Whilst a worker on the NMW pays 13% of his income on direct taxation, Tony Blair Associates paid just 3%. That means than a minimum wage worker paid 333% more tax last year that Tony Blair Associates as a proportion of income.

If you compare the tax paid by a company as a proportion of its revenues against the tax rate paid by an individual as a proportion of his/her income, it's hardly surprising you're going to end up with idiotic results.

A company isn't a person. As I heard only this evening, thanks to a great talk by David Allen Green, it's a legal fiction that's given certain person-like qualities, but only in order to enable it to enter contracts, limit the liability of its shareholders, etc.  We tax companies in order to tax their shareholders. But we tax companies on their taxable profits, not their revenues. This is exactly the same way that sole traders and other unincorporated businesses are taxed.

We tax people differently. We tax them on their income, with very little scope for deduction.

So if there's a baddie in this tale, it's the tax system which beats up on the little guy. It's not Tony Blair, who will pay tax on any income he receives personally (possibly in the UK, but possibly not, depending on how he has structured his affairs). 

And it's mathematically dishonest to compare the rates paid and shout that one is higher than the other, without taking account of the actual amounts of tax paid. It takes a superhuman quantity of fuckwittery to actually believe that a minimum wage worker pays 333% more tax than Tony Blair's company. It's simply not true, whichever way you look at it.

Filed under: Taxation with tags corporation tax, david allen green, eoin clarke, eoinomics, fucknut, idiots, income tax, tony blair
59721 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Feoin-is-an-idiot%2FEoin+is+an+idiot2012-01-31+00%3A31%3A21Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5972

ASH are making idiots of themselves again:

A new report by FairPensions and ASH (Action on Smoking and Health) has challenged the long held view that UK local authority pension funds can hold 'unethical' assets such as tobacco in order to fulfil a legal duty and  maximise investment returns

With tobacco sales declining for the first time in 2010 and savers continuing to express concerns over whether their money is invested 'ethically', the report claims to expose misconceptions surrounding investors' duty to have tobacco as part of their portfolio. 

The report is launched with figures showing that councils across Britain have at least £1.3bn of employee pension funds invested in tobacco.

Both organisations claim that the three most heard arguments in favour of schemes investing in tobacco can no longer be upheld.

One of the most heard arguments; that is a trustee's "legal duty to maximise financial return" and that a trustee "cannot give consideration to ethical issues", is dismissed by the report as being "somewhat simplistic".

"Although local authority pension funds are governed by different laws to other types of pensions, members of their pensions committees have similar fiduciary duties to pension fund trustees," says the report.

"The phrase 'duty to maximise return' does not appear in any UK statute or case law. Pension fund trustees have a fiduciary duty to invest 'in the best interests of members and beneficiaries'. This is based on the common law duty of loyalty, which exists to ensure that trustees avoid conflicts of interest and do not abuse their position to further their own ends. Trustees also have a duty to invest prudently."

The report also claims that the two other common justifications for the investment practice, (that trustees do not interfere with the day-to-day decisions of external investment fund managers and that tobacco is a low risk, high return investment) are no longer valid.

Now, I mostly hate smokers. I hate the way they smell, I hate the litter they make, and I hate how they're always in the fucking way the whole time, whether walking down the street or when entering or leaving buildings. I hate how they use stupid schoolboy arguments to rationalise their irrational habit. I really hate how they see themselves as funding the NHS single-handed, as if that excuses all their other sins.

However, smoking remains legal. Although I don't smoke myself, I have no qualms about investing in tobacco companies and making money from the addiction of smokers (I've made quite a bit of money in doing so). Yet I can see that some people do have a problem with it.

But when you sign up for a local authority pension, you forego any right to determine what equities your pension fund is invested in. Local authority pensions are defined benefit, ie they promise you what pension you'll get in retirement. If you want a fund to call your own, over which you can make investment decisions, then defined benefit pensions aren't for you. You'll be wanting a defined contribution pension plan instead, just like we private sector taxpayers have been enjoying for years.

You can't have it both ways. Either take your defined benefit pension and shut up, or move to a defined contribution pension scheme. ASH and FairPensions are trying to have their cake and eat it. They can get stuffed.

Filed under: Economics with tags ash, defined benefit, defined contribution, fairpensions, idiots, smoking
59621 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fget-stuffed-ash%2FGet+stuffed%2C+ASH2012-01-25+22%3A05%3A15Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5962

The rate of profits made by companies who work in oil & gas are upwards of 44%. This is at the same time as the rates of profit in manufacturing are less than a quarter of that. Clearly, some sectors have a fast buck culture where their rates of profit do not match the work that they are doing. Multinational Companies operating in the UK should have their rates of profit capped at about 25%.

Oh brother. Let's just have a little look at BP's accounts for 2010:

Revenues: $297 billion

Loss before tax: $4.8 billion

Which I calculate to be a rate of loss of 1.6%.

OK, so 2010 was an extraordinary year for BP, given that it had to pay out bilions of dollars to pay for the cleanup of the Gulf of Mexico (see why they have to charge so much now, Eoin?). Let's look at 2009:

Revenues: $239 billion

Profit before tax: $25.1 billion

That's a rate of profit of 10.5%. I give up. Where on earth does he get his idiotic figures from? Clearly not from the accounts or from anything even remotely resembling reality.

Oh, and these are fun:

No employee/er or shareholder should receive a bonus in shares or payments of above £1m in any one year. The Sainsbury's boss for example received several millions in bonuses and shares while the same company hired disabled teenagers to work UNPAID. 

The idea that no shareholder can receive a bonus in shares or payments above £1m in any one year will totally fuck with any large pension fund. They'd have to reduce their holdings to ensure that they didn't receive dividends in excess of £1m, which for many companies wouldn't require that large a holding.

And forcing bosses to receive smaller bonuses will generally mean that they'll seek larger salaries. That makes payment for failure virtually guaranteed.

Ah, but Eoin has a plan:

No worker should ever be allowed to earn 2000% more in one year than the lowest paid worker in the company. The Tories had previously suggested that they might support this during the General Election campaign.

OK, so you've got an apprentice on £2.60 an hour and he works 9-5 for 40 weeks a year. That's a salary of £4,160 per annum. That would mean the boss can earn no more than £87,360. Is that realistic for a large engineering company, or would any prospective candidates make sacking all apprentices their first priority just so they can earn a bit more money?

His grand plan would see the total annihilation of every apprentice programme in the country, dumping loads of half-trained youngsters out of their jobs and onto the street. What a masterstroke!

Filed under: Economics with tags apprentices, bp, dividends, eoin clarke, eoinomics, idiots, oil and gas industry, pensions
593912 Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fanother-accounting-lesson-for-eoin%2FAnother+accounting+lesson+for+Eoin2012-01-24+22%3A08%3A01Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5939

It didn't take them long to start trotting out all sorts of nonsense about the proposed cap on benefits.

The worst hit, of course, are large families in the south-east, where rents are higher. Even in Tolworth, described by the Evening Standard as the "scrag end of Kingston borough", a four bedroom house will give you little change from £400 a week. Cutting housing benefit to £100 a week – which is broadly what the cap means if you have four children – makes life impossible. After rent, council tax and utilities, a family with four children would have 62p per person per day to live on. That is physically impossible.

Do you see what they've done there?

They've worked out the total benefits package that a family of four would get. Then they've made up some numbers for what this family would have to live on. Then they've complained that this would leave the family with only 62p per person per day.

Of course, this family doesn't have such a paltry amount. They've actually got £11.87 [(£26,000 / 6) / 365] per person per day to live on. And every single penny of that £11.87 comes from the good grace of working taxpayers.

Now it's true that rents are expensive. And that utilities are expensive, so a great deal of that £11.87 needs to be spent on those items. But they're also expensive for those who work. A family of four would need to earn a great deal more than £26,000 in order to actually bring home £26,000 because they have to pay tax on their income. And they would still face the same pressures of expensive housing and expensive utilities. It's an appalling insult to those who work to pretend that the real poverty is faced by those who are propped up to the tune of £11.87 every single day for each of their six non-working members.

And pretending that it's not £11.87, but is really only 62p, makes that insult a thousand times worse. Shame on you, Tim Leunig.

Filed under: Economics, Other blogs with tags guardian, housing benefit, idiots, poverty, tim leunig, welfare benefits
59452 Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fwhy-tell-lies-about-the-benefit-cap%2FWhy+tell+lies+about+the+benefit+cap%3F2012-01-22+21%3A10%3A47Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5945

If you listen carefully today, you might be able to hear some wailing. That's Ian Fraser, Frannie and Ritchie crying because the naivety of their eagerness to blame the auditors for everything has been exposed.

AUDITORS KPMG and Ernst & Young have been cleared of any responsibility for the accounting black hole discovered at Olympus.

A report by Olympus' lawyers absolved the Japanese firms of blame, but claimed that current and former individual accountants - providing oversight within the business - were responsible for 8.3bn Yen (£70.4m) in damages, reported Reuters.

I called this one some time ago.

This would be a good time for the audit-bashers to admit they got this one wrong, and to be less hasty to blame auditors in the future.

Filed under: Auditing, Other blogs, Regulation with tags accountancy age, francine mckenna, ian fraser, idiots, olympus, pwned, richard murphy
5932No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fbad-news-for-the-audit-bashers%2FBad+news+for+the+audit-bashers2012-01-19+09%3A13%3A09Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5932

Pre-distribution. The single (non) word that Eoin thinks will win Labour the 2015 election. So what is this big idea?

Essentially, the jist of Pre-Distribution is that you fix the way capitalism works before profits & incomes are made, and that way you have less redistributing to do at the other end. Take rail fares for example. During the New Labour years, the prices of rail fares were permitted to rise 5% over the rate of inflation. That often meant rail fare increases of 10%+. Under Ed Miliband's leadership, the maximum rail companies would be permitted to raise fares above inflation would be 1%. This would dramtically reduce price increases and thereby make the burden of transport costs easier for commuters. By making customers fork out less you enable them to keep money in their pockets and thereby help them cope with the cost of living crisis. Whereas subsidising transport costs, capping rail increases does not.

Eoin has managed to spectacularly miss the point here. The cost of rail depends really on two things: the quantity of services that need to be provided and the amount of investment that's needed to preserve and enhance the rail network. And this cost can be paid for in two ways: by recovering it from passengers through ticket prices or from general taxation.

If you cap rail fare increases, ceteris paribus, the amount of money to fund the railways will decrease. And this means that either the rail network has to run fewer trains or it cannot fund necessary improvements and repairs to the rail network. Or, most likely, both. Eoin's assertion that "capping rail increases does not [cost]", it most definitely does cost. Either more money is needed from general taxation or the quality of service provision must fall.

The same type of philosophy can be applied to reductions in Corporation Tax. Ed Miliband has said that companies qualifying for low tax will have to sign up to proper apprenticeship programmes or face punitive taxation. In addition crèche providers could be prevented from charging parents registration & reservation fees of hundreds of pounds when capacity at their crèches is not utilised.Can you see a pattern developing? You regulate companies to get it right at the point of pricing and delivery rather than correct big businesses failings by subsidising low wages etc. Whereas Tax Credits to subsidise low wages cost, a Living Wage does not.

The first bit of this is total interventionist meddling bollocks. Government has no authority to fuss about in private businesses like this. And they're totally incompetent at the bits of business they run themselves. They'd be mad to seek to interfere in the business affairs of others, and could certainly not hope to reduce overall costs by doing so.

The idea that a living wage is a free lunch is very dangerous. The living wage would destroy jobs. Maybe not today, maybe not tomorrow, but some day - and for as long as the living wage remains in force - it will destroy jobs. Some of them would end up being mechanised. Some would get exported to China or India. Some would end up being done by other people already working. But while we cry over redundancies, we never shed any tears for those jobs that were never created in the first place. And a living wage would lead to vast numbers of businesses seeking to place jobs elsewhere, in countries where the living wage legislation doesn't apply.

So this is the big idea that will win Miliband the 2015 election? I really don't  think so...

Filed under: Politics, Regulation with tags ed miliband, eoin clarke, eoinomics, idiots, labour, living wage, minimum wage, railways
59172 Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Feoinomics-pre-distribution%2FEoinomics%3A+pre-distribution2012-01-16+21%3A53%3A59Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5917

This is Tory tax haven policy – to make the UK a centre for the abuse of global capitalism at cost to the ordinary people of this country who will gain nothing from this move because Aon won’t be contributing hardly a bean for making use of the UK as the centre of its global non-taxation.

Yep, it's you-know-who, in an article he's entitled Tax haven UK is attracting business. And, challenged to explain just why he thinks it appropriate to refer to the UK as a tax haven, he refers us to the Financial Secrecy Index.

Where to start with all this? Well, let's start at the beginning. Firstly, it's clearly apparent that any measure of 'tax haven' that includes the UK must be complete bollocks. Include the UK, and you might as well include very country in the world. The UK has a long tradition of fairness, openness and transparency and any measure that fails to reflect that cannot be worth the paper it's written on.

And it all hinges on the Financial Secrecy Index work, produced by Ritchie's old friends the Tax Justice Network. Although he now claims to have no connection with TJN, they're still his mates, so their work can hardly be classed as independent. The only reference in the link Ritchie provides is to work co-authored by him. But what's the methodology of the FSI? It's the following:

The fifteen indicators used for scoring secrecy are:

Knowledge of Beneficial Ownership

1. Bank Secrecy: Does banking secrecy have a statutory basis and are banks required to collect and maintain adequate records about their clients
2. Registration of foundations and trusts: Can foundations and trusts be created and is there a public registry of foundations and trusts?
3. Recording of company ownership: Are details of the beneficial ownership of companies submitted to and kept updated by a competent authority?

Key Aspects of Corporate Transparency Regulation

1. Publication of company ownership details: Are details of company beneficial ownership maintained and made publicly available on the internet at reasonable cost?
2. Availability of company accounts: Does the jurisdiction require company accounts to be submitted to a public authority, and are these accounts made publicly available on the internet at reasonable cost?
3. Country-by-country reporting: does the jurisdiction require companies listed on the national stock exchange to comply with a country-by-country reporting standard?

Efficiency of Tax and Financial Regulation

1. Efficiency of tax administration: does the tax administration make use of taxpayer identifiers?
2. Taking measures to not promote tax evasion: does the jurisdiction apply a tax credit system for receiving interest and dividend income payments?
3. Fitness for information exchange: are all paying agents (e.g. banks, trust and foundation administers, etc.) required to automatically report payments to non-residents to the tax administration?
4. Harmful legal vehicles: does the jurisdiction allow the creation of cell companies, and are flee clauses for trusts prohibited by law?

International Standards and Cooperation

1. Anti money laundering measures: assessed on the basis of compliance with FATF standards
2. Provisions for automatic information exchange: does the jurisdiction participate in the AIE provisions of the EU’s savings tax directive, or does it offer a withholding tax alternative?
3. Bilateral treaty provision for information exchange: how many double tax agreements and tax information exchange agreements have been agreed?
4. International treaty commitments: including the 1988 Council of Europe/OECD Convention; 1988 UN Drug Convention; 1999 UN International Convention for the Suppression of the Financing of Terrorism; 2003 UN Convention Against Transnational Organised Crime; 2005 UN Convention Against Corruption;
5. International judicial cooperation: FATF recommendations 36, 37, 38, 39 and 40 relating to mutual legal assistance and other forms of cooperation

(I'm sorry, I had to renumber the criteria from the original 1-15)

And we can find elsewhere the report on the UK which gives the scores on the doors.

And that's your howler, right there. He's gone from a scoresheet under which the UK scores an excellent 11/15 "good" answers to a measurement that the UK is 45% tax haven and 55% transparent.  This simply cannot be right. Especially when you consider that one of the UK's "bad" answers is in not having full country-by-country reporting. No country has full country-by-country reporting because the idea is equal parts expensive, bonkers and useless (for why I think this, read this blog post I prepared earlier). Despite the UK's long tradition of the rule of law, compliance in full with global protocols robust tax enforcement, it's deemed to be 45% tax haven.

How the weighting actually works in practice isn't explained in their reports. But it's clearly a total load of nonsense.

What does this all prove? Not a lot, really, other than the extreme danger of believing seductively-printed reports that purport to have an academic justification but which, when you dig beneath the surface, are just a load of hokum. And, when Ritchie and others claim that the UK is a tax haven, you can tell them - with authority - to check their workings.

Elsewhere, Simon Cooke argues that we do really want the UK to be a tax haven.

Filed under: Taxation with tags country by country reporting, idiots, richard murphy, simon cooke, tax havens, transparency, uk
59053 Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fthe-uk-is-not-a-tax-haven%2FThe+UK+is+not+a+tax+haven2012-01-16+20%3A59%3A20Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5905

I know it's common at this point of the year to write "2011" when you mean "2012".

But every single press release from ICAEW this year is dated 01 Jan 2011. Uh, is there any chance they could be dated when they were released, as is, er, the normal convention?

Filed under: Institutes with tags icaew, idiots, press releases, website
58881 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Ficaew-press-releases-are-so-last-year%2FICAEW+press+releases+are+so+last+year2012-01-12+09%3A33%3A04Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5888

On the subject of removing limited liability:

We should be much more straightforward in saying that limited liability is a privilege to be used for the benefit of society, and with care, and that if obligations to society are not respect then it should simply be withdrawn with the shareholders and not society at large then having the duty to remedy the defect. When should that happen? Let me suggest the following occasions for a start:

1) When excess pay is allowed, as noted above.

2) When accounts are not filed on time, for any reason.

3) When corporation tax returns are not filed, for any reason. Of course these are not public documents now: they soon would be if this was the case.

4) Three months after any set of accounts is filed showing the company to be insolvent unless action to remedy the defect has been taken in the meantime.

Now, shareholders are generally considered to be absent owners. They've plonked down their money in a company and then they basically let managers get on with it. The system of corporate governance has evolved in order to ensure that managers don't simply run off with the money or spend it all on booze and fast women. 

The idea of limited liability is to encourage investment. When shareholders aren't worried that they may face future capital calls, they'll be prepared to invest more. 

So the idea that shareholders should lose their limited liability because they wanted to pay a superstar director (or other employee) what they think they're worth is totally ludicrous.

The next three are even more idiotic. Shareholders are, as we said, absent. They've delegated the responsibility of running the company to managers. So why should shareholders be penalised if managers screw up by not filing accounts or tax returns or by trading while insolvent? Ritchie's got this totally wrong. Directors are responsible for ensuring a company isn't trading insolvently, and they suffer if they fail in that responsibility. Not shareholders.

And by 'shareholders' we mean ordinary people like you and me, in our pension funds. It's you and me, Ritchie wants to clobber when directors screw up. Doesn't sound so good now, does it?

Filed under: Corporate governance with tags directors, idiots, limited liability, richard murphy, tax returns
58751 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fritchie-on-limited-liability%2FRitchie+on+limited+liability2012-01-11+22%3A48%3A02Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5875

From a particularly idiotic online petition:

Our tax chief had secret lunches with Vodafone and Goldman Sachs and then handed them billions in tax breaks – while keeping Parliament in the dark!

No. HMRC hasn't handed out tax breaks. It has taken a view on how the tax law should be applied and, in both cases, decided that it the benefit of settling now outweighed the cost of enforcement, taking into account the likelihood of success and potential impact on future cases.

The tax under dispute in the Goldman Sachs case is measured in the tens of millions, not billions. It's by no means a trivial sum, but it's a country mile from UKuncut's hyperbole.

The idea that HMRC kept Parliament in the dark is particularly lunatic. Parliament is an oversight body, not a managerial function. All sorts of activity takes place in government departments of which Parliament is unaware. That's why we put each department under the watchful eye of ministers. Ministers are then accountable to Parliament for what happens in their departments on their watch. 

MPs are outraged, claiming we are owed over 25 billion pounds in back taxes from these and similar dodgy deals. But the tax agency has blocked an inquiry into the scandal and refuses to release documents to shed light on why these tax breaks were ordered in the first place.

MPs didn't claim we are owed over 25 billion pounds of back taxes. The PAC report noted that there is some £25 billion currently under dispute. But that's not the same thing at all. HMRC thinks it is owed £25 billion but the taxpayer disagrees. Therefore there will need to be some form of dispute resolution, potentially involving the courts, to decide who is right. Do UKuncut really believe that the tax due is the amount HMRC asks for first time? Do they really believe HMRC never gets it wrong?

Tim Worstall covers this issue in more depth here.

By acting together now we can ensure full transparency on the Goldman Sachs and Vodafone deals, and get them to pay the tax they owe. Let’s turn up the heat -- sign the petition to David Cameron for tax justice -- we’ll deliver it with a splash next week.

I think you'll find that the Vodafone case is settled and that due process will make it impossible to reopen.

And let's all be thankful that we do actually have a process for determining the tax due in this country instead of the stupid Humpty Dumpty process that UKuncut seem to think they want. 

Filed under: Taxation with tags goldman sachs, hmrc, idiots, paye, tim worstall, ukuncut, vodafone
58671 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2012%2F01%2Fmore-ukuncut-tax-balls%2FMore+%23ukuncut+tax+balls2012-01-06+09%3A59%3A55Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D5867