Tax

Now that we tax unrealised gains we’ve got a really useful effect on the economy. When billionaires lose money then we all get to send them some of ours. Ain’t that great?

Net worths of Musk, Bezos, Zuckerberg drop $64B+ in 2022

I’ve pointed out that if there are to be windfall taxes on energy companies then they should be on energy companies. Note the if near the start there. But if horrible Big Oil is to be hammered then so should Big Wind, Big Solar and Big Biomass.

The argument against having a windfall tax at all is in this morning’s stock market. Drax is down 13% on the mere rumour of a windfall tax, Centrica 7%.

Quick slide rule peer at suggests that the losses to investors are larger than the revenue which might – recall, it’s still only might – be collected. Which means that we’ve a tax here with a greater than 100% deadweight. The losses are greater than the revenue collected.

That’s just insane. It’s a very bad tax indeed.

Anyway, back to the story. I wanted to talk to Richard about an idea in the very last paragraph of The Great Tax Robbery: his suggestion that we needed to “monitor systematically multinationals’ tax payments and actions (or inactions) against tax avoidance: TaxWatch perhaps”. I agreed passionately.

And so Mr. Richer did indeed start the funding for TaxWatch.

The same Mr Richer who sold his company – entirely and wholly legally – without incurring a tax bill for himself nor, I think I’m right in saying, even creating an asset which would then be subject to inheritance tax. Although I may well have misunderstood that last.

It tracks all forms of tax abuse and works very hard on what to do about it, and has started a national discussion on what tax avoidance actually is (HM Revenue & Customs’ definition is “bending the rules of the tax system to try to gain a tax advantage that parliament never intended”, which most of us don’t seem to realise).

TaxWatch being run by Richard Brooks, the Private Eye guy who entirely made up the idea that Vodafone faced a £6 billion tax bill, that there was some “deal” which led to a much lower bill actually being paid. When Vodafone was, in fact, simply obeying the European Union’s laws on the taxation of subsidiaries.

But then one man’s entirely legal and moral obeying of the tax laws shades into tax avoidance when done by someone else, doesn’t it?

Capital gains
First, Rishi Sunak could raise capital gains tax rates to match income tax rates, and reintroduce an inflation allowance, as his predecessor Nigel Lawson did in 1988. It was the top recommendation by Sunak’s own advisers, the Office of Tax Simplification, in 2020. This could raise up to £16bn. While some people will doubtless delay cashing in gains to avoid the tax, the chancellor should comfortably reach £10bn even accounting for this. A reformed capital gains tax would also be fairer, reducing the opportunity for some to game the system to pay lower effective tax rates.

With inflation at 9% entirely uncertain that CGT with an inflation allowance would raise anything at all…..

Barclays could have been taxed between 25 and 30% had it not taken advantage of rules allowing it to offset losses linked to $9bn-worth of shares

Losses offset profits, ho hum…..

“We paid no corporation tax in Luxembourg in 2021 as our taxable profits were offset by substantial tax losses brought forward from prior years, and also due to dividend income not being taxable under Luxembourg law”, its 2021 report stated. “We have unused tax losses which are automatically carried forward, and available to offset against future taxable profits.”

Asked about the prospect of taxing energy firms’ profits to ease the cost-of-living crisis, Mr Sunak replied: “If we don’t see that type of investment coming forward, if companies aren’t going to make investments in our energy security, of course that’s something I’d look at.”

But then of course just imagine the squealing if he taxes *all* energy firms, the renewables as well….that might be worth even the stupidity of the basic idea.

After the tax status of the chancellor’s wife emerged on Wednesday, her spokeswoman said it was a consequence of India not allowing its citizens to hold dual nationality. But experts said that she had made a proactive decision to remain a non-dom, meaning she does not have to pay UK tax on foreign earnings.

Dan Neidle, a tax lawyer at Clifford Chance, said “citizenship is irrelevant” to an individual’s tax status and that Murty had made a choice to be a non-dom. He said: “You have to tick a box on your tax return, claiming what’s called the remittance basis. So that’s a choice that she made. The statements implying it wasn’t a choice are a disgrace.”

To be taxed on the remittance basis or not is indeed a choice. Which is what the man said. Which isn’t the same as saying that to be a non-dom is a choice or not. And he didn’t say it was. He said that your domicile is a fact, not a choice.

At least I can read Twitter, apparently more than The Times can…..

Mob astonished:

Rishi Sunak’s millionaire wife holds non-domicile status for UK tax purposes, the Treasury confirmed on Wednesday.

Akshata Murthy, the daughter of the billionaire Indian businessman Narayana Murthy, held “non-dom” tax status as recently as April last year, while her husband was Chancellor of the Exchequer.

The designation allows Ms Murthy to avoid paying tax on foreign investments and overseas rental income, and to avoid inheritance tax entirely.

It’s difficult to say she avoids such taxes as they’re not due in the first place. Still, that probably does for Rishi ever becoming PM.

Britain’s richest woman Denise Coates takes home another £250m from Bet365

She didn’t, did she?

Denise Coates, Britain’s richest woman, has taken a £170m pay cut as growth stalls at her sprawling bet365 gambling empire.

Ms Coates’ salary fell from £421m to £250m for the year to March 2021, according to filings on Thursday. In addition, she received her share of a £98m dividend alongside her brother John and father Peter.

No salary she pays income tax at 45% and NI at what, 12% (plus 2% employers?)? So, in round numbers, £120 million say. The dividend will be taxed at 35% or so, summat like that.

She might have had £250 million sent out to her but it didn’t arrive to be taken home now, did it?

The tax office has been “strongly encouraging” employers to justify the Government’s controversial National Insurance increase to workers, in a move derided as “propaganda” by business owners and “meddling” by a former senior civil servant.

HM Revenue & Customs has contacted businesses multiple times telling them to promote the manifesto-breaking tax increase as “for the NHS”. In an email to employers, the tax agency said employers should include a message to employees “affected” by higher taxes on all payslips in the coming tax year.

The email said: “The message should read: ‘1.25pc uplift in NICs funds NHS, health and social care’.” The instruction also featured in bulletins sent to employers last month and has been poorly received, with many business owners and lobby groups lambasting the request as “government propaganda”.

Let’s insist – jeez, it’s so long since I had a paycheque from anyone, rather than presented an invoice, that I don’t know if this happens already or not – that all pay stubs show gross wages. Before everything. Then they show employers’ NI, employees’ NI, income tax etc.

With a percentage calculation at the end. Just for fun, of the marginal tax rate. For the average worker that’s going to be a marginal tax rate of 40% or more. Would nicely bring home that we’re not a low tax nation, eh?

HM Revenue and Customs is urgently reviewing a rule that allows anyone who works even a single day from home to claim a yearly sum of up to £125 in tax relief, The Telegraph can disclose.

OK

However, the rules were relaxed at the beginning of the pandemic to help the millions more people told to stay away from the workplace – with the tax-free amount raised from £4 a week to £6.

Umm

Claims can also be backdated, meaning that anyone eligible who worked from home because of Covid but never made a claim is entitled to a two-year payout of up to £250.

Payout? Is this a tax relief or what? A relief, I assume, being you can earn £125 without paying tax on it to cover these costs of working from home? Or maybe a £125 knocked off your tax bill to cover it?

But payout? Like, an actual claim against govt? Whut?

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.