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A no brainer.

December 6, 2012

“Anyone with a home worth over £1million now facing a visit from elite tax inspectors” Well, up to a point, Lord Copper!

Let’s have a look, shall we?

The announcement was of a further 100 staff for the “affluence unit”, the bit of HMRC that looks at the tax affairs of people with more than a million quid. As the Telegraph article says

The unit, comprising 200 investigators and technical specialists in six locations across the UK, focuses on people who are evading or avoiding tax.

And, looking for the official announcement that was the initial impetus for this non-story, I see that Danny Alexander announced the unit was expanding from 200 to 300 staff, and with a remit to look at people with £1 million rather than, as before, £2.5 million.

OK then.  So how many millionaires are there?  The Treasury press release estimates half a million but – going back to The Telegraph, where we started – that seems to be a pre-crash figure and their current estimate is 280,000.  I’m not saying I prefer the Telegraph’s figures to the Treasury’s, you understand!  But let’s be generous and take the lower figure.

So we have 300 HMRC staff looking into the tax affairs of 280,000 people.

280,000 divided by 300 is 933.333 according to my calculator.  So let’s round it down and say each of these HMRC staff deals with the tax affairs of 900 millionaires.  Yes, according to the Telegraph’s own figures each worker in the Affluent Unit will need to spread their investigative powers over 900 millionaires.  According to the Treasury’s, over perhaps twice that.  Where on earth will they find the time to go nosing around blameless individuals whose houses have just drifted up in value?  It’s scaremongering, forget about it.

What is more interesting is the announcement that HMRC will have more resources in the autumn statement.  It’s here, in line 32 of the policy decisions:


 £ million
 Head 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
+
32 HMRC investment Spend -10 -80 -25 0 0 0

Ten million in the current year, eighty million next year, £25m in the final year of the coalition and then zilch.  Hmmm… David Gauke’s written ministerial statement on December 3rd clarified this a bit: the 100 staff for the affluent unit are in there, plus some warm words about transfer pricing and centres of excellence.  But the figures are a bit off:

 A further £77 million will be provided to HMRC in this spending review period to further expand its anti-avoidance and evasion activity focused on offshore evasion and avoidance by wealthy individuals and by multinationals.

Well, 10+80+25 = 115 in my book, so if HMRC are getting 115 million and using 77 million on anti-avoidance and evasion, what are they going to use the other  38 million on, do we think?  I’m sure it’s hidden in the small print somewhere but I haven’t come across it yet – anyone?  (maybe they’re upping the £42 they can spend on each business for RTI by another, erm, sixteen quid apiece?)

But look here, at the ARC union website.  Now, ARC stands for Association of Revenue and Customs senior staff and it’s the branch of the FDA which covers senior staff in HMRC, tax inspectors, lawyers, senior managers and a bunch of other professions, economists and the like.  And they have a paper, Reducing the UK Tax Gap – Proposals from ARC. (which isn’t exactly prominent on the site, but if you look at the entry for December 3rd you’ll find it in the “notes for editors” from a press release they apparently put out on 30th November, presumably by leaving it in the statutory locked filing cabinet in the basement office marked “beware of the leopard”!)

What interests me is the suggestion that you could put resources into HMRC’s legal services:

Additional legal resources, 150 trained lawyers and 50 legal assistants, to accelerate litigation of the Tribunal backlog and accelerate yield. Cost £35m. Projected yield £2000m

One of the things that worries me about the extra hundred staff for the affluent unit is, where are they going to come from?  Because trained tax professionals don’t actually grow on trees, and HMRC has always been rubbish at planning for the future and making sure it has enough trained tax professionals coming online to replace natural wastage from retirements and resignations.  You can’t just go out and hire a hundred trained tax professionals – largely because the accountancy profession, where you might find people with at least analogous skills – pays a damned sight more than HMRC.

But you could go out and recruit a hundred and fifty lawyers tomorrow.  Because lawyers train themselves, or at least pay for their own training, and there are supply and demand issues in the legal profession which there aren’t in tax at the moment.  So you couldn’t find 150 trained tax lawyers – they get shedloads more than HMRC tax lawyers, I’m told.  But you could get 150 criminal lawyers, trained litigators, and start taking some of the backlog of tribunal cases to tribunal as fast as the tribunal could accommodate them.

ARC think an investment of £35m could bring in two thousand million.  And HMRC seem to have £38m left over, so it’s a no brainer, surely?  Why on earth not?

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

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For some values of “interesting”. Part the third.

October 9, 2012

Here’s what I actually sent in response to the Financial Policy Committe: Macro Prudential Tools consultation

1 Do you agree that the FPC should be responsible for setting the level of the CCB in the UK?
What are you asking here? Do you want to know whether we think there should be a Financial Policy Committee or a “Counter Cyclical Buffer” at all? Because if the existence of the authority and the mechanism are taken as read, then it’s obvious that the one ought to be in charge of the other. However as evidenced in the IA, you don’t seem to have considered (or at least to have shared in this document) any other option except creating the FPC or not. In short, the answer has to be “yes” because of the way you’ve framed the question, but the case for change is not made because you haven’t given any evidence of having considered any alternatives.

2 Do you have any views on the Government’s proposal to give the FPC control over the CCB buffer rate for the UK before 2016?
As for 1: it seems we’re taking part in a macro-prudential experiment whether we will or no.

3 Do you agree that sectoral capital requirements will be an effective macro-prudential tool for the FPC?
Were you a Latin scholar? I seem to remember that there is a Latin formulation for “a question expecting the answer, yes”. It sounds like a reasonable idea, but I would like to see a reasoned consideration of some alternative proposals before agreeing. It may be “effective”: will it be the most effective alternative we could reasonably adopt? I can’t tell from this.

4 Do you agree that the FPC should have the ability to apply granular requirements e.g. differentiated by LTV or LTI for residential property related assets?

As for 3. I would, however, like to point out that it appears that you are proposing a “fine tuning” mechanism which might well impose prohibitive costs or entirely prevent access to some forms of financing for particular kinds of customer with no consideration being given at the time of adjustment to any question of equality – for example it looks as if you could cut off the housing market entirely to dampen market “exuberance” without needing to consider the consequences for the people denied housing. I strongly suggest the FPC needs to be covered by the Equalities Act and to have a statutory requirement to give “due consideration” to equality issues as they might affect the end user of the banks’ or other financial institutions’ services before taking any action.

5 Do you have views on how macro-prudential sectoral capital requirements should be integrated with the existing micro-prudential framework?
None at all, sorry.

6 Do you agree that the FPC should have a direction-making power for a time-varying leverage ratio once international standards are in place?
Well again, it would be a pretty pointless institution if it didn’t, but what alternatives have you considered? Is there a need (for example) for the UK’s institutions to have a different mechanism from the EU’s or do you envisage the FPC acting as the UK arm of the ESRB? I also dislike the idea of giving the FPC carte blanche at this stage but would like to look at this again in 2018 or whenever the envisaged “international standards” are being put in place.

7 Do you believe that there is a case for the scope of the FPC’s directive tools to be applied to firms that are currently outside the purview of CRR/CRD IV?
No opinion, except again to point out the dearth of options offered.

8 Do you have any views on the best definition for exempting small investment firms from the FPC’s directive tools?
First use the SFIT definition (fewer than 20 employees) and then, because that doesn’t necessarily map to risk for a finance company, have a turnover and/or capital test. Around a million, probably.

9 Do you have any views on whether procedural requirements under FSMA 2000 should be modified or waived when the regulators implement FPC directions?
Either there’s a reason to have “procedural requirements” or there isn’t. If there’s a reason to have them, in that you’re trying to used evidence-based policy to make the best decisions, then that might be overriden in an immediate need, where someone (the FPC) has to make the decision urgently on evidence that might not necessarily be immediately available or shareable. But the procedural rules should still apply post hoc to justify the *retention* of the direction, or the direction should fall. In particular there should be no margin for equality issues to be overlooked or overruled.

10 Do you believe that liquidity requirements could be a useful tool for the FPC to have a direction power over once international standards have been developed?
As for 3

11 Do you believe that margining requirements could be a useful tool for the FPC to have a direction power over once international standards have been developed?
As for 3

12 What is your assessment of the advantages and disadvantages of granting the FPC a power to set and vary maximum LTV and/or LTI ratios?
No opinion, except to reiterate that there must be other options than do it/don’t do it. What are they?

13 Do you agree with the Government that recommendation powers will be sufficient to implement disclosure policies?
As for 3.

14 Do you have any comments regarding the Statutory Instrument?
Yes: I am surprised that you are asking for comments on the SI and not on the accompanying IA which is of poor quality (I see it has an amber rating). I have commented further on this in my blog entry.

Regards

Wendy Bradley
http://tiintax.com

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For some values of “interesting”: part the second

October 8, 2012

OK then, let’s all turn to page 48 of the Financial Policy Committe: Macro Prudential Tools consultation where the 13-page Impact Assessment for the proposal is published.

First of all, note the RPC Opinion, which is that this is an “amber” IA, on a three category “traffic light” scale of Red-Amber-Green.  Now, I don’t know about your driving skills, but I know that when I took the test, Amber meant stop, provided it’s safe to do so.  However the Regulatory Policy Committee, the panel of independent experts who assess the quality of the evidence underlying impact assessments before they’re published, obviously work to a different set of traffic lights.  Because their amber means “fit for purpose” but with issues that ought to be put right:

Under the RPC’s traffic light system, if it is ‘Fit for Purpose,’ it is classified as either ‘Amber’ or ‘Green’. ‘Amber’ is used to denote an IA with areas of concern that should be corrected but which is still ‘Fit for Purpose’. If an IA is classified ‘Red’ it is ‘Not Fit for Purpose’ – the RPC has major concerns over the quality of evidence and analysis.

So this IA has areas of concern that should be corrected.  Hmmm.

Well for me the first one is the cost of the preferred option, where the total net present value of the proposal is given as £68,600m.  No, you read it right. Sixty-eight point six billion.

Now I’m baffled by this.  I know I’m easily baffled, particularly by government gobbledegook, but what on earth is the Financial Policy Committee’s macro-prudential toolkit going to involve that will cost sixty-eight point six billion?  How much are these people going to be paid, for heaven’s sake!

I suspect the answer is that the figure doesn’t represent the cost of setting up and operating the committee, duh.  It’s suspiciously close to the figure we’ve (where “we” means “British citizens”) been compelled to “invest” in the two failed banks, RBS and Lloyds but that can’t be it, surely?  I’m hoping the Treasury analysts who put the figures up are going to be allowed to respond to this blog and I’m not going to have to put in an FoI request to explain what they’re talking about <waves to the Treasury>

Theoretically, the IA should show the cost to businesses – that’s the basic theology of IA anyway, that the government shouldn’t make regulatory decisions that are going to cost businesses money without working out the costs and benefits first.

All right, let’s just assume I’m having a Deeply Stupid moment and the reason we’re spending sixty-eight point six billion quid is transparently obvious to everyone except me and move along.

Next look at “what policy options have been considered”.

“Two policy options have been considered”.  I call bullshit.  Basically the document has been prepared on a take it or leave it basis – do this, or do nothing – when actually the whole point of using “better regulation” mechanisms like impact assessment and consultation is to generate and consider the evidence in favour of a range of options.  You could (off the top of my head)

  • set up a separate body, not part of the Bank of England at all
  • let the Treasury operate macro-prudential policy
  • make it (once more?) part of the Chancellor’s job
  • set up a kind of “Cobra” committee of MPs to do the job
  • form a citizen’s jury
  • submit ourselves to the EU or US mechanisms
  • set up another Bretton Woods type conference with a view to merging the EU and US mechanisms and forming some kind of world macro-prudential finance organisation

Hey, I didn’t say they were GOOD options, I said they were OPTIONS, and the point of the exercise is, surely, to think of all the possibilities and then decide between them.  Evidence based policy – look at the research, the evidence, that’s out there, and then form a judgement.  Not, you know, policy based evidence, where you decide what you want to do and then consult on evidence to support it!

(Part three will be the consultation response I actually sent)

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For some values of “interesting”

October 8, 2012

Ooh, this is interesting.  Well, for some values of “interesting”, obviously!

It’s not an HMRC consultation but a Treasury one, on the Financial Services Bill: the Financial Policy Committee’s macro-prudential tools.  And the good news is, it’s open till December, so you have plenty of time to read and respond…

Yes, well.

Assuming you ARE interested, it’s about the bank crisis and how the “tripartite” regulatory system didn’t actually have anyone whose responsibility was to look at the way the system itself worked – so all the bits could function reasonably well and meet all their regulatory requirements, but the whole thing fall apart.  As if we’d checked the wheels were turning and the tyres at the right pressure, the brakes fully operational and the driver sober, but no-one was in charge of spotting there was no steering wheel and isn’t that a cliff up ahead???  “Macro-prudential” seems to be a poncey way of saying “in charge of the system as a whole”, as well as signalling “don’t bother your pretty little heads about it, plebs: we only want to hear from, you know, People Like Us.”

Also, let’s be clear, there’s already a “macro-prudential” regulatory body in the US (The Financial Stability Oversight Council aka the FSOC) and the EU has set up the European Systemic Risk Board (ESRB) to identify macro-prudential risk in the EU and then to warn the individual member states who are responsible for, er, doing something about the warnings.

With me so far?  Right, then – what are we going to do over here? Well, it seems, we’re going to have a subsidiary of the Bank of England with power to look at the financial system as a whole and ensure financial stability in the light of the government’s economic objectives (at present, for “growth and employment”)

Incidentally I was a bit gobsmacked by 3.12 of the document:

3.12 In addition to the new secondary objective, the Financial Services Bill already prohibits the FPC from taking any action that it believes would be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term.

Wait just a cotton-picking minute: you can’t save the economy if it would have an adverse effect on the banks’ position in society?  Can we not envisage financial circumstances so dire that the best thing for the country – yes, the country; it’s a nation state made up of citizens, not a plc – would be for the banks to play a less prominent role.  For some of them to go to the wall and finance to be provided direct by government or by some other structure like cooperatives or credit unions or something brilliant that no-one’s invented yet.  Do we really want to hard-wire the banks into primacy?  Like I said, a bit gobsmacking!  When did that one slide on through?

My response is a bit long, and my response to the impact assessment is even longer, so I’ve split it between three posts.  Watch this space for parts two and three!  (Well, somebody must find it interesting.  Somewhere.  Anyone?  Bueller??)

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