Dear God what a twat

I explained I thought the relief, which costs about £2.7 billion a year, was wholly unnecessary. First, that’s because real entrepreneurs will be entrepreneurs come what may because, as it has always been for me, having a boss is unimaginable for a moment longer thjan strictly necessary. In that case the tax relief is not needed to induce people to start businesses and so the spend does not change behaviour, and so is a waste of money.

Second, very clearly the relief is not to encourage entrepreneurial activity: it’s given at a time when people cease to be entrepreneurs by selling out of their businesses and effectively declae themselves redundant with regard to its activities in most cases, meaning that again there is no benefit to the spend.

Look, there’s only two really important things in economics: opportunity costs and incentives matter. and if you’re going to comment upon economics then you’d really better get a grip on the two of ’em.

Here’s it’s that incentives matter that the Murphaloon is missing. Murph might indeed describe pissing away charitable grants as being an entrepreneur: others of us might not be quite so sure. but a third thing in economics is that things happen at the margin. And it’s incentives which make them do so.

We think that having people trying to be entrepreneurs is a good idea: they are, after all, the people who make us all richer by playing around with the various possibilities within the technological frontier and thus work out what increases productivity. Excellent: and sure we’d have some of them around whatever the tax system was.

But we also think that we’d like to have *more* of them. And thus there’s that tax privilege there. In exactly the same way that we hand out grants and subsidies to public goods in fact. We’re not arguing, when we talk about patents or grants for scientific research etc that none of these things would happen without them. We are arguing that the privilege makes more of what we think desirable happen.

and he’s missing again that incentives matter. Because we care not a toss for the justness or righteousness of the tax rate that the retiring entrepreneur pays. Instead, we care about the incentive to the next generation of them by their seeing that successful ones can retire with a great big pot of loot. It’s entirely utilitarian.

And this is just lunatic:

And last, the relief is largely argued for by people who have never set up, run or sold a business (politicians, bankers, business advisers who have been promoted into partnerships and paid ;lobbyists, incduing those in professional institutes) and so have no real idea about the process, which I certainly have. They think tax is important to real entrepreneurs in a way that is just not true.

If tax isn’t important to entrepreneurs then why do so many of them bugger off out of the country to avoid taxes once they do strike it rich? Does Ritchie think the Reuben brothers are in Monaco because they like the shithole or something? The Barclay’s on some rock in the Channel because they want to sardine fish out of their bedroom window?

Jeebus but the man’s dim

35 thoughts on “Dear God what a twat”

  1. So Much For Subtlety

    The Barclay’s on some rock in the Channel because they want to sardine fish out of their bedroom window?

    Yeah he is a twat and all that. But I have always thought that the Barclays live on some rock because they have created some sort of Dr No/James Bond Evil Lair. I bet they have lots of guys running around in single-colour over-alls and the best count down to self-destruction.

  2. And it’s “Entrepreneurs’ Relief” not “Entrepreneur’s Relief” because there are lots of them.

    You’d think a tax ‘expert’ would know that.

    I doubt he’s ever dealt with a claim.

  3. Ritchie claiming he was an entrepreneur again I see.

    He didn’t need this relief then as he just dodged the tax via Barbados and Ireland anyway.

  4. @Noel Scoper

    No doubt when Murphy sold his accountancy practice he would have benefited from ER’s predecessor Taper Relief.

    Nasty evil ER reduces the tax rate to 10%. Taper Relief had the effect of reducing the tax rate to 10%.

    Having sorted himself out by engaging in every tax reduction strategy you can think of he wants to pull up the ladder behind him.

    Odious toad.

  5. “Having sorted himself out by engaging in every tax reduction strategy you can think of he wants to pull up the ladder behind him.”

    Perhaps he claims to have had a damascene conversion on this. He hasn’t so much had a damascene conversion than got to Damascus and is now insisting on tearing up the road behind him.

  6. I suppose in his mind the thought of paying either / all of corporation tax, income tax and eventually capital gains tax at full rates topped off with the real risk of losing everything and the stress of being responsible for other people’s salaries etc. is incentive enough. Wanker.

  7. “First, that’s because real entrepreneurs will be entrepreneurs come what may because, as it has always been for me, having a boss is unimaginable for a moment longer thjan strictly necessary”
    Richie works for himself, right? Ergo he has a boss. And he’s a twat. But never mind.

    “In that case the tax relief is not needed to induce people to start businesses and so the spend does not change behaviour, and so is a waste of money.”

    I think he’s assuming everyone starts their own business for the same reason: to avoid having a boss. I certainly didn’t. I did it because I could double my salary and I could do so quickly at a point when I needed to do just that. Am I an entrepreneur, though? Dunno- I help certain kinds of business do things better for less money. Does that help?

  8. A post In which Tim, again, comes to the conclusion that he, and many others, have drawn time and time again.

    Perhaps it is almost getting to the point where we might want to stress the “conclude” root of conclusion, wall the bugger up in his shed and let Dr M feed him through an appropriately small slit.

    If she can be bothered. But she’s a Quaker so she’d probably stick it for a week or so.

  9. Bloke in Costa Rica

    I suppose Murphy is an entrepreneur, if you can call constantly finding ever more convoluted ways to spout witless, grasping totalitarian bullshit and get paid bungs by your buddies entrepreneurial.

  10. Capital gains tax is an absurdly complicated tax that yields sweet FA in revenue – even less than Vehicle Excise Duty. It should be abolished.

  11. There are no sardines in Guernsey. Except in tins. It is just possible those Barclays could reach out and grab them off the supply boat.

  12. He claimed when asked if he had benefited from this relief that he sold up at the worst possible time to take advantage of it, I believe there was a gap between taper relief and this relief where the tax was briefly higher (one of Gordon’s little tricks, cancel then delay replacement) so assume that is what he refers to.
    Which leads to the conclusion that he can’t even give himself good tax advice.

  13. OT: following our esteemed host’s moans about the accelerating descent of the Telegraph, they outdid themselves today. There was an article on their website stating that some Nigerian professor had proved the Riemann Hypothesis & won the $1M prize offered by the Clay Mathematical Institute! They’ve subsequently toned down the item, removing the prize claim.

    If someone does prove RH, then it would be even bigger news than the proof of Fermat’s Last Theorem, so it made me perk up. It looks like the ‘reporter’ at the Telegraph uncritically parroted something from the BBC World Service that in turn picked it up from a Nigerian paper. He could at least have checked with the Clay Institute, or even a local mathematician. I’m sure the Telegraph must have Marcus du Sautoy’s phone no on speed dial.

  14. “…some Nigerian professor had proved the Riemann Hypothesis…”

    But he needed your bank account details in order to transfer over the proof.

  15. Bloke in North Dorset

    Economic policy making at its absolute best. Based on a wide ranging data set that includes: [All retired accountants AND live in Downham Market AND married to a GP AND run a blog AND is a Quaker AND has been divorced].

    At least it saves the treasury commissioning expensive field research from prestigious universities to go out and ask people who’ve set up and run businesses and then used lots of clever statistics to correct for all sorts of variables to try and understand their motivations.

  16. To follow on from Tel, I can only guess you are arguing for progressive corporation taxes here.

    To which the liberal answer is surely, treat everyone equally, and stop trying to make government-defined “entrepreneurs” that get special treatment. Everything else is illiberal market-fbucking.

  17. Because it will be Royal and Antient established firms and guilds that shoehorn themselves into the definition of “entrepreneur” (e.g. didn’t Golden Sacks manage to briefly reclassify themselves as a retail bank to take advantage of certain government subsidies for writedowns?), as they do with everything else, leaving the true disruptors out in the cold.

  18. BiG

    The definition of “an entrepreneur” for this relief is:

    “To be eligible, a shareholder must have a 5% or more shareholding, and have been involved for a year or more with a company as an employee or director”

    Since the yield from capital gains tax in the UK is about £5-6bn and the cost of this relief is said to be £2.7bn, surely it makes more sense just to abolish this pointless tax?

  19. @Diogenes

    Point of order. employee or officer. Meaning company secretary qualifies. Jolly useful if you want a spouse to share in the gains.

  20. I hope he doesn’t stumble across Employee Shareholder Shares, his blood pressure would go through the roof…oh hang on.

  21. @Lizardking

    He wouldn’t understand ESS. He barely understands ER.

    At least, he wouldn’t understand how ESS is being used. If he did he’d already be having a fist-typing paddy about it.

  22. He periodically makes this claim that entrepreneurs are sply not motivated by tax savings. The corollary of which must be that they are not motivated by money at all, which seems a little bit unsustainable evening theory. In practice provincial airports are full of provincial accountants and financial advisors and their clients heading to the Channel Islands or the Isle of Man. That’s why.The Apprentice has a never ending stream.of hopefuls with ideas of being a millionaire.
    Ritchie himself contradicts his.pwn claim by announcing the relief doesn’t work because it is changing behaviours in ways that aren’t wanted. In other words: incentives matter and he knows it.

  23. So Much For Subtlety

    Tractor Gent – “There was an article on their website stating that some Nigerian professor had proved the Riemann Hypothesis & won the $1M prize offered by the Clay Mathematical Institute!”

    Must. Fight. Urge. To. Comment.

    The purpose of political correctness is to make crimethink impossible. Any competent journalist would have asked the obvious question. So it seems to be working.

  24. AndrewC said:
    “No doubt when Murphy sold his accountancy practice he would have benefited from ER’s predecessor Taper Relief.”

    From vague memory of something he said years ago, I think it’s so long since he’s had a real practice that he actually sold up before Taper Relief (or at least before the very high business taper came in).

  25. But his main problem is that he confused self-employment (not having a boss – I can see why he would have problems with one) with creating a reasonably sized business.

  26. “that’s because real entrepreneurs will be entrepreneurs come what may”

    The goose will always lay golden eggs. Always.

    “because, as it has always been for me, having a boss is unimaginable for a moment longer thjan strictly necessary.”

    My inability to work with and for others makes me an entrepreneur.

    “In that case the tax relief is not needed to induce people to start businesses and so the spend does not change behaviour, and so is a waste of money”

    I am omniscient.

  27. Andrew…

    Good catch. But the point holds…if the legislation is designed to prevent people paying CGT, then why bother with this tax?

  28. Maybe the principle behind the relief is sound, but the execution isn’t. I encountered It in the wild with Private Equity structuring executive rewards to fall within it… without an ‘entrepreneur’ in sight.

    5% equity and 1 year involvement? And that 5% can be in secondary share classes without comparable rights to dividends etc (i.e. the sorts that used to be issued to managers in PE investments to get their exit payments taxed as capital instead of income).

  29. The structures used in PE have been hit by the legislation this year – I have a client who is going to lose out (he’s actually a full-time executive director, not a PE fund manager, but his ultimate interest is less than 5%). Still, he’s not really an entrepreneur in my book so I can’t get too upset.

    Murphy has been asserting, and Maugham has been citing from the Oxford study, that ER is not a good incentive as once you’ve claimed it there’s nothing left to gain. This is completely missing the point in my experience.

    In my SME client base most people are working well within the £10m limit. ER is a major concern for all my SME clients, and off the top of my head I can only think of one or two where the limit is in sight.

    So in many cases, someone will sell their business and get ER, then start a new one. This means that the old business goes to someone bigger who can grow it further, plus a new business gets started. Murphy seems to think that a business which is sold ceases altogether.

    Without ER, the dynamics would change. People would be more inclined to hang on to a business if the post-tax value of selling is less, as the relative value of continuing to operate it is higher. So you’d have businesses being run by people who’d quite like to be doing something else…not ideal, really.

    I think there is a fair bit wrong with ER, and it may well be possible to come up with a better alternative. But the anecdotal evidence of it not really working in certain cases (or being abused) doesn’t mean it’s useless in a wider sense.

  30. Prior to being declared an ‘unperson’ or troll on TRUK a memorable exchange with Murphy was where he admitted disincentives (or at least the existence thereof) – upon realisation this single admission effectively obliterated every aspect of his worldview he swiftly reverted to his customary comments policy and declaration of contrary opinion as ‘trolling’ – but hard to add much to your last sentence – I would emphasise he is evil as well as stupid, though…..

  31. According to the CV on Ritchie’s website, he sold his business in 2002. Taper relief would have been available with the result that the effective CGT rate would have been 10%. The same rate as the entrepreneurs relief he is now denouncing. I wonder if he has sent a cheque to the Treasury for the value of the relief. I think we can all guess the answer.

  32. CGT was introduced as an anti-avoidance measure – all those capital/revenue tax cases. It raises very little but gets to cut our all those trading transactions being described as capital.
    Reliefs are and have been given to a greater degree to those holding the asset for a greater length of time – a pretty good indicator of fixed rather than circulating capital.

    All of which raises the question: why do we want to charge tax these transactions in the first place? It isn’t to raise revenue; to think that is to.miss the point entirely. Murphy cites people selling to access ‘the relief’. There is only ‘relief’ because there is tax. The behaviour journal shift can all be traced back to the tax being charged. I take Pellinor ‘ s advice on selling perhaps being a good thing. Perhaps it is; perhaps it isn’t. In the absence of tax though only commercial considerations are left.

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