Category Archives: tax

NICked again!


Much has been said today about Hammond’s so called U-turn on changes to National Insurance. It is, of course, no such thing.

If you read Hammond’s open letter to MPs he says that increasing benefits for the self employed has to be matched by increased contributions. However, these benefits will not be explained in detail until later this year. What he actually doing is putting things in the right order. You can’t expect people to cough up extra unless they know what they’re getting for it!

He is pressing ahead with the abolition of Class 2 NI. Unsurprisingly nobody is objecting to that and it does mean that the self employed will now pay less – so the inequality between contributions and benefits is now even greater. If I was an employee, I’d be protesting about that bit of unfairness. It just goes to prove that you really can’t please all of the people all of the time…

At the end of the day, the government has listened to the reaction to the proposed changes and modified its approach. The opposition make much of this, saying the government is in disarray and chaos which is, of course, nonsense.

Personally I saw nothing wrong with the changes announced but they were badly explained. And at the end of the day a government that listens and responds to public opinion can’t be a bad thing can it?

More taxing stuff


My ‘friend’ Longrider has been sounding off again ripping apart my ‘logical fallacies’ in the recent posts I published about tax. You can read his latest here.

Normally I would comment on his article at his place, but as he blocks me from commenting I reluctantly have to respond here.

The thrust of his argument is twofold. Firstly he continues to insist that the self employed shouldn’t pay the same NIC for unequal benefits. It might surprise him to know that I agree with him. However, the fact is that even after the proposed NI increases, the self employed will still be paying less than employed.

It is sensible that the government has delayed the changes until later in the year. In the summer the House will examine benefits and it will be made clear how the benefits the self employed enjoy have been improved to bring them closer – not equal but closer – to those given to the employed.

Secondly, he regards all taxation as theft. This is patent nonsense. He sites the waste of government as his justification for this stance. Again he may surprised that I agree with him that much government spending is wasteful and shameful, but that is not the real issue. There has to be collective responsibilty for the operation of a civilised society.

He rightly points out the difference between tax avoidance and tax evasion. As a chartered accountant I am well aware of the difference. Avoidance is perfectly legal and a thorough knowledge of tax legislation should always be used to ensure each person or organisation pays the proper amounts required by law and no more.

The morality and fairness is irrelevant when one is filling a tax return, as I do every year. Several of them, in fact! However, it is proper to consider such issues when framing the laws that govern what level of tax is appropriate.

I am criticised for citing large companies who pay little or no UK tax on their profits. They do this by setting up complex corporate structures to artificially move profits to tax shelters, thereby paying little tax in countries when their profits are generated. There are laws – too lax in my view – that make such practices illegal in the UK.

And are such schemes immoral? Well it’s answer that depends on which side of the fence you’re sitting, isn’t it?

So let’s have a direct quote from the self appointed expert. He’s fond of quotes so how about this one from him?

“So, to summarise, there is no morality in taxation; merely theft”

Right on the first, but the second is ‘a logical fallacy’ and ‘cockwaffle’

Feel free to comment because I don’t censor you the way you censor me…

Avoiding corporation tax


There’s been a lot of hot air spouted this week about tax and the self employed, but what about the big boys? You know, the big corporations who make billions and can afford to pay clever accountants and lawyers the rest of us can’t even dream about instructing…

Here’s a round up of what’s going on – and it’s by no means exhaustive :

Caffe Nero : UK sales £274 million CT nil
Vodafone : UK sales £2.7 billion CT nil
Gap : UK sales £426 million CT nil
Waterstones : UK sales £395 million CT nil
EE : UK sales £6.3 billion CT nil

And there is a whole list of other big companies who pay some CT but nowhere near anything proportionate to their sales or real profits. Companies like Apple, Boots, Starbucks, Vision Express…

The list goes on and on, so maybe it would help defuse the row over the taxation of the self employed if the Chancellor was seen to do something about fairness in taxing the big boys as well as the little man?

Fairness shouldn’t be selective…

Maximum wages and punitive taxation

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I admire Jeremy Corbyn. No, really. I do! He’s such great entertainment value. A bit like Donald Trump only considerably less consistent and without the logic or practical aspects. Our Jezza is just priceless…

His latest idea is a cap on wages. This is, of course, not a new idea. It’s been done before by the Wilson government. In those days there was a 98% top rate of tax comprising 83% income tax plus 15% investment income surcharge. My memory of the time is a bit hazy so I looked it up. I was a teenager at the time but remember my father complaining that Labour were taking 105% of his top slice income. As it turns out that was a bit inaccurate but nevertheless 98% is bad enough.

So what happened? Well, high earners fled the country in droves. Reportedly 750,000 British taxpayers were liable for a 98 percent tax rate in 1974. Take, for example, the Rolling Stones. Reflecting on the time, Bill Wyman said in the band’s DVD “Stones in Exile” that if a band member made a “million quid,” he would be taking home only £70,000. “It was impossible to make enough to pay Inland Revenue. I had to get out of the country to pay the tax that was incurred on me,” Keith Richards remembered.

The Stones weren’t the only ones. Actors left in drove too. And top business people. The rich have the power and the means to just go off to places where the tax is less punitive. The problem is that they takes jobs and investment with them. No wealth, no job creation or entrepreneurship. It’s all gone abroad – and at the end of the day, it’s a global marketplace we’re living in.

So how about the so-called ‘John Lewis model’ where the top man’s pay is pegged to a multiple of the lowest paid worker? Better, but still bad for business. Top companies will just move their headquarters to other countries, killing the UK jobs in their offices and factories. There they can still pay high salaries to attract top people.

There is only one country in the western world that has a maximum wage in place, and that’s Cuba – but before my old friend Longrider starts kicking off about Cuba again, I’m forced to point out that Cuba has a rather curious dual currency system. It’s been said that the maximum Cuban wage equates to about US$30 a month but there is a an external currency and an internal currency, so the equivalence is meaningless. Locals are paid in local currency and they buy stuff in local currency. It’s worthless outside Cuba. As I said, a curious system…

Also, the wages paid to top executives in private companies is a matter for the shareholders, not the government. Corbyn reckons he wouldn’t give government contracts to companies who pay excessive executive salaries. He won’t put a figure on it and it’s unworkable because there’d be nobody left to give the work too!

So, maximum wages pegged by punitive taxation doesn’t work. Government interference in executive pay doesn’t work. In fact, the entire premise of 1970’s socialism on which Corbyn bases Labour policy doesn’t work.

EU FTT : More lies from Osborne

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In 2013, the EU proposed that a tax on financial transactions – aka a Tobin tax, named after the man who thought of it – would be introduced on 1st January 2014 but when this proved problematical it was delayed until January 2016.

It’s been widely condemned because although is sounds insignificant at 0.1%, it is applied at all stages of a financial transaction which means it mounts up as it multiplies. The main worry for the UK working man is that it is likely to mean an increase in mortgage rates.

In April 2013, George Osborne filed a legal challenge of the decision authorizing the use of enhanced cooperation to implement the FTT with the European Court of Justice. Osborne said that “we’re not against financial transaction taxes in principal but we are concerned about the extra-territorial aspects of the Commission’s proposal”. A Finance Ministry spokesman said that “we will not stand in the way of other countries, but only if the rights of countries not taking part are respected” and that the current Commission proposal “does not meet these requirements.” Luxembourg’s Minister for Finance Luc Frieden said that his country was “very sympathetic” to the UK’s legal challenge and would “bring arguments in support of the case”.

On 30 April 2014, the European Court of Justice dismissed the United Kingdom’s action against the authorization of the use of enhanced cooperation, but didn’t rule out the possibility the UK could challenge the legality of the FTT itself if it is eventually approved. Osborne has threatened a new challenge if the FTT is approved. In other words, he’s going to shut the stable door after the horse has bolted and she if he can get the horse to come back of its own accord!

So why didn’t it happen this January? Well us awkward sods in the UK insisted that we should have a referendum on the EU so guess what? It’s been delayed until ‘mid 2016’ or to put it another way until after the referendum.

George Osborne says that Britain will never accept the tax. He’s lying because that would mean that 27 other EU countries would have to agree with him and he knows that ain’t gonna happen!

So at the risk of sounding a bit like the doom-mongers of Project Fear, if you want the cost of your mortgage to go up, then vote to remain in the EU. And – just for once – this scare is actually real…