Offshore Madness

The 31st of October 2011 is the deadline for submitting your personal tax return on paper, which in the digital age seems rather quaint, a relic of a bygone age where people use fountain pens to write cheques,  denominated in guineas, for life's essentials such as top hats, shooting sticks and steamer trunks (whatever they were).

Nostalgia aside, no one from any era is a fan of paying tax, unless you do in fact work for HM Revenue and Customs when paying tax is more akin to the staff of John Lewis shopping at John Lewis - you genuinely are keeping yourself in a job. Although I suspect tax inspectors do not get a staff discount on their income tax. If they did, they might be more inclined to pick up the phone. That's directed to the Chapel Wharf Area Tax Office, you know who you are.  When I owed you money, I received menacing letters warning that you were going to repossess my left kidney (my favourite one, since you ask) and sell my wife to a sex trafficker. (Strictly speaking the letters they sent me did not actually threaten organ loss or spousal slavery; but they were curt and I know how to read between the lines). Of course when the debt is the other way round mysteriously enough the income tax refund gets stuck, as if the funds were somehow an overweight feline that had outgrown its catflap.

There is, however, one species of cat that has no problems wiggling out of tight spots.  It's a fat one, who receives a special  tax discount not available to the the little people (as the rest of humanity, tall or short, shall now be known). What's more, this type of moggy is well-greased by Her Majesty's servants. You guessed correctly, fat cats are back in the news again: in this case Goldman Sachs for a backroom deal  with the Revenue that avoided a £10 million liability.

Interesting the contrast between the small trader whose VAT receipts are late: he gets the knock and his property seized. But the likes of Goldman have a cozy arrangement that would do an African kleptocracy proud. For those of you that missed this latest banking wheeze, they had set up a Virgin Islands subsidiary to pay bonuses to its UK employees and after a chat with Dave Hartnett, the UK's most senior tax collector, were let off the money they owed. He did a similar deal with Vodafone, who by some accounts owed the Exchequer £6 billion and paid only £1.2 billion.

Scroungers in suits

Judging by the standards of the 25% of FTSE 100 companies who were named and shamed in the Action Aid report this month, the use of offshore companies located in tax havens to avoid UK taxes is widespread. Two prime offenders are Lloyd and RBS; yes state-owned banks have scores of offshore vehicles designed to avoid UK tax. It is beyond parody, beyond politics, beyond belief.

Brand Values 

In a sense, the rampant tax evasion and freeloading by high net worth individuals and corporations, with the supine assistance of accountants and lawyers who betray their own professional codes, would somehow be more acceptable if it were done brazenly, as a colossal 'Fuck You' to civil society. I guess it might not sit so well with their brand values. You would have to ask Barclays, Vodafone and BP what those values are exactly, if they do not include being a decent corporate citizen and paying your dues.

Yet those involved must have some twinge of conscience because they have to couch their immoral behaviour in the veneer of respectability,  so this is not  rampant tax evasion, parasitism and freeloading of the type if displayed by a member of the underclass would provoke The Daily Mail to new heights of indignation.  No, it is tax competition: a form of free enterprise and a bulwark to socialism.

The concept of tax competition

There is little point dealing with the substance of their arguments as there is none. Tax competition means every country must join in a race to the bottom, where you'll find Afghanistan, the country with one of the lowest tax takes in the world. Reform must take place within the context of people and corporations paying tax; evasion by offshore havens undermines the basic contract that a citizen and corporation makes with the state: live here, trade here, pay tax. Those hedge funds based in the Cayman Islands should actually live in the Cayman islands, the Tesco stores located in the UK owned by a Lichtenstein holding company should be relocated there, breeze block by breeze block if necessary.

Growing deficits in developed economies have coincided with an explosion in tax avoidance via offshore activities, with lost revenue accounting for over half the deficit by some calculations. Crack down on benefit scroungers and welfarism if you want, but how else would you describe an individual or multinational who derives all the benefits of UK civil society but avoids paying their dues?

Tax havens should be shut down by old fashioned gunboat diplomacy, using a boat with guns on it. Even though the British navy has been reduced to a canal barge with canon of Napoleonic vintage and a couple of blokes in outboards with cricket bats, they could still handle these offshore jurisdictions. Seriously, what exactly could Jersey do if we decided to send over some marines and forcibly open its books?  Likewise, the French should storm Monte Carlo, the Spanish march into Andorra, if the Germans can't quite bring themselves to invade Lichtenstein, subcontract the job to the Poles if you to get the job done properly.

The law needs to change: if it looks like duck and quacks like a duck, it's a duck. If it looks like tax evasion, then the burden of proof should be reversed so that companies must prove that setting up numerous shell companies in tropical islands that are notorious for laundering drug money is in  fact a legitimate way to structure a business. Likewise, lawyers and accountants who help offshore tax evasion should be held accountable, with criminal charges if appropriate. If a little person dodges his tax, they can face prison, why should it be any different because miscreant is better dressed?

Let's call time on this offshore party at our collective expense.

Oversize Me

England's Olympic Squad

Britain is officially great, not economically or militarily, but when it comes to waist size we are in the first rank of flab. According to a recent survey, sixty percent of the UK's population are overweight; the other forty percent tried to eat the census taker...with chips and a  bottle of Lambrini.

Never fear though, Andrew Lansley, the health minister, is here to the rescue, proposing that we count the calories and display them in fast food restaurants. Unlike his Great Leap Forward for the health service, focusing our growing guts makes some sense. Although we may live as long as our grandparents, we will be doing so unable to leave the house without a flatbed truck and winch, reminiscing about the time we could see our feet without a remote camera.

Except we know lecturing people won't work. When a cigarette company marketed a brand called 'Death' with a skull and crossbones on the front, their  sales soared; the pack of 200 was even coffin-shaped. Back in the days when Tower Records existed, 'Death' had a display in their Piccadilly branch with skeletons and gravestones. I bought a pack at once and smoked it like cancer was just a star sign.

At American state fairs, stands advertise their high calorie wares such as deep fried butter with a picture of   paddles they use to shock a stopped heart; the public loves it. Humans seem to be hard wired to crave sugar and fat, a relic of our wandering days on the savannah. Unfortunately, what makes sense for hunter-gatherers who rarely if ever encounter sugar or fats is a bad strategy for desk-bound office potatoes whose sole exercise is moving a computer mouse or other mono-hand pursuits. Maybe if you did have to dodge marauding lions on the way to KFC you would burn up the calories, but all it would take is one fatal mauling and the scheme would have to be abandoned. Health and safety gone mad.

There are, however, other ways to fight the obesity crisis that don't involve releasing large carnivores into urban areas or lecturing people like naughty children. Try limiting the number of fast food outlets in the high street. Insist that every outlet be located at the top of a steep hill or fitted with running machines at the entrance, like that Ok Go video except with annoyed customers.

Install this in front of every junk food restaurant.

Do not, repeat do not get the likes of Cadbury's to sponsor some retarded idea of exchanging chocolate bars for sporting equipment, making the direct association in children's minds of junk food with athletics. Oh hang on, that's exactly what the Blair government did.  Learn the lesson of that mistake and do not what ever you do make official sponsors of the 2012 Olympics the likes of Coke or build the largest ever McDonald's in the world at the Stratford site. Oh hang on...

The same government and local authorities lecturing us on calories are busy turning every high street in Britain into one uninterrupted branch of Subway-KFC-Pizza Hut-McDonalds-Burger King-Greggs-Chicken Cottage -Kombo Feeding Warehouse. It's not the calories that need counting. After all, how many branches of Subway does the world need? The answer is any number less than one in case you're interested.

Now, where's that takeaway?

Stimulating Packages

Occasionally you hear a politician say something so breathtakingly stupid and contradictory it makes you want to hurl something across the room in a howl of desperate rage.  This morning as I listened to the Today programme, I  wanted to take my  i-pod and DAB combo radio, get a taxi to Broadcasting House and fling the black cube at George Osborne. Obviously common sense intervened before the armed police did and I calculated by the time the cab had negotiated rush hour traffic, George would probably be heading back to Number 11.  There's always a chance he'll repeat the idiocy this evening, but then I will be watching on TV and getting a large flatscreen off the wall mounting is simply too much like hard work.

In amongst all the talk of 'packages', 'stimulus' and 'growth spurts', which turns out to be much less fun than you think, was a discussion of Wonderboy George's magic fix for the British economy which as you may have noticed is about as lively as the parrot in the Python sketch. It is an ex-economy. His claim was that freezing council tax would help boost the economy, some £800 million in all, found apparently down the back of the Treasury sofa along with Domino's pizza menu, a leaky biro and an old remote control. But in the same interview, he asserted we must also cut the deficit which would not harm growth prospects, whilst planning to cut corporation tax further. Observe the strange logic here: cutting £40 billion of deficit spending from the government will have no effect on the economy, but £800 million will.  This is not a cake-having and eating scenario, this is having the cake, taking a photo of it, eating the cake, then printing ten colour copies of the cake and trying to pass them off as actual cakes to other people.

Asking for trouble 

Moreover no one has satisfactorily explained how cutting corporation tax is going to have any effect on the collapse in domestic demand and  vast debt burden. Judging by the FTSE 100 companies' behaviour, their principal aim at the moment seems to be shovelling as much cash into their senior executives' pockets, regardless of performance. In a period of deep recession and share price collapse, executive pay rose 32%, which means as a multiple of average earnings it's trebled in ten years. By all means cut corporation tax, but it's a bit like giving Pete Doherty a big bag of crack to look after, you have only yourself to blame.

This is not to say that the Labour party has anything remotely useful to offer in the current situation. Their economic cure all is that no one in the public sector should ever lose their job ever, even if a broken shop dummy would have better productivity.  I am probably making their programme sound more coherent than it actually is. As for the Liberals, they claim a mansion tax is the answer, but as we aren't living in a real life version of Downton Abbey, the lack of actual mansions in the UK seems to undermine their case.

A wise investment 

The Bank of England is about to start another round of quantitive easing, which is money-printing by another name; it is often described as the equivalent of helicopter dropping money onto the economy. Except you never hear anyone suggest doing exactly that: putting money directly in people's hands. I think it is because deep down politicians and economists feel that, for example, granting every single British taxpayer a sizeable cash credit that had to be used in three months would somehow be...cheating. Pouring billions into bankrupt banks, buying your own debt, all of this is acceptable policy. But the final logical step which would immediately kick start demand, the genuine money drop, is off limits. Perhaps there remains some deep seated mistrust about what we would do with the money: some people would no doubt spend it on frivolities like shoes or hats or perhaps just one very expensive hat. The rest of us would spend some, possibly on a wider range of goods and services than millinery, and save the remainder.  The net effect would be to boost domestic demand and help recapitalise the banks.

£200 billion of quantitive easing and the dead-parrot economy is only just about staying upright because someone nailed it to its perch.  Or you could have credited every single taxpayer with £7,692. Who would you trust with the money: yourself or those financial masters of disaster?

Dear Mr Osborne, I'd fire up the chopper if I were you.


(For more stats and numbers see this interesting article: Who eat all the QE pies?)