Winner and 7th most influential left-wing thinkers demonstrate their ignorance over business taxation
Posted by Christie Malry on September 29, 2011 at 9:19 pm
Owen and Ritchie fall over themselves in their determination to prove who is the more ignorant about business taxation.
Owen:
Then Ritchie:
And finally Ritchie (remember, "you're wrong" is not debate):
Sean Sullivan has got it right and our chief cheerleaders for the left have got it wrong. Even small changes in taxation can cause phenomenal difficulties for businesses. Here are some illustrations:
- On 24 November 2008, the then Chancellor, Alistair Darling, announced that he would be reducing the rate of VAT from 17.5% to 15% with effect from 1 December 2008. He gave businesses one week's notice of this profound change. Many businesses had already printed their 2009 brochures and price lists. Thanks to Darling's change they had to either pulp them or put stickers over every price. Website-based businesses also had to scramble to generate the correct pricing. This generated a phenomenal amount of admin and, thanks to Darling's desire to create political capital out of the increase, business had virtually no time to react to it.
- When the corporation tax rate changes, businesses have to do more than just pay tax at the new rate. They also have to revalue their deferred tax balances and fix the reconciliation between the actual and effective tax rate. But that's not all. Typically they'll need to explain to critics (such as Ritchie) why changes in their accounts are legitimate transactions and not just the fruits of tax avoidance. This isn't just a simple change, it's much more complex than that.
- Small changes in income tax can also create problems. Businesses have got to get every last change to income tax right, otherwise they'll produce the wrong numbers in their employees' PAYE figures. And that's serious business, because employees typically hate it when they have more tax to pay in one year because their employee reported the wrong figures to the tax office in the previous year. It glosses over the phenomenal amount of work businesses do to ensure that personal income tax paid by employees under Schedule E is right.
- And today we have a new example, courtesy of Wales. Wales has decided that retailers must charge a minimum of 5p for single-use carrier bags. But the price is still 5p regardless of the VAT status of the business. So unregistered businesses must charge 5p and VAT-registered businesses charge 4.17p + VAT. But that's not all. "For the purposes of Corporation Tax and Income Tax, receipts from the compulsory charge on single-use carrier bags should be brought into account in calculating trading profits. The Welsh Assembly Government expects the proceeds to be used to fund good causes in Wales and relief may be available where the normal charitable donations/gift aid rules are met." Sure, it's only a 5p charge, but it means profound changes to businesses who, if they get it wrong, will face fines and penalties from HMRC.
We know Ritchie was once the brave entrepreneur that sold Trivial Pursuit in Ireland. And it's obvious that Owen has never had a real job in his life. Neither has any idea of what it means for a business owner to react to the torrent of petty tax changes that has plagued this country over the last 15 years.
Thank you for 'breaking a lance' (as we say in Spain) in the small businessman's favour. People like these two (who despite Mr. Murphy's protestations to the contrary) have never been responsible for a real working company with real people and real cash-flow problems have no idea of the time we waste complying with petty rules and the problems that 'minor' changes in rules cause us.
Mr. Murphy may be a chartered accountant, he might even be a good one (although at this stage in the game I admit to serious doubts), but he knows nothing about running a small enterprise. I presume that as all he does is that bit of a business (if he in fact does even that anymore) that for the rest of us who do finance, sales and HR as part of our GM function (can't have drones for everything) he doen't see that what we most crave for is simplicity and stability in the rules. So he and his kiddie mate can bog off.
I actually can't believe that he doesn't know this stuff. So it can only mean that he's wilfully ignoring it because it doesn't suit his "seventh most influential left winger" persona. That's much, much worse than ignorance, in my view.
Just to correct you, Ritchie's company in Ireland was set up to *manufacture* Trivial Pursuit for sale in the UK purely for tax purposes:
http://www.taxresearch.org.uk/Blog/2010/08/06/ire...
The hypocritical nature of Ritchie's past is explored in that comment thread.
Thanks, Noel. I had it in my head that this discussion had taken place on Worstall's blog. Then, I got impatient and posted the best link I could find. Thanks for finding a better one.
Erm, just to chime in: he admitted that he set up the company to avoid tax, and that he was ignorant at the time and is now sorry he did it. This seems fair enough to me.
Are the smears really necessary?
Hi, Cahal. Put Trivial Pursuit to one side for one moment. The hypothesis, supported by my points 1-4 above, is that their glib statements that small changes in taxation generate virtually no increase in administration for companies is simply totally wrong.
Wouldn't you want the most influential left-winger and the sixth runner up to get this sort of basic point right? In that context, it's not a smear to say that Owen Jones has no business experience; it's really the only explanation for how he could come up with such nonsense. As for Ritchie - he should know better, but i guess it's not good for his image to let on.
No, I agree with your points. What I said was merely supposed to be a reply to Noel.