Wednesday, 29 August 2012

The problems with taxing wealth

The beast is hungry:

In an interview with the Guardian newspaper, Mr Clegg appeared to highlight differences over fiscal policy, by suggesting the government could go beyond his own Liberal Democrats' current policy for a "mansion tax" on properties of a high value.

He said: "In addition to our standing policy on things like the mansion tax, is there a time-limited contribution you can ask in some way or another from people of considerable wealth so they feel they are making a contribution to the national effort?" he said.

Whilst it is a big Lefty wank fantasy to be able steal a chunk of what someone has accumulated during their lifetime, the reality is wrought with problems:

1. Liquidity - my wealth, if you can call it that, consists of the shares I own in my business, my pension fund, and housing equity. I don't have any cash - really, I'm virtually penniless but I have assets. The problem is with these assets are that they are illiquid and I'm not going to be able to realise cash from them in a hurry to pay a wealth tax. People don't tend to have large amounts of cash sitting around because it could be generating a better return elsewhere, be it in property, classic cars, yachts, fine art, shares, gold, business ventures, or whatever.

2. Wealth creates income - the shares in my business (hopefully) give me an income in the form of dividends. My pension fund will also give me an income when I retire. So taking away some of this wealth now reduces my income now and in the future and with it, any tax that would be due on it. 

3. Stability - arbitrary tax grabs to pay for gross government profligacy are a massive disincentive for investment in this country. If the government does it once then they will undoubtedly do it again and again. No one is going to want to set up shop here if they believe they'll end up as a piggy bank for the government to raid at will.

In short, you're going to struggle to generate significant amounts of tax revenue from wealth without hitting future revenues and investment. This is short-termism at its worst. Fuck off Clegg.

Tuesday, 28 August 2012

Magic money tree found in Bristol?

The living wage is rearing its ugly head again:

LABOUR'S mayoral candidate Marvin Rees has promised to introduce a living wage in Bristol if he gets elected to the figurehead post in November.

He has pledged to bring in a rate of not less than £7.20 an hour for all council employees and hopes it will be extended across all firms and organisations throughout the city.


But it gets better:

He said: "Every council employee who currently earns less than £7.20 per hour will be raised to the living wage with immediate effect.

"Following that, as every council contract is re-tendered each company providing services for Bristol must include paying a living wage of at least £7.20 per hour for any person working on those services."

Somehow, Bristol City Council found a spare million for a one-off payment for the low paid recently but this is a permanent increase with the additional pension and social security costs that go with it, and yet no corresponding increase in productivity or other benefit for council tax payers. Not only that, there is the double whammy of making contracted services like cleaning even more expensive for the council as the costs get passed on to the customer. This is a council like many others that has been forced to make long overdue cuts and is still trying to recover several million that it invested in Icelandic banks, so where is the money coming from? Well Rees hasn't costed it so either he'll have to find some more things to cut or put up council tax, although I suspect that he will end up shaking the branches of Labour's magic money tree borrowing to "invest". A classic example of a Labour politician trying to buy votes with no regard to those who will ultimately have to pay for his profligacy.

Monday, 20 August 2012

Social/Economic Cleansing

A good idea from Policy Exchange:

Selling expensive social housing as it becomes vacant could create the largest social house building programme since the 1970s. The sales would raise £4.5 billion annually which could be used to build 80,000-170,000 new social homes a year and reduce the housing waiting list by between 250,000 to 600,000 households in five years.

Sell the expensive property to fund additional, cheaper ones - more housing that we apparently need and creates jobs building them. Someone has actually bothered to come up with a costed plan that helps with unemployment and gets people on low incomes off a waiting list and into acceptable accommodation. Who would argue against that?

   
Oh dear, the left have gone fucknuts over this with the likes of John Prescott claiming it to be "social cleansing" and there's 900 or so comments like the one above in the Guardian article. Two things are important here; the plan is to sell off vacant properties, you know, those without anyone living in them, and second, it is an idea from a think tank, not Tory or coalition policy.

What we're seeing here is pure tribalism; that Policy Exchange is conservative and right-leaning is enough for the left to instantly shut down the debate regardless of the merit of any of its studies. Expect the Thursday Polly Toynbee article in the Graun to cover this with references to apartheid, cleansing, ghettoisation, and comparisons with the forced-repatriation policies of the far-right.

Tuesday, 14 August 2012

38 Degrees Fuckwittery

Here's my response to online activists 38 Degrees and their petition to get Google to pay its "fair share" of tax, a reaction to a flawed and discredited article in the Telegraph recently. They say:
By sending money offshore Google’s revenue and profit here in the UK falls. That seems to be part of the reason Google recorded a loss in the UK last year.
I say:

Your petition was based on the Google UK Ltd results. Google UK provide marketing and R&D services to Google Ireland Ltd and Google Inc., that is to say that their only two customers are other Google group companies. The value of these services, or what the company turned over was £395,757,534. To provide these services, Google UK incurred the following expenses in 2011:

Advertising and promotional expense - £105,474,648
Professional services - £9,815,144
Auditor's remuneration - £55,000
Stock based compensation expense - £51,457,135
Depreciation and amortisation expense - £5,748,424
Employee benefit expense - £190,644,447
Other administrative expenses - £53,667,487

Total - £416,862,285

Quite simply, the company made a loss because its expenses were greater than its income. Substantial expenses relate to employee costs (employee benefit and stock compensation), which is probably a good thing, keeping people gainfully employed. There is no suggestion that Google UK is sending money offshore, quite the opposite in fact noting that its revenues (i.e. the flow of income into the UK) come from Ireland and the US.

I was also amused at the the following on the petition page - "Originally this petition was published using mistaken information from The Telegraph." Kind of invalidates the whole thing really.

Wednesday, 8 August 2012

Revenue v. profit for dummies*

Dave is the sole director and owner of 100% of the shares of Dave's Widgets Limited which employs him and two other people. In 2010, he sold £100,000 of widgets. That was his revenue (also known as sales or turnover). Now there are costs involved with making widgets. For 2010, these were:

Raw materials - £20,000
Rent - £5,000
Utilities (power, water, etc.) - £2,000
Sales/marketing - £3,000
Staff salaries - £30,000
Dave's salary - £20,000
Total - £80,000

Deducting the above from the revenue figure gives you £20,000. That's Dave's operating profit or earnings before interest and tax (EBIT). Since this is simple example, we'll forget about interest and look at tax. In the UK, corporation tax would be due at a rate of 20% on this £20,000, so £4,000. Take that away from the £20,000 leaves £16,000, the net profit.

Fast forward to 2011 and there's a shortage of raw materials, the landlord is being an arsehole, gas and electricity have gone up yet again, and a campaign to bring in more sales didn't work and revenue remains static at £100,000. Overall costs are now as follows:

Raw materials - £30,000
Rent - £10,000
Utilities (power, water, etc.) - £4,000
Sales/marketing - £6,000
Staff salaries - £30,000
Dave's salary - £20,000
Total - £100,000

Now Dave has no operating profit and therefore nothing to tax. Corporation tax due is zero. So what's my point? Well the examples above demonstrate the difference between revenue and profit and that a company's revenue has no bearing on corporation tax that it may or may not pay.

This blog post is in response to an article in the Telegraph today with its failings covered nicely by FCA Blog. There's also a still incorrect but slightly less mangled version of the article here.

* UK Uncut, Occupy, and Matt Warman.

Monday, 6 August 2012

Voluntary work experience not slavery shocker

From the BBC today:
A graduate has lost her legal challenge to a government scheme which she says forces people to work without pay.
Cait Reilly, a University of Birmingham geology graduate, had argued that making her work unpaid at a Poundland store for two weeks or risk losing her benefits was a breach of human rights.
Lawyers representing the pair were trying to get their back-to-work schemes declared unlawful under article four of the European Convention on Human Rights, which prohibits both forced labour and slavery.
I remember this case from when the Guardian gave her an article back in January. Ms. Reilly was incorrectly told that the back to work programme was mandatory by the Job Centre. Having arranged her own placement, which you are entitled to do and still claim job seekers allowance, surely the sensible course of action would have been to go through the complaints procedure to resolve the conflict?  Perhaps her MP could have got involved if the complaint fell on deaf ears? Nope, she went on a crusade and got the human rights lawyers involved rather than trying to deal with a minor fuck up. It was clear that she was after a fight and wanted to make a political point rather than trying to sort things out. If she wonders why she is struggling to find work, perhaps it's because she seeks conflict and is unwilling and/or unable to deal with a problem calmly and rationally. Who the fuck would want to take on someone like that as an employee?

Friday, 3 August 2012

Thursday, 2 August 2012

Wasting police time...and a solution

So, some people have said nasty things on Twitter this week that got in the news:
Police said the teenager was given a harassment warning before being bailed pending an investigation into other communications on his Twitter account.
Shortly after missing out on a medal on Monday, Daley retweeted the message from the boy which said: "You let your dad down i hope you know that."
He then responded to the tweet by posting: "After giving it my all...you get idiot's sending me this..."
That's obviously not a nice thing to say given that Tom Daley lost his father to cancer not so long ago, but given that the sender is likely after a reaction, why retweet it to nearly a million followers? To defend Tom, I suspect that it was a heat of the moment thing and besides, it wasn't him who complained to the police, somebody else was offended on his behalf...

The case that I found more interesting was that of Kirstie Allsopp:
Kirstie Allsopp, the television presenter, has reported two teenage girls to the police after they sent her abusive online messages telling her to “squat on a Christmas tree”.
The two 15-year-old schoolgirls directed a further string of aggressive and bullying taunts to the Location, Location, Location host including instructions on how to kill herself. They also told Miss Allsopp she was “like a mince pie – bland and crumbly”.
Let's see the build up to this and how Miss Allsopp handled the situation:


Ah, so instead of blocking the users after the first abusive tweet, she put a shout out to her 235k follows to try and track them down.


Two days later and she's still out for revenge!


But it could have been dealt with without bothering the police Kirstie.  You could have stopped all of this quickly and quietly by blocking the pair and perhaps reporting them to Twitter for good measure. But no.

I don't believe for one minute that Miss Allsopp is either stupid, naive, or a delicate flower that needs her sensibilities protected, so the only reason for her actions is attention seeking. What is particularly telling is the following in the Telegraph article published on 1st August:
Neither Merseyside Police nor the Metropolitan Police have yet to receive Miss Allsopp’s report.
As Twitter is a fairly new phenomenon, I reckon that the police need a bit of direction in dealing with these sort of complaints.  Here's my slant on it:

1. If you don't block the user for the first tweet that you find offensive, there's no case.
2. If you don't report the user to Twitter for abuse then there's no case.
3. If you retweet the offending tweet or otherwise incite your followers to take any sort of action against the abusive user then there's no case.
4. If the abuse is not directed at you (and this unfortunately requires a change in the law as someone can be offended on someone else's behalf and it can still be a crime) then there's no case.

If you ignore points 1 to 4 then you're nicked for wasting police time. A few cases of this given high profile in the papers would stop all of this shit from the likes of attention seeking Allsopp and the professionally offended. You're adults - fucking deal with it. The police have far better things to do.