issuance? Are the Libtards are so outraged that they forgot to detail what is actually happening? Perhaps outrage alone is sufficient.

  24. Gamecock: the employees are given Restricted Stock Units, which basically means that they have a nominal amount of shares earmarked for them, and they’ll be given them if they hit performance targets.

    RSUs are normally reckoned to be worth something on issue, though for accounting you normally discount them according to the chance of them being issued.

  25. Andrew M

    “can you imagine going to your local car showroom to buy a car, and at the final step the dealer hands back your paperwork, and prompts you to use the office fax machine so that you can fax your order to e.g. Vauxhall Ireland.”

    It should not matter to the end customer unless there is a real price differential. The difference is mainly to the company – whether the transaction is taxed in the UK, or in ireland, or in both. The terms of delivery will probably be critical. It used to be that UK residents would order a VW from Germany because they were cheaper…but then they would have to take delivery in Germany to get the more attractive price. If the car were delivered to a VW premise in the UK then that premise would likely find itself liable to German tax in addition to UK tax.

  26. ” I wish more companies tried this on: can you imagine going to your local car showroom to buy a car, and at the final step the dealer hands back your paperwork, and prompts you to use the office fax machine so that you can fax your order to e.g. Vauxhall Ireland”
    You mean like buying through a foreign agent? That’s how it works if you buy an aeroplane from Boeing or a JCB from JCB.

  27. re. car companies – I suspect if it was delivered to your door from a warehouse or from Ireland rather than collected at a dealership then it might probably fly.

  28. “The level of ignorance (and I am being nice) and the level of incompetence is amazing.”

    Don’t be nice. “Lying b*tch” is the word that springs to mind.

  29. This country by country reporting business – how does it work? I am assuming it is based on the sales in a particular country, but how do you determine profit in that country? Or do you get X% of the entire company profits, where X is the percentage of sales in your country?

    If this is the case, will a country with a 40% CT rate be taking money from a country with a 20% rate? Why not have a 70% CT rate and live off the proceeds just because a company in a foreign country happens to sell lots of stuff to your citizens?

  30. Murphy seems believe bringing this in means the entire financial statements will be split by country.
    When pointed out that as he wasn’t a management accountant he might not appreciate
    a) this is unlikely without massive changes to company structures, data and reporting which will take a lot of time and effort
    B) will likely result in a lot of assumptions about costs and allocations which would make the current complaints over transfer prices seem irrelevant
    C) just recording sales by country for tax purposes isn’t simple, a few examples involving foreign distributors and working for Multinationals in one country that impacts other countries and a suggestion be look at US state sales tax and the problems with recording that properly

    His answer was to list all his ‘many’ achievements and qualifications and claim he fully understands management accounting and that it will all just happen anyway so there

  31. One of the little thought experiments suggested was

    Company A writes a report for Company B, both based in UK.
    Company B has operations in 10 countries and report covers all of them, as a result of report changes are made in 4 countries.

    What countries has Company A sold to, would it make a difference if they had sent staff or had staff based in some or all of the other countries. What if Company A wasn’t based in UK?

    How should Comapny B show the cost,? to just UK? To all countries or just those impacted by the report?

    Country by country could end up being so complex it’s meaningless, which funnily enough is the problem
    Murphy has with current system.

  32. Dont ask Murph…he could not say except apply the max tax rate in each country and split it 3 ways…. But give 100% to the UK because that is fair and Murphable

  33. His exact reply was

    “I have been a practitioner (senior partner), director of numerous companies, campaigner, author, creator of country-by-country reporting and now a professor of politcial economy

    And yes, I do understand management accounting”

    Clearly he’s never heard of humility

  34. @Bloke not in Cymru

    That may well be, but if you’ve been a wanker at all these things, it’s not much of a qualification at all.

  35. “Bloke not in Cymru

    His exact reply was

    “I have been a practitioner (senior partner)….”

    He over-puffs everything he does. He was ‘senior partner’ in a 3 partner 12 staff firm.

    That’s tiny in the accounting world. I’ve worked in sections of departments of branches of a firm that were bigger.

  36. I see Ritchie is considering writing a simple guide to PQE. Hopefully this will explain:

    – Why PQE is not inflationary
    – Why PQE can deliver a “modest amount” of inflation
    – Why PQE must be used immediately
    – Why PQE is only a tool to be used once all else has failed
    – Why PQE Is designed for large scale national projects (£bns)
    – Why PQE is designed for small scale local projects (£100ms)
    – Why PQE is not just printing money
    – Why PQE is just printing money

    Do you think he’ll have a separate chapter for each? He has held all of these positions on the same day, sometimes even in the same blog post.

  37. Won’t happen with cars.

    (This may have changed, but I can’t find info on it anywhere, so will be grateful to anyone in the know who corrects me.)

    There is a law that no manufacturer is allowed to dictate which retailers may or may not stock their products. There are three exceptions to this law, on the spurious grounds that it’s OK because they are luxury items: cars, perfume, and gemstones. The UK’s supermarkets have been lobbying for years to get the cars exemption removed so that they can start selling them (which would be great). While the exemption is still in place, the UK’s car dealerships are onto a very good thing (they get to combine high prices with fucking awful service). The LAST thing they’re going to do is attract the attention of the political class.

    How Apple got away with dictating which retailers could stock iPhones, I don’t know. Possibly by only doing it for a while and stopping before the law got around to them.

  38. What about a company based in the UK making sales all over the world? Assume they have a London office and fly their sales staff around the place when necessary and have no regional offices in other countries. Wouldn’t CBC reporting mean they end up paying less tax in the UK?

  39. No – this the Rolls Royce position, and Murphy has explicitly said that those profits belong in the UK.

    I think he allowed that where there is a regional office some of the profit could be attributed to it, but as the HQ is in the UK most of the profit should be there.

  40. GD

    When Andrew Neil was interviewing him, Murph managed to get most of those contradictions into a single sentence. How can you debate with a guy who can believe so many opposing things at the same time?

  41. How Apple got away with dictating which retailers could stock iPhones, I don’t know. Possibly by only doing it for a while and stopping before the law got around to them.

    Ah, that would explain why you can buy them outside the Apple store now. Few years back, you couldn’t.

    I think the test for this case was when Levi’s tried to stop Tesco from selling its jeans.

  42. Pellinor,

    > No – this the Rolls Royce position, and Murphy has explicitly said that those profits belong in the UK.

    Right. But if their HQ is abroad (in Dublin, for instance), the profits still belong in the UK? WTF?

    Arnald,

    > No, it’s just a report.

    And people call me literal.

    I understand that the point of the demand for the report is that actual taxation may then be based on it. Am I wrong, and in fact the demand is simply that the country desperately needs another bit of paperwork which may then be ignored?

  43. Ah, now if their HQ is in Dublin then they have a sales presence in the UK, and so their profits should be taxable here.

    I don’t understand how this is consistent either, but Murphy is adamant that it is. Or at least he doesn’t brook any suggestion that it is inconsistent.

  44. He has no real understanding of multi national companies or even large companies come to that, also no understanding of manufacturing or a number of other fields.
    He wants the ‘report’ for tax purposes, though he’s inconsistent about what economic activity that should be taxed that he is referring to, sometimes it’s sales (Facebook) sometimes it’s production (Rolls Royce). He also doesn’t seem to understand the implications of using distributors vs direct sales.
    If put good money down that what he thinks the OECD reports will do is not what will actually happen.

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