TaxTicked blog

Is tax avoidance about greed - or spite?

2009-05-18T16:59:00.001+01:00

Once someone is outrageously wealthy, increasing their wealth makes no real difference. So why do they carry on avoiding paying taxes that would help others out of poverty? Some new research suggests that it has more to do with spite than greed …

“Last year Karla Hoff, an economist at the World Bank who is currently working at Princeton University, and her colleagues reported the results of experiments conducted in villages in the Indian state of Uttar Pradesh (American Economic Review, vol 98, p 494). In these tests, two players started out with 50 rupees each. The first could choose to give his to the second, in which case the experimenters added a further 100 rupees, giving the second player 200 rupees in total. The second player could decide to keep the money for himself, or share it equally with the first player. A third player then entered the game, who could punish the second player - for each 2 rupees he was willing to spend, the second player was docked 10 rupees.

The results were startling. Even when the second player shared the money fairly, two-thirds of the time the newcomer decided to punish him anyway - a spiteful act with seemingly no altruistic payoff. "We asked one guy why," says Hoff. "He said he thought it was fun."

Hoff found that high-caste players were more likely to punish their fellow gamers spitefully than low-caste players, leading her to suggest that context is everything. It is not that people in Uttar Pradesh are nastier than elsewhere, but rather that the structure of their society makes them acutely conscious of status. The sensitivity of higher castes to their position makes them tend not to support any changes that threaten to level the social hierarchy, such as development projects. But higher castes can also put others down, safe in the knowledge that "untouchables" are unlikely to strike back.”

Pretty easy to equate caste with wealth-related snobbery ...

MP expenses scandal: it's time for tax avoiders to cough up too

2009-05-13T12:15:00.001+01:00

Named and shamed, MPs are queueing up to repay their ill-gotten gains. Junior Minister Phil Hope has just announced he’ll be paying back a whopping £42,000. Whether it’s the threat of deselection that’s doing the trick, the public humiliation, or just that they’re starting to come to their senses, it’s the right thing to do and I applaud it.

(Sure, there are exceptions: I’ve asked my local MP, Rudi Vis, if he’ll be returning the £40,000 he’s claimed in the last two years after moving his “principle residence” to Suffolk - he’s the MP for Finchley - but I’ve had no reply.)

But the thing is that many MPs have been coerced by public opinion.

So why hasn’t the same thing happened to all those company directors whose utterly cynical tax avoidance shenanigans are depriving our public services of billions of pounds each year?

Darling takes the stick to corporate tax avoiders - but where's the carrot?

2009-04-23T11:34:00.003+01:00

Alistair Darling’s new tax avoidance clampdown is finally exploiting public revulsion to corporate tax avoiders.

But according to the Guardian, “Michael Wistow, head of tax at Berwin Leighton Paisner, said the moves threaten to impose onerous duties on directors.”

My heart bleeds for them. Corporate tax avoiders are starving our public services of £12bn-plus a year.

On the other hand, if they simply paid the corporate tax expected of them, I suspect their duties would be a heck of a lot less onerous. Who knows, they may even sleep better.

What Darling’s plans lack, however, is some kind of carrot as the flip side to his stick. He’s talking about “naming and shaming” the tax dodgers, but offers no incentive to comply.

Of course, that’s where the Tax Tick would fit in - a logo to help us consumers identify and support products sold by tax-compliant companies. (Self-funded by very minimal royalties and administered by a dedicated non-profit company, it wouldn’t put any additional burden on taxpayers either.)

Personal responsibility for corporate tax submissions - at last!

2009-04-22T14:55:00.001+01:00

The new budget is certainly making a stab at closing various tax loopholes – probably to the delight of the tax avoidance industry which will make loads of dosh from figuring out how to circumvent them. But there’s one thing that Darling definitely got right:

“Accountability of senior accounting officers

The Government today announces a measure to establish a statutory requirement for senior accounting officers of major corporates to certify personally that adequate controls to prepare accurate tax computations are in place.”

It’s a strange fact that ordinary decent people tend to throw ethics to the winds when they can hide behind corporate invulnerability. Introducing the principle of individual responsibility should do a lot to change that.

Co-operative Bank: tax compliance leads to higher profits.

2009-04-03T10:27:00.000+01:00

“The Co-operative Bank sailed through market turmoil in 2008, lifting profits by 70 per cent as depositors flocked to it for security.

While its listed competitors struggled, profits at the mutual rose from £50.4m to £85.6m in the year to January 10. Retail customer deposit balances were up 17 per cent, corporate deposits rose 27 per cent to £14.6bn and mortgage and corporate lending rose a quarter to £12.2bn.

David Anderson, chief executive of Co-operative Financial Services, said it vindicated the bank’s cautious lending policies and ethical stance.” – FT, 2 April

Of course, the Co-op has such a brilliant reputation, they don’t need a Tax Tick. But if your company is tax compliant, your customers would love to know.

G20 utter bloody failure on tax avoidance

2009-04-02T15:10:00.001+01:00

Close down tax havens and you’d close down tax avoidance. And the world economy would be £250bn better off a year.

Instead, we’re going to give the IMF another £750bn of our money – that’s your money and my money – while the tax dodgers will continue to laugh in our faces.

It was China that put the boot into Sarkozy’s plan to publish a list of tax havens. (China needs the money that’s laundered via Hong Kong and Macao.) But I didn’t notice Sarkozy getting any real support from the UK. (Probably because much of our so-called aristocracy is up to their necks in tax avoidance schemes – including financial watchdog Lord Myners, for God’s sake.)

This is ridiculous. Corporate tax avoidance is not a side issue to the credit crunch. It’s one of its causes. Tax havens and their secrecy infrastructure make it impossible for companies to trust each other’s balance sheets. It’s an important reason why companies are so wary of lending each other money.

I was really hoping that the whole issue of corporate tax avoidance would just evaporate. But while the G20 trumpets all kinds of success, it’s at our expense – and once again, the architects of the credit crunch slip off the hook.

Barclays': "Countering Tax Avoidance in the UK"!

2009-03-20T16:57:00.002Z

The “Institute for Fiscal Studies” has put out a thick piece of analysis on corporate tax called “Countering Tax Avoidance in the UK”. Which sounds interesting. Until you notice that it’s sponsored by Barclays (as well as various other tax avoidance cheerleaders). And that its solution to the problem is “more consultation”.

By the way, the Institute purports to be independent. Of irony, certainly.

Barclays' Roger Jenkins - paying 40% income tax?

2009-03-19T13:11:00.004Z

Well, it appears that Barclays' "£10 billion of tax payments" that CEO Varley claims they've paid in the last five years includes anything and everything they can loosely construe as tax payments, the bulk of which is probably their employees' income tax. Odd, I'd always thought that I was paying my income tax, rather than my employer. But for an organisation so familiar with the concept of double dipping, such technicalities are obviously fatuous.

Re Barclays' Roger Jenkins, the "Roger the Dodger" who masterminds their tax avoidance schemes, I'd love to know what percentage of his reputed £40 million salary is paid as income tax?

Barclays tax avoidance: CEO Varley keeps digging

2009-03-18T11:26:00.003Z

John Varley, Barclays CEO: "We are not shy about paying tax."

That must be why they're gagging the Guardian from publishing their tax machinations then.

And as for making local tax authorities aware of their activities, "transaction by transaction", that's certainly not what it said in the documents I read before the gagging order was granted.

I'd certainly like to see how they've come up with the conveniently round figure of "10 billion pounds" which Varley claims they've paid in UK taxes over the last five years. (Corporate tax? Income tax? Stamp duties? Who knows?)

Why not incentivise tax avoidance whistleblowers?

2009-03-17T09:59:00.001Z

The Barclays whistleblower who leaked some of the bank’s tax avoidance schemes to the Guardian points out why HMRC is being left in the dust. “SCM has huge amounts of resources, the best minds rewarded by millions of pounds. Compare this with HMRC recently advertising for a tax and accounting expert with the pay at £45,000.”

Considering the billions of pounds at stake, the number of bankers being dumped onto the market, and the vastly reduced bonuses that will be available in the private sector for the next couple of years at least …. Why not incentivise HMRC tax investigators with a bonus scheme of 10% of everything they claw back from the tax avoiders?

For those who know which cupboard doors to unlock, the skeletons could be worth fortunes.

The Spirit Level, social inequality and tax avoidance

2009-03-13T12:42:00.003Z

There’s a new book out, "The Spirit Level", on why growing inequality in the UK is so bad for health, education, life expectancy and so on. (The Guardian's interview with the authors is here.) I haven’t read The Spirit Level, but I found it odd that the interview ignored the way in which financial inequality has proved fatal for the economy itself. John Kenneth Galbraith believed that the yawning financial inequality in the USA in the late 1920s was one of the key reasons for the 1929 stock market crash. And while it took a long time for social inequality to get back to those levels, it certainly did by 2008, just in time to help spark off a crash that could prove to be even more profound.

Reasons being: Extremely rich individuals stop spending on the main drivers of the economy (there’s only so many vacuum cleaners and sofas they need), and push a disproportionate amount of money into absurdities like yachts and jets which only make rich people richer. The very rich also stop investing in new, sustainable business ideas, going for quick win, unsustainable investments like property instead. And finally, they lose touch with reality and start speculating wildly and incautiously on dodgy investment vehicles designed purely to exploit their greed and recklessness.

And, of course, a vital factor in creating financial and social inequality is … tax avoidance … as, no matter what the tax avoidance propaganda says, it seldom enriches anyone but company directors and the highly paid tax avoidance industry. Crack one nut and a lot of good can come from it.

RBS, Swiss Re denied Tax Ticks

2009-03-13T10:19:00.002Z

It was close. But on balance, considering RBS's £500 tax avoidance schemes, involving Swiss Re, all the usual tax havens, Morgan Stanley, Merrill Lynch and AIG, it has been regretfully decided that they can get stuffed.

John Lewis bonuses a refreshing dose of business ethics

2009-03-12T16:51:00.001Z

I’m sure the John Lewis staff are all bloody happy right now, with each and every one of them sharing in the bonus pool – a bonus pool they earned by actually being successful at what they do. That’s a company we can all respect. Good at what it does and good to its staff. Why do I suspect they also pay their full corporate taxes too?

The Co-op, John Lewis, there’s a landslide trend developing here!

(Of course, if your lovely, ethical company isn’t big enough to get national headlines for being nice – get a tax tick.)

Laughable Lloyds tax avoidance court ruling

2009-03-09T21:16:00.002Z

With the financial meltdown sucking economies around the world into an ever-expanding black hole, some people may argue that worrying about the tax that individual companies are paying is an irrelevance.

Well, they’re wrong.

Tax avoidance and fiscal recklessness have gone hand in hand right through this crisis. When (if) we get out of it, part of the post-crash ethos should be a greater sense of responsibility about paying taxes. And even if government doesn't close the loopholes (the latest absurd court ruling on Lloyds suggests they won't), we consumers can still do something about it. Start by asking the companies you have contracts with if they would qualify for a Tax Tick.

Should the Fortune Forum get control of our aid budget?

2009-03-02T22:43:00.002Z

Just because all the conspiracy theorists are nutters doesn’t mean there aren’t any conspiracies.

It turns out there’s a hundred very wealthy people meeting tomorrow night in London to discuss a scheme to lobby for 50% tax relief for making big donations to charity. The idea being that the government must match their donations. Then the people who donated the money (no, not the ordinary taxpayers who the scheme would force to match the donations, but the rich people who made the donations) get to decide how the money is spent. Even if their money comes from an offshore tax shelter, they still get to influence how UK taxpayer money is spent. With the financial target being equal to the UK’s entire foreign aid budget of £5 billion a year. If I understand Marina Hyde’s article properly, it means someone can donate £1 million, get 50% tax relief on it, then get an additional £1m from the UK government to the charity of their choice.

Of course it’s unthinkable that these benefactors would try to interfere with the running of any of these charities or try to dictate their agendas or anything. Not like George W. Bush who got feted for donating billions to Africa to fight AIDS and then directed it towards an abstinence campaign rather than a treatment campaign (because the organisations doing treatment were also carrying out the occasional abortion).

But after turning the world’s financial system into their private casino, it does rather look like the same class of arrogant crazies are also trying to hijack the world’s charities. With a bail-out built into the system from the beginning, this time. It sounds insane, but the Treasury has already granted them a couple of meetings. So it’ll probably be knighthoods all round fairly soon, and our aid money spent on whatever these rich benefactors feel like selling to their new pet charities. (Gosh, hopefully not their drowned share portfolios.)

I don’t think we need another absurd top-down initiative. Let’s try bottom-up instead. We spend our money on what we choose and reward the companies that keep our values to heart. Do these companies exist?

The Tax Tick: the enthusiasts and the pessimists

2009-02-26T22:41:00.002Z

I find so many people supportive of the idea of a Tax Tick, it comes as a bit of a surprise when I get a negative comment (let me clarify that I've been asking regular taxpayers, not tax accountants).

So what reasons do people give for dismissing the idea?

Well, firstly there's young people, not so long out of education and not paying much tax. They're not using much in the way of public services and frankly, a lot of them couldn't care less where the NHS and education system and pensions get their money from. And I guess if I was in their position I might not either. (Although I must add that this doesn’t apply to all young people, many have been very enthusiastic.)

But there are also people with plenty to benefit from a more tax-compliant culture (and who pay pretty high taxes too) who pooh-pooh the idea. But what’s interesting is that they don’t say it’s a bad idea – in fact, they say it’s a great idea. The reason why they dismiss it, though, is they say that people won’t care enough to make it work.

So - besides a proportion of young people - taxpayers fall into two groups: those who think the Tax Tick is a great idea and want to see it happen, and a minority who think it’s a great idea but don’t believe that it will work.

Could the second group simply have that pessimism gene that’s just been discovered?

PS. I’d say at a guess that Fred Goodwin (the ex-RBS Chairman clinging on to his £650,000 pension) wouldn’t know a pessimism gene if it repossessed his house.

Middle-class riots? Or protest with the Tax Tick?

2009-02-23T23:07:00.004Z

So the police expect the unemployed middle classes to spend the summer rioting? I suggest they bring their forecast forward to spring. The government still seems to have no idea how to rein in corporate greed, whether the bosses are plundering the bailout for bonuses or running cynical rings around our tax authorities.

But while mounting public anger may soon shatter some windows in the City, I propose a more satisfying way to channel your sense of justice - and for genuinely civic-minded companies to reap the benefits of their integrity. If your company is up to date with its corporate taxes, display the TaxTicked logo on your products and on your website. And if you're a consumer, simply redirect your disposable income to companies that you can respect.

Find out more at www.taxticked.com. Forward the link to any friends whose company could qualify for it. Or contact me if you'd like to trial the TaxTicked logo for free.

Get online visitors and credibility with a Tax Tick

2009-02-22T23:12:00.004Z

Until now, the internet has earned a reputation for offering the best deals around. But unfortunately, just when people have become even more concerned about getting the best deal possible, con artists are flooding the internet with dodgy ecommerce sites.

In an article on ticketing websites, the Guardian warns against no fewer than 13 such sites that are currently in operation. Some of them promise tickets for "sold out" events. But the chances are that many buyers will never see their tickets. And when they revisit the site, there's a good chance it'll be gone.

The credit crunch will see more and more dodgy websites trying to take advantage of cash-strapped consumers. And even some well-intentioned ecommerce companies will have to close up shop through no fault of their own.

So if you have a legitimate ebusiness, how do you prove it to your visitors? How do you show that your site's been in business for years, and intends to honour its commitments?

Well, a TaxTicked logo would prove that you've been in business at least long enough to pay your UK taxes – unlike most scamsites which avoid accounts and taxes by closing down within a year of opening.

It would also show potential customers that your company is contributing its share to public services – a very emotive issue right now.

And you needn't only put the TaxTicked logo on your website – by putting the words "a TaxTicked company" on your Adsense ad and in your site's description (the bit that shows up on Google), you'll attract far more visitors to your site.

Check out the TaxTicked concept – then get in touch for a free trial. See how much better your Adsense ads work when they mention the TaxTicked logo. And how many more visitors get to your checkout.

Corporate tax, not aid, for Africa

2009-02-20T13:38:00.002Z

A massively qualified African academic has lit a fire by declaring
that government-to-government aid to Africa hasn't, doesn't and won't
ever work.

According to Dambisa Moyo, Live8, Bono and Geldof are misguided. China
is doing a better job of helping Africans out of poverty than the
West. The elections that the West demands don't lead to rule of law or
institutional improvement, just unrest.

Part of the problem, it seems to me, is that we don't expect higher
standards from Western corporations active in Africa.

Many of them have got away with all kinds of mischief. Tax
avoidance, easily achieved where tax departments have no resources to
put up a fight, is rife. But at the same time as we put our hands in
our pockets or demand that our politicians give some of our own tax
contributions to African governments, we continue to buy stuff from
the corporations who're denying Africa an effective infrastructure.

That's because we have no easy way of knowing which corporations are
paying full whack and which aren't. With a TaxTicked logo, we could at
least know who is. First in this country. And then overseas.

Brown to discuss tax avoidance with … Berlusconi?

2009-02-19T09:29:00.003Z

http://www.guardian.co.uk/business/2009/feb/19/gordon-brown-tax-avoidance-switzerland

Well, now that Silvio has passed a law ensuring that he can't be put on trial, I presume he'll be able to give Gordon the full masterclass.

Looks like Brown's scoring some easy points by responding to public reaction that the Guardian's Tax Gap series provoked. But is it for real? The main target is apparently Switzerland. But they're outside the EU – their whole selling point.

And as for the Caymans and the Channel Islands – they're British protectorates for God's sake. Let's just send a destroyer to each of their ports and offer them some "protection".

But seriously, if your business is paying its full share of taxes, your customers want to know. Get a Tax Tick on your website and let's see what a difference it makes.

The failure of tax avoidance

2009-02-18T09:47:00.002Z

“Corporations do more good with the money saved via tax avoidance than the government would do with it.” I don’t know how many times I’ve read this specious justification. OK, well have they? No.

They haven’t been spending those tens of billions of pounds on education or health or social infrastructure or international poverty relief. Instead, it's gone to directors who've poured it into shares and other speculative investments that are now worth a lot less than the original value of the money. Oops.

And, of course, many directors who used intermediaries to make their “investments” for them are now discovering that their investments simply don’t exist at all.

Tax avoidance has been very successful for some tax avoidance practitioners. For nearly everyone else, it’s been a disaster.

So where's our day of mass action, Guardian writers?

2009-02-16T23:22:00.002Z

A friend of mine expressed it well: "The Guardian spends two weeks provoking us into a fury and then just leaves us dangling? Why no call to arms, why no demo in Trafalgar Square?" Instead, as the public's initial anger found no way to vent itself, the tax avoidance lobby simply hijacked the Guardian's comments forum to show us just how distasteful their rationalisations are.

Well, if you're still seething about the brazen tax avoidance that's rife in a large proportion of the UK's top companies, I can't offer you a march or even a T-shirt. But you could help me get the attention of some of the organisations that would benefit most from the Tax Tick, and that could help jumpstart the logo into being. It's all explained below.

Help the TaxTicked logo to make a difference

2009-02-16T00:10:00.002Z

A couple of days ago, I said I'd need your help. Here goes:

The thing is, for the TaxTicked logo to get big in a hurry, it needs some big-name credibility and support. So a little while ago I contacted the Federation for Small Business, Action Aid and Christian Aid, three organisations with a lot to gain from the logo's potential success, to ask them to get involved. Perhaps they're in high-level meetings about it right now, but I haven't heard anything back yet. So I kind of fear that I'm on their back burner (or their nutter folder) – and that by the time they do get back to me, people will have already forgotten why the corporate tax-avoidance issue is so important. So:

If you're also just a little incensed that a third of the FTSE 100 don't seem to pay any corporate tax in the UK, and that 40% of financial directors don't think that paying taxes has anything to do with ethics, there's something you can do for me. Please drop a line to the FSB, Action Aid and Christian Aid and very politely let them know that it would be really, really brilliant if they would get involved in the TaxTicked campaign.

To make it as simple as possible, you can actually just use a letter that I've already written for you and send that off. Check it out here.

Just copy, paste and send. No filling in forms, no waiting for something to appear in your inbox and no cryptic numbers to type. And no matter what else happens to you, you'll have a nice warm feeling for the rest of the day. THANK YOU!

Only 60% of financial directors ...

2009-02-14T17:22:00.002Z

...believe that tax payment has an ethical dimension, according to today's Guardian. Amazing. I'd always assumed that everyone who pursues artificial "tax efficiencies" at least realises that they're cheating the general public. So if you're one of the seemingly small percentage of financial directors who do meet their tax obligations, why not win the support of a lot of new customers by letting us know?

Have we reached the tipping point on tax avoidance?

2009-02-13T14:04:00.001Z

After two weeks of daily revelations about tax avoidance in the Guardian, we've now reached a point where we have to assume all big corporations are guilty until proven innocent. The Guardian's holding company is itself under a cloud of suspicion.

Incredible but true.

So how can we be sure of buying our groceries, communications, mortgage, car, holidays and on and on from tax-compliant companies?

Or:

How can tax-compliant companies show us that they're contributing their fair share to public services?

It's time for the TaxTicked logo.

The danger, however, is that we're already so cynical about tax avoidance that we decide to just put up with it. Reader comments on the Guardian's webpages have dropped from hundreds to a handful. Just when we should be shouting louder.

I'm going to be asking for your help to get the Tax Tick off the ground.

Please check back to see what you can do.

BP, BOOTS TO USE THE TAXTICKED LOGO

2009-02-12T00:33:00.003Z

Sorry, I'm dreaming. But wouldn't it be great if consumer support for the TaxTicked logo encouraged mega-marketers to comply fully with their corporate tax obligations? But in the meantime, the field's wide open for smaller, tax-compliant marketers to take advantage of the TaxTicked logo's appeal. Read the proposed qualification criteria here.

Govt now dodging its own taxes?

2009-02-11T09:40:00.001Z

It appears that Lloyds Bank has been sheltering hundreds of millions of pounds from the taxman.
http://www.guardian.co.uk/business/2009/feb/11/tax-gap-lloyds

So now that the government owns 43% of Lloyds, that raises the ironic possibility that the government is itself a tax dodger.

The plot thickens.

Let's hope the bankers' grovelling is catching

2009-02-10T14:51:00.001Z

The "profound and unreserved apologies" given by the disgraced ex-bosses of RBS and HBOS represent a fairly seismic shift in the financial world. If they can lose their arrogance about their financial acumen, there may even be a chance that they and other FTSE 100 directors can lose their arrogance about avoiding the taxes due from their corporations.

The "TaxTicked" logo: your views please!

2009-02-09T23:41:00.003Z

Well what do you know? It turns out that a third of FTSE 100 companies are so good at tax avoidance that they don't pay any UK corporate tax ... leaving us PAYE payers to support the NHS, school system, pensions (and the bailout) without any help from them.

Enough is enough. So I'm proposing a voluntary TaxTicked logo that could be used by companies that DO meet their tax obligations. It would help us recognise and support the good corporate citizens out there, whether they're banks, brewers or bakers.

What do you think of the TaxTicked idea? Would you like to support companies that contribute their fair share towards our public services? Do you have any suggestions to make the idea bigger and better? Leave your comment here.

Barclays' £6 billion profit - what'll the British taxman - and our public services - get?

2009-02-09T22:09:00.001Z

A round zero if their tax whizz continues to earn his reputed annual £40 million. (Read about him here: http://www.guardian.co.uk/business/2009/feb/06/tax-gap-poacher-barclays )

So, as usual, we'll have to carry on putting our own hands in our pockets to pay for the public services that help companies like this prosper.

Personally, I'd rather bank with the Co-op. Corporate tax paid: pretty much 100% of the headline rate.
Sign up here: http://www.co-operativebank.co.uk

Polly Toynbee's one word opinion of the TaxTicked concept

2009-02-09T21:55:00.001Z

"Brilliant!"

Hey, it's a start.

You can read her own take on the sad state of UK corporate taxation here:
http://www.guardian.co.uk/commentisfree/2009/jan/31/corporate-tax-avoidance-polly-toynbee