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Tax

Something I didn’t know

The US tax brackets automatically adjust for inflation:

For instance, the top tax rate of 37% stays the same, but the amount of income to qualify for it rose from $539,900 to $578,125. Meanwhile, the lowest rate of 10% will apply to individuals making $11,000 or less, up from $10,275 in 2022.

Unlike the British ones where the Chancellor announces them each year and may or may not uprate them with inflation.

The effect of this is that the American system collects less money from fiscal drag than the UK one does. Still not nothing of course. In normal times wages rise faster than inflation, so tax brackets still creep down the income scale. But there’s less fiscal drag in the US system than the Brit one.

So, err, MMT doesn’t know history then?

Taxes (or other forms of compulsory payment) are a good way to start up a currency from scratch, as history clearly shows. Define the unit of account. Impose tax liabilities payable in the state’s unit of account. A state that can make and enforce its tax laws can compel people to produce for the state (mercenaries, roads and other public works, crops, etc.) in order to get the “token” (state currency) that is needed to pay the tax. The imposition/enforcement of the tax is what gives the state’s otherwise (intrinsically) worthless currency value. Remember, the British government literally used to spend “tallies” (notched hazelnut sticks. Upon payment of taxes, the two sides of the stick (the “stock” and the “stub”) were matched up and the debt was paid. The sticks were then burned. Just as paper currency used to be burned once returned to the issuer. Beautiful short paper by Randy Wray covering this history.

No, other way around.

Taxes were levied, the tallies were notched, then the tallies were split. This then gave each side, payer and collector, a matchable and unalterable record of the taxes that had been paid.

They were then stored under the Houses of Parliament, it was them being burnt that burned the place down.

Tallies were a system of receipts, not debts in tax terms.

If you can’t even read Wikipedia then there might be something wrong with your economic and or historical knowledge.

You recall last year’s tax on unrealised capital gains?

Sure, you do. Make the billionaires pay income tax on the rise in the value of their shares even if they don’t sell any. Liz Warren, Bernie Sanders, all over it they were.

Forbes reports that rising inflation and falling stock prices have collectively cost members of the Forbes 400 US rich list $500 billion in 2022 with tech tycoons suffering the biggest losses.Jeff Bezos (worth $151 billion) lost $50 billion, Google’s Larry Page and Sergey Brin (worth a collective $182b) lost almost $60b, Mark Zuckerberg (worth $57.7b) lost $76.8b, and Twitter co-founder Jack Dorsey (worth $4.5b) lost $10.4b. Former Microsoft CEO Steve Ballmer (worth $83b) lost $13.5b

Hell of a refund season next spring, right?

BTW, Piketty – is r greater than g these days?

So, how do we know this is bollocks?

Scrapping the non-dom scheme and taxing this income could raise more than £3.2bn in additional annual tax revenue, the researchers claimed.

….
However, the Warwick and LSE research, which is based on HMRC filings, claims that “only 0.3% of those affected would leave the country (fewer than 100 people), most of whom are paying hardly any tax under the current regime”.

That’s a very precise estimate. So, how can we test the truth of it?

Arun Advani, associate professor at Warwick’s economics department and Cage research centre, said

Ah, there we go, it’s bollocks.

Case solved.

It’s nearly the perfect tax!

From the mountains of Snowdonia to the hills of the Brecon Beacons and beaches of the Gower Peninsula, the beauties of Wales now come at a cost – even for the Welsh.

The country’s government has published proposals for a tourism tax on overnight visitors, regardless of where they have travelled from.

A consultation document reveals the tax would be applied to campers, bed and breakfast and hotel guests, as well as Welsh people holidaying within Wales.

Think about the politics of taxation for a moment. If folk both see and feel a tax and also have a vote – for or against – those doing the taxing then there’s a limit on how much can be taxed.

So, the desire is always to hide the tax – goods are quoted inclusive of VAT, the left try terribly hard to insist that corporation tax is really paid by companies etc. Levying a set fee upon individuals, the poll tax, runs into problems, even though the effect was vastly smaller.

As Monty Python pointed out the perfect tax is to tax foreigners living in foreign countries. But taxing outsiders – without the vote – who come in is nearly as good. So the popularity of such tourism taxes. Despite the fact that you’re now taxing people who come to your place to spend their money.

The political joy of the tax is such that it overcomes anything about efficiency or good sense.

These people are weird

They say the Duchy of Cornwall private estate has been “generating tens of millions of dollars a year” and “done so without paying corporation taxes like most businesses in Britain are obliged to, and without publishing details about where the estate invests its money.”

Which tax is paid doesn’t really matter. And if it’s not a corporation then corporation tax really isn’t payable anyway.

As it happens, Charles has been paying 45% on the income from the estate. Top rate of income tax. So, that’s solved then, isn’t it?

The tax rises are only on the rich

As part of the American Rescue Plan, third-party e-commerce platforms like eBay, Poshmark, Mercari, Depop, and Tradesy will now have to issue a 1099-K tax form to anyone with a total revenue of more than $600 on their websites. In the past, the platforms only gave tax reporting forms to sellers who operated at a larger scale, those who brought in $20,000 in revenue and had more than 200 sales in one year.

Oh, right…..

A suggestion here

Desperate times need radical solutions. Even Churchill knew when it was time to tax the rich
Torsten Bell

Anyone who wants to call Churchill in in support of higher taxes should read about his turning and twisting over the money from the History of the Second World War. It was very – very – much tax for thee and not me, to put it mildly.

True

Inflation surge threatens Truss’s tax cut plans, says IFS
Government’s benefits, pensions and borrowing bills expected to soar next year

Taxes also surge with inflation – fiscal drag. The balance might not be all that terrible……

Not really, no

BP is on course to pay a lower tax rate this year than before the onset of Covid, despite a raid on energy companies’ profits during the cost of living crisis.

The FTSE 100 oil behemoth said it expects its global underlying effective tax rate this year to be around 35pc, which compares to 36pc in 2019 and 38pc in 2017 and 2018.

Murray Auchincloss, finance chief, told analysts last week the rate had been helped during the first half of the year by strong results from its refineries and traders.

He said he expected the company’s overall effective tax rate to be around 30pc during the first half of the year, rising to 40pc in the second half, averaging at 35pc for the full-year.

Mr Auchincloss added: “I suppose what we didn’t plan for at the beginning of the year was a much stronger refining market, nor did we plan for exceptional trading results. So, if you take account of those things, that’s what drives the effective rate lower.”

BP said it typically pays tax on products sold as they leave its refineries. These facilities are typically located in lower-tax countries than the wells where it extracts oil and gas from the ground.

The explanation isn’t right. It’s actually that oil wells pay ihgher tax – righteously – than refining. Look at the UK tax system. Refining pays normal corporation tax. Wells pay the special regime for oil wells at much higher rates.

From a PR email

“Reining in corporate greed is the key to bringing down costs for families and kickstarting economic growth, and fortunately Congress has the opportunity do it. Passing the Inflation Reduction Act will ensure corporations will finally begin to pay their fair share in taxes. This bill will put billions of dollars more into the pockets of Americans by reducing the leverage big oil, health insurance and drug companies have to charge whatever they please – all while creating thousands of new jobs.”

The idea that folks will invest more to create more jobs when the return from investing to create more jobs is more highly taxed is, umm, contestable, to say the least.

Gosh, d’ye think?

Its president can also gain access to the confidential tax declarations of companies or individuals. While these cannot be published, Mr Coquerel’s rivals claimed in the run-up to the vote of a risk that a Leftist radical could be tempted to breach this rule for political gain.

Although why that would be exclusive to leftists I’m not sure. Which politician wouldn’t abuse that power?

Windfall taxes

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.

I do so enjoy Mr Richer

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?

Deeply unconvinced

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…..

So, umm, not actually avoiding tax at all then….

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.”

Bad, bad, idea

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.

That’s not quite what the man said…..

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…..

British tax system treats foreigner as foreigner

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.