Ritchieism of the day
Posted by Christie Malry on November 24, 2011 at 8:52 pm
Occupy London and the dead hand of the state
Posted by Christie Malry on November 20, 2011 at 11:15 pm
The dead hand of the state represents those bits of the economy that never happen at all because of the interventions of the state. The most obvious example is tax, but the dead hand of the state can also work its evil through regulation.
Interestingly, in their attempts to show that there's a better way of organising society, Occupy London manage to demonstrate beautifully just how the dead hand operates:
James Sevitt of Occupy London’s Tent City University commented: “As we enter day 36, it’s hard to imagine Occupy London not being part of the City of London now. There is a real sense of community growing, as campers, speakers, workers, tourists mix, engaging diverse views about how we can create a more just society. This is collective thinking and wisdom in action.
No, James, there isn't wisdom in action. It's dead easy to set up any sort of co-operative. What's difficult is keeping it going. We solved this sort of problem centuries ago, by creating currency. If you work for the co-operative, you get given tokens, which you can then spend at the co-operative. No token, no service.
Unfortunately, the government messes all of this up. It says that if the co-operative employs you to work for it, then instead of giving you 10 tokens, it must pay you 7 and give the other 3 to the government. It then says that just for the privilege of employing you, the co-operative must pay an additional token to the government. But that's not all! The government then says that anyone buying from the co-operative must pay an additional 1 token for every 5 spent at the co-operative.
So for a total employment cost of 11, you get 7, and you can only buy 6 tokens' worth of goods with it. Pretty sucky, right? If you can't get enough from your contribution to the co-operative to make it worth your while, you simply won't contribute at all. And if all that tax makes the co-operative's prices too high, people simply will stop buying from it.
What does the government do with all that money? Why, it hires employees of its own! And those employees grab their clipboards and head on down to the co-operative to ensure that only properly regulated people are allowed to work there. That reduces the supply of labour which, when you're trying to set up a co-operative in which everyone contributes, is sort of a bad idea.
Now, of course, Occupy London didn't set up a token system. Nor did they use cash. If they had used cash, they'd have had to register all their services for tax purposes and pay tax on them, and they'd have had to establish proper employment contracts. So it's all done on a strict voluntary basis only. For a group that's seemingly opposing the Big Society, this seems strange, given that they're effectively proving that the Big Society can work.
However, any fool can set up a food tent or pretendy university. But running a restaurant to national hygiene standards that can pass an Environmental Standards inspection, while paying its staff's wages and employer's national insurance is hard. Setting up a university that can deliver proper, accredited degrees, while paying its staff union-agreed wages and pensions is hard.
We didn't need Occupy London to tell us that. But it does appear that they needed to learn this simple lesson in economics for themselves.
That cappuccino metaphor
Posted by Christie Malry on November 19, 2011 at 8:31 am
Ritchie has blogged about this before, but I must have missed it. But it's right there at the beginning of his book. No, I haven't bought it; you can read the beginning of it on the website of that evil tax-dodging multinational, Amazon:
Isn't it ironic that, in order to illustrate the essential nature of the state, Ritchie must rely upon something that was generated entirely within the private sector? Twenty years ago, nobody drank cappuccino. Thanks to the marketing expenditure of the private sector, the tired old white coffee with sugar has been transformed into an exciting array of flavours, textures and aromas.
Go to any council building and ask for a coffee and you'll still be served that white coffee with sugar in a plastic cup.
As a metaphor for the ingenuity and risk-taking of the private sector and for highlighting the excruciating foot-dragging of the public sector, the simple cappuccino is hard to beat.
And, as an added bonus, there's the Libertarian View's coffee test, which demonstrates that those who portray themselves as caring socialists often prefer to treat themselves than help others.
A week is a long time in politics
Posted by Christie Malry on November 18, 2011 at 11:49 am
Accountancy Age reports that, rather than issue its audit proposals next week as had been widely expected, the European Commission will now take a further week. Who knows, they may even decide to delay it further.
This is a mistake. The draft proposals were leaked months ago and that led to a rather childish and unhealthy debate in which everyone had seen the proposals but no-one would publicly admit that they had. Rather than treat the targets of their proposed regulations with respect, the EC seems determined to spring sweeping regulations on the market. And, if European process repeats itself, they will allow a pitifully inadequate period to respond to them, a period that also includes a two week Christmas holiday.
This is no way for a responsible regulator to behave. Barnier should meet his original deadline, even if he feels the papers are half baked. He should allow a proper period for discussion: say, six months. And he needs to listen to the evidence and feedback, and accommodate it. The listed company investment market is too valuable to the European economy to be treated in this lacksadaisical manner.
With markets showing falling confidence, Barnier must show how he intends to help restore it - and fast. A week could be a luxury he, and we, can't afford.
From Amazon to income splitting, Richard Murphy's hypocrisy grows and grows
Posted by Christie Malry on November 16, 2011 at 12:42 pm
This story just gets better:
The profits will go to Tax Research LLP and be taxed at my full marginal rate - which is fully tax compliant, of course.
And some will as a result be allocated to my wife - who as the preface notes, made a massive time contribution to the writing of the book.
OK, she's a GP, so her marginal rate probably is 40%. But what did she actually do to make a massive time contribution to the book? I don't mean this in a sexist sense. Ritchie says she neither typed nor proof-read. So what did she do to justify diverting income from Ritchie, who wrote most of the book, to her?
Ordinarily, you'd expect an employer-employee relationship. It's not like she is co-author. If she had been employed, there would have been employers NI to pay.
Is the purpose of this relationship to eliminate or reduce the amount Ritchie might have to pay in the 50% band? And income splitting of this sort is exactly the kind of tax structure he would criticise if anyone else were to use it.
Two things are certain: this isn't a transparent way of addressing Mrs Murphy's contribution to his opus; and Ritchie clearly thinks that tax fairness only applies to everyone else. When it's his turn, he's just a hypocrite.
Taxpayer views on taxation
Posted by Christie Malry on November 15, 2011 at 11:15 pm
HM Treasury has released a short video that shows just how confused taxpayers are about tax.
There's a transcript of the video too. It highlights that there really are lots of muddled taxpayers out there. And, with tax being so confusing, who can blame them?
You filthy, filthy hypocrite!
Posted by Christie Malry on November 15, 2011 at 10:24 am
Wow. Just, wow.
My new book, the Courageous State is now available, and will be on sale from Amazon and such sites within days
I'm sure he'll try to justify this in terms of the proposed abolition of Low Value Consignment Relief. But, with Ritchie having campaigned for so long against tax avoidance, it's hard not to see this as a triumph of his own personal greed over the principles he so readily seeks to apply to everyone else.
Twat.
Financial journalists are idiots
Posted by Christie Malry on November 10, 2011 at 11:06 pm
I make no secret of my total disdain for virtually all financial journalists. So many of them write sloppy, badly-researched stories about financial issues that scream to the world their total lack of understanding of accounting.
But this snippet really is the lowest of the low, in an article on HSBC's third quarter results:
The “reported” profit before tax figure, which gives a less accurate sense of how the business is performing was actually up $3.6bn on the equivalent period of 2010, at $7.2bn, including a $4.1 favourable move in the value of the bank’s own debt. This will not be the figure investors will be looking at, however.
While I can see what they're trying to get at, it's extremely irresponsible to talk of a listed company's GAAP results as "less accurate". It's this sort of nonsense that fuels the idea that IFRS is just a game that companies play, with the full complicity of their auditors, to produce financial numbers that have no direct relevance for investors. IFRS are designed for investors, so if they don't like IFRS numbers, they need to get on the IASB's case to get them changed. But journalists must also do their part to support trust and confidence in reported information.
Prove it, Prem
Posted by Christie Malry on November 10, 2011 at 10:51 pm
Prem Sikka would like to see the tax returns of people who earn above-average incomes:
First, the impulse of wealthy elites and large corporations to opt out of the tax-paying obligation needs to be checked by public scrutiny. As part of this, the tax returns of individuals with above-average annual income should be made publicly available. The tax returns of all UK registered corporations, together with details of tax avoidance schemes, should also be public.
Tax is the price that we pay for democracy, social rights and a civilised society. Our contribution towards that should be a matter of public record. The public availability of tax returns would enable citizens to alert, analyse and inform regulators of dubious practices and demand action.
A professor in accounting who also writes for a national newspaper must surely be earning an above-average income.
So, Prem, if this is such a great idea, why don't you start the ball rolling by publishing your own tax return?
While you're at it, why not convince your fellow tax campaigner and high earner Richard Murphy to join you on your quest? And see if you can't convince Polly "We are the 1%" Toynbee to take part too?
There's no need to wait for regulation to force you to do it. Show the rest of us how easy it is, and how you have no qualms about making the personal information on your tax return public. Or stop making unreasonable demands of others that you're clearly unwilling to undertake yourself.
Er, no Ritchie
Posted by Christie Malry on November 10, 2011 at 10:37 pm
Ritchie writes, in relation to Olympus:
The first is to note that a situation where an overly strong board of directors with weak or non-existent nonexecutive directors, none of them accountable to effective shareholder scrutiny gives rise to a situation where corruption and abuse is far too easy. We should not be complacent and think that this applies to Japan alone. This is also an accurate description of the UK quoted company environment where boards are almost entirely unaccountable, whether to non-executive directors (almost all of whom are recruited from the same small coterie of people) or to shareholders, where institutions dominate. Since, however, those institutions show no willingness to act on behalf of those whom they are supposed to represent, but do instead align their self-interest with the City of London and in turn with the companies they are supposed to be monitoring, we have no effective governance of these arrangements in the UK either, so we have no reason to take comfort from this situation by pretending it is peculiar to Japan alone
So, a case of dodgy corporate governance that took place in Japan is proof that UK corporate governance is ineffective?
No, I can't accept it, Richard. Put up balanced, objective evidence from the UK, or shut up.
