Archive for the ‘Bit of politics’ Category

« Newer Entries
Older Entries »
h1

Self defence?

July 19, 2012

I am grateful to Ian Brownhill for his article on the Justice Gap blog with the news that the government is changing what happens if you are accused of a crime.  From this autumn, if you are accused and found innocent, you will no longer be able to claim reasonable costs of your defence but only an amount equivalent to the amount which would have been paid out if you’d been on legal aid.  So no fancy forensic work and no high profile barrister and you might at some point have to make a Sophie’s Choice between keeping your house and keeping out of prison.

Where does this come from?  The legislation is in The Costs in Criminal Cases (General)(Amendment) Regulations 2012.  So, yes, I thought I’d have a look for the impact assessment.  And, no, there isn’t one.  This is what the Explanatory Memorandum says:

10.1 The impact on business, charities or voluntary bodies was set out in the final Impact Assessment that was published with the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which can be found at www.justice.gov.uk/downloads/legislation/bills-acts/legal-aid-sentencing/ia-central- funds.pdf

OK, so there’s no impact assessment for this particular statutory instrument, but the impacts were taken into account in the IA for the enabling legislation.

Let’s look there, then.

What is the problem under consideration?  Why is government intervention necessary? Individuals who are found not guilty (or acquitted) in criminal cases and who have paid privately for their defence may have their expenses reimbursed, including legal costs, from central funds.  The central funds budget is a Ministry of Justice budget.  The problem under consideration is that central funds spending has exceeded its set budget, which cannot be extended because of the Government’s fiscal deficit reduction objectives.  Government intervention is required to maintain central funds within budget.

All right, that’s plain enough.  There’s no more money.  The budget is fixed.  The problem is how to stay within a fixed budget with a fluctuating and presumably increasing set of costs.

The impact assessment should then go on to consider the options available to meet that objective. (para 58 of the IA toolkit:)

it is Government policy to regulate only as a last resort, having demonstrated that satisfactory outcomes cannot be achieved by alternatives, self-regulatory or non- regulatory approaches. These options should be considered during this step.

What do we think?  “The government should give them more money” is one obvious option that’s ruled out by the way the question is framed; what we’re looking at is ways to stay within the set budget limit.  Well what about using money that we get from elsewhere?  Fines and penalties, for example?  There was a spare 59.5 million from the Barclays fine that was only going to be used to lower the fees the other bankers paid for self-regulation, as I recall – couldn’t we use that?

The impact assessment doesn’t contain any options other than cap the fees or do nothing.  Hmmmm.

It also suggests that the amount to be raised by making the change is about fifty million a year – hey, Barclays could pay for this year and we could set a higher budget next year?  No??  Just a thought!

Legal Aid Clients and Providers: An estimated loss of up to £50m in nominal cash from central funds payments. £10m of this is from companies being excluded from central funds on the basis that they might be able to buy insurance. £40m is from paying only legal aid remuneration rates. The burden would be shared between providers and clients depending on whether clients choose to pay their provider over and above legal aid rates.

All right then – this is the important bit.  The change means that companies can’t claim back their expenses any more but are expected to have (or obtain) insurance, which saves around £10m a year.  The remaining £40m is shared between providers and clients.  Track that thought, it’s important.

Because impact assessments are all about the impact on businesses.  The theory is that if the state makes you and me fill in a form on a Sunday afternoon, well, we’re annoyed but we haven’t lost anything financially.  But if the state makes a business fill in a particular form, then – the theory goes – the business has suffered an “administrative burden” – has been forced to pay someone to spend some time doing something that doesn’t earn them profits.

And that’s why impact assessments are all about the costs and benefits to business – you and I, as citizens, may think that it’s unconscionable that we wouldn’t be reimbursed our legal fees were we to be falsely accused of something but, in Impact Assessment terms, that doesn’t matter.  What does matter here, I think, is that the government hasn’t followed its own rules.

Part of the impact assessment, as I’ve said before, is to look at the impact on small businesses.

Now, it says clearly that the burden of this change will fall on both “clients and providers” – both the people wrongly accused and the people who defend them.  The people who defend them who might be solicitors or barristers, in small or large firms.

Because what is a “small firm” for the purposes of the small firms impact test?  It’s a firm with fewer than 20 employees.  Not partners, not members; employees.

How many solicitors are in small firms within that definition?  I don’t know, but I’d suspect a large number.  How many barristers?  I don’t know, but I’d suspect nearly all of them.  And the government has made this regulatory change without taking that into consideration.

Look at clauses 56-60 on the impact assessment for the main legislation.  Most of it is about the removal of repayment provisions for companies accused of wrongdoing: the only consideration of small firms who are legal services providers is in paragraph 60:

Small firms which are legal services providers may be affected by these proposals if their income and/or levels of business is lower in future.

Well big hairy woo – how many of them might be affected and in what way?  We don’t know and we don’t care, seemingly.  But look again at the explanatory memorandum to the actual SI making the change:

11. Regulating small business

11.1 The legislation does not apply to small business.

I put it to you that this is nonsense.  The statutory instrument fixes “the amount to be paid to the accused”: how many wrongly accused people are also small business owners (one man or “micro businesses” in the jargon)?  We don’t know, and MoJ doesn’t care.  How much of the impact of this change will affect legal services providers who are also small businesses?  Again, we don’t know, and MoJ doesn’t care.

Yes, I agree, I’m finding a piece of legislation I don’t like and trying to find a way of overturning it on a technicality.  But for heaven’s sake, the government makes these rules to regulate its own conduct, because it knows that some of its members and servants think it appropriate to say “Yes, Minister” when they ought to be saying “are you sure, Minister?”

One final thought.  I had a not tremendously helpful response from BIS to my Open Letter to Mark Prisk on the subject of the small firms impact test.  It tells me that “independent scrutiny of IAs through the Regulatory Policy Committee” ought to drive up the quality of IAs in the medium term.  I did look on the RPC site for their opinion on the Central Funds IA but couldn’t find it, and to date they haven’t answered my phone message or email asking them for  a link.  But if you look here, at their last annual report, and turn to pages 60-62, you’ll see the MoJ has a less than stellar record of having not one impact assessment scored as “green” on the RPC’s red/amber/green ratings grid at its first attempt, and it only managed to get two of its twenty eight listed IAs through the “green” hurdle on the second attempt.  Maybe a nice little judicial review of whether this legislation should be sent back and its impact on small firms given proper consideration might encourage them to pay more attention in future?

Posted in Bit of politics, Consultation, SFIT | Tagged , , , , | 1 Comment »

h1

Olympics: tax dodge?

July 17, 2012

I’ve had an interesting email from the 38 degrees organisation asking me to sign a petition against an “Olympic tax dodge” and then another, excitedly explaining that McDonalds had already agreed not to take advantage of the so-called dodge.

So, I thought, what’s all this about then?

I had already vaguely heard that a country wasn’t able to apply to host the Olympics unless it also agreed to include a tax exemption, essentially so that athletes could go to the country where the games were held without having to worry about a tax grab over things like image rights that they might already have in place.

How did this, I wonder, apply to corporates like McDonalds?

Well, there’s an interesting article here from the Ethical Consumer which sets out their understanding of the “dodge” – that explains there’s also an exemption from corporation tax for “certain non-resident companies”.  Leaving aside the question of why would the Olympics be using non-UK-resident contractors in the first place, it seems not unreasonable to legislate so that the simple fact of working on the Olympics wouldn’t make a non-resident company into a resident company, doesn’t it?

The relevant legislation seems to be The London Olympic Games and Paralympic Games Tax Regulations 2010 (No 2913) (which can be found here, if you speak legislative-ese).  Let’s have a look, I thought, at the TIIN – the Tax Information and Impact Note, the impact assessment which would let you know the costs and benefits of the legislation.

Ah.  There isn’t one.

Look instead at paragraphs 10, 11 and 12 of the Explanatory Memorandum (the “plain English” explanation of the legislation)  First of all the explanation of where the Impact Assessment might be:

10. Impact

10.1 An Impact Assessment has not been produced for the Regulations as they have a negligible impact on business, charities or voluntary bodies.

10.2 The impact on the public sector is negligible.

Ok then, what do we mean by “negligible”?  The answer is to be found in the TIIN instructions which I obtained via a Freedom of Information Act request and published here.  The relevant limits are £100,000 or £3 million (presumably annual costs or benefits of £100,000 or overall cumulative costs/benefits of £3m):

“NEGLIGIBLE IMPACT (that is below £100k/£3m) then DO NOT commission analysis but instead explain what analysis has already been done e.g. any sectoral impacts or populations already known.”

So we conclude that no analysis was commissioned to support this piece of legislation because it was already known/assumed that its costs or benefits would be below the “negligible” threshold.

And then there’s:

12. Monitoring & review

The Regulations implement tax commitments made by the UK in bidding to host the Games. The tax commitments given are unique and for a time limited period. No monitoring and review of the Regulations is therefore planned.

So there we have it.  The government doesn’t think there’s any significant tax at stake, and it isn’t going to go back and check, so there.

The ethical consumer article (in its “read more” tab) has some interesting comparative figures from the 2006 FIFA World Cup in Germany which suggest the “negligible” figure is wildly inaccurate.  A Freedom of Information act request to see the data on which the decision not to commission analysis was founded might be interesting…

Posted in Bit of politics, TIINs | Tagged | Leave a Comment »

h1

Whose service is it anyway?

July 16, 2012

Sorry I was a bit quiet last week: I was sick.  Fortunately it was nothing to do with my blood pressure, because otherwise I think we might have had a bit of a mess today when my head exploded.

Why, do I hear you ask?

It all starts with the Cabinet Office consultation with the civil service unions about reforming facilities time.

(Incidentally, when did the word “reform” lose its meaning of “improve or amend, moving to a better state by abandoning what is wrong or corrupt” and instead come to mean “cut, preferably off at the knees”?)

OK let’s unpack this one a bit.  First of all, who is invited to consult?  Civil servants, that’s who.  Just civil servants.  Not the citizens who pay for government services (including the wages of civil servants) via our taxes.

Who cares?  Well the Taxpayers Alliance published a report last year claiming unions received more public funding than the political parties received donations, so  they’ve already had their two cents worth.  The Daily Mail has its opinion out there and it’s just what you’d expect.  Francis Maude has seemingly already made up his mind.

Yes, there are a few countervailing arguments.  The TUC had a go, commissioning a report, for example.  But where is the room for the wider argument, the opinion of the citizen, the consultation with the people who pay the civil service’s wages?

Secondly, and I know you know what I’m going to say, but where is the damned impact assessment?  The Government’s own rules say that when they are consulting about something with an impact on the public sector they should include an assessment of the costs and benefits of the proposal.  In this case, there’s a lot about how much facilities time is granted and what it’s used for and how it might be more closely regulated, and absolutely nothing about any benefits.  In other words, think about your own spending.  If you have to save money and you see you have two direct debits, one for £30 a month and one for £40, would you just stop the £40 payment? Or would you want to look at what you were paying for first? Instead of stopping payment on your house contents insurance because it costs £40 might you not first be well advised to consider the benefits of having cover, and the risks inherent in not having any?

Isn’t there also a legitimate expectation argument, in other words the government has said that it will consult before making regulatory changes and that this consultation will include an impact assessment?  If I were in one of the civil service unions I’d be looking closely at whether a judicial review was appropriate at this point, with the objective of asking the government to re-run their consultation on a rational basis, ie consulting fully with all the affected parties and including a proper assessment of the benefits, as well as the costs, of the proposals.

So I object to the limits on the consultees and on the lack of a proper consideration of the impacts.  What about the proposals themselves?

There are four areas covered in the consultation:

1) Reporting and benchmarking – developing a common system for reporting and monitoring Facility time across the Civil Service;

2) Ending or limiting the practice of 100% of Civil Service employees’ time being spent on trade union duties and activities;

3) Reviewing arrangements for time off for trade union activities so that the default is that this time is unpaid; and

4) Reduction in overall facility time across the Civil Service, in particular through more rigorous individual management of facility time. Ensuring that the provision of the use of facilities is appropriate, and represents good value to the taxpayer.

A “common system for reporting and monitoring” sounds like a reasonable idea but then I’m old enough to remember when the civil service had common pay and conditions that applied across departments and only required one team to negotiate and implement them instead of a different team in each department.

The second one is interesting.  As far as I can tell (and I’ve read the document twice so far) there’s absolutely no justification offered for wanting to end or limit the practice of having one person working for the union full time rather than thirty six people on an hour a week.  You elect a union president, for a year they’re union president full time, and then they go back to their job.  If that’s a problem, then can we see some evidence of what the problem is and why it’s a problem, please?

The third one is interesting: distinguishing between union duties and union activities and suggesting that you can get paid time off for one but not for the other.

We intend that we will develop and introduce a rigorous checking regime to support departments to differentiate between time off for duties and activities? Q3. How can we best introduce this approach? Are there any other approaches that you can suggest?

That’s an “it all depends what you mean by…” section.  What are duties and what are activities?  Well, helpfully listed in the appendix, I see that duties include

accompanying or representing a trade union member at a disciplinary or grievance hearing;

Now, I was a union personal caseworker for some years, but I never attended a disciplinary or grievance hearing.  I had discussions with people about whether they were in danger of disciplinary action or had cause to take grievance proceedings.  I accompanied people to formal and informal meetings with their managers or the people they managed to see if disagreements could be settled without recourse to disciplinary and grievance hearings.  Would all that time have been a “duty” – for which I would have been allowed paid work time – or an “activity” – for which I would have been expected to take unpaid leave?

And a “rigorous checking regime”?  So instead of someone being able to call on a colleague with some union training to help sort things out, what should we do now?  Perhaps private enterprise will step in and we’ll see a whole new raft of “ambulance chasing” lawyers offering no fee claims direct with a guarantee you’ll keep 100% of the compensation?

And the fourth objective of the consultation?  Words fail.  Is there any evidence that there is a need to reduce union facilities time?  Is there any evidence that a “rigorous individual management” of facilities time isn’t code for “bullying and victimising union members who choose to be active in their union”?  And is there a scintilla of evidence that trades union facilities time is not already “appropriate, and represents good value to the taxpayer”?

Posted in Bit of politics, Consultation | 2 Comments »

h1

Not quite a smoking gun. But still terrifying.

July 10, 2012

Here on Storify you’ll find my take on the Channel 4 Dispatches story last night, as it happened, on Twitter.

The programme looked at HMRC’s Non-Execs – the Board members who aren’t civil servants, aren’t there in a management role, and are there to keep the organisation on track.  As it says on the HMRC website:

HMRC looks to its Non-Executive Directors to:

  • bring guidance and advice
  • support and challenge management about the department’s strategic direction
  • provide support in monitoring and reviewing progress

and it found that a couple of them had business interests that you could categorise as in the “interesting” end of the tax avoidance spectrum.  One was director of a company which was located in Guernsey… and as I said on twitter at the time

“We are not in Guernsey for tax reasons”? I also have a rather nice bridge I could sell you if you’re interested…?
The other was director of an estate agency group and the programme managed to find some staff in one of the group companies who helpfully advised him on how to avoid stamp duty on a big ticket purchase.
It wasn’t exactly a smoking gun, no.
To me, the worrying thing was the flood of comments (which I’ve collected in the storify link) essentially saying that HMRC is corrupt and why should I pay my taxes when HMRC is corrupt.
If I were on the Board of HMRC today what would absolutely terrify me would be the thought that the public have started to perceive of HMRC as corrupt.
It isn’t, of course.
Yes, I am absolutely confident it isn’t.  Or at least I saw no evidence of corruption in the areas of the department with which I came into contact,  my 25 year career in the Department only ended in March and I don’t believe a culture of corruption can have taken hold in a mere three months.
But I do think there is a problem, and it’s this.  Business interests have become the arbiters of HMRC’s success, rather than the interests of the citizen and the wider polity.
Look at the HMRC’s non-execs:
  • Ian Barlow – KPMG
  • Colin Cobain – Tesco
  • Philippa Hurd – ITV
  • Phil Hodkinson – HBOS
  • John Spence – Lloyds TSB

and then compare them with, for example, the BBC’s Board of Trustees

The BBC includes former employees of the organisation, academia, politics and economics as well as big business.  HMRC’s non-execs are, in contrast, almost painfully non-diverse.  Where is the trades unionist (how about Liz (Baroness) Symons who was the first female General Secretary of the FDA union?)  The former employee (how about Liz Bridge, former Tax Inspector and now construction industry taxation expert)? The economist (how about Richard Murphy)?

Are we really moving towards a society where tax is to be compulsory for the little people but optional for big business?  Where tax policy making will be outsourced (and not to citizen groups)?  Where the only people who are qualified to guide, advise, support and challenge HMRC are – bankers?

Posted in Bit of politics, HMRC | Tagged , , , | 1 Comment »

h1

June round up

June 29, 2012

Wait a minute, it’s the last working day in June?  How did THAT happen?

Yes, there was another tax tracker update, issued on 22 June, and, yes, I missed it.

(Incidentally I see I still haven’t had an answer from the Treasury to my email on 14 May:

Hi.  I have been following the tax tracker with interest (I blog about it at https://tiintax.com/) and I wondered whether publishing the tracker as a pdf rather than as a searchable part of the html content of the page is in accordance with your accessibility commitments?

It would also be extremely useful if you told people how you had updated it when you DO update it.  How about it?)

Anyway.  There were six consultations whose deadline passed this week – more of them later.

What I wanted to draw to your attention however was the backlog.  You remember the 22 consultations that were due to be published in “May”? The ones that turned into 22 consultations that were due to be published in “June”? As of this morning, there are still 13 formal consultations and three informal consultations shown as being due in “June”, which of course ends on Saturday. Going to be a busy weekend for the web publishing team, then?

Why are there a dozen or so provisions – which have already been announced, whose details are due to be discussed with the rest of us – where the document isn’t ready to be published?  Is it government indecisiveness, or HMRC lack of resource, or both?  Paxman, please note next time you have a Treasury Minister in your studio…

Posted in Bit of politics, Consultation | Leave a Comment »

h1

Is that smoke I can smell?

June 29, 2012

It seems that every day in every way HMRC is getting better and better.  Call centres answer their phones six whole seconds faster than they did last year.  (On average.  When they answer at all.)  There are more “front-line staff dealing with tax avoidance and tax evasion” (Even if that means there are fewer dealing with routine policy work like preparing consultations or doing cost/benefit analysis of changes).

Yeah. Right.

Posted in Bit of politics | Tagged | Leave a Comment »

h1

FSA: show me the money

June 28, 2012

So there was a tweet going the rounds this morning which said that the £59.5 million of fines which Barclays are going to pay for attempting to manipulate the LIBOR and EURIBOR rates of interest will go direct to the FSA… and reduce the fees which banks pay to the FSA for being regulated!

Let’s have a quick look.  The FSA website explains they are independent, receive no government funding, and charge fees to those they regulate and, yes, if you look at the paragraph “Who Pays for the FSA” you will see what they do with any fines they receive.

When financial penalties are imposed on firms or individuals, the proceeds are used to reduce fees in the following financial year.

So no worries, boys!  Be naughty this year, you’ll pay us less the next!  Champagne cocktails all round.

However there is this:

The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 2012.

Yes, the FSA is going to be wound up.  At the moment, according to their annual report and accounts, they already have funding in place to cover the transitional costs of the transfer of responsibilities to the new Financial Conduct Authority and Prudential Regulation Authority that will take over their function.  So what becomes of the £59 million?

Well, under Schedule 21 Part 1 Para 2 of the Financial Services Bill (HL Bill 25) which seems to be working its way through the House of Lords at present it looks to me as if the FSA has to sort it out with the Bank of England and the Treasury:

Transfer schemes

2(1)The FSA must make one or more schemes under this paragraph for the
transfer of property, rights and liabilities of the FSA—

(a)to the PRA or the Bank,

(b)to the PRA and the Bank, to be held jointly, or

(c)to the FSA and either the PRA or the Bank or both, to be held jointly.

(2)A scheme under this paragraph made by the FSA is not to be capable of
coming into force unless it is approved by the Treasury.

(3)The FSA may not submit a scheme under this paragraph to the Treasury for
their approval without the consent of the Bank.

So perhaps one of the Noble Lords might like to check that our £59.5 million – as well as any other fines that might accrue from any other ramifications of what looks set to be a fair old scandal – go back to us, the taxpayers, rather than indirectly benefiting the people whose offences caused the fine.

If you want to ask a Noble Lord to do so, go to this list of members and pick one – they don’t have constituencies like MPs, so you’re entitled to ask any of them.  I picked the one with my surname (no relation!) but you might someone you’ve heard of who might have an interest, or simply pick one at random.  And then ask them to take an interest.  I want our money back!

UPDATE

World’s shortest campaign (or maybe “great minds think alike” – no) but George Osborne picked up the same thing in his speech on Barclays today.

Here’s what he said:

Under the previous government’s regime fines paid to the FSA are used to reduce the annual levy other financial institutions are asked to pay.

I am far from convinced that in all cases, this is the best use of the money.

We are considering amendments to the Financial Services Bill that ensure that fines of this nature go to help the taxpaying public, not the financial industry.

I have also asked my officials to urgently investigate whether this legislation could be applied to the fine imposed on Barclays Bank.

Well well – evidence that even politicians are capable of going “that’s really stupid – let’s not”.

Posted in Bit of politics, Regulation | Tagged , , , | 3 Comments »

h1

Only connect

June 25, 2012

Today the PCS – the Public and Commercial Services union – in HMRC – is on strike (or, as Sky news helpfully has it, “Jimmy Carr inspires thousands to walk out“)  The strike is in protest at cuts in HMRC staffing and to what they call “creeping privatisation” including two trials of using commercial services to replace HMRC call centre staff.  At the same time there is a lot of political noise about abolishing various benefits such as housing benefit for the under 25s.  The thinking around this is presumably that they can always go home to Mummy and Daddy, can’t they – an astonishing display of privileged thinking from the people who have never had an actual proper job in their lives.

Twitter, as ever, summed it up in 140 characters: ” Cutting housing benefit to under 25s might save you £2bn.  Well done.  Collecting the tax will save you £76 bn.  Happy to help.”

Only connect.

Meanwhile, here is the response I sent last week to the consultation on “possible changes to income tax rules on interest” – yes, I responded to all the ones that closed on Friday, I just didn’t have time to blog about it last week!  But there is a connection to today’s action, in that this is yet another consultation document that has a sloppy impact assessment that doesn’t make any compelling case for change, which is of course the point of doing the thing in the first place.  There’s an inbuilt cost to businesses and the rest of us in making any change to tax law at all – the cost of people having to learn about the changes and implement any changes to their own systems when they could otherwise be spending their time making widgets and earning profits.  So it’s one of the basic tenets of better regulation that you only make changes when the benefits justify the costs.

Is the current crop of consultations a bit woolly on the whole cost/benefit analysis side because they’re just going through the motions of consultation, or have they genuinely not got the resources any more to do the basic analysis work that ought to underpin any changes to legislation?

Anyone?

Possible changes to income tax rules on interest: consultation response

Dear Tony

This is an individual response to the consultation and will also be published over the next couple of days (with commentary) on my blog, http://tiintax.com.
I cannot see that the case is made for any changes to take place.  Although the impact assessment shows a 200m exchequer impact on the possible withdrawal of an exemption for intra-group Eurobonds, the remainder of the proposals are said to lead to “improved rules on the taxation of interest and interest-like returns” but what the “improvement” represents is not clear and there is no quantification of any impact on individuals, businesses or HMRC.  There is no cost/benefit analysis which would justify the change, and no compelling case for change is made elsewhere in the document.
It also seems to me that this is a consultation which would have benefited from a step back and look at the whole interest question in the round – the consultation is said to cover “the income tax rules on the taxation of interest and interest-like returns” but not to cover proposed “changes to the procedures for the collection of income tax deducted at source by companies, local authorities and individuals”.  Why not?  Wouldn’t it have been sensible to have looked at the taxation of interest – all interest – at once and made much more radical simplification?

Posted in Bit of politics, Consultation | Tagged , , , , | Leave a Comment »

h1

K2, #toffshore and aggressive avoidance

June 21, 2012

So you resign from your job with – let’s call them “Employer Ltd” – and you go to work instead for a company, which we’ll call, originally, “Company”.  And your old employer takes out a contract with the company for Company to provide various services to Employer… Services like, oh, exactly what you used to do when you worked for them, for example.  And – what a coincidence – Company sends you to go off and provide those services for Employer.

You might be doing the same stuff, perhaps sitting at the same desk, surrounded by the same people.  But you don’t work for Employer any more.  You work for Company.  And all that Company pays you is minimum wage, so that’s what you pay tax on, all legally done and dusted.

Except – oh look!  Company are also making you a loan of a remarkably large amount of money.  And you don’t pay tax on loans, do you.  So you’re quids in… until you have to pay the loan back.

You never have to pay the loan back.  You effectively own Company (via a trust and a couple of quick offshore shuffles).  Woo hoo.

That, at least as I understand it, is the essence of K2, the avoidance scheme that has embarrassed Jimmy Carr over the last 24 hours.  And, to his credit, he’s said he was just acting on the advice of his accountant and, now he gets it, he’s not going to do it any more.

And here’s an infographic showing the difference in scale between the amount of tax he might perhaps have avoided, and the amount of tax a certain multinational might have avoided recently…

There are a couple of things to be said about all this.

First of all, there’s a huge amount of hypocrisy from politicians about this case.  It makes me think it would be a good idea if we went down the American route and made tax returns subject to Freedom of Information Act requests, with a reasonably chunky fee payable (to discourage the frivolous or plain nosy) without preventing or pricing out proper investigative journalism.

Secondly, not that I’m a conspiracy theorist or anything, but there’s a worrying number of pieces about tax avoidance that seem to end with a plea for a flat rate tax.  It’s a trojan horse: don’t be fooled.  We might have to come back to that one!

Finally, it’s relatively easy for the press, the political class, and the twitterati to go after a tax-avoiding individual.  People have reputations to maintain.  People have family and friends to look in the eye.  People have shame.

Big business?  Their reputations may not suffer from an aggressive “tax arbitrage” or “tax mitigation” strategy.  And how many of them have any friends?  Any shame?

Posted in Avoidance, Bit of politics | Tagged , , , | Leave a Comment »

h1

Four Yorkshiremen

June 15, 2012

The human body is a time machine.  Your mind is carried into the future, whether you want it to be or not.

When I was a child, I remember a television programme called “Twenty Five Years Ago Today” which covered, week by week, what had been happening in the second world war, 25 years ago.  So this must have been, what, the late sixties (1939-45 + 25)

To me, this was history.  Black and white, unimaginably long ago.  I didn’t connect it with the lives of the adults around me, and I didn’t understand why my grandmother would “Boo!” every time Hitler appeared, and yet it was no further away from them than Bon Jovi’s “Livin’ on a Prayer” is from us.

Twenty five years ago today it was 1987.  I was thirty one years old, starting my career as a tax inspector after five years lecturing in drama and communications in a college of Further Education.

The human body is a time machine.  The brain in my head now has come from the past.  This is the past that I remember.

When I was recruited into the Inland Revenue, a Member of Parliament and an Inspector of Taxes were both paid at approximately the same rate, the equivalent of a Grade 7 or Principal, a grade understood across the entire Civil Service.

An Inspector of Taxes – even a raw, green, trainee Inspector of Taxes – had an office of her own; a room, a desk, a cupboard, shelves.  A set of hardback Tax Cases.  A set of Manuals.

There were controversial issues: whether the clerical staff called you “Ms Bradley” or “Wendy”.  Whether “Ms” was a real title or not.  Whether it was sexist that the staff list read

  • J Doe
  • R Roe
  • Ms W Bradley
  • F Bloggs

And, yes, I had an actual argument with a District Inspector who maintained that this was “correct” and that my suggested alternatives were not.  That

  • J Doe
  • R Roe
  • W Bradley
  • F Bloggs

wouldn’t do, because then how would you know which members of staff were female????  And

  • Mr J Doe
  • Mr R Roe
  • Ms W Bradley
  • Mr F Bloggs

would make work for the typists!

And, oh, yes, we had typists!  The District Inspector had a secretary, and the rest of us had a typing pool, and we were not under any circumstances to type our own correspondence because (a) it was taking work from our typing pool colleagues and (b) we couldn’t type to Civil Service Standards anyway and (c) our time was too valuable to waste.

We didn’t have computers on our desks, and we calculated using 174 paper – paper ready ruled with convenient columns for doing T-accounts and which I still miss (I hear rumours there are still secret stocks of 174 paper around HMRC but they are jealously guarded, not least from HMRC management)

We were intensively trained according to a method which offended every bone in my teacher-trained body.  Where you would cover a new topic, do your level best to wrap your brain around it, and then tackle the practical example at the end of the chapter which would always – always – have some entirely different issue in it that hadn’t been covered by your training yet!

This was not, I argued, how you learn.  You struggle to get your head around a piece of legislation and its accompanying calculation and then you do a practical example which cements that learning.  Ah, but that IS how life in the Revenue works, was the argument.  It’s always what you don’t know that you don’t know that trips you up.

The pass mark in the exams was high.  Because, there was nothing woolly about the topic you were learning.  There was always a right answer.  And that was your job.  To find the right answer.  To require people to pay the right amount of tax.  Not too much, and not too little.

Later, after you’d passed your training, when you looked at a set of accounts and found that the taxpayer hadn’t arrived at the right answer, you would register the amount and reason for any adjustment you had made.  They were called R adjustments (for “review” – you would look at accounts as they came in and classify them as A – accept – R – review – or E – examine or investigate.)  There was a box you ticked on the form to record whether the R adjustment was in favour of the taxpayer or of the Revenue.  Because both kinds of adjustment counted.  Your job was to find the right answer.

Not to find something “reasonable” that would do.

Tell the young people of today that…

Posted in Bit of politics | Leave a Comment »

« Newer Entries
Older Entries »