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Notes from a very small island Below are the 40 most recent journal entries recorded in the "king_pellinor" journal:

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August 15th, 2016
06:39 pm

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Our Wonderful Armed Forces
I've just come back from a very nice weekend away in Dorset, in where the excellence of the walks was enhanced not only by the addition of tea shops and pubs every mile, but also by a decent leavening of second-hand book shops :-)

I suspect that LadyofAstolat and I may not have been taken seriously as Walkers, what with our sandals instead of boots and small carrier-bag-full of books instead of a proper rucksack, but hey ho.

Anyway, I am now the proud possessor of a book called Our Wonderful Armed Forces, which seems to have been published in around March 1940.  I've barely started it so far, but I did flick trhough it in the shops.  A few spoilers:

- People were worrried before the War that there might be aerial bombardments of cities.  It has however become clear that if Hitler were to try it his losses would be extremely heavy, so that's never going to happen.

- The Me109 is OK as a plane, but not nearly as good as a Hurricane, and in fact German pilots don't like taking it into combat.  The Me110 is better, but still not as good as a Spitfire

- The Spitfire is about the be supplemented by a plane with a turret-full of guns behind the pilot.  This will make the Defiant an amazingly good fighter.

- The Army has super-heavy tanks weighing alsmost *16 tons*, whose 2-pounder guns pack a tremendous punch.

- Germany did very well in Poland, and there are lessons to be learnt from that campaign, but the Germans are clearly never going to manage anything similarly dramatic in the West.

As the young lady in the shop said, it's a snapshot of history :-)

(2 comments | Leave a comment)

February 21st, 2014
07:39 pm

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Ti ra ra la i tu! I gloat!
The cut-out bit of door from when I put the catflap in over 10 years ago, that I have been carefully keeping in case it ever came in handy, has come in handy!

I gloat!  Hear me gloat!

Thanks to keeping something that had no apparent earthly use, I can confirm that the hole is neither too large nor too small for the new catflap.

Ti ra ra la i tu! I gloat! Hear me gloat! :-) :-) :-)

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December 25th, 2013
09:14 pm

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Left 4 Dead 2 is free for Christmas
If anyone wants this and hasn't got it, it's apparently free on Steam until late tomorrow.  All you need to do is go and download it.

(1 comment | Leave a comment)

July 5th, 2013
04:11 pm

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Quite right too
Apparently the South Croft tin mine in Cornwall is going into administration.  From the article I read which announced this:

"There have been several challenges to operations at South Crofty which have made it difficult to attract investment. These include UNESCO’s objections to mining operations taking place in the area designated as the Cornwall and West Devon Mining Landscape, which is protected as a World Heritage Site."

Well done UNESCO, I quite agree.  Mining is entirely out of place in a mining area.  It would be like taking a school, a place of quiet learning and development for young people, and filling it with children and all their noise and disruption.

(2 comments | Leave a comment)

June 11th, 2013
10:08 pm

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Question that has been at the back of my mind for a while
I wear a suit for work these days.  When I get home I usually go upstairs to the armoury to change out of it, to avoid getting dinner all over my good shirts and better trousers.

Question: having removed suit, shirt and tie, which is the more sensible approach to putting on a t-shirt and casual trousers?

A)  Trousers first, so although you can't see where you're going as you walk downstairs while pulling a t-shirt over your head you at least have unencumbered feet.

Or

B) T-shirt first, so although you have no control over your legs as you walk downstairs while putting your trousers on you can at least see where you're going.

Despite repeated empirical testing I can't honestly say which is better, so I thought it might be useful to try getting some theorising to determine the question.  Any thoughts?

(8 comments | Leave a comment)

May 18th, 2013
09:17 pm

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An RPG of Thrones part 5 - A Misuse of Maesters
This is far too long for anyone not there to read. And possibly for those who were...Collapse )

(1 comment | Leave a comment)

March 10th, 2013
09:31 am

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New blog
I've started a new blog about tax - partly to be about the avoidance thereof, and partly to be about bits I think are unfair the other way.  It occurs to me that I probably ought to tell people about it, though :-)

I've done it entirely separately from LJ - mostly as I think it's going to end up TLDR - but if anyone's interested it's over here:  http://andrewjjackson.wordpress.com/

I may still rant here, of course :-)

(Leave a comment)

February 6th, 2013
09:38 am

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Tax Prat of the Year
Mike Truman, editor of taxation magazine and a very well respected figure in tax circles, is a bit upset by the Public Accounts Committee.

He's done an opinion piece in Taxation, which I think is open to view without a sbscription:  http://www.taxation.co.uk/taxation/Articles/2013/02/06/53361/tax-prat-year

I'd urge everyone to read it, as the PAC's approach seems to mirror what the papers are saying so Truman's comments apply quite widely across the current tax avoidance debate.

(3 comments | Leave a comment)

February 1st, 2013
02:43 pm

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Tax ranting # 11 - In the Headmistress's office

I listened to yesterday’s Public Accounts Committee meeting with the Big 4 accountants yesterday.

It was billed as a chance for the PAC to collect evidence about tax avoidance.  In fact it was just a soapbox for Margaret Hodge to browbeat a load of straw men.  She made herself look absolutely ridiculous, in my eyes: she seems to think she’s a headmistress telling off some naughty schoolchildren.  Austin Mitchell wasn’t much better, though he was fairly inarticulate most of the time so it was hard to tell.

Hodge clearly has an idea of what happens in business, and although she was supposed to be collecting evidence she set out far more “facts” than the witnesses did. Her refrain was “I don’t agree”, whenever someone made a valid point that ran counter to her prejudice.  I cannot see that she will have changed her mind in any way, but then I don’t think she intended to: all she was after was to try to get the Big 4 people to admit something she could attack them for.

Running through my notes...Collapse )

(6 comments | Leave a comment)

January 10th, 2013
09:15 am

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The tax avoidance "debate": an elegant summing up
This is from the speech made by John Andrews, founder of the Low Incomes Tax Reform Group, on being given an award recognising his efforts to help peope who have trouble with their taxes.  Note that he deals with the complete opposite end of the spectrum from multinational companies.


...a report in the US press last year [credit here to Rex Huppke of the Chicago Tribune] made Facts into a mythical person and then criticised US politicians for killing Facts. The event that caused the demise was when a Florida Republican announced, without any evidence, that at least 81 of his fellow members of the U.S. House of Representatives were communists.

This made me think that some tax debates may have pushed our equivalent of the mythical person, Facts, to an early grave here in the UK.

Facts had a long life and I believe was born in ancient Greece, the child of Aristotle who saw that evidence was essential for his nurture. As Facts grew up people like Edmund Burke observed "Facts are to the mind what food is to the body."

Facts helped to discover gravity, break the Enigma Code, discover DNA and, perhaps, introduce self-assessment.

In 2012 however, people seemingly unable to understand how tax systems work, began to doubt and ignore Facts. Opinion became the new truth and reprinting of such opinion in the press confirmed this new truth as correct. No feedback from Facts was thought necessary.

Facts had suffered serious injuries at the time of the 10% tax rate debacle in 2008 and through the misplaced assertions in 2010 about millions of errors being produced by the new PAYE system.

His health was improving, when early last year he was laid low by the absence of any sensible discussion about the granny and pasty taxes.

But nothing was to prepare him for the cruel assault which led to his demise in the final month of twenty-twelve. Assertions in the press that you can judge the right amount of tax a multinational should pay by looking at its turnover; followed by the revelation that for certain there was a £69.9 billion tax gap caused by avoidance, caused Facts to have a major stroke.

He was still in intensive care in hospital when the final straw came. His cousin TaxLaw was the one to break the news. TaxLaw had been admitted to the hospital’s isolation unit and had been ignored by all and sundry, including, at times, the Public Accounts Committee. The oxygen was rushed to Facts when he was told that a coffee bean company was now to be the arbiter of the amount of tax that people should pay; but it was too late.

That news coupled with the whisper that a burger chain would set the CPI in future had done its worst.

You will have seen from his obituary that Facts was aged 2,372 and was buried, at his request, in the birthplace of Parliament - the Isle of Man. He is survived by two brothers Rumour and Dogma and a sister Shout Loudly.

Donations in his memory may be made to HMRC in a brown envelope marked “corporation tax”.

I hope that the CIOT pro-actively pick up the challenge in 2013 to ensure the resurrection of Facts and to protect his cousin Taxlaw from also being sent to an early grave.

(1 comment | Leave a comment)

January 9th, 2013
04:14 pm

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Tax ranting #10 - Free speech
Richard Murphy, the Tim Coates of the tax world, has recently banned me from posting on his blog.

Apparently, when I suggest that a company should follow the laws of its home country, rather than those of a country it doesn't operate in at all, I am promoting crime. 

Presumably crime is now defined as "doing something Murphy disapproves of ", rather than that outmoded "breaking the law" thing.

Oh Woe.

Current Mood: worriedDistraught

(5 comments | Leave a comment)

04:08 pm

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Tax ranting #9 - Hear Hear
Campaigner criticises MPs over avoidance debate

"Other parts [of the debate] contained a distinct lack of facts, accompanied by impossible dreams, misunderstandings and many unsupported assertions."

Quite right too.  I've skimmed the transcript of that debate, and it's rubbish.  The aim is laudable, but there's no understanding of the real situation, the problems which arise, the solutions which are being applied now, or the possible solutions which could be applied.

(Leave a comment)

December 5th, 2012
04:26 pm

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Tax ranting #8 - losses
Oh, lord, they're at it again. This really is scraping the barrel.

"Tui Travel admits it did not pay any corporation tax": http://www.bbc.co.uk/news/business-20590961

What devilry is this?  No tax paid, on profits of £390m?  Surely some immoral manipulation of arcane accounting rules!

Er, no.   They lost a lot of money one year due to the ash cloud, then spent another load on restructuring and are only just starting to recoup the money they spent on it.  Net position: they've made no money for a few years, so there's nothing to tax.  For Pete's sake, this is a complete non-story.

And where did that "admits" in the headline come from, anyway?  Surely the reporter found out because it was in freely-available public information, and the company saw nothing wrong in being in a perfectly ordinary position!  I seriously doubt it took any pressure. 

What's next?

OK, OK, I admit it, I paid no corporation tax last year, in fact in my working career I have never paid any!  Like TUI, I use a really complex accounting dodge called "not making any profits chargeable to corporation tax", although in my case I take it a step further than that and ensure that I never will make any by carefully structuring myself to, in the technical jargon, "not be a company".  I maintain that I have done nothing wrong, and have complied with all relevant tax laws. 

Call me immoral if you like - I am unrepentant and care not for boycott.

(4 comments | Leave a comment)

December 4th, 2012
01:45 pm

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Tax ranting #7 - Richard Murphy
Richard Murphy is a name that crops up time and again in news items about tax, along with the Tax Justice Network and Tax Research UK, campaigning groups he's involved in which seem to punch well above their weight in terms of media exposure.

To me, quoting Murphy in support of your position is shorthand for saying "I want to jump on the bandwagon, and here's someone who's always ready to provide an apparent Authority which absolves me from doing any actual research" - there's no point reading the article, because if Murphy is quoted then the useful fact content will be nil.  I've never found him say anything I agree with yet.

I can't tell whether he's keen but out of his depth, or whether he knows that what he's saying is bollocks but it serves his purpose.  I suspect that actually he doesn't care whether what he says is true or not. 

For example, on his blog today he quotes something saying that someone or other has as much wealth as the bottom 48 million Americans combined.  Someone commented that as the bottom 25% of American households are apparently in debt, and 25% of the population is more than 48 million, the net wealth of these 48 million is presumably nil; so on that basis her 4-year-old daughter is also richer than 48 million Americans combined and so it's not a useful thing to say.  Murphy responds that this is pedantry, you can always argue about stats, and it's the message that's important. And so, I assume, the facts aren't: if you're sure the conclusion is correct, you can make up any evidence you like to support it.  I don't like that sort of approach.

But this is typical of the way the media at the moment is taking big numbers and waving them about as if they're important.  I've already ranted about comparing tax paid to turnover, simply because turnover is a bigger number so it looks more impressive.  Can't they use sensible figures but just put them in a bigger font?  At least that's just fiddling with presentation, not distorting the position.

He's also gotten a load of basic tax calculations wrong - he corrected someone else's article a month or two ago, but got his corrections wrong because he was proceeding along completely the wrong lines.  He then spent quite a while arguing that it didn't matter because you'd end up with the same result anyway, but, er, no you wouldn't.  But I note that he doesn't take correction: he's right, or the conversation stops.

So in short, I think he knows just enough about tax, accountancy and economics to be dangerous: he thinks he's an expert and infallible, when he's actually fairly incompetent.  However: he has an agenda he wants to push, he knows enough to dress it up in plausible-sounding language, and he's happy to give a soundbite to any reporter keen to push the same message.  At the moment his views are fashionable, so he's getting a lot more exposure than the real experts who try to explain that it's more complicated than they think and perhaps the companies aren't necessarily being Evil.

Even shorter: don't believe a word he says.  If he said the sky was blue I'd look out of the window.

(1 comment | Leave a comment)

December 3rd, 2012
03:40 pm

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What the PAC wants to do
There seem to be two main issues that the PAC is complaining about.

The Starbucks issue is that it's a big business but isn't very profitable even though it tells people things are going well.  So what the PAC wants to do is scrutinise the amounts Starbucks pays to related parties to make sure they're not inflated to avoid UK tax.

So we need to set up an official arm of the UK Government with powers to examine the accounts and tax returns of large companies to make sure they don't do uncommercial things.  Oh, wait, that's exactly what HMRC is meant to do, and in fact has done - as evidenced by the reducting in royalties from 6% to 4.7%.  So, er, nothing for the PAC to look at here.

The Amazon/Google issue is different: the issue for them is that they're located outside the UK and selling into it, which is made a lot easier by the web.  So when someone in the UK buys from them, the profit on that sale is taxed outside the UK.  So what the PAC wants to do is make sure that it's taxed in the UK.

Only... if you apply that across the board, then every company selling across the web will need to carefully keep track of where its customers are, and file tax returns in every single country they come from.  Bit of a bugger for businesses, especially small ones - you either have an impossible administrative job, or you have to refuse sales, or probably both.  This was considered in the VAT context a few years ago, and the EU decided that the only way to make things work was to have the VAT chargeable where the supplier is, as otherwise there'd be no sales to charge VAT on.

Also, for every person on the outside selling in, you have people on the inside selling out.  So doing this would strip a lot of profits out of the UK tax net.  Ignoring balance of payments issues, it would have no effect on tax revenues - except for the fact it now makes it much harder to sell anything, so the economy goes downhill and taxes fall.

The other thing might be to look at the definition of "Permanent establishment".  At the moment marketing and distribution are regarded as ancillary to the main business of selling, so if you have an overseas company with a warehouse in the UK then it doens't necessarily have a taxable presence here.  There may be some scope in looking harder at that area to see if maybe some marketing/distribution operations are substantial enough to count as establishments.  At that point, the UK gets a cut.  Again, this is something you need to look at both ways round, and would be a major international discussion point, not something you can do unilaterally.

So what the PAC wants to do is stop meddling in what it doesn't understand.  Oh, and maybe think about funding HMRC properly so they can get on with doing the job that they're actually surprisingly good at (for all I say about them).

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02:56 pm

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Public Accounts Committee Report
The PAC has published a report based on the discussions it had with Starbucks, Google, and Amazon here: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/716/71605.htm

It talks about the tax paid by a company in the context of its turnover.  It accuses HMRC of failing to show that avoidance is not increasing, as if that is evidence that it is.  It complains that HMRC, a department whose staffing has been massively cut, might not be acting robustly enough.  It several times says "we weren't convinced of X", but never sees fit to provide any evidence for concluding not-X.  It seems to think that agreeing how to tax something in the Netherlands is an arrangement designed to remove things from UK tax, rather than an exercise of that government's sovereign rights.

Above all, it harps on about looking at where economic activity takes place, but seems entirely ignorant of the normal rule that to decide this you look at where the contract is made.  It betrays no understanding of the Permanent Establishment clauses of tax treaties, which are in there precisely to resolve this sort of issue, which have been carefully negotiated by the UK Government, and which almost universally agree that marketing and distribution operations do not constitute a taxable presence in a country. 

But it comes to no conclusions whatsoever, beyond a general feeling that the companies and HMRC are in the wrong, somehow.  Or rather, the cynic in me says, that the MPs want to show that they are in the right and therefore need to find someone else to be in the wrong.

Current Mood: annoyedannoyed

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November 21st, 2012
02:00 pm

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Tax ranting #6 - Royalties

Starbucks is being slated for paying royalties from the UK to reduce taxable profits.  Apparently no-one pays royalties for any other reason.

Couple of things here:  first, er, yes they do.  It's what the whole franchising business is based on, for one thing.  I don't think there's a Starbucks on the Island, but I'm pretty sure that if I set up Starbucks IW Ltd and opened a coffee shop called Starbucks, the existing Starbucks group would want a cut of the action.  It's not a tax trick, it's not even an accounting thing, it's a perfectly ordinary business arrangement.

Second, if we start saying royalties shouldn't be taken into account for tax purposes, what happens to all the royalties received by UK companies?  ARM, for example?  Or indeed any company working in the new Intellectual Property sector that people are saying is the future for UK business?  Do they get all their income tax-free?

Or is it just that royalties are a bad thing when they go in one direction?  No-one's mentioning that they're taxed where received.  OK, they're not taxed very much in the Netherlands, but that's for the UK to complain about to the government of the Netherlands.  It's the sort of thing wars have been fought over, if I remember my history properly.

Third, Starbucks apparently has a global agreement to pay royalties at 6% of turnover, which is in the sort of ballpark I'd expect.  HMRC argued it down to 4.7% for UK tax purposes, probably because HMRC will always assume that anything you're paying will be too high (which can be a reason why you go for the highest reasonable number).  So it's both a standard thing across the board, and HMRC have agreed that it's being deducted at the right level. So Starbucks UK is acting like a perfectly commercial company whose tax affairs have been approved by the authorities.  The swine!

It all comes down to profit, and the fact that they don't make any.  Royalties only come into it because people look at the profit/loss line, and then say:
     - If you didn't have this number here that I don't understand you'd make a profit. 
     - Therefore the only reason you don't make profits is because of this number here. 
     - Therefore the only reason to have this number is to avoid profits.

Of course there are any number of things that would have a bigger effect on Starbucks's profitability than the royalties: turnover and wages, for two.  I've seen it suggested that if everyone went out and bought an extra cup of Starbucks coffee, we could pretty much force them to pay UK tax as that income would go straight to the bottom line.  Equally, if they'd just cut wages they'd get the same effect. 

So when it comes down to it, Starbucks avoid tax by a) not selling coffee and b) paying their staff.  Immoral swine!

(5 comments | Leave a comment)

November 20th, 2012
02:16 pm

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Tax ranting #5 - transfer pricing
Right, this one really annoys me. 

According to the media, "transfer pricing" is the name of a sophisticated accounting technique used to avoid tax.  For example, Margaret Hodge has been accused by one Priti Patel, who I understand is some sort of MP, of not being without reproach vis a vis tax dodging, and in an open letter on the subject Patel says Hodge's company Stemcor "admits to using 'transfer pricing' ".

To me, who's actually dealt with the stuff, transfer pricing is just an aspect of book-keeping: like stock-taking, invoicing, or accruals.

This takes me back to the rant about MP's not having a clue about that whereof they speak, but hey ho.

Let me run through the etymology of "transfer pricing" in this context.
Read more...Collapse )

So, to summarise:  "transfer pricing" is all about getting the tax figures right.  It's no more an abuse than "invoicing" is.  It annoys people like HMRC, because whenever a compromise figure gets agreed both sides will thnk they've been done.  Tax managers in industry hate it, because HMRC keep asking for more documents so they can challenge the figures even though they're ignoring the ones you sent them months ago.  CEOs hate it, because they want a nice solid cashflow forecast but the Tax people are always saying we might have to pay more cash out but they can't be sure how much for five years.

And journalists and politicians love it, because they don't know what it is and neither does the public, so they can get all outraged for a while until they find a new bandwagon.

(2 comments | Leave a comment)

November 18th, 2012
07:33 pm

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Tax ranting #4 - MPs have no clue whatsoever
The transcript of the PAC hearing is on-line: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/uc716-ii/uc71601.htm

I've only skim-read it, as I could feel my blood-pressure rising as I did.  Let me summarise it:

MPs don't ask questions so that the other person can give the answer: they ask the question so the MP can interrupt and fill in the answer they think ought to be given.  Anything the interviewee sees fit to say should rightly be ignored as irrelevant.

MPs can't grasp the concept of a limited liability company as a person in its own right.  As far as they're concerned any global group is a single entity, and thee are no circumstances under which any individual company can have obligations to any other.

The HMRC view of business seems to have infilitrated Parliamentary thinking: the only reason to do anything is to avoid UK tax.

No country outside the UK has any right to decide their own laws or taxes.  Charging less than the UK does is illegal, somehow - the UK is trying to be competitive in its tax rates, which is entirely reasonable, but being more competitive than the UK is just immoral.

Profits should be taxed where the activity that gives rise to it takes place, but only if that place is the UK.  If you live in the UK and sell to a someone in France, obviously you should pay tax on the sale in the UK because that's where the sale takes place.  Conversely, if someone in France sells to you in the UK then obviously you should pay tax on the sale in the UK because that's where the sale takes place.

This is largely because paying for something is tax avoidance: a wholesaler should sell goods for the price it paid for them, and throw all the overheads in for nothing.  If you spend years building up a brand name, you should let other people pretend to be you for nothing.  Franchises are only ever run as charities. 

The world is divided into the UK and Offshore.  People only do business Offshore to avoid UK tax.  Being Irish or Swiss should be a criminal offence, as the only reason to be born outside the UK is to avoid UK tax.

The fact that rules exist to govern behaviour, and that virtually everyone complies with them, is proof that those rules need to be invented to regulate the huge number of people who blatantly defy them.

(3 comments | Leave a comment)

November 15th, 2012
02:00 pm

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Tax ranting #3 - "loopholes"

It really annoys me that anything that anyone ever does which reduces their tax is described by journalists, campaigners and politicians as a "loophole".

To me, a loophole is an unintended gap that you're not meant to be able to get through.  But things I've seen described as loopholes include:

- Paying a royalty to an overseas company
- Claiming capital allowances
- Paying for raw materials
- Doing business in another country

All these are perfectly normal things to do. The only one which isn't just part of doing business is capital allowances, and that's a deliberate policy from the Treasury (it simply fixes the rate at which you get tax relief for buying your equipment, instead of letting you chose how quickly to write it off).

The "loophole" which really annoys me is to do with small companies.  In 2002 Gordon Brown, as Chancellor, announced that to encourage small businesses the first £10,000 of a company's profits would be taxed at 0%, though the relief would be gradually withdrawn so there'd be no benefit if the profits reached £50,000.  Everyone immediately pointed out that loads of small businesses would incorporate to take advantage of this, but the Treasury said, yes, yes, we know, thats fine.

A couple of years later, the same Gordon Brown got rid of the 0% band completely on the grounds that he'd found that thousands of small businesses were incorporating deliberately in order to exploit this loophole.  He called it a loophole in the Budget speech.

If he'd said that it was costing more than he'd expected so the relief was being withdrawn, that would have been fair enough.  But he didn't even admit that he'd introduced the nil rate: the way it was spun was that he'd noticed this problem and decided to fix it. 

I was very annoyed.  Still am :-)

(1 comment | Leave a comment)

November 14th, 2012
01:52 pm

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Tax ranting #2 - don't ignore sales
What if we decide we should tax effort instead of reward, by charging tax on gross income?

Taxing turnover: so say 20% of every sale goes straight to the tax man.  Hold on, doesn't that sound awfully like VAT?  Which we already have?

OK, so the Starbucks argument seems to be "We think you're not paying enough tax, because if we take your sales and then ignore the tax you pay on them, we find you're not paying tax on them".

Doesn't sound entirely fair to me.

Can we argue that they're not paying enough VAT, because if we take their stamp duty bill as a percentage of VATable sales it comes to a very small number?

(Leave a comment)

01:48 pm

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Tax ranting #1 - ignore sales figures
I thought I'd do some ranting here about the current media circus about Starbucks, Facebook and so on.  If I can flag up some myths and misconceptions about tax here - and complain about things which irritate me - it may save some harangues in person :-)

OK, first thing which irritates me:  Satrbuck has had £3bn in sales but paid hardly any corporation tax. It must therefore be avoiding tax unfairly.

What's wrong with this?  Well, you get taxed on profit, not sales.  Why?  Because sales are what you put into the system, not what you get out, and tax (or at least income tax) is based on what you get out of things.

People seem to think that sales is a good number to use, probably because it's an obvious and simple one.  And, to be honest, because it's a bigger number than profit so if you're a journalist and want to get a small percentage for effective tax rate then you want as big a number as possible.  But it's a stupid number to use as any sort of measure of someone's income, because you have to pay your costs out of it and different businesses have different costs.

If you take two businesses.  One sells grommets, which you can buy cheap and sell dear, and it makes £100k profit on £1 million of sales - 10% net margin.  The other sells widgets, which you buy cheap but sell cheaply too: it needs £2 million of sales to make £100k of profit, because it only gets 5% margin.  The latter's business is twice as big, and according to the Starbucks argument, the bigger your business the more tax you should pay.

Follow the logic through: if we charge tax based on sales, we're basically taxing the thing which allows us to earn the take-home profit.  The grommet-seller is selling £10 per £1 of profit, and the widget-seller £20 per £1 of profit - he has to sell twice as much, which suggests he has to work twice as hard for every £1 he takes home.  So if he should pay twice the tax because his business is twice as large, the corollary must be that the amount of tax you pay should relate to the amount of work you're putting in (for a given reward).

Can we apply that logic to employment tax?  I'm on average earnings, getting £24k a year, so it takes me 2 weeks to earn £1,000.  The office cleaner gets £12k a year, so has to work for a month to earn £1,000.  If he's putting in twice the effort, surely he should be paying twice the tax?

Only if you tax effort instead of reward.  Which we don't.  Which is why sales figures are nothing to do with income tax.

(2 comments | Leave a comment)

November 13th, 2012
01:34 pm

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Starbucks and Google and so on
Is it just me who's a little fed up that the Parliamentary Accounts Committee seems to have no clue at all about tax, and yet is berating companies for acting pefectly legally and commercially and within the rules?

It's as if some obnoxious oik were to come up when you're playing Bridge and complain that you couldn't possibly have won that trick with the Jack of trumps, because you didn't even have a pair.  What do you mean "that's poker"? I've seen people playing cards loads of times, from a distance, and you're doing things I don't understand so you must be cheating.

Current Mood: irritatedirritated

(9 comments | Leave a comment)

September 12th, 2012
01:54 pm

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Georg Bjarnfredarson is mayor of Reykjavik!!!
Surely there's been some sort of mix-up?

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September 4th, 2012
01:52 pm

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AKICOLJ - new PC
On the off-chance LoA's PC can't be revived economically, we'd be looking to get a new one for her.

She needs to be able to play FPSs and maybe CRPGs.  What's the current upper-middle class for games PCs?  I have no idea what current graphics cards and processor names mean :-)

For the rest, we'd probably be looking at your basic DVD-RW drive, plenty of RAM, basic ethernet.  Onboard sound would be good enough, and the smallest hard drive around should be bigger than the one she hasn't got near filling yet anyway.

Oh, and is there any real advantage to a Professional version of Win7 instead of Home?

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August 14th, 2012
01:52 pm

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Is this unacceptable tax planning?
I've just been advised that I can get a tax relief in a particular situation.  Basically, A is paying £100 over to B; B already holds £100 on A's behalf, due to a previous transaction, but if A simply says to B "keep that cash", there's no tax relief.  If however B pays £100 to A and A then immediately pays it back to B, then we can claim tax relief.

That is: there's no commercial difference, but if we make two payments of cash which have no purpose other than to be able to claim tax relief, then we can get it.  That seems wrong to me.  Any thoughts?

To add a bit of information: B is a charity, A is a donor to the charity, and we're talking about Gift Aid (on a few hundred pounds).  Does that make it better?

Further information:  the person advising me to make payments purely to be able to access tax relief is HMRC.  What they're really saying is that we could qualify for Gift Aid but they're going to disqualify it unless we send the money round in a circle.  The substance of the matter is irrelevant: you only look at the legal form.  This is not how they tend to argue in tax avoidance cases, naturally ;-)

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August 13th, 2012
02:50 pm

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Google tax dodging
More on the tax dodging front.   Now Google's getting flak for only paying £6m tax on revenues of £395m, which is 1.5% against a headline tax rate of 24%.

Only, the headline rate is based on profit, not revenue.  So that numbers is about as useful as a chocolate teapot.  £6m tax implies profit of £25m at 24% - although of course 24% is the current rate, not the one that applied to the year in question; and it's not clear if that's tax paid, or the tax charge in the accounts (which would include deferred tax - basically, the impact of the differences between accounts profit and taxable profit, most of which tend to defer the payment of tax as an incentive to start doing business)  so we now seem to have an icecream teacosy.

But let's get our handy gooey and play with those numbers anyway - £25m profit on turnover of £395m is what, 6%?  A moderately decent margin - a bit slim for a modern high-tech company, perhaps.  But then, what does Google actually *do* in the UK? The odd data centre or something?  All the value of the company comes from intellectual property, and I don't think that gets developed here.  Data hosting is pretty low risk, so you wouldn't really expect a very high margin.

So, er, sounds like Google's playing fair, based on those numbers.

Now what I'd be interested in is the transfer pricing situation.  What does the revenue represent?  I suspect that it's just a commission on advertising sales.  So maybe the thing to do is question whether the revenue figures are at arm's length - but that sort of enquiry takes HMRC years to finish and no-one publishes the results anyway.  I'd be amazed if Google haven't been quite aggressive about their internal pricing, but then I'd also be amazed (having been there and talked to them about similar companies, that is) if HMRC aren't pushing back quite hard so the final position should be reasonable. 

So, at the moment once again all we we have is a number labelled  "Tax" in a vague way, which is much smaller than another number picked at random, and this makes Tax Avoidance.  *Sigh *

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02:27 pm

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Shiny new technology
I've just been upgraded at work to use a Citrix terminal.   The advantage is that I can use all my programs from any computer anywhere, and it's all so much faster because rather than use my own PC to run local programs, I now dial in to the server which runs them for me :-)

Except... I only ever use Outlook, Internet Explorer and Word/Excel.  And my PC could run those all perfectly well, and I had web access to Outlook anyway.  So my home PC allowed me to do anything I'd ever want in any case.

And because it's now the server running the desktop for me, it runs it with the same settings as it uses for everyone, which means clumsy large icons and a strange blue-grey desktop.  Oh, and it's locked things down - I can't even move bookmarks around in IE any more, even if I can find them because for some reason they've locked away the ability to show the menu bar permanently.  I have to summon it with the alt key every time I want it, or else have the Favourites Bar permanently taking up half the desktop.

So: remote access I don't need, a speed boost of nil, all my customised layouts gone, and forced to use programs with mittens on, effectively.

Hurrah, I love progress!


PS: I did sneakily ask what would happen if I ignored Citrix and just used the programs I already have, which work better.  The IT chap looked shifty, and said that nothing would break.  He then said they'd probably be wiped sometime soon so I couldn't :-(

Or I could just use my own laptop and dial in through the firms' wi-fi to get to Outlook Web Access - I have my own Word and Excel, so could do the job better on my own hardware... :-)

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July 27th, 2012
03:31 pm

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More tax silliness

Guido Fawkes this time:

http://order-order.com/2012/07/23/david-gaukes-wife-is-tax-avoidance-lawyer/

Hold on a minute, she works for Lexis Nexis.  They publish law reports and so on - so she's not actually advising anyone at all.  Her profile says she used to advise on restructurings and other transactions, nearly all of which will consist of simply trying to work out how to avoid doing something silly, and the rest of which will be explaining to the client why they should keep things nice and simple.  It's very easy to generate a tax charge that even HMRC would admit shouldn't be there (not that this would stop them taking the money), if you're not careful.

Is Fawkes just assuming that anyone involved in tax law is all about the avoidance?  If so his world view is very... simplistic :-D

Actually, my respect for Gauke has now gone up marginally.  If he has someone from Lexis Nexis around then he should have a bit more awareness of what a mess tax law is than I'd given him credit for :-)

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July 20th, 2012
01:40 pm

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Olympic tax breaks
Various sources are reporting that people like Coca-Cola and Macdonalds are responding to pressure and are waiving their right to tax breaks for the Olympics.  So all the masses of profits they'll be making will now be generating tax for the UK Exchequer - what a victory for moral pressure on big business!  Hurrah for grass-roots activism!!

Only... they never qualified for the tax breaks in the first place.  The point of the exemptions was that if you come to the UK only to compete in the Olympics, or as a journalist to cover them (or if you're a company sending people to do such things), then you won't have to pay UK tax on your income - it removes a barrier to people coming.  And as the UK wouldn't have collected the tax if it weren't for the Olympics, as you wouldn't have come, the UK isn't losing out.

As Coca-Cola etc operate in the UK through UK companies, these breaks for non-residents never applied: they're "waiving" a right they never had in the first place.  So, er, why all the fuss?

And why are campaigners crowing about it?  Could it be that they are in fact tilting at windmills? I do wish people would try to understand things that they campaign about.

I think I'll go and publicise the results of my campaign to stop people hunting tigers in Wiltshire.  Might there be an OBE in it for me, if I can show that no tigers have been illegally poached there in the last 10 years?

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July 12th, 2012
05:40 pm

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Late status update
I've not done a proper update recently, so perhaps I should do a bit of a retrospective of the last few months.
WorkCollapse )
CarsCollapse )
DancingCollapse )
Fools & HeroesCollapse )

What else?  Seems to be about it, really :-D

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July 4th, 2012
12:52 pm

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Poll on attitudes to tax
"Taxation" magazine is doing a survey to see if the public's attitude to tax avoidance/evasion/planning is what the Government thinks it is.  Can I ask people to have a quick go at it, to inform the debate a bit?  It's all anonymous.

http://bit.ly/TaxHowFar

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July 3rd, 2012
10:32 am

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US tax

An interesting thing has just come up for delinquent US tax-payers: http://www.irs.gov/businesses/small/international/article/0,,id=256772,00.html

The IRS seems to be following HMRC in trying to encourage compliance by waiving penalties.

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June 28th, 2012
02:16 pm

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Uninformed commentary

I've seen this around a few times in the last few days:

http://3.bp.blogspot.com/-Tpsju1uJiws/T-L_Ebbwh0I/AAAAAAAAAXM/YQ4ffrSSYFw/s1600/Jimmy.gif

Can I say that, yes, I am a bit angry.  Or at least I'm rather fed up that once again people are going off on rants about things that they're completely misunderstanding in order to support their own agendas. 

As a Chartered Tax Advisor I flatter myself that I can unnderstand the situation a little better than some journalists.  Let me review some of the things said here:


Cut for technical detailCollapse )

So what we have on the internet now is saying that deliberately flouting the expressed will of Parliament so as not to pay £1.65m is OK, but having a tax liability which is smaller than an arbitrary imaginary number is evil.

No wonder morale in HMRC is low, if they have to deal with this sort of thing.

And don't get me started on the recent stuff about Vodafone making UK profits and not paying UK tax... remember when they paid billions and billions for 3G licences a few years ago, Mr Journalist...?  You don't think they should get some relief for that?  The deferred tax charge is right there in the accounts, for crying out loud!  Oh, you don't know what deferred tax is?  Then maybe you shouldn't be writing articles about tax, eh?

Maybe I should start blogging about football :-D

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June 8th, 2012
04:10 pm

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Have I moved to Camberwick Green?
Looking up the tax implications of a situation for a client, I find myself looking at the case of Farmer & Giles v HMRC, which picks up points from the cases of Mason and Miller and as well as Mr Farmer himself and his executors Messrs Farmer & Giles, has important input from his farm manager Mr Carter.

HMRC were represented by a Mr Twiddy, which seems entirely in keeping :-)

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May 20th, 2012
09:23 pm

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Springfest 2012
At the May bank holiday I went up to Leicestershire for a Fools and Heroes Fest.  Springfest is the second-biggest fest of the year, after Summerfest, and as Summerfest is hard work rather than pure play I've been wanting to go for a while.  Unfortunately May Day has been the same weekend for a few years, so I haven't been able to make it; but now I have.

So here's a write-up, mostly for my benefit when I'm re-reading all this stuff in a few years' time.

TL:DR. Seriously - TL:DRCollapse )

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April 10th, 2012
01:45 pm

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Efficiency of the NHS
It was my 40th birthday on Saturday.  Hurrah! :-)

I had some friends round and had a really nice weekend.  Hurrah! :-)

I got lots of post.  Hurrah! :-)

One bit was from the NHS, saying I now qualify for a free health screening because I'm in the 40-74 age bracket.  Huh...arrgh :-(

Well it's nice to see that their efficiency is such that they can time the letter so perfectly, but really, sometimes you can afford to wait a day or two even for good news.. :-)

Current Mood: moroseOld

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01:39 pm

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Why does the word "tax" mean people abandon all logic and sense?

From the BBC today:

"Among the ploys used by the very rich to cut their income tax bills to nothing, are giving all their money to charity, or offsetting business losses, or the interest on some types of loans, against their taxable incomes."

Hold on: you can cut your tax bill to nothing by:

- Passing the money on to good causes rather than keeping it; or
- Losing money in business, so you've not actually made a profit at all.

Er, how is this abusive, exactly?

Surely the abuse is where someone rich, who you'd expect would get to keep £48 out of every £100 he earns, actually keeps £90.  If he ends up with nothing in his pocket out of £100 of gross income, then how on earth has he been cheating?

I understand tax (mostly), but I really don't understand public attitudes to it. 

<rant>

It's that Vodafone thing all over again.  Someone has mentioned a big number in connection with you, so if you don't pay tax on it you're a tax avoider - QED.  Regardless of whether that number is anything to do with anything taxable, or indeed exists outside someone's fevered imaginations.

Let's see... my house is probably worth something over £200k, so hey, look, I must owe about £85k in tax and NI this year.  OK that's a tax bill which is well over my actual salary - but £200k is an amount of money so it must be what I owe tax on!  Although... it might be worth £300k, so logically I owe £137k!  But what if someone offered me a million?  Well, I'd sell for that in the unlikely event that anyone did, which must mean I owe tax on a million pounds!  It's a number, therefore it's taxable!

</rant>

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January 19th, 2012
11:23 am

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Low expectations
I've just been sent a letter from a company called AT Cross.

The salutation reads "Dear Cross Customer"...

I feel sorry for their customer service people :-D

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January 17th, 2012
12:41 pm

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Obnoxious traffic
On the way in to work today I was merging in turn, as a slip road from the motorway joined an A road (a horribly complicated junction where four lanes of traffic need to re-organise into four new lanes in the space of 100 yards), when I noticed a large white van was being very aggressive and trying to push past me.  I was about to get all outraged when I realised that it had blue flashing lights on (barely visible, it was so close), and was in fact an ambulance that had snuck up past the lorry behind me all silently.

You know, I was under the impression that these things were fitted with some sort of loud noise-making device specifically to alert drivers in this exact situation.  Had I known there was an emergency vehicle nearby, I'd have hung back on the slip road and he'd have been an awful lot quicker getting past me, not to mention everyone else. 

Why oh why oh why was the driver not using his siren?  I know he had one, it went off for about half a second as it clambered on down the road.  Madness!  The world is going to pot!!

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