Rock & Roll!!!
Since the credit crunch there has been a lot of talk of tax avoidance and recently it was “revealed” that Amazon.co.uk paid no corporation tax on profits from UK sales of more than £3bn. People are outraged and questions are raised in the House. But hang on, we all avoid tax. I do, I avoid it any chance I get. I try to put my savings into an ISA each year, I have given up smoking and I am deterred from driving because the bloody fuel is so expensive and that’s because of tax.
On BBC Radio 4′s New Quiz today, comedian Andrew Maxwell said that, in an effort to avoid tax, Rock and Roll cliches U2 are now all classed as Dutchman and their guitarist (“The Edge” as he ludicrously calls himself) was quoted as saying “Who wouldn’t want to be more tax efficient?” – As Mr. Maxwell commented: “Yeh!! Rock and Roll!!!” – Everybody’s at it. Bankers, corporations, rock stars, me and you. So what is the problem?
There is a problem because if too much tax is avoided then the chancellor wont be able to finance all the spending. Somebody has to pay for the roads, hospitals and the Queen’s corgis.
One aspect of tax avoidance that annoys most of us is when large corporations, which have extensive business in the UK, fail to pay significant tax and I have blogged before about how this is enabled by tax havens such as the Caymen Islands.
But you can’t blame Johnny Foreigner for this sort of thing. The British are not averse to maintaining tax havens in Guernsey and The Isle of Man. In addition a recent article in The Economist made the point that the UK is one of the few countries which still allows “bearer bonds” which differ from normal investments bonds in that they are unregistered and untraceable. This is the toffs equivalent of paying the plumber in cash, only on a massively bigger scale.
Tax Avoidance?
Tax systems vary across the world. Some developing countries do not have a civil service reliable enough to collect tax from individuals and so most tax is derived from large international corporations but this is a practical decision not a moral one. Kings and governments have always based tax policy on what will generate income and on what they think they can get away with. In the 18th and 19th centuries England, France and Scotland taxed the number of windows in a house and in order to avoid this tax some owners bricked-up their windows. This was tax avoidance. Should the government have insisted that individuals maintain a minimum number of windows in their buildings?
Tax law evolves over time. There was no moral reason why a tax should be paid on windows and there is no moral reason why a tax should be paid by corporations. In a democratic country the tax system is a settlement broadly agreed by the people with recourse to their government and electoral system.
The trouble is that the wealthy have the ability to employ lots of clever bastards to avoid the machinations of government. Further, political parties who receive funds from the wealthy will always turn a blind eye to loop holes which allow the rich to avoid tax.
But the apathy and bias of government are not the only reasons why companies like Amazon can perform the corporate gymnastics allowing them to avoid so much tax.
Two other factors are now making tax avoidance a hot topic: Globalisation and technology. Globalisation started centuries ago, perhaps with the silk road, but it began to gain traction in the 19th century enabled by European empires.
Over the past 20 years technology, and specifically computers and The Internet, have turbo charged globalisation. Our governments are constantly banging on about how we, in The West, should do the design and development work and leave the manufacturing to others and this is happening now on a massive scale. Outsourcing is the order of the day. A recent article in The Economist stated that, despite Apple manufacturing iPads in China, 30% of the value was still created in the United States. Apple’s developers sit at their computers in the U.S. and squirt designs and instructions across the world in split seconds. The situation is similar with the British chip maker ARM who make most of the processors in smartphones. The designers sit in the UK but the chips are manufactured abroad. From telephone banking based in Mumbai to British stag weeks in Thailand we can see that the world is integrating.
Yet when Amazon adjust their business model to avoid UK tax we squeal like little piggies.
So what’s to be done?
The solution is not to force corporations to stick to a 20th century tax structure any more than they should be forced to have more windows. Governments have changed the rules on commerce so it is logical that the rules on taxation be adjusted accordingly. This may mean designing rules which ensure that corporations pay more tax but not necessarily.
We should understand that only one group of people in society ever pay tax and that is the general public. You and me. The “consumer”. Joe Blogs. The Man on the Clapham Omnibus.
There IS nobody else.
In theory the super rich pay tax but since they derive their incomes from employing a lot of us and, since they largely set their own salaries, any increase in tax for them will just be compensated by an increase in salary and who pays their salary? We do. Similarly corporations don’t really pay tax as they pass all their costs on to the consumer and their profits to share holders.
The starting point of any taxation system should be: What is the fairest and most efficient way of distributing taxation. To determine this we should ask what are the reasons for taxation. The most obvious reason is to raise funds, but a second reason is to deter the activity which is taxed.
The purpose of income tax might be purely to provide funds to the government but the tax on cigarettes is meant as a deterrent (although one suspects that it is now just cash cow).
If we believe that taxing cigarettes deters smoking then we should also believe that taxing income deters work – and we do. Consider the Tories reducing the top rate of tax from 50% to 45% to encourage “global talent” to come to the UK and consider people who collect “benefits” but would lose this money if they took paid employment.
Given this, it is astonishing that 48% of taxation in the UK (according got the 2008 budget) was derived from the taxation of work in the form of income tax and National Insurance.
Tax
If we want people to work then why the hell are we taxing it?
Our tax system seems antiquated and not fit for purpose. Large parts of it deter desirable activities and other parts, such as corporation tax, are so dysfunctional that corporations are running rings around the HM Revenue & Customs.
The solution is a radical design of the tax system. We need a system which is simple, practical and deters only activities which society deems undesirable.
Ah….but there’s the rub. What does society deem undesirable? Cigarettes? Alcohol? Marijuana? I suggest that the activity which is most undesirable, yet prevalent, is the emission of gases which cause climate change Therefore, our tax system should be adjusted to place the majority burden of taxation on activities which emit CO2.
Commuters will scream: “but I need my car to get to work. How will I manage if my fuel bill is a thousand pounds a month?” – My repost would be: If income tax and National Insurance were abolished then you could afford to pay a thousand pounds for fuel……but you would have huge incentive to DO SOMETHING about climate change rather than talking about it.
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Selling England by the pound
Tags: aristocracy, Bank of England, big money, conditions, Duke of Westminster, Earl of Cadogan, Forestry Commission, forests, ideology, Julian Glover, london, marketing, nationalisation, out source, Political donations, Privatisation, ramblers, registered property, safeguards, save our forests, sell off, talking bollocks, tax, Thatcher, The Guardian, the tap, Tory, trees, Viscount Portman, Viscountess Townshend, will be made, woodland
Sell! Sell! - Bye Bye
I hear that the government want to sell off public forests. I guess we should have known that the Tories are still hell bent on privatising the entire planet. Surprisingly, Julian Glover in The Guardian seems to think this is a good idea.
Mr. Glover’s case rests on the the assertion that “The Forestry Commission only controls 18% of Britain’s woodlands and has by no means been the best guardian of them”. In other words, we haven’t got much left and the people who are supposed to be doing it are crap.
Julian Glover is TALKING BOLLOCKS!
Firstly we should be startled to discover that the state only owns 18% of woodland and ask why and who the hell owns the rest of it? A little hunting around reveals that the owners are the same people who own the Tory party. i.e. The British aristocracy. According to an articles in The Independent and the Daily Mail it seems that 36,000 individuals, that’s 0.6 per cent of the British people, own 69 per cent of the land and if we are talking about rural land those 0.6 per cent own 50 per cent of land.
As hopeless as New Labour were it seems that they were attempting to get an understanding of who owns the land. It seems that land that has not been sold or mortgaged does not need to be registered and so land owned by aristocratic families does not appear on public records. – One has to wonder about the tax implications for the wealthy land owners!
The argument that because the aristocracy have managed to hang on to the land which they expropriate hundreds of years ago we should therefore give them ownership of the rest is farcical. Its rarity value means that we should prize it even more.
I’d go further, rather than flogging off more land, the government should be completing the survey initiated under New Labour, figuring out who owns the land and asking the question: Why, in the 21st Century, a lot of people descended from the Normans still own Britain and how they could possibly be paying correct tax if their assets were not fully disclosed.
As for the argument that the Forestry Commission are doing a bad job, well perhaps they are. But if your garage does a bad job to you sell your car? If you plumber is hopeless do you sell your house?
The fashion these days is for outsourcing and this could easily be done with all sorts of functions where the government considers privatisation the only option. If the Forestry commission are not up to scratch and there is a private company that think that they can do a better job then fine; draw up a fixed term contract, have the two organisation submit tenders and allocate the contract as you would any other. It’s not rocket science.
But to lurch to the conclusion that the land must be sold merely reveals that the Tories have the same idiotic obsession with privatisation which Britain has endured under both Tory and Labour since the rise of Thatcher. When Thatcher came to power the state owned and incompetently managed far too much. There was an argument for privatisation back then but continuing this simplistic doctrine when there’s nothing left to sell but the land itself is vandalism.
The land should stay in public ownership because it belongs to the people of this country, because we treasure it and because we want our children to own and treasure it.
Of course the government will argue that they will put in place safeguards which will ensure public access and, no doubt, in the first decade or so, this will be true.
But private capital thinks long term and has patience. I’m now old enough to understand the modus operandi of big money. They will agree to all sorts of conditions just to get their hands on the deeds. Then they will work slowly and quietly over the years. Governments will fall, MPs will leave, new people will be appointed who are unaware that the land was ever publicly owned and who are completely uninterested in some fusty old rules protecting ramblers. Political donations will be made, young naïve MPs will rise to cabinet ministers.
One day some poor rural area will be shouting for jobs and a large corporation will be looking for a place to build its latest factory and if only it were not for those silly out of date restrictions on public access. The people will be too worried about their jobs and the politicians too eager to bring unemployment figures down and bit by bit the “safeguards” will be dismantled and the only people to remember that we, the people, ever owned our country will be historians.
Not that the people will lose access completely. The marketing industry will kick in and the little patches of woodland remaining will be converted to forest themed entertainment parks complete with visitors centres, car parks with wheel chair access, pay toilets and a shopping mall with a handful of trees dotted around between the Pret-a-bloody-Mange and Star Bucks.
Phew!
To continue on the topic of who owns the land the situation in London is no better. The metropolis is largely owned by the Duke of Westminster, the Earl of Cadogan, Viscountess Townshend and Viscount Portman and his family.
If we started wondering who owns the Bank of England the situation becomes even murkier. Like a fool I had assumed that it was me, the tax payer, but according The Tap not only am I mistaken but the official owners are a state secret.
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