From the recently published Oxford report on UK Corporation Tax, Ritchie draws the following:

Within each sector there is evidence that, as a proportion of trading profit, the tax liabilities of the largest 100 companies are generally lower than for other companies.

He then concludes the following:

In other words - there is compelling evidence of systematic tax avoidance, because large companies should be paying tax at 28% and are actually paying it at less than the 21% due by small companies but we must not, Oxford says (returning to its normal apologist style) draw any conclusions from this - a point on which I fundamentally disagree with Mike Devereux, as ever.

This is, dare I say it, in fact nothing of the sort. It's compelling evidence, if anything, of comprehensive, undiluted Ritchiebollocks. Companies pay tax based on their taxable profits, not their financial reporting profits. While the former is derived from the latter, there's simply no reason for the country's largest companies to have similar sorts of adjustments to smaller ones.

Of course, accounting sort of takes care of this via a concept known as 'deferred tax'. Where the way an item is treated for tax and accounting is the same, but the periods in which it is recognised are different, 'deferred tax' is recognised to make the overall tax charge mimic the accounting entries, even though the actual payments may take place in different periods. The Oxford report doesn't really make it clear which 'tax charge' they are using, but I'm presuming they've taken current + deferred tax.

But there's another big problem with Ritchie's claim.  The Effective Tax Rate in the Oxford report is based on EBIT ¹, earnings before interest and tax. However, interest is an allowable deduction for corporation tax. So to the extent that companies have net interest payable, it will depress their effective tax rate, because the interest won't have been deducted in EBIT but will be an allowable deduction for tax purposes. The report explains ² why these data must be approached with caution. Of course, Ritchie doesn't think that these warnings apply to him, or he thinks that any discrepancies are ex ante evidence of tax avoidance.

This is pretty criminal stuff from Ritchie. Virtually every time he gets the chance, he tells us that Mike Devereux is a totally discredited academic. Yet here, because Devereux has provided some information with which he agrees, Ritchie has cherry-picked it to serve his own devices. Unfortunately, he's then chosen to compare apples (taxable profit) with pears (accounting profit), resulting in a nonsense analysis.

Filed under: Other blogs, Taxation with tags centre for business taxation, deferred tax, idiots, interest, michael devereux, oxford university, richard murphy
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The Oxford University Centre for Business Taxation has issued a report on the UK corporation tax, entitled Corporation Tax in the United Kingdom. It's written by our old friend, and Ritchie's nemesis, Michael Devereux.

The report has some interesting findings. In 2010, the UK had the 7th lowest corporation tax rate in the G20 and the lowest in the G7. Despite, or more likely because of, this UK corporation tax revenue has generally been above the G7 average.

And, of particular interest to UKuncut, the top 1% of corporate taxpayers pay 81% of all corporation tax. Indeed, they note that the concentration might be even greater, because their data are based on unconsolidated company information. So, while the chance of any particular taxpayer leaving the UK might be small, the impact on our tax revenues could be disastrous if they do.

They note that a significant (13 – 15%) proportion of companies with a positive accounting profit do not show a positive tax charge. This will no doubt be used by the Ritchies of this world as evidence of gross tax avoidance. In fact it shows nothing of the sort. Tax and accounting profits are different for a number of good reasons. You can't immediately infer things about one from the other. If anything, this demonstrates the limitations of country by country reporting and why those who resist it have good reasons for doing so.

Overall, this is a vital contribution to the UK tax literature.

Written on my Android mobile phone. Article may be edited later.

Filed under: Taxation with tags centre for business taxation, concentration, corporation tax, country by country reporting, michael devereux, oxford university, richard murphy, ukuncut
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Meet Toby Ord. He's an Oxford academic who believes that people can and should donate much more money to charity over their lifetimes.  He is aiming to give away £1 million over his, despite earning £25,000 (soon to be increased), an amount many might consider to be paltry.

So, as someone who also loves philosophy, who appreciates off-the-wall thinking, and who believes that the Big Society can work, why - in thinking about Ord's campaign - do I find him to be the most insufferable tossbag?

Firstly, I cannot accept that it's right - whether economically, socially, or rationally - to encourage people to give so much of their own earned money away to charity before they've been able to put the prospect of their own poverty beyond reach.  It seems daft to me to give lots away only to have to turn to other people's charity at some later date.

Secondly, Ord's campaign rests in no small part to his university flat which, at a monthly rental of £416, is significantly below the market rent, even in a slum city like Oxford.  It's all very well to call others to arms, but it's unfair to do so using privileged access to assets from which others can't benefit.

Thirdly, and most seriously, I strongly object to the mixing of "savings and tax" in the BBC graphic.  Savings are totally different to tax.  They could hardly be more different.  Savings are amounts put aside from current earnings to fund your own future expenditure.  Tax represents amounts put aside from current earnings to fund society's current expenditure.  That's not to say that some taxes weren't at one time savings-like.  National insurance, for example, started life as a scheme to encourage people to provide for their own retirement benefits via a national scheme.  Over time, though, we can see that the scheme has been totally subverted by government meddling, such that now it's just another tax.  You have to pay national insurance, but it now really doesn't purchase you any direct benefits over and above what other people can get.

I would be happier if Ord were encouraging people to make generous bequests in their wills.  It's better to get people to save up their own money and then donate from that, rather than getting them to hand it over now when they might need it later.

And with tax representing the biggest bill for virtually every citizen as well as being an individual's donation to society, it would be better to treat tax payments as part of one's lifetime donation to charity.  If you did that, you'd see that lots of higher earners already donate £1 million or more to other people.  Why the ukuncut protestors and other left-wingers can't appreciate that, is a much better question to be asking.

Filed under: Ethics, Other blogs, Taxation with tags big society, charity, national insurance, oxford university, philosophy, toby ord, ukuncut
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There's only one Robert Chote.  He's rightly respected by all commentators for his sensible, well-articulated views on economics.  However, sometimes the IFS wants to say something on a topic and Robert's not around.  Then this happens:

The Institute for Fiscal Studies (IFS) said plans to taper the rate from profits on shares, second homes and other assets according to how long they have been held - a key concession to head off a revolt by Tory MPs - is "misguided".

"Taper relief is a dreadful idea," IFS senior research economist Stuart Adam told the Financial Times. "It is highly undesirable in terms of its economic effects.

"Persuading people to hold on to assets they would otherwise sell, to get a lower tax rate, is a misguided thing to do."

We already dealt with this - because government(s) can't be trusted not to let inflation run rampant, we need taper relief and/or indexation to protect the innocent.  Indexation, although complicated to calculate and administer, is fairer for addressing inflation.  But taper relief also has a role: it differentiates between those who have bought assets solely to make a quick turn and those who have bought assets to improve and develop over a much longer period, and who then will be looking to make a sensibly-timed exit.  To view these people as "holding assets they would otherwise sell" betrays a peculiarly distorted, economist's view of the world.

If we want to raise the CGT rate (and I think we do, no matter what the Wicked Witch of the Lords, Baroness Noakes, might say), we need to protect entrepreneurs who have held or intend to hold assets for a long time and we need to protect people from inflation.  Entrepreneurs generally can't put their companies into pensions, so they need some other way of protecting their retirement.  That basically means taper relief because it's fair, regardless of whether economists view it as pure.

By the way, Stuart Adam studied PPE at Oxford - run away, run away!

Filed under: Economics, Taxation with tags baroness noakes, capital gains tax, ifs, indexation, inflation, oxford university, ppe, robert chote, stuart adam, taper relief
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This has been doing the rounds on Twitter over the last 24 hours or so. You've probably seen it already. In fact you've probably seen it about a thousand times already. It's likely that you're so sick of it that you're ready to punch the television at the mere mention of it. So, with that public health warning out the way, here it is again:

Blair's 1st Cabinet: 17% Oxbridge. The new Cabinet: 65% Oxbridge, 61% private school, over 90% white, middle aged men. #newsnight.

The BBC lists Blair's first cabinet here. There are 24 people, which means that Bacon is claiming that 4 of them went to Oxbridge.

A quick check of Wikipedia shows that Blair, Chris Smith, Lord Irvine, Robin Butler, Ivor Richard and Gavin Strang (a diploma only) studied at Oxbridge.

So, depending on whether or not you count Strang, that's 5 or 6, not 4, for a proportion of 21-25%.

It's a pity that he didn't check his facts more carefully before blathering off. There's still time for him to make a correction.

Filed under: Politics with tags cabinet, cambridge university, idiots, oxford university, pwned, richard bacon, tony blair, twitter
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OK, it's probably unfair to pick on a whole class of people who studied a particular subject at a particular university. But Labour does seem to have rather a lot of people who studied PPE at Oxford.

Here's a snapshot from a year or so ago:

(okay, I'm too lazy to check whether these people all really were the Cabinet on a particular date, but this article says 7 too)

The problem isn't the course. It isn't even the university. But it's the fact that so many of these people aspired to nothing other than climbing up the greasy pole of the Labour party in order to become MPs. Most of them have never had proper jobs, but have got into politics via their local Labour party or as a special advisor to an MP.

This isn't good for politics, and it certainly isn't good for us. And Labour tends to attract more of this type of person than other parties.

Filed under: Politics with tags oxford university, ppe, reasons not to vote labour
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Bellagerens is unhappy with Ed Balls. Balls has deemed that Latin is useless in schools. In response, the delightful Boris Johnson responded:

[T]here are times when a minister says something so maddening, so death-defyingly stupid, that I am glad not to be in the same room in case I should reach out, grab his tie, and end what is left of my political career with one almighty head-butt.

Something I think we'd all pay good money to see. But Balls's comments are deeply ignorant. Not so long ago, before universities had developed fully-fledged undergraduate computer science courses, classics was the preferred subject for computer software companies when selecting graduates. They found that classics graduates were better than graduates of other disciplines at thinking clearly through a problem. Must have been all those Latin sentences, I guess.

The same skills are valuable in accountancy too. Accountancy also requires precision of thought. Unpicking the debits and credits (lest we forget, words both derived from Latin) that are needed to account for a particular transaction use many of the same sorts of skills that you would use in deconstructing a Latin sentence. And just like UK accountancy’s concept of ‘true and fair’, you might be able to find several answers in Latin translation, but some of them may be better than others. Elegance has a part to play in both disciplines.

Besides, Latin is a brilliant sourcebook for determining how English grammar works and for remembering how to spell fiddly English words. It’s much more difficult for someone who has studied Latin to misspell, say, “independent”, because the Latin pendere screams out at them. Subjunctives in English? Not a problem, you probably learnt them in Latin. Nobody ever taught me them in English. They didn’t need to.

Even for a quiet, reserved boy like me, Latin’s educational payload was irresistible. By translating these texts into English, you revealed mighty battles, terrible monsters such as Scylla and Charybdis (go on then, which would you choose?) and the deception of the Trojan horse. We learned about monumentally sensible Roman ideas, such as building roads in a straight line or building heating under the floor, and some ghoulish practices such as the punishment of decimation for cowardly soldiers. Take away the Latin and the rationale for teaching these to children goes away. Why teach children rancid subjects like citizenship when you can teach them about how the Roman Senate worked? Or about what democracy meant in Roman times?

has a bee in his bonnet over the issue. Even now, it would appear that those who studied Oxford’s terrifying four-year Literae Humaniores, known affectionately as Greats, look down snippily on the lesser mortals who could only manage PPE. In the lesser camp is Balls, who one might imagine was heavy on the politics and economics and light on the philosophy, wouldn’t even have studied the most valuable element of the course.

Filed under: Other blogs with tags bellagerens, boris johnson, ed balls, latin, literae humaniores, mythology, oxford university, ppe
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Ritchie tells us all a a sob story about how he doesn't get invited to the high table at Oxford University any more:

Chris Wales - who was instrumental in setting it up - told me that was the case, in person when I was [a]t Oxford two or three years ago before Prof Mike Devereux, the head of the centre, contrary to all UK academic ethics, withdrew my invitation to all events there.

Firstly, contrary to all UK academic ethics? FFS... the Oxford Centre for Business Taxation is a private institution. Richard has no more right to be there than anyone else. It's not as if he's a recognised tax academic.

And the Centre did invite him to their annual conference in 2007. He sat at the back and didn't contribute a bean to the proceedings. Then they found he'd been posting all day on his blog slagging them and their guests off.

So why would they invite such an obnoxious character to their future events? Especially when it's patently clear that he has nothing of value to add to proceedings, other than his trademark rudeness.

Filed under: Academic research, Other blogs, Taxation with tags idiots, mike devereux, oxford university, pwned, richard murphy
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