Tax

Prince Harry and Meghan have set up 11 companies in a tax haven

Lord knows I’m not going to defend those two. But really?

The Duke and Duchess of Sussex have set up a network of 11 companies in the tax haven state of Delaware,

Delaware’s not a tax haven, most certainly not for someone living in the US. It has distinct advantages as a corporate centre, not least is that they’ve paid great attention to having an efficient and sensible (no, not pro-corporate, just one that deals with cases quickly and according to the law) commercial court system.

You don’t get to dodge US Federal taxes by being in Delaware, most certainly not as either a resident or citizen of the US. It’s not a tax haven.

Among the listings are two publishing firms – Peca Publishing LLC and Orinoco Publishing LLC.

And that’s even more stupid. LLC and LLP are pass through entities. Taxes aren’t paid at the level of the company or partnership, they go on to the personal tax bills of the individuals. Being in Delaware in this sense is no different than – except for very minor issues – being in CA or TX or ND.

Experts say there are several benefits in incorporating a company in Delaware, including the state’s flexible business laws and its low personal income tax rates.

What damn bloody experts are these? In the US system you pay personal income taxes according to the rules of the state where you’re resident. Where the LLC is resident doesn’t change that in the slightest. They pay CA income tax rates!

Delaware doesn’t impose income tax on corporations registered in the state which don’t do business in the state. Also, shareholders who don’t reside in Delaware need not pay tax on shares in the state. This is why it has been referred to as a domestic tax haven.

They’re pass through corporations! Meaning that they pay their tax where they reside – California.

Where the Mediterranean Sea once met land now stands a vast building site. Cranes, excavators and steels are strewn across a six-and-a-half hectare reclaimed plot of land that extends to the Monte Carlo beach. The €3bn Anse du Portier development, also known as Mareterra, will increase the principality’s landmass by an estimated 3pc and is scheduled for completion in 2025.

Some 120 luxury apartments, 10 villas and a seaside promenade will be built in what will rank among one of the world’s most sought after residential districts, with prices to match.

Properties are expected to sell for around €150,000 per square metre – this compares with £30,000 per square metre in London’s upmarket Mayfair or Belgravia districts. Manhattan “ultra prime” residential properties average £20,000 per square metre.

So, that freedom from personal taxation gets capitalised into land prices, does it?

It’s the inverse of the most extreme version of the Georgist argument, that all profit and thus all taxes eventually devolve down to land and rents. Even, in a way, it’s Ricardian.

And to put it less extremely. If you have to pay tax to live somewhere then some part of that tax impacts upon the value of land which you can live on. That seems safe enough to state as a truth, rather a lot of weight hanging on that “some” of the part.

Taxing wealth. OK, well, but. The aim here, hopefully at least, would be to tax those who just happen to be wealthy. But not to tax those entrepreneurs who are making the rest of us better off as they build their fortunes.

To tax, ahaha, good fortune but not to tax wealth creation.

Much inherited wealth – the big chunks of it, the great fat gobs, is in trust funds. It’s this generation’s newly created and still growing wealth that is in the easily taxable stuff like equities directly held.

A wealth tax won’t apply to trust funds. But it will to those directly held equities.

So, an actual and real wealth tax will end up taxing those we don’t want to and not those we might want to.

We’ll not tax the Duke of Westminster and we will tax Mike Lynch. Just not the right way around, is it?

A wealth tax could unfairly hit people who are “equity rich, but cash poor” and lead to a “flight” of high net worth individuals out of the UK, Sadiq Khan has said.

Imagine, just as the set up, that you’re one of those wealthy folks.

A capitalist, almost certainly – among the wealthy there might be a sprinkling of top top musos etc. The trust fund kiddies don’t count here because, well, trust funds are differently taxed.

To be on this rich bastard that must be taxed radar you’re going to be, well rich. Say, £10 million as a starter. At which valuation you can live pretty much anywhere.

OK. So, wealth tax. This is, when we come down to it, a fee for living somewhere. You’ve the choice of living many places, the ability to exercise that choice. Why would you live somewhere where they’re charging you a high fee?

Especially as the rules allow one to pick and choose in part. Organise yourself and you can still have 90 days a year in London – the plays, whatever – and pay no tax here.

A “Google tax” introduced by the coalition government to crack down on multinationals shifting profits overseas has been criticised as a “total failure”, as new documents show it is predicted to raise no money over the next six years.

The diverted profits tax, introduced in 2015, was hailed as a pioneering effort to tackle multinationals who were reducing their UK corporation tax by shifting profits overseas.

It was predicted by officials that the tax would raise up to £400m a year, but new figures published with the budget last week show revenues slumping to zero.

All that shouting from Ritchie and the TJN and UKUncut and….nowt. It’s like all that shouting was propelled by ignorance, isn’t it?

There’s a bit of kabuki theatre here.

Given that they’re using budget reconciliation to get this passed. Plus, Biden insisting the deficit won’t go up. Means they’ve got to find tax revenue to pay for their spending.

It doesn’t actually matter – politically – whether the tax revenue arrives. It just has to score, by the usual CBO numbers, as going to arrive. So, if the CBO would score a tax on moonbeams and cucumbers as increasing revenue then that’s what they’d put in there.

That’s the correct way to view all of this. It’s not anything like considered views on how to gain more actual revenue. It’s anything and everything to get this bill passed and bugger all else.

Which is why the tax proposals are so idiotic of course.

But the US president abandoned plans for a “billionaire tax,” which would have seen America’s 745 billionaires pay 23.8 per cent on the value of their unsold shares.

Instead, he targeted individuals earning $10 million or more with the five per cent extra tax, rising to eight per cent for those with incomes of over $25 million.

His plan was similar to the “wealth tax” proposed by left-wing senator Elizabeth Warren last year, which was rejected at the time as too radical by many Democrats, including Mr Biden.

Details matter, no? So, which tax is it? Income tax? Then it’s not the billionaires who will be paying, is it? But if it’s on income then it’s not the wealth tax. So, could it be just a raise in the CGT rate?

Hmm….

The analysis was carried out for the Guardian by Arun Advani, the assistant professor of economics at the University of Warwick’s CAGE Research Centre and a research fellow specialising in tax at the Institute for Fiscal Studies.

He’s the bloke at that wealth commission who advocated retrospective taxation.

Using the latest data on capital gains, as recorded by HMRC, Advani estimates that if gains were taxed at the same rates as salaries, an extra £13.8bn could have been collected the in 2016-17, rising to £15.9bn in 2019-20.

The idea of alignment is not new. The former Conservative chancellor Nigel Lawson introduced parity between capital gains and income taxes in 1988, but this was unpicked a decade later by his Labour successor, Gordon Brown.

“The chancellor doesn’t just decide how much money to raise, he also has to choose how to do it fairly. So far he has raised taxes on those who work to earn a living, in order to protect those who live off income from wealth,” Advani said.

Well, yes, the Lawson rate included an inflation adjustment. The Brown one didn’t. Thus the difference, at least in part, in the rates. And yes, this does make a difference. In that decade following 2007 inflation was about 30%. As CGT operates over time taxing at income levels would be a tax on phantom gains, wouldn’t it?

Even vague connection with the base issues would stop people writing stupid pieces like this:

Will Ireland’s corporation tax rise see tech companies leave Dublin?
Analysts question if Dublin’s reputation as a leading tech hub could be undermined by new 15% tax rate

No, it’snot going to make a damn bit of difference.

Because the game wasn’t driven by Ireland’s low tax rate. It was driven by the American tax system.

If you made profits in foreign and then kept them in foreign then you didn’t pay American corporate income tax. At which point it’s worth striving around to find some lovely low tax place to make your foreign profits in.

Now you pay US corporate income tax – with strings ‘n’stuff but still – on worldwide earnings, whether you bring them back into the US or not. So, global tech company. Your foreign tax bill is deductible from your US one now. Striving around for low foreign taxes doesn’t actually matter any more.

It’s only if you’re not US domiciled as a company that low foreign taxes matter now. And as none of them are…..

It was always the American tax system driving this, now that’s been reformed it’s over.

How cool is this?

“Why won’t young people have children?” they ask, surveying the broken housing market, the staggering generational wealth gap, the 42% tax rate for graduates, decades of pay stagnation and the extortionate cost of childcare. “Must be climate anxiety!”

— Rachel Cunliffe (@RMCunliffe) October 14, 2021

Clearly 42% marginal tax rates are soceitally undesriable then. Which means that top tax rate (47% ish, 45% plus 2% NI) needs to come down, as does that 60% plus as the personal allowance fades out as does, well, all tax rates really once we add in employers NI.

How cool that it comes from this source!

The mean percentage of profits booked in tax havens is about 20% but the figure ranges from 0% in the case of nine of the banks to 58% by HSBC.

The figure is high because of HSBC’s strong ties to Hong Kong, which for the purposes of the study was counted as a tax haven.

We would never have known without the P³. HongKong and Shanghai bank books profits in Hong Kong.

Mercy!

The endowment fund behind the Guardian will pump more money into the booming private equity market after the value of its assets increased by nearly a fifth in the pandemic.

The Scott Trust, which owns the left-leaning news publisher and funds its persistent operating losses from its investment returns, said the overall value of its assets increased by 19pc – or £178m – to £1.1bn for the year to March.

If they’re profiting while millions die we must tax them!

And as Elynomics³ keeps pointing out, government running a deficit simply does produce a rise in private wealth which must be taxed back…..

Freelancers face being “left out of pocket” because tax plans that would result in the self-employed paying regular monthly tax bills as if they were employees, according to new polling.

Two in five freelancers would be left struggling with cash flow if proposals for a monthly or quarterly pay-as-you-go tax regime came to fruition. It would require the self-employed to pay tax in advance, based on their profits from the previous year.

I’ve had $200,000 years. I’ve also had $30,000 years.

So the intention is that I should pay tax on $200k in a $30k year?

Cretins.

In the US, most people make their money from a regular job; they get a paycheck and pay income taxes. But the richest Americans, the top 1 percent, make most of their money from things like investments in real estate or the stock market. Those investments are taxed as capital gains. While federal income tax has a maximum tax rate of 37 percent, the tax rate for capital gains tops out at just 20 percent.

Sigh.

No.

It’s not even a majority is capital income, let alone capital gains.

For the top 1 percent of households, in contrast, capital income — most of which enjoys preferential tax rates[4] — constitutes 41 percent of their taxable incomes,

Capital income is not the same as capital gains. Further:

According to the Congressional Budget Office, as of 2011, the top 1 percent of income earners in the U.S. get more than a third of their income from capital gains. For context, the typical annual income for those in the top 1 percent is about $1.4 million.

Sigh.

The OECD said more than $100bn (£73bn) was expected to be raised by curbing profit shifting. About $150bn is expected to be raised from the global minimum tax rate.

Those numbers are in fact bollocks but still.

Consider the total impact. Global tax revenues are around $25 trillion. Governments will – OK, might – have 1% more to play with.

We’re saved I tell ‘ee, saved.

The City watchdog’s new most senior lawyer was involved in a celebrity tax avoidance scheme that cost the taxpayer £52m, The Sunday Telegraph can reveal.

David Anthony Scott, appointed last week as the Financial Conduct Authority (FCA)’s interim general counsel, is named in Companies House filings among hundreds of people who backed a 2011 tax incentive scheme involving empty data centres in Tyneside.

OK.

HM Revenue & Customs officials began clawing back the £52m “tax profit” in 2016, but a High Court ruling in 2019 then ruled in favour of the investors. The scheme was legal and there was no suggestion of wrongdoing by anyone who invested in the centres, which were intended to foster economic growth in the area by offering investors a generous tax allowance.

Someone who obeys the law sounds like a useful fort of person to have in that job, no?

We’re told billionaire tax avoidance is ‘perfectly legal’. But is it?
David Sirota
A presumption of innocence is never afforded to poor people accused of petty theft. Yet billionaires benefit from it every day when it comes to taxes

Every court case ever starts with that presumption of innocence. OK, well, since the end of the Star Chamber at least.

In the wake of ProPublica’s recent disclosure of how billionaires avoid income taxes,

Jeeeezus. It’s not even about income taxes, it’s about capital gains taxes.

Idiot.

As we get braver we should also aim to tax all those unrealised gains – so if a billionaire’s wealth rises, they pay tax on that annually, whether or not they sell (or “realise”) assets. Some powerful Democrats in the US are now pushing for just this.

Sigh.

So where does the money come from to pay taxes on unrealised gains? The gains must be realised, right?

Jeff Bezos gave umpteen billion to the ex Mrs Bezos. So the state would have had to give him a massive tax rebate on his reduced wealth, right?

aaa in comments.

Quite so, if rises in uncrystalised wealth are to be taxed – the current insistence – then losses should generate rebates.

ProPublica’s bombshell report on America’s super-wealthy paying little or nothing in taxes reveals not only their humongous wealth but also how they’ve parlayed that wealth into political power to shrink their taxes to almost nothing.

Jeff Bezos, the richest man in America, reportedly paid no federal income taxes in 2007 and 2011. Elon Musk, the second richest, paid no taxes in 2018. Warren Buffett, often ranking number 3, paid a tax rate of 0.1% between 2014 and 2018.

The real scandal is it’s legal.

Wealth and power are inextricably connected. The super-rich have bought armies of lobbyists to keep their taxes minuscule and to create and maintain tax loopholes large enough to drive their Lamborghinis through.

This talk of loopholes and avoidance.

America has never had a tax system which taxes those uncrystalised capital gains. So what loopholes, what tax avoidance?