EU Referendum

Showing posts with label taxation. Show all posts

On Tuesday Lord Foulkes of Cumnock, another of the local council - House of Commons - House of Lords brigade, not to mention being a member of the Scottish Assembly as well, asked HMG the following question:

What is their forecast of the revenue lost to HM Treasury through the use of the Channel Islands for avoiding the payment of United Kingdom tax.

The debate that went on for about seven minutes was quite curious in that practically everything the question and immediate response to it implied, was incorrect.

All we managed to gather is that HMG, together with other states and governments that is anxious to destroy economic activity by extracting as much tax as they can manage, are trying to think of all sorts of schemes whereby "tax havens" will be shut down, even if that will mean the places in question going bankrupt and money being laundered some other way. For sure as eggs is eggs, the rich will find a method of keeping their spondulikins out of the various politicians' hands and who can blame them.

What was not mentioned was that there might actually be another solution to the problem and that is lower taxation. That, on the other hand, would undermine the assumption on which much of the debate was conducted: that, somehow, HMG (or any other government) has an undeniable right to people's earnings to do whatever they see fit to do with it.

Another unmentioned aspect was the curious fact that members of what is known as "Another Place", to wit the House of Commons, had, at various times, voted themselves substantial salary increases, which they called expenses in order not to pay taxes on them. Behaviour of that kind would be frowned upon if indulged in by the great unwashed.

There are, of course, no salaries except for Ministers, in the House of Lords, and the expenses are minimal. Lord Foulkes, one assumes, is paid as Member of the Scottish Parliament. For all of that, his was one of the few names in the Upper House that cropped up in the course of the recent unpleasantness, as Wikipedia unkindly mentions:

In 2008, Foulkes had been criticised for his expenses claims, which included around £45,000 over a period of two years for overnight subsistence to stay in a flat he had inherited. Between April 2007 and March 2008, Foulkes claimed £54,527 in expenses from the House of Lords.[13][1]

The words houses, glass and stones spring to mind.

COMMENT THREAD

One can have a lot of fun at the expense of our political establishment. Sadly, at the end of it all, they have the last laugh. Here is a wonderful piece of news: Alistair Darling is setting up a working group or a think tank as one of London's freebie papers called it, to have a look at the British tax system that is driving multinationals away from this country.

Well, no, since you ask, it is not the fact that Britain has stayed out of the European and Monetary Union, popularly known as the euro, that is causing the problems. Some of these companies are, indeed, going to Ireland, but they do not mention the euro. What they do mention is the impossibly high taxes they have to pay in this country.

The CBI, instead of telling Alistair Darling a few home truths, is supporting the idea.

CBI director general, Richard Lambert said: ‘The CBI looks forward to working as part of the new group to identify a clear, internationally competitive corporate tax strategy for the UK.’

The employers’ body released a taskforce report last month revealing failure of the UK tax system to respond to increasingly global business activity which was creating an unsustainable regime.

Hmm. So, how much research will this working group or think tank have to do? How many staff will it have and how many position papers will it produce? How much will it cost the taxpayer? And all the time, the answer is so simple. In fact, it can be boiled down to two words. But one cannot quite envisage the government listening. Of course, this might be a ploy to drag matters out until the next President of the European Union, France, goes all out to harmonize those corporate tax rates.

George+Osborne[i-George+Osborne]I did go to the Policy Exchange to listen to the Shadow Chancellor discussing his ideas on taxation when and if there is a Conservative government. As, at present, it looks like Gordon Brown and Alistair Darling are bigger losers than David Cameron and George Osborne, this is of some interest.

As I also stopped off for a cup of tea and had to do some day-jobbing, I expect several bloggers like Tim Montgomerie have got there ahead of me.

Our readers will not be surprised to hear that I was somewhat underwhelmed by the speech and by the answers to questions afterwards. It was not out and out bad but neither was it particularly good. Would these ideas make me consider voting Conservative? Not without a great deal more coming from that party.

First of all, I cannot help feeling that a Conservative Shadow Chancellor whose ideas, by his own account, are similar to those of the Lib-Dims, is not one whom I can support wholeheartedly.

Secondly, few of the statements were particularly bold. The Conservative Party is still content with fiddling about on the edges, talking about the need to preserve stability as if that and serious tax cuts and tax reforms were somehow antithetical and transfer money from one pot to another. Thus, the biggest idea seems to be to substitute environmental taxation, without any real calculation of how it might affect the economy and society, for onerous business taxes.

The notion that, perhaps, the government does not actually need to raise quite as much money as it does at the moment for its own purposes may be there in the background but is struggling to emerge.

Mr Osborne started with the four basic principles of taxation enunciated by Adam Smith: efficiency, certainty, transparency and fairness. Then he explained how he was going to apply those principles. Of course, he was not going to ask for ideas from the Taxpayers’ Alliance or any other organization that has been working on the subject for some time.

No, sirree, he is setting up another group under Geoffrey Howe to work out long-term tax reform proposals.

So, how is Mr Osborne going to ensure that his policies stay with the four principles?

As far as efficiency is concerned he is going to look at corporation tax. As he rightly pointed out, Britain is lagging behind other countries with ever higher business taxation. Therefore, the Conservative government will aim at a lower rate and broader base for corporation tax.

This may or may not work. The question that was not even raised is what will Mr Osborne or, for that matter, any other Chancellor of the Exchequer do if the EU finally manages to harmonize either the base or the rate of corporation tax across the whole of the Union? Does Mr Osborne even know that these moves are afoot?

When it comes to certainly, Mr Osborne could really rip. After all, he did not have to propose anything, merely rubbish Mr Darling’s recent record and that of Mr Brown before him. It is entirely shambolic in its inability to stick to one particular line either on capital gains tax or on the subject of non-doms, together with numerous other fiascos.

Such things will not happen under the Conservatives, we were assured. Lord Howe and his “group of senior tax specialists and experienced politicians will propose long term tax reforms to the way we make tax law in this country”. Then again, long-term tax reform to the way the people of this country are over-taxed might also be quite a good idea but that did not figure in Mr Osborne’s speech.

The third principle is transparency and this is where those environmental taxes come into play. Mr Osborne is determined that emphasis should shift to them from business (little enough was said about other kind of taxation though, apparently, those promises about inheritance tax and stamp duty will be kept).

There will be no stealth taxes. Every new green tax will be clearly noted as to what it replaces.

That is why I have pledged that any new environmental taxes that we propose will be replacement taxes not additional stealth taxes. Any additional revenues will go into an independently audited Family Fund that can only be used to reduce other taxes on families.

Sounds a bit fiddly and will require a great deal of administration. What of cutting a bit of waste in the treasury?

So we come to the undeniable length and complexity of our taxation system.

That is why we are working with the experts to do the long term thinking on simplification.

With PWC on simplifying corporation tax.

And with Grant Thornton on simplifying income tax and National Insurance, and the administration of VAT.

And it is why the final aspect of the proposals being examined by Geoffrey Howe’s group will be so important – the establishment of a new Office of Tax Simplification with a remit to examine the existing tax system and make proposals for simplification.

With a permanent staff of tax specialists aided by secondees from the tax professions, this will create a powerful institutional momentum towards a simpler tax system.

Oh goody. Another Office and this one for Tax Simplification. Another bunch of civil servants plus secondees who will create another bunch of rules. As Cole Porter said, “another opening of another show”. That show will be more government and more elaborate ways of confusing the taxpayer so the realization of just exactly how much money is handed over to the government to misuse will be obfuscated.

Oh, and by the way, VAT is an EU tax. There is not much anyone can do about it, though he does say that it will only be the administration that will be examined and “simplified”.

The last item is fairness and this is covered by the need to raise the threshold for inheritance tax and stamp duty as these have not kept pace with rising asset prices. One cannot argue with that. There are various ways of taxing non-doms, which will, apparently be fair without driving people away from the country but no questions as to whether a serious reform, which would take people at the lower end of the income tax out of the system so they did not have to claim benefits would not be a good idea.

And above all, all tax reductions must be lasting and sustainable while the proceeds of economic growth must be shared.

David Cameron and I have been arguing for this long term approach to sustainable public spending for years.

Now the Labour Government have been forced by their own profligacy to adopt plans for the coming three years that halve the growth rate of government spending from 4% to 2.1%.

They too will be sharing the proceeds of growth. Not through choice but by necessity.We do have a choice.

We can either: stick with our long term course; stick with the commitment I made to spending growth of 2.1% for the coming three years; review the final year when we know the state of the public finances; and understand that in an economic slowdown this will mean tight spending plans and difficult decisions about government priorities.

Or we can head off onto the margins of the political debate and reduce spending growth even further for the sake of a short term argument.

Never mind that it would probably be unachievable in a slowdown, when tax revenues fall and welfare spending rises. Never mind that it would be lower than anything Margaret Thatcher achieved during the economic turbulence she faced in her first parliament. At least, we are told, it will give us 'a dividing line'.

Gordon Brown believes in the politics of 'dividing lines'. I've seen where it has got him: the most unsuccessful start of a premiership in modern British history.

We are not going to follow him down that dead end. We are a serious and credible alternative government. We will do what is right for the country.

On the whole, I am glad I am not a Tory. Here is the whole speech.

tax_07_100[i-tax_07_100]Calm down everybody. We have not reached it yet. The Americans have, on April 30. Of course, this is average calculation. There are states and cities in the US where tax freedom day is almost as late as it is here and others where it is around early March.

What of Britain? This year it will, once again, fall on June 1 as analyzed by the Adam Smith Institute. You realize what that means, don't you?

The Treasury now takes over 40% of the National Income in taxes – income tax, VAT, capital taxes, company taxes, inheritance taxes, and all the rest. That is 152 days’ worth of the average taxpayer’s annual wages.

Any Conservatives out there who might think there is something wrong with that? Something morally as well as economically wrong?

The tax burden is also a postcode lottery. Taxpayers in Wales work eight days less for the tax-collectors than the national average (until 23 May), but Northern Ireland residents have to work much longer (until 5 June). Taxpayers in England are spot on the national average (1 June) while those in Scotland enjoy their tax freedom earlier (26 May).

There are significant variations within England, too. Lightest taxed are Eastern England and Yorkshire & Humberside, with a Tax Freedom Day of 24 May, and the North East, on 29 May. The West Midlands is relatively lucky with a date of 31 May, while the North-West and South-West taxpayers have to work a day more, until 1 June. Highest taxed are the South-East (3 June) and London (5 June).

Well, that has made me feel a lot better.

COMMENT THREAD

William+tell[i-William+tell]Well, OK, maybe he shoots apples again. Whatever it is, the Swiss are once again proclaiming their right to run their own country as they see fit, which includes the various cantons setting their own tax levels. And guess who does not like it. Yes, that's right the EU Commission.

We have followed the saga of the Commission's spat with Switzerland about those taxes and have noted that a number of firms have decided to move to Zürich to take advantage of the fiscal atmosphere.

As the BBC reports, the Commission (for some reason, with a small ‘c’) has decided to get tough.

The commission said the tax breaks were "unfair" as they differentiated between domestic and foreign income sources.

However, Switzerland said the argument was "unfounded".

There were no regulations between Switzerland and the EU on harmonising tax arrangements, so it was impossible to infringe rules, the Swiss government said.

Well, of course, it's unfair. I mean, here are the Swiss, letting their cantons decide on levels of taxation, exercising local democracy rather than subsidiarity; and here are the cantons setting tax levels that would be attractive to businesses. Sheesh! How unfair can you get?

"Switzerland enjoys the benefits of privileged access to the internal market and must accept the responsibilities that go along with this," said EU external relations commissioner, Benita Ferro-Waldner.

"The decision the commission has taken is not about tax competition, but about the state aid undermining the level playing field necessary for partnership and trade relations between Switzerland and the EU."

Actually, she is wrong. This is about tax competition – an unfair concept for the EU.

Swiss+scene[i-Swiss+scene]The Commission has warned Switzerland to stop undermining the EU's own high-tax economy (as if it needed outsiders to undermine it) and stop cantons from setting their own, advantageous levels. It is not, however, clear what the Commission will do, if Switzerland refuses to comply with these demands.

Will the European Rapid Reaction Force invade the country? I wouldn't advise it. Despite falling off Machiavelli's standards a bit, they remain "armatissimi e liberissimi" – most armed and most free.

COMMENT THREAD

Poland+cars[i-Poland+cars]Here we go again. After writing innumerable pieces saying that the European Union is "dead man walking", up it pops with another little jab at the member states' systems, sufficient to demonstrate that the "walking" bit is definitely right, and the Union is still alive and kicking.

We are talking here about vehicle tax and it was in April last year that we recorded EU commission action against Cyprus to purge it of the deadly sin of national discrimination, where it was charging higher taxes on imported second-hand cars than it was those bought new on the island.

Now Poland has also attracted the ire of the Community, with a report yesterday that the ECJ has ruled a Polish second-hand car tax illegal. This is exactly the same issue which confronted Cyprus, where the Polish government levied a higher tax on second-hand cars imported from other EU countries than on vehicles registered at home.

And, as with Cyprus, the Poles thought they had a good reason for their tax. It was intended as a mechanism to curb soaring imports of cheap second-hand cars from Western Europe, which were harming domestic sales of new vehicles.

However, this is not the end of the game, as the commission has launched infringement proceedings against Hungary, Denmark, Cyprus and Finland, saying their car taxes were incompatible with EU rules. EU newcomer Romania may also be added to the list.

Gradually – and it is exceedingly gradual – member states are being reminded that they lost their tax autonomy in certain key areas when they signed up to the EU.

And, to cement this lesson into place, EU finance ministers are to discuss possible harmonisation of car tax rules in May. With a proposed directive already on the table, and car taxation rules already under discussion, this begins to look like a done deal.

It is certainly one to watch.

COMMENT THREAD

johnny-halliday[i-johnny-halliday]Those French Socialists have a way with words. Particularly political terminology. An article in the Times that has come my way via the Freedom and Prosperity blog (well, one can dream) describes the slow but sure move of American firms from EU capitals to Switzerland.

In particular, there is a move from London, the latest one of those voting with their feet is the food producer Kraft, which “has taken a lease on a building in Zurich and will transfer staff from Vienna and from Kraft’s UK headquarters in Kew, southwest London”.

Obviously, it is not the fact that the UK has not joined the single currency that is the problem but the fact that the UK is an important part of the high tax, high regulation European economic disease. (Not to mention such peculiarly London problems as appalling transport.)

Some 200 UK jobs will be affected by the move to Zurich, Kraft said yesterday, suggesting that tax was just one of the factors that drew the company away from London. Other issues, including public transport, lifestyle, quality and the cost of accommodation were equally important.

France is not happy either.

Biogen Idec, a US pharmaceutical company, recently decamped from Paris to Zug, a canton which boasts nil corporate tax. The knife was twisted further when Johnny Hallyday, the French rock star, revealed that he would move his residence to Gstaad because he was “fed up” with French taxes.

Supporters of the French Socialist presidential candidate, Ségolène Royal, accused Hallyday of treachery and called for European action against Swiss “tax banditry”. However, President Chirac said that France must reduce its corporate tax rate if it is to remain competitive, calling for a reduction of the rate from 33 per cent to 20 per cent within five years.

Well, one does rather wonder where l’escroc has been all this time. Has he not been the President of that country for a little while? Easy for him to say tax competition now. But, clearly, competition is not a word that comes easily to our Ségo and her supporters. Tax banditry, eh? You can see the woman is set to be a success in France.