Gay cakes

Posted by Christie Malry on May 19, 2015 at 2:34 pm

In which of the following situations can the business owner refuse service without being sued for discrimination?

1. Two men order a wedding cake with "For Chuck and Dick" on the top.

2. A man and a woman order a wedding cake with "For Chuck and Dick" on the top.

3. A straight man orders a cake with "Gay marriage is great" on it.

4. A gay man orders a cake with "Gay marriage is great" on it.

5. A straight man orders a cake with "Hitler is a hero and the Holocaust was justified" on it.

6. A gay man orders a cake with "Hitler is a hero and the Holocaust was justified" on it.

If it's the slogan that's the problem, not the person seeking service, how can it be discrimination?

Um, no

Posted by Christie Malry on April 13, 2015 at 11:33 pm


The problem they [right wingers] face is this. If you won’t advocate sensible reform against your own interests you can’t expect to be listened to when you advocate sensible reform for them.

This is just silly.

An argument stands or falls based on two things: facts and whether the policy is supported or refuted by those facts.

The strength or weakness of an argument is unrelated to who makes it and whether it's in their own interest for them to make it. Jolyon makes a logical fallacy here, a form of ad hominem.

For sure, being predisposed to a policy might make the proposer likely to overstate upsides, downplay downsides and/or skew evidence in their favour. So show where they've done that, instead of smearing them.

Ritchie caught lying again

Posted by Christie Malry on April 12, 2015 at 2:41 pm

He's caught bang to rights:

There are three things to say about Osborne’s long term economic plan.The first is he did have one. It was based on imposing austerity. It failed. We had a recession.

This just isn't true. A recession is defined as two successive quarters of negative growth. And we simply haven't had two successive quarters of negative growth at any time in this Parliament.


Non-dom dynamics

Posted by Christie Malry on April 9, 2015 at 6:12 pm

One day on, and we’re still reading total hogwash about non-doms. Jolyon started it, with his ill-conceived back-of-a-fag-packet calculations that started to unravel almost as soon as he had pressed publish. Then campaigners changed tack, arguing that it was never about money but was about fairness instead. The exercise of how it’s “fair” to change non-dom taxation in a way that might reduce overall tax revenues, leaving ordinary people to pay more, is left to the reader. The indomitable non-dom campaigners are back again today, claiming ‘hell no, they won’t go’ in what might be a case study in missing the point.

Enough, already. This post aims to set out the dynamics of answering the question of what would be the impact on tax revenue of abolishing the non-dom remittance basis.

First, we need to establish just what the non-dom basis is. Thanks to the CIOT, there’s a handy primer to the law here, and I suggest you go refresh your memory as it’s a good summary.

So, Labour’s policy is to prevent those who currently claim the remittance basis of taxation in respect of their non-UK income from doing that in future.

Currently we get:


Where N is the number of non-doms claiming the remittance basis, IncUK is their UK taxable income, TR is the tax rate, Unremitted is their unremitted foreign income, Remitted is their remitted foreign income, RBC is the remittance basis charge and multiplier is a variable to reflect their economic impact on the rest of the economy. [Of course, you can’t actually multiply N by the average income for each non-dom. More strictly, you should be summing the bit in brackets individually across the population N. But it’s easier to understand if it’s presented in this way.]

Labour would move to this basis:


Where IncForeign  = Unremitted + Remitted. I’ve put some redundant terms in each equation to make them easier to compare.

Jolyon’s analysis can be summarised, roughly, as follows:

  • N won’t change much because previous changes were accompanied by small behavioural responses.
  • He ignores the max(UK-Foreign) side of the tax rate calculation using TRUK instead, although this may be because people who currently pay the remittance basis charge do so to avoid a UK tax charge that would otherwise exceed the remittance basis charge. Still, it’s important to calculate these things properly. Guido called him on this yesterday.
  • He ignores RBC altogether. He has claimed on Twitter that its impact would be relatively insignificant.
  • And he ignores multiplier altogether.

He argues that it’s OK to simplify it like this because the behavioural impact is uncertain, so we can smear its impact across all the other variables to arrive at an overall approximation of, he says, £1 billion or more.

Don’t ignore the remittance basis charge

But omitting RBC is a howler. He’s trying to calculate the steady state impact of abolishing the remittance basis altogether. Currently, only a handful of people pay the charge as it only applies if you’ve been living here for some time. But if all 49,000 people who currently claim the remittance basis had to pay the remittance basis charge, even at its lowest level (£30,000), this would bring in £1.47 billion. And Labour just abolished the remittance basis, so that represents a loss to the Treasury of more than Jolyon claims would be brought in by changing the way non-doms are taxed.

Don’t overlook the spending power of rich people

Omitting multiplier is also a howler. Anyone who is prepared to (eventually) pay the remittance basis charge is rich. Richer than you or I can imagine. Rich people tend to have lots of money but no time, so they use their money to pay people who have lots of time but not so much money to do things for them. They hire drivers, cleaners, nannies, executive assistants. And they spend money on cars, houses, golf club memberships, restaurants and football clubs - both tickets to go see them play and, in some cases, the clubs themselves. You can turn up your nose at this spending if you like. But it is undeniable that rich people have an impact on the economy that goes beyond the tax that they pay to the Treasury. How much? I don’t know. But my instinct would be that multiplier is a positive number and that it’s quite big.

The biggest UK tax risk isn’t that non-doms leave, it’s that they never come in the first place

The last howler that’s being repeated by almost every commentator everywhere is in respect of N. When people say ‘they won’t go’, they’re treating N as if it were some sort of constant. But of course it isn’t. People leaving the UK isn’t the only way N can decrease. We’re talking about rich people here, and rich people tend to be older. And old people die. Over time, they will all die. To sustain a future tax income stream from the megarich, we must entice more of them to leave wherever they live now and come to live in the UK. It’s not obvious to me why a very rich person would want to choose the UK over, say, Ireland or Switzerland, when the UK would tax their worldwide income much more heavily than those alternatives. Yes, tax isn’t everything, for sure, but a six-figure tax difference is enough to make someone think twice. When Richard says non-doms won’t be leaving, he’s totally missing the point. The biggest risk to the Treasury isn’t the non-doms who leave. It’s the non-doms of the future who decide never to come.


Even if this weren’t in the run-up to a General Election, this would still remain a political, emotional debate rather than a rational, economic one. But it’s a shame that, in their rush to make a political impact, so many ordinarily sensible people are abandoning reason for headline grabbing rhetoric.

Income, schmincome

Posted by Christie Malry on April 9, 2015 at 12:27 pm

He: “I’m really cross about all this non-dom stuff. It’s an outrage!”

She: “What’s that?”

He: “Non-doms get a massive tax break so they don’t have to pay tax like we do. It must be stopped!”

She: “Go on”

He: “We have to pay tax on all our income.”

She: “And non-doms don’t?”

He: “No, they pay tax on all their income too.”

She: “So what’s all the fuss about?”

He: “Non-doms don’t have to pay tax on their schmincome.”

She: “What’s schmincome?”

He: “Schmincome is income they earn in another country.”

She: “Oh. And you do have to pay tax on schmincome?”

He: “You bet I do. It’s completely unfair!”

She: “But can they use schmincome as income?”

He: “Well, they can. But if they do turn schmincome into income then they have to pay tax on it.”

She: “OK. I’m still struggling to see why that’s unfair on you.”

He: “Because I have to pay tax on schmincome and they don’t!”

She: “So how much schmincome do you have?”

He: sheepishly “Well… none, actually”

She: “Er…”

He: “But if I did have schmincome, I would have to pay tax on it. It’s disgusting and indefensible that they get such preferential treatment…” (cont’d p94)

Shouldn't we extend non-dom status to everyone?

Posted by Christie Malry on April 8, 2015 at 12:06 pm

Consider the following examples. K, L and M are all UK-domiciled:

  • K’s elderly mother lives in Canada. K regularly goes to visit her to check that she’s OK. K retains a Canadian bank account with a modest amount in it to cover incidental expenses while visiting and to be able to pay for emergency care if she becomes ill while K is in the UK. The account earns interest.
  • L hopes to retire to Brazil in several years’ time. Because property prices are currently at an all time low, L has bought a house there now and has rented it out. All money is being retained in Brazil to cover possible emergency costs.
  • M works for a multinational company and has just returned from a two year posting to the US. M’s package in the US included a 401K in which there is a five figure sum. M became engaged while in the US and is still undecided whether to make their long-term home in the US or the UK.

In each of these cases, the UK tax system seeks to tax the worldwide income of K, L and M. So the bank account interest, rental income and 401K investment return would be considered taxable for UK purposes, subject to any double tax agreement between the UK and those countries.

Putting to one side the rhetoric about billionaire non-doms, can anyone explain why it would not be fairer to simply ignore K, L and M’s foreign assets altogether? Rather than, as currently, forcing K, L and M to account for their worldwide income and navigate two tax systems that may or may not have treaty provisions to eliminate double taxation?

Still not convinced? Read Robert Maas’s excellent post on the complexities of how UK tax law messes with internationally mobile ordinary people. Wouldn’t it be better, far easier and fairer for ordinary people just to tax everyone as if they were a non-dom?

Should we judge HMRC by process or results?

Posted by Christie Malry on February 18, 2015 at 9:48 am

Imagine two taxpayers. One is a small business. Perhaps an entrepreneur and her husband. The business’s tax affairs are challenged by HMRC and she must go to court to fight her case. After a lengthy case, which is appealed, she wins.

The other is a large multinational. This business’s tax affairs are challenged by HMRC and the multinational must go to court to fight its case. After a lengthy case, which is appealed, it wins.

How would these cases be reported in the media? The SME case would be the tale of a plucky entrepreneur who has had to take time away from her business (and family) to fight an unfair challenge from a faceless government inspector. Whereas the multinational case would be the story of how big business dodges its tax responsibilities and, by employing its vastly superior resources, hoodwinked the tax authorities.

Of course, these are gross simplifications. But it seems - to me, at least - that the idea that HMRC is tough on small business but gives big business an easy ride is a selection bias problem. Everyone knows a family member or friend or friend-of-a-friend who has been taken through the wringer by HMRC. Whereas not everyone knows a tax director at a FTSE-100 company. That means we tend to judge HMRC’s interface with SMEs by its process whereas we judge the interface with multinational business by its results.

HMRC is an organisation that takes money off you. Invariably, it will focus on those areas where it thinks you haven’t paid as much as you should. So any interaction with it is unlikely to be pleasant. Judging HMRC by process will invariably create a negative impression of HMRC, which looks like it behaves badly in its dealings with ordinary people.

Assessing HMRC by its results creates a no-win situation. Either HMRC loses, which makes it look soft on big business. Or it wins, which merely reinforces the idea that big businesses are dirty tax dodgers. Whatever the outcome, tax campaigners can chalk it up as another piece of ‘evidence’ that big business and HMRC are unethical.

A better approach would be to recognise that both the SME and big business narratives are inadequate. We need to assess HMRC by its overall service standards, and business by its overall behaviour, not merely by the narrow parameters of tax investigation process or outcomes. Anything less might produce good stories but inevitably leads to terrible policy.

The impact of cutting taxes on tax avoidance

Posted by Christie Malry on December 18, 2014 at 1:24 pm

the Tories have realised, rather late in the day, that cutting taxes does not in any way end tax avoidance.

This is obviously untrue.

Imagine a country with a tax rate of 20%. And suppose companies are very, very badly behaved. So bad, they use no end of (legal) tax avoidance techniques to dodge half the taxes due. Suppose the cost of this is 1% of their taxable profits.

If the government of that country cut the tax rate to 10%, there would no longer be any need to avoid taxes. Companies would be better off sacking their tax advisors and simply paying the tax due. Because the net cost of doing this would be 10% of (pre avoidance) taxable profits, not the current 11% (yet don't lose sight of the fact that they *should* be paying 21%: the 20% statutory rate plus the 1% they've decided to spend on advisors).

But suppose they keep on paying their advisors to dodge even more tax. Suppose those devilish lawyers manage to produce a 5% effective rate of tax in return for their 1% fee. Then the company would be paying 6% instead of 10% so it would continue to avoid. But the amount avoided is only 5% of taxable profits, not the 10% when taxes were higher.

Lowering the tax rate necessarily reduces tax avoidance because of these two effects. Firstly because it reduces incentives to avoid in the first place. Secondly because it reduces, arithmetically, the level of any avoidance that does taken place.

Making it utterly ludicrous to suggest that cutting taxes doesn't reduce tax avoidance "in any way".

Why tax allowances don't belong in personal tax statements

Posted by Christie Malry on November 5, 2014 at 11:36 am

Ritchie is very proud at how well his alternative personal tax statement has travelled. But if there’s one thing in this world that is and will forever remain true it’s that popularity is a miserable gauge of quality.

And, given that we’re dealing with Ritchie, this is especially true. So let’s have a look at his methodology.

Then I assumed a number of quite reasonable things, all based on the fact that although there were explicit spends in 2013/14 of £726 billion there are additionally what are called tax spends, which are money not collected as a result of reliefs and allowances within the tax system, and there are also some implicit subsidies the government supplies not even included within those totals.

So he’s adopting his usual approach of arguing that various tax reliefs should in fact be considered tax expenditure. So - this argument goes - it’s “tax expenditure” to give me tax relief at 40% on my pension contributions because, economically speaking, it’s identical for the state to write me a cheque for the tax on my contributions as it is for it to simply not tax me on them in the first place.

While in some circles this might work, it produces results in this case that are - and I’m going to use a technical term here - Ritchiebollocks.

Imagine a country with ten identical employees. Each has income of £10,000 from which they make pension contributions of £1,000 and pay income tax and NI of £3,000 on the rest. Their tax return would look like this (sorry for formatting, I'll just have to tidy it up later):

Income                 £10,000

Less pensions     (   1,000)
Sub-total               £  9,000

Tax paid                (£ 3,000)

Total                       £  6,000

The total government tax take would be £30,000. To make the example easy, let’s suppose this was spent entirely on the NHS.

A fair statement would look like this:

Tax paid: £3,000
Spent on: NHS 100%

Whereas Ritchie would have us say this:

Tax paid: £3,000
Spent on:  Pension tax relief 25%, the NHS 75%.

This clearly is an absurd distortion of what actually happened.

In order to make his numbers work, he’d have to pretend that actually, each employee paid £4,000 of tax and then received a cash rebate. But this isn’t what happens, and would require HMT to send out information to taxpayers that don’t reconcile to what they have in fact paid, because their payslips say they only paid £3,000.

This is why allowances simply don’t belong on the personal tax statement. Trying to shoehorn them in manages to create something even less accurate than what the Treasury came up with in the first place. And that’s really saying something.

You cannot accuse both Vodafone and Amazon of tax avoidance

Posted by Christie Malry on October 7, 2014 at 10:11 pm

So, some tax campaigners have been celebrating the news that the EU is to investigate Luxembourg's deal with Amazon that saw the multinational bookseller pay a special low rate of tax in the country. According to the campaigners, this allowed Amazon to avoid paying tax in the UK 1.

In supporting the EU's action, one is recognising that EU tax law takes precedence over national tax law. So countries do not have absolute liberty to set their tax policies as they might wish. They must obey EU law, or risk seeing it overturned upon challenge.

Then cast your mind back to Vodafone. In the case of Vodafone, tax campaigners were arguing that the UK should be able to set whatever tax law it likes, with no consideration of whether this might be permissible under EU law. Vodafone said that the UK must respect EU law and was working its way through the courts to force the UK to comply. The precise bit of law was the UK CFC legislation, which sought to bring vast swathes of foreign-source profits into the scope of UK tax. The EU said no; in the EU at least the UK may only tax profits that are earned in the UK.

One cannot logically deny Vodafone its appeal and support the EU action in respect of Amazon. Anyone who blithely claims both Vodafone and Amazon are guilty of avoidance is, I would suggest, guilty of some flaky thinking. Because you need to apply EU law in one case and completely deny it in the other.


  1. Never you mind that, on a consolidated basis, Amazon doesn't make a lot of profit, by design. So the idea that it's shifting profits about is weak, to say the least. But that's not important for the purposes of this post.