Posts Tagged 'HMRC'

A reply to the Letter regarding HMRC and taxation to Margaret Hodge MP

Readers may remember that this author recently sent a letter (shown below) to Margaret Hodge regarding her comments and those of HMRC directors at a recent meeting of the Public Accounts Committee.  A reply has now been received – a not entirely satisfactory one – that follows on below…

Your comments and suggestions about what next steps could/should be taken are most welcome…

—————

Dear Mrs Hodge,

Since the recent appearance of senior HMRC representatives including Edward Troup, HMRC’s Tax Assurance Commissioner and Jim Harra, the Director-General of Business Tax, before the Public Accounts Committee, I have undertaken some reading which has resulted in me identifying two very important questions that need to be answered.

Following your recent appearance on BBC Radio 4’s PM programme where you explained that you actively seek to engage with voters, I hope you will be kind enough to answer my questions.

You were quoted as saying in Committee that:

It looks to me that you should be litigating. Why have you not chosen to litigate and test your powers?  Why have you not litigated against one single internet company?

Make a few cases, a few show cases. It’s so bloody obvious.

It transpires HMRC has already pursued a case to test their powers in respect of the movement of capital within the EU, the Thin Cap Group Litigation v Commissioners of Inland Revenue.  In 2007 the European Court of Justice rejected HMRC’s case.  HMRC therefore clearly know the answer to your question is that they have tested their powers and know they would lose such a case.

My first question is, although Mr Troup did say, “We make sure we collect the tax due under the law,” why did neither he nor Mr Harra reference the Thin Cap Group Litigation case in their evidence to your committee in answer to your question, explaining that EU law prevents the taxation you would like to see applied to the likes of Google, Facebook, Amazon and Starbucks in the UK prior to transfer payments being made to another EU member state?

My second question is this.  Given the ECJ verdict in respect of Thin Cap Group, have you not been informed by advisers or civil servants about this failed test of powers, as it is central to the UK Exchequer’s inability to tax profits made by corporations that based their EU trade in another member state?

I am sure you will agree that it is only right that people should be encouraged to understand the laws that apply and their origin, and that discussion related to this matter in Parliamentary committees should be open and transparent.  It is clear that the UK does not have tax sovereignty as laws made elsewhere pertaining to taxation have primacy.  Do you not think this should be made clear in your committee?  Will you seek to explore this further in future PAC hearings?

I look forward to and thank you in advance for your reply.

Yours sincerely,

Tom Nightingale

The reply received is shown below…

Letter regarding HMRC and taxation to Margaret Hodge MP

The letter shown below has been sent to Margaret Hodge.  Should a reply be received it will be published here.

—————

Dear Mrs Hodge,

Since the recent appearance of senior HMRC representatives including Edward Troup, HMRC’s Tax Assurance Commissioner and Jim Harra, the Director-General of Business Tax, before the Public Accounts Committee, I have undertaken some reading which has resulted in me identifying two very important questions that need to be answered.

Following your recent appearance on BBC Radio 4’s PM programme where you explained that you actively seek to engage with voters, I hope you will be kind enough to answer my questions.

You were quoted as saying in Committee that:

It looks to me that you should be litigating. Why have you not chosen to litigate and test your powers?  Why have you not litigated against one single internet company?

Make a few cases, a few show cases. It’s so bloody obvious.

It transpires HMRC has already pursued a case to test their powers in respect of the movement of capital within the EU, the Thin Cap Group Litigation v Commissioners of Inland Revenue.  In 2007 the European Court of Justice rejected HMRC’s case.  HMRC therefore clearly know the answer to your question is that they have tested their powers and know they would lose such a case.

My first question is, although Mr Troup did say, “We make sure we collect the tax due under the law,” why did neither he nor Mr Harra reference the Thin Cap Group Litigation case in their evidence to your committee in answer to your question, explaining that EU law prevents the taxation you would like to see applied to the likes of Google, Facebook, Amazon and Starbucks in the UK prior to transfer payments being made to another EU member state?

My second question is this.  Given the ECJ verdict in respect of Thin Cap Group, have you not been informed by advisers or civil servants about this failed test of powers, as it is central to the UK Exchequer’s inability to tax profits made by corporations that based their EU trade in another member state?

I am sure you will agree that it is only right that people should be encouraged to understand the laws that apply and their origin, and that discussion related to this matter in Parliamentary committees should be open and transparent.  It is clear that the UK does not have tax sovereignty as laws made elsewhere pertaining to taxation have primacy.  Do you not think this should be made clear in your committee?  Will you seek to explore this further in future PAC hearings?

I look forward to and thank you in advance for your reply.

Yours sincerely,

Tom Nightingale

Questions for HMRC that need answering

Staying on the subject of Margaret Hodge’s hissy fit and in particular the evidence given to the Public Accounts Committee, by Edward Troup, HMRC’s Tax Assurance Commissioner and Jim Harra, the Director-General of Business Tax, there is a very important question that needs to be answered.

Margaret Hodge continued with her now familiar narrative of having a show trial or two for major companies who, in her eyes, don’t pay their ‘fair share’ of tax to the UK Exchequer – because despite trading here and generating impressive revenues a lot of the money is sent to another EU location in the form of transfer payments and the like.  Hodge said to Harra:

It looks to me that you should be litigating. Why have you not chosen to litigate and test your powers?  Why have you not litigated against one single internet company?

Make a few cases, a few show cases. It’s so bloody obvious.

Now, HMRC knows very well about the Thin Cap Group Litigation, with the subsequent European Court of Justice ruling on in March 2007, and how that makes Hodge’s demand impossible.  It would therefore be pointless HMRC spending our money to pursue a case it already knows from case law there is no prospect of winning.  So,

  1. Why did neither Harra nor Troup simply tell Hodge that European law allows what Google, Facebook, Amazon and Starbucks are doing?
  2. Why did they not explain to the committee that challenging the companies, in the way Hodge is demanding, falls foul of Article 63 of the Lisbon Treaty which declares that: “all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited”, and that: “all restrictions on payments between Member States and between Member States and third countries shall be prohibited”?
  3. What is it they are trying to conceal from the PAC, the media and the wider public through this refusal to state what the facts are, explaining that European law and treaties have primacy and have supplanted the UK’s tax sovereignty and that Westminster therefore does not have competence make the rules in these matters, thus putting an end to Hodge’s continuing witch hunt?

Something doesn’t smell right.  It is such an open and shut matter that there has to be more to this than meets the eye.  Surely it can’t just be a desire to divert attention away from the EU elephant in the room.  Someone needs to call out HMRC on this so that the facts are aired in public in an open and transparent manner.

Then even the media might get curious and show more interest in this issue than repeating the ‘he said/she said’ exchanges, which leave people wondering why Parliament appears toothless, why no action is being taken by HMRC and why the corporates are continuing with their current tax arrangements within the EU.

Whose money is it exactly?

Hope you’ve all been keeping well while I’ve been taking a blog break. With the madness that surrounds us it’s always good (and sometimes necessary) to shut out the noise and clear one’s head of the idiocy and wrongheaded nonsense that defies reason and logic.

So, the horsing around continues. This essay isn’t about the horsemeat farce – Richard has been at his blistering best showing up the ignorance and incompetence of most politicians and journalists about food regulation and the EU’s competence control of it, and there’s really nothing I can add of value. Suffice to say if you have not read his post about the involvement of Nestlé in the scandal then you really should.

No, this is about the political arrogance and media’s hysteria and misrepresentation surrounding the subject of taxation.  According to a typically statist article in the Independent, tax avoidance schemes:

are costing the Treasury £5bn a year by exploiting loopholes in a complex system designed to help businesses, the Public Accounts Committee (PAC) said.

Apparently the committee was scathing about the performance of HMRC, which, it says, is losing a game of cat and mouse with companies that promote aggressive tax avoidance.

That assessment sums it up. Costing the Treasury money?  How very dare some people and firms try to keep what actually belongs to them.  While there is nothing new under the sun here, it is deserving of focus because of what it reminds us about what is wrong with governments of every stripe,  namely that they believe they are entitled to the money we earn – our money – and that it is theirs to do with whatsoever they wish.

Tax avoidance is perfectly legal and responsible, yet HMRC is being criticised by MPs for not collecting more money from businesses and individuals for whom there is no legal necessity to pay it.  Despite the actions of tax advisers, and the businesses and individuals who rightfully want to hold on to as much as possible of what they earned, MPs and HMRC are engaging in a game of setting traps to seize more money and demonising those people and businesses who manage to retain their money legally. Look at Starbucks, accused of not paying its fair share and disgracefully maligned by MPs and the media, it actually does make a loss in the UK even before its supposedly controversial (yet under EU law perfectly legal) transfer pricing to its European headquarters. Yet as a result it has been pressured into voluntarily paying over money to HMRC, worsening its UK losses and most likely resulting in cost cutting that could affect jobs.

This is an outrageous inversion of the way things are supposed to be. The state has assumed for itself the position of master, rather than servant. And when it doesn’t get what it wants it bullies, threatens, slanders and character assassinates those who justly stand up for themselves.  And now MPs are calling for this so called informal ‘naming and shaming‘ to be made into a formal approach.

The inversion looks set to be extended by something even more dangerous – as evidenced by a discussion on BBC Radio 4 this morning – where a recommendation was being made to follow the approach taken by the Australian tax authorities.  This is where schemes designed to be tax efficient are not permitted until they have been examined and then approved by the authorities. Such a change would represent a move away from a position where an action is lawful unless proscribed by law, to one where the action is considered illegal until permission for it is granted. This is not the definition of freedom within a society. It is defacto enslavement.

Lets not forget it is the state, in the guise of grubbing politicians continually making unsustainable and unfunded spending pledges, that has caused and is deepening the financial mess this country is in.  The same state thinks it can arrest the decades-old slow burn implosion of our economy by seizing more of our money. It is as desperate as it is futile.

The fact is successive governments have, over a period of decades, been buying votes with our money by inflating and extending the welfare state. The emergency safety net originally envisaged for the welfare state has been gradually replaced by unfunded gerrymandering to buy off voters, creating an unaffordable client state.

The notion of living within one’s means has been abandoned by many Britons and by the government itself.  Instead of government recognising it cannot keep doling out an ever increasing number of billions of pounds to people to subsidise their lives – even when they are actually working – and cutting welfare spending to all but the most needy and vulnerable, governments have embedded a handout culture that has been funded by ever increasing borrowing.  This has been exacerbated by the adoption of increasingly delusional and unaffordable European approaches to welfare combined with a rapid increase in eligibility for benefits for foreigners who come to these shores.

The system is broken and the UK is bankrupt in all but name, owing a total of 900% of what the whole economy generates. The irresponsible politicians and feckless fools who believe in something for nothing are to blame.  It is only low interest rates that are keeping the country clinging on by its fingertips as it tries to service ever rising debt repayments.  Yet incredibly this Cameron-led coagulation government which promised to tackle and reduce debt is actually borrowing even more money than the feckless Blair and Brown government before it.

If the UK economy was a business, the organs of the state would immediately close it down and ban its directors from ever running a company again. But instead we have desperate politicians engineering the state sanctioned theft by HMRC in a desperate last gasp effort to undo the folly that has built up over many years.  It is an utter waste of time because the government’s own policies add more to the debt burden than can ever be replaced by even 100% taxation.

So back to the original question in the title of this essay.  Whose money is it exactly?  The answer is simple and unsurprising.  The money we earn through our endeavours is ours. The tax system is being abused, but it is the irresponsible and profligate previous and current governments that have been abusing it and continue to abuse it for its own self serving ends.  In such circumstances it is not only understandable that people and businesses are aggressively looking to be as tax efficient as possible, moreso than ever they are completely justified in doing so.

Footnote:

It’s interesting that George Osborne has been finding that despite record levels of people in employment, the UK’s tax receipts have actually been falling.  It’s common sense really and not just because more people have part time rather than full time work.  Many more productive people have started working for themselves due to redundancy or uncertainty with existing employers, forming small limited companies, they are discovering they can set their tax arrangements to ensure they pay no income tax or national insurance.  In fact they can pay corporation tax only on company profits after allowable expenses, and as long as they keep dividend payments below the higher rate tax threshold they pay no tax on that either – with some doubling the tax free dividend amount in their household if their spouse is a shareholder in the company too. If their spouse is also a director of the company an extra £7,488 of tax and NI free income can be taken in by the household.

I know this because it’s what I am now doing and it means for taking a small risk by being self employed I can keep more of what I earn.  It’s worth any fight with HMRC for the reward and the sheer bloody satisfaction of not having as much of my hare earned money pissed up the wall on moronic pet projects like wind turbines and imported benefits claimants by the useless idiots in Whitehall. Forget the claims that the Thatcher era made people selfish. It’s this supposed compassionate era since that is making people say enough is enough and look to themselves. The money I earn is being used to clear all my household’s debt and to purchase gold which will hold its value far better than our steadily devaluing paper currency, so I can leave something with intrinsic value for my children in what is likely to be a harsher economic climate that even that we have today.


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