Posts Tagged 'Tax Avoidance'

The tide of ignorance of EU law laps over the wall of reality

The Mail has bought and run as its own a piece from the Guardian about what its like to work for Amazon.

It focuses on the working conditions, low pay, use of agency labour and number of jobs they estimate the company’s rise has cost elsewhere.  But no such attack piece on a company like Amazon is complete without bringing up taxation:

It is taxes, of course, that pay for the roads on which Amazon’s delivery trucks drive, and the schools in which its employees are educated.

Taxes that all its workers pay, and that, it emerged in 2012, Amazon tends not to pay.

On UK sales of £4.2 billion in 2012, it paid £3.2 million in corporation tax. In 2006, it transferred its UK business to Luxembourg and reclassified its UK operation as simply an ‘order fulfilment’ business.

The Luxembourg office employs 380 people. The UK operation employs 21,000. You do the sums.

One can understand this line.  One can also sympathise with it to a degree because it underlines what is wrong with the corporatist system we have, something that too many people wrongly describe as capitalist.  But that sympathy erodes somewhat when what follows a few paragraphs further on shakes us back to our senses and reveals yet again the sheer ignorance of the people railing against this situation:

MPs like to attack Amazon and Starbucks and Google for not paying their taxes, but they’ve yet to actually create legislation compelling them to do so.

All too often these left leaning campaigning writers are pro-EU, they love the idea of knocking over nation states to create a nationless unions such as the EU.  Yet they are either too stupid to understand the reality, or too dishonest to report it, by not pointing out it is EU law and one of the four freedoms (of movement of capital) that prevent MPs creating legislation to tax profits made in the UK when that company’s UK operation is merely ‘passported’ because its base is in another EU state.

Such is the pisspoor calibre of our media, they continue to misinform, mislead and misdirect their slowly dwindling audience, ensuring the sum of knowledge is minimised yet rousing rabbles to attack MPs for inaction where in reality they have no power.

Rather than attack MPs for not applying taxes they are barred from levying, these prestigious know nothings should be attacking them for allowing power to be taken by Brussels, leaving the UK without sovereignty.  But this is what happens when we are flooded by a tide of ignorance so big the walls of reality are breached.

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Tax sovereignty – ducking and diving

On the day that Alex Cameron QC became the first barrister to be recorded and filmed in an English law court, giving an eloquent and gently earnest display before the Court of Appeal in an effort to secure a reduced sentence for his counterfeiting client, Kevin Fisher, Alex’s brother and Prime Minister David Cameron, gave an equally eloquent if rather more earnest display at the summit of the Open Government Partnership on the subject of tax avoidance and tax evasion.

Ultimately, despite their lofty positions, neither Cameron demonstrated sufficient grasp of the law and relied upon arguments that are completely flawed in the hope people would be taken in by them.

Alex failed to convince the Appellate bench that seven years for his client’s role in what is thought to be the largest ever plot to make fake pound coins in the UK, was unduly harsh and the appeal was thrown out.  David?  Well, let’s pick up Richard’s summary…

What Mr Cameron cannot do, of course, is admit that he has no strategy whatsoever “to keep corporate taxes coming in”. He cannot admit to the essence of this paper on the Thin Cap Group Litigation, a case which makes it very clear that the EU’s three freedoms – capital, establishment and services – prevent any action on the part of national governments to prevent corporates offshoring their tax liabilities.

The government cannot possibly admit that the losses of such huge sums lost to the taxman are attributable to EU treaty law. Apart from anything else, it would destroy Mr Cameron’s carefully fabricated claims about the benefits of EU membership.

Perhaps the truth of it is that both Camerons understand the law very well indeed.  But both of them, in their roles, deployed a mixture of smoke and mirrors, distraction and misdirection in an effort to conceal the reality of the situations from the judges and the British people respectively.

The Camerons, in their separate roles, are simply ducking and diving in a way that would put Del Boy and Rodney to shame.  What we have are an extremely wealthy and privileged version of the Trotters, in wigs, gowns and sharp suits.

In very calculated fashion, David Cameron is trying to confuse people, by linking tax avoidance, which is perfectly legal and acceptable, and tax evasion, which is not.  By appearing to clamp down on evasion, and further linking it to ‘money laundering’, he is trying to convince us that he getting to grips with public concerns.

But what has been concerning the public is tax avoidance, thanks largely to the demonisation efforts of various parliamentarians and media entities.  They see money being earned by huge corporates.  They see the revenues exceeding the costs.  Then they see little or no corporation tax being paid on the profits made here, because the corporate is structured to pay royalties and levies to another part of the company based elsewhere in the EU – where only then are profits taxed, by that nation’s authorities, with those tax receipts going into that nation’s revenues rather than ours.

The reality is, as part of the European project’s objectives of eroding borders and creating a de facto single state, several freedoms were enshrined.  These stop nation states from interfering with a company setting up entities anywhere in today’s EU, moving its money around the EU as it sees fit, and making payments (such as royalities and charges) between its various branches within the EU.

But on this reality, on this explanation as to why Amazon, Google, Starbucks etc, can make large profit on their activities in the UK without the UK Exchequer being able to tax it, David Cameron is doggedly, relentlessly and utterly silent.  It is the truth that dare not speak its name.  It destroys most of his argument about the economic benefits of EU membership – which are used as justification for accepting the erosion of sovereignty, the erosion of what little democracy we had, and submission to the will of unelected and unaccountable foreign structures and bureaucrats that make our national parliament and local government nothing more than an executive of the EU machine.

Multinational corporations may benefit, but it does little for the UK taxpayer.  That isn’t something that plays well with ordinary people, who are expected to bear all the pain and sacrifices that have to be made to ensure the corporations and their political friends can enjoy the fruits of regulation they make in their own interest.  That’s an admission Cameron will never make.

Even more ignorant than we originally thought

Richard has picked up on my previous post about Margaret Hodge’s examination of HMRC leadership at the Public Accounts Committee and, reliable and well informed as ever, has shed more light on matters.  The information he provides serves to show up Hodge’s ignorance as even deeper than we originally believed.

Richard explains how the Inland Revenue has already run a test case of the type Hodge was demanding in such ill tempered, playing to the gallery fashion.  This was the Thin Cap Group Litigation, with a ruling on 13 March 2007 from the European Court of Justice.

In that case, based on the tax arrangements being used, the European Court of Justice (ECJ) found that EU law “precluded legislation of a Member State” which restricted “the ability of a resident company to deduct, for tax purposes, interest on loan finance granted by a direct or indirect parent company which is resident in another Member State or by a company which is resident in another Member State and is controlled by such a parent company”.  You can read Richard’s post in full and in glorious technicolour over on EU Referendum.  It’s an education in itself.

In summary, Richard explains that to charge tax therefore – in the way Hodge is cajoling HMRC to do – would be contrary to EU law, but with a limited proviso – that this does not apply if it can be proved that the loan is a “purely artificial arrangement, entered into for tax reasons alone”.  Proving that particular point is nigh on impossible as companies can provide a multitude of reasons for establishing their European HQ in a particular location.

Hodge is chasing her own tail, to no purpose, at the expense of a public that is being misinformed and deceived by her ill informed and pathetic political grandstanding.  If Hodge wants the law pertaining to this area of taxation to change, she needs to push for the UK to withdraw from the EU.  That won’t happen this side of never.  So her continual hectoring is a waste of everybody’s time.

Now, a question.  Why is it the media – with its powerful reputation for accuracy – is incapable of researching this story and explaining this?  Why is it that to understand the facts we have to resort to reading what a hard working blogger has published on his particular piece of electronic pub gossip?  Answers on a postcard to Brian Leveson, courtesy of:

1, Passed Over for Lord Chief Justice
Guardianista Chambers
Establishment Mews
LONDON
WC1 GMG

The incredible ignorance of politicians writ large

After the John Major government tied the UK to the Maastricht Treaty, Douglas Hurd was reported as saying:

I suppose we had now better go away and read what we have signed up to.

It’s a lesson that successive intakes of politicians have failed to learn.  Most recently this has been demonstrated by the Chairman of the Public Accounts Committee, Margaret Hodge.  The Mail reports on today’s session of the PAC where the HMRC Annual Report and Accounts 2012-13 was being examined.  The witnesses were Edward Troup, Tax Assurance Commissioner at HMRC, Jim Harra, Director-General Business Tax at HMRC and Jennie Granger, HMRC’s Director General Enforcement and Compliance.  Some of Hodge’s reported comments include the following:

The tax gap is really the tip of the iceberg in the gap between the money that you collect and the many if everyone paid their fair share.

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.

According to the Mail, Hodge named Google, Facebook, Amazon and Starbucks as companies whose tax affairs had sparked public anger and doubts about whether they were paying their fair share in Britain.  However, if Hodge had the first bloody clue about what she was bloody well talking about, she would bloody well know that she was spouting a load of bloody nonsense.  What Hodge is encouraging HMRC to do is spend public money pursuing cases that would be lost.

Why would HMRC lose?  Posting about a separate issue over on EU Referendum, Richard makes clear that companies moving money between EU countries in the way Google, Facebook, Amazon and Starbucks are being demonised for doing, is one of the most fundamental provisions of the European treaties, the “free movement of capital” which was one of the “four freedoms” in the original 1957 Treaty of Rome.

Chapter 4 of the Treaty of the European Union (the Lisbon Treaty) , Article 63 declares that “all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited”. Furthermore, the article states that: “all restrictions on payments between Member States and between Member States and third countries shall be prohibited”.

Hodge, as a well remunerated Committee Chairman of one of the most muscular select committees in Parliament, with significant research resources available to her, should know this.  The fact she doesn’t demonstrates the incredible ignorance of our politicians.  Despite the supposedly powerful position she occupies, she doesn’t understand that what Google, Facebook, Amazon and Starbucks are doing is what the EU’s rules permit them to do.

Any show case would simply show up the stupidity of the UK authorities and result in a win for the demonised firms.  But it seems no case will be forthcoming because, unlike Hodge and the expenses troughers in Westminster, HMRC understands the rules – and that seems to be why Edward Troup told the committee:

We make sure we collect the tax due under the law.

It is because of corporate friendly rules such as the free movement of capital that company bosses like Richard Branson and CBI stooges like John Cridland are desperate to keep the UK in the EU.  it suits big business to engage in tax tourism and it suits them to hire in the cheapest labour from around the union.

Politicians like Margaret Hodge can grandstand, rant, rave, stamp their feet and pretend to be the conscience of the population, but it is she and her ilk who signed the UK up to EU rules they clearly don’t understand, and who want to keep the UK firmly inside the EU.  It is at times like this, when they are constantly telling us why the UK’s future has to be within the EU, that the consequences of EU membership – the loss of tax sovereignty – become apparent.

But rather than acknowledge the reality and the self imposed limitations under the structures they are constantly trying to convince us we should remain part of, they depart into the realm of fantasy like today’s performance in Room 15 of the Palace of Westminster, where they resort to bluster and blather and playing to the audience, but ultimately will change nothing.

It’s your money, but we want it and are taking it…

Here we go again.  The old chestnut of tax avoidance being equated with tax evasion is back in the papers today.

The paywall-free Mail reports about a number of BBC ‘stars’ who elect to be freelancers and paid as ‘personal service contractors’, rather than work on the BBC payroll.

The benefits are clear.  The BBC doesn’t have to pay tax on the money it pays to the freelancer (other than VAT on the invoiced sum), as the freelancer is a ‘company’ entity and responsible for paying taxes due for the services they provide.  The freelancer can pay a lower effective tax rate than an employee, depending on how they organise their directorships, salary, costs and expenses and dividend arrangements.

But yet again we see the grubbing politicians, who are so preoccupied with hoovering up as much of our money as possible in order to control how money is spent, making moronic statements that demonstrate they are trying to con the public and demonise people who have done nothing wrong.  As the Mail puts it:

There is no suggestion that any of the individuals named have acted improperly but  MPs accused the BBC of having ‘staggeringly inappropriate’ arrangements in place for many employees and said it could be ‘complicit’ in tax avoidance.

Complicit in tax avoidance?  What the hell?  This is the equivalent of criticising drivers for going along a road at 30mph in a 30mph limit by claiming they are complicit in driving within the speed limit.  The argument is completely ludicrous.  The pressure that has been applied to lead to this unnecessary change is an example of excessively powerful government that is out of control.  Personal freedom is being infringed as a result of undue pressure being brought to bear by the over powerful state.

There is nothing wrong with tax avoidance, which is the arranging of your financial affairs so that you legitimately pay less tax.  It is legal and responsible.  Yet some politicians, whose only motivation is wanting more of our money to control and use to service their whims, have even gone as far as coining the expression ‘aggressive tax avoidance’ to describe the active effort to find legitimate ways of a person or company arranging their affairs to ensure they pay as little tax as necessary within the law.  In using this description they are deliberately attempting to mislead people into thinking these individuals and companies are engaging in tax evasion – the illegal and criminal act which is the deliberate failure to provide full and accurate information about income and assets to the tax authorities so tax liability can be correctly assessed and demands applied within the law.

Although it is our money the refrain of the politicians is, ‘but we want it and are taking it’.  We no longer have a Parliament.  We have an elected Court of Robber Barons.

Court of Robber Barons

Court of Robber Barons

And they are doing all they can to bully, threaten and demonise individuals and companies into handing over money they have no legal obligation to pay.  Starbucks being a case in point, having suffered so much reputational damage at the hands of politicians and blinkered campaign groups who believe government should control everything, they voluntarily offered to pay millions of pounds to the Exchequer they were not liable for in order to put an end to the blackmail they were subjected to.  You read that right, Starbucks were blackmailed into handing over money because politicians did all they could to turn people against the company, which was wrongly being painted as abusing tax law.  That should engender fear in everyone.

Taxation has long since ceased to be the process for raising funds to be spent on essential public services and infrastructure.  It is now a form of oppressive control to restrict the ability of individuals to use their money as they see fit.  The funds raised are squandered on whims and discretionary spending to bribe people into voting the politicians back into office, which is not dissimilar to the use of taxes in medieval times to fund the adventurism of monarchs and luxury of lords.

In a classic abuse of language, the politicians hark on about people having to pay their ‘fair share’, even though this invariably means people with larger incomes and who use public services far less than most other citizens, paying the same contribution as many other people combined.  There is no sense of proportion in all this.  They have the money and the government wants it, so it rigs the system to ensure it gets it.  But in their bubble this is supposedly fair.

The only way this country will ever see responsible taxation and use of our money by the government is when the people have the power to block spending plans that service the interests of the politicians rather than the interests of the population.  This road leads back to The Harrogate Agenda, and the fifth of the six demands:

5. No taxation or spending without consent: no tax, charge or levy shall be imposed, nor any public spending authorised, nor any sum borrowed by any national or local government except with the express approval the majority of the people, renewed annually on presentation of a budget which shall first have been approved by their respective legislatures

Only with such democratic control can anyone in this country ever talk about tax in terms of fairness.

Open letter to the Archbishop of York, Dr John Sentamu

Dear Lord Archbishop,

I read with great interest the report of your comments to the BBC on the subject of tax avoidance in the context of morality.

In your interview you said of tax avoidance that, ‘It is sinful, simply because Jesus was very clear; pay to Caesar what belongs to Caesar and to God what belongs to God.’  Perhaps, My Lord, you would care to give consideration to the fact that much of our wealth belongs to us and does not belong to today’s Caesar at all?  To accuse individuals and companies of being sinful for finding ways to ensure they only pay the tax for which they are legally liable, is frankly nonsense.

But there is an additional concern here, which is the notion you raise that by only paying the tax for which individuals and corporations are legally liable, they are  ‘not only robbing the poor of what they could be getting, they are actually robbing God, because God says “bring into my store house all the tithes”‘.

This is a disgraceful and outrageous assertion, My Lord.  Government policy throughout the world is far and away a greater cause of poor people being deprived than any other factor.  Your assertions seeks to position government as an absolute force for good, while ignoring the fact so much poverty in the world is caused by government spending decisions.  To lay the blame for poverty and hunger at the door of those people and businesses that do not wish to see the money they have earned squandered on electoral bribes, gerrymandering, servicing vested interests (including at local government level), and feathering the nests of powerful supporters, rather than directed at essential public services and infrastructure, is an appalling inversion of what should be considered as moral.

Where do you see government being ‘just’ or ‘walking humbly’ as it uses taxation as a tool of coercion and takes more than it needs?  Surely, by coveting their neighbour’s goods and taking what they are not owed, it is the government robbing God, the world and my neighbour.  Government has a duty to take only that which is needed, but it refuses to be bound by that covenant and abuses its power.  Why should taxpayers tolerate such abuses at the expense of them and the well-being of their families for who they have responsibility?

The Anglican Church, more than most other institutions, has good reason to doubt the moral credentials of the government, which increasingly interferes in matters of conscience and spirituality and undermines the practice of one’s faith in the pursuit of secular orthodoxy.  It would serve you well to remember that before presenting government as a moral authority only held back from good works because taxpayers strive to retain what is lawfully theirs.

For an educated and intelligent man, your comments point to a naivety and childish simplicity that while it may be touching for some, is profoundly disturbing and results in an articulated ignorance that does more harm than good.

Yours sincerely,

AM


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