Why do the elite want us to leave the EU?
Category Archives: Tax avoidance
“IFS: UK’s richest people exploiting loophole to cut tax rate”
“More than 9,000 of the richest people in the UK collected more than £1m each in capital gains last year, exploiting a loophole that could result in them paying tax at a rate as low as 10%.
Economists at the Institute for Fiscal Studies (IFS) thinktank said wealthy professionals often chose to form companies and partnerships to be eligible for lower capital gains tax (CGT) rates rather than collect salaries that would be subject to the top rate of income tax.
HMRC data shows 9,000 people paid just £5.1bn in tax on £33.7bn of capital gains income in the latest financial year available. That works out at an average tax rate of 14.8%, lower than than the basic rate income tax of 20% that people pay on salaries of between £12,501 and £50,000.
Andy Summers, a tax expert and assistant professor at the London School of Economics, said that despite recent changes to tax rules, private equity fund managers were still able to receive most of their remuneration in the form of “carried interest”, taxed as capital gains instead of income. Other highly paid professionals can convert their income into gains by retaining profits inside their companies as they approach retirement.
“Capital gains are highly concentrated at the very top of the income distribution; the vast majority of reported gains go to people who received more in one year than a worker on the median wage would earn in their entire lifetime,” he said at an IFS conference in London on Tuesday titled “Inequality and the very rich: what do we need to know?”
Business owners can qualify for entrepreneurs’ relief, under which they can pay just 10% CGT when they sell all or part of a company. The standard CGT rate is 20%. This compares with the 40% income tax rate on salaries of between £50,001 and £150,000.
People recording gains of more than £1m each accounted for 62% of all capital gains receipts in the 2017-18 financial year, the latest available data set.
Mike Brewer, a professor of economics at the University of Essex and expert on inequality, who chaired the debate, said: “Capital gains are not counted as income when the Office of National Statistics, Department for Work and Pensions and Institute for Fiscal Studies estimate income inequality in the UK. This means that our impression of inequality or top income shares is overlooking 9,000 people all with at least £1m of capital gains, with an average capital gain of £3.7m, and a total capital gain of £34bn.” …”
“Super-rich prepare to leave UK ‘within minutes’ if Labour wins election”
Oh dear …austerity for the rich, that will be interesting!
HMRC doesn’t have enough staff to chase rich tax avoiders
Owl says: Well, that’s jolly convenient isn’t it!
“The tax office has been “swamped” with 5.7 million pieces of information about overseas bank accounts held by three million British citizens under the terms of a new international treaty, according to tax experts.
However, HM Revenue & Customs (HMRC) does not have enough staff to investigate the information, according to the tax consultancy BDO, so is instead blitzing the people named with speculative letters asking them to send details of their financial affairs.
The information is coming from 100 countries under common reporting standards (CRS) agreed by the international Organisation for Economic Co-operation and Development. The standards are designed to stop tax evasion, or avoidance, by making governments aware of overseas money held by their citizens. HMRC says in its annual report that the agreement has “created an unprecedented increase in the global transparency of offshore tax affairs”.
Richard Morley, a partner at BDO, says, however, that this flow of data is in danger of overwhelming the taxman.
Research by Pinsent Masons, a law firm, found that HMRC’s investigators last year made 540 requests to overseas authorities for information on the highest-net-worth individuals that it believed may be storing tens of millions of pounds abroad to avoid tax.”
Source: Times (pay wall)
How company debt (and greed and tax avoidance) will sink us all
“Corporate addition to high debt threatens to destabilise the world economy. Not my words – those of the International Monetary Fund.
A recent report by the IMF says that “in a material economic slowdown scenario, half as severe as the global financial crisis, corporate debt-at-risk could rise to $19 trillion —or nearly 40 percent of total corporate debt in major economies—above [2008] crisis levels.”
In other words, in an economic slowdown, many firms will be unable to cover even their interest expenses with their earnings. Countries most at risk are US, China, Japan, Germany, Britain, France, Italy and Spain.
One study estimated that in 2018 UK s FTSE 100 companies alone had debt of £406bn.
Sinking in debt
Low interest rates have persuaded companies to pile-up debt in the belief that they will be able to use it to maximise shareholder returns. The key to this is tax relief on interest payments.
Ordinary folk don’t get tax relief on interest payments for mortgages or anything else because successive governments argued that such reliefs distort markets and encourage irresponsible behaviour.
However, corporations get tax relief on all interest payments. Currently for every £100 of interest payment, companies get tax relief of 19%, the prevailing rate of corporation tax, which reduces the net cost to £81. The tax subsidy enables companies to report higher profits.
Companies do not necessarily use debt to finance investment in productive assets. The UK languishes near the bottom of the major advanced economies league table for investment in productive assets and also lags in research and development expenditure.
British companies appease stock markets by paying almost the highest proportion of their earnings as dividends. BHS famously borrowed £1 billion to pay a dividend of £1.3bn. Carillion used its debt to finance executive pay and dividends. Thomas Cook had at least £1.7bn of debt but that did not stop lavish executive pay and bonuses.
Fatal effects
Corporate debt facilitates profiteering and tax avoidance. Water companies have long used ‘intragroup debt‘ to dodge taxes. Typically, they borrow money from an affiliate in a low/no tax jurisdiction. The UK-based company pays interest which qualifies for tax relief and reduces the UK tax liability.
Many a tax haven either does not levy corporation tax or exempts foreign profits from its tax regime. As a result, the affiliate receives the interest payment tax free.
It is important to note that the company is effectively paying interest to another member of the group and no cash leaves the group. The inclusion of interest payments in the paying company’s cost base can also enable it to push up charges to customers, especially if has monopoly rights on supply of goods and services.
Thames Water is an interesting example here. From 2006 to 2017, it was owned by Macquarie Bank and operated through a labyrinth of companies, with some registered in Caymans.
During the period, Thames’ debt increased from £2.4bn to £10bn, mostly from tax haven affiliates, and interest payments swelled the charges for customers. Macquarie and its investors made returns of between 15.5% and 19% a year.
For the period 2007 to 2015, the company’s accounts show that it paid £3.186bn in interest to other entities in the group alone. Tax relief on interest payments reduced UK corporate tax liability. For the years 2007-2016, Thames Water paid about £100,000 in corporation tax.
Private equity entities use debt to secure control of companies and engage in asset-stripping. A good example is the demise of Bernard Mathews, a poultry company.
In 2013, Rutland Partners acquired the company and loaded it with debt, which carried an interest rate of 20%. This debt was secured which meant that in the event of bankruptcy Rutland and its backers would be paid before unsecured creditors.
In 2016, Bernard Matthews’ directors, appointed by Rutland, decided that the business was no longer viable and sought to sell it. However, they only sold the assets of the company which realised enough to pay secured creditors, Rutland and banks.
The big losers were unsecured creditors, which included employee pension scheme, HMRC and suppliers. The purchaser of the assets told the House of Commons Work and Pensions Committee that it offered to buy the whole company, including its liabilities, but the offer was declined by Rutland because by dumping liabilities it collected a higher amount.
What needs to change
There is some recognition that corporate addiction to debt poses a threat to the economy. Following recommendations by the Organisation for Economic Co-operation and Development, the UK has placed some restrictions on the tax relief for interest payments, but that is not enough.
An independent enforcer of company law is needed to ensure that companies maintain adequate capital. Companies need workers on boards to ensure that directors do not squander corporate resources on unwarranted dividends and executive pay.
The insolvency laws need to be reformed to ensure that secured creditors can’t walk away with almost all of the proceeds from the sale of assets and dump liabilities.
And finally, tax relief on debt needs to be abolished altogether.”
https://leftfootforward.org/2019/10/prem-sikka-how-companies-use-debt-to-line-their-pockets/
Surely not?
Nearly 75% of government contractors are based in tax havens
“Almost three-quarters of companies who have been given major government contracts have operations based in tax havens, according to a new report.
Value Added, published on Sunday by the thinktank Demos, reveals that 25 of the government’s 34 strategic suppliers – organisations that receive £100m or more in revenue from the government – operate in offshore centres.
According to estimates, they account for about a fifth of total central government procurement spend. Of these, 19 had operations in jurisdictions included on the EU’s “blacklist” or “greylist” of countries that are considered to be non-compliant with EU international standards for “good tax behaviour”, according to the report.
The Labour MP and former chair of the public accounts committee, Margaret Hodge, said it was “perverse that the government continues to pay significant sums of taxpayer money to big corporations that practise tax avoidance on an alarming scale”.
There are claims that aggressive use of tax havens can distort competition.
The Labour peer, Lord Haskel, added: “For too long large international tech companies have failed to pay their fair share of tax while being rewarded with government contracts, leaving British companies at a competitive disadvantage.”
The Demos report states: “Large multinational companies, for example, continue to squeeze their tax contributions ever lower: the OECD estimates that US$100–$240bn (£78bn-£186bn) is lost globally in revenue each year from base erosion and profit shifting by multinational companies.” …”
Where do profits go when British businesses are sold to foreign companies?
To disguise the fact that we are selling the family silver, these transactions are called “inward investment”. But how is tax levied and where do profits go?
And how come a Turkish pension fund can afford to buy the only British steel-maker left in this country when ours can’t/won’t?
A British windfarm, owned by a Spanish company is sold to an Australian company:
Macquarie buys $1.77 billion stake in mammoth UK offshore wind farm
A British steel company owned by an Indian company is likely to be sold to a Turkish military pension fund:
https://news.sky.com/story/turkish-military-pension-fund-plots-900m-british-steel-revival-11783143
The British-owned Morgan Sports Car company was sold to an Italian company:
https://www.independent.co.uk/life-style/motoring/morgan-motor-company-sold-italian-firm-bought-a8810156.html
Boots was owned by the Swiss who sold it to the Americans:
https://www.independent.co.uk/life-style/motoring/morgan-motor-company-sold-italian-firm-bought-a8810156.html
Sainsbury’s and British land sell British superstores to USA:
https://www.independent.co.uk/life-style/motoring/morgan-motor-company-sold-italian-firm-bought-a8810156.html
“The wealthy businessman who paid just £35.20 in tax”
“A wealthy businessman who lived a life of luxury paid just £35.20 income tax, a BBC investigation has discovered.
Frank Timis rented a £14,000-a-month penthouse and spent thousands dining in London’s finest restaurants.
But his personal tax return for 2017 shows he paid just £35.20 in tax, after claiming that he had hardly any income from his worldwide business empire.
Mr Timis’s lawyers say he has fully complied with all of his tax obligations.
Documents leaked to BBC Panorama and Africa Eye also reveal how Mr Timis managed to do this.
They show that in 2017, Mr Timis received payments totalling £670,000 from his offshore trust.
These were mainly payments called distributions, which should have been taxable. But shortly before he submitted his tax return, Mr Timis allegedly asked the trust to turn the distributions into untaxable loans.
A backdated loan agreement was created making the loans look legitimate.
John Christiansen, from the Tax Justice Network, said it looked like Mr Timis was dodging tax: “It all points to this being a manoeuvre to cheat the tax man. And, if that is the case, because it’s been done retrospectively, there seems to be prima facie evidence that this is tax fraud and it should be investigated.” …”
“UK and territories are ‘greatest enabler’ of tax avoidance, study says”
u”The UK and its “corporate tax haven network” is by far the world’s greatest enabler of corporate tax avoidance, research has claimed.
British territories and dependencies made up four of the 10 places that have done the most to “proliferate corporate tax avoidance” on the corporate tax haven index.
The UK ranked 13th on the list, which was published by the Tax Justice Network on Tuesday.
The shadow chancellor, John McDonnell, said the findings showed the government’s record on tax avoidance was “embarrassing and shameful”.
McDonnell added: “The only way the UK stands out internationally on tax is in leading a race to the bottom in creating tax loopholes and dismantling the tax systems of countries in the global south.
“The rot has to stop. While Tory leadership hopefuls promise tax giveaways for the rich, a Labour government will implement the most comprehensive plan ever seen in the UK to tackle tax avoidance and evasion.”
A government spokesman said tackling tax avoidance was a priority and the UK had “been at the forefront of international action to reform global tax rules”. …”
“Tories resisting efforts to allow scrutiny of secretive trusts, says Labour”
“The UK government has been accused of thwarting Europe-wide efforts to combat money laundering and terrorism by resisting measures to open secretive trusts to public scrutiny.
Under Europe’s fifth anti-money laundering directive, which comes into force next year, member states are supposed to give those with a “legitimate interest” a right to know what assets are owned by trusts and who the beneficiaries are. The Treasury is currently consulting on how it will implement the directive.
Labour says the government’s proposals, published this month, are “extremely restrictive” and will block enquiries by those who should have access to the data, such as journalists, campaigners and the victims of fraud.
Shadow Treasury minister Anneliese Dodds wrote to Philip Hammond on Thursday to urge a rethink. “Investigative journalists have done great work uncovering corruption,” she told the chancellor. “The UK government should not be blocking them from accessing important information.”
In the UK, vast tracts of land and property are controlled and passed from one generation to another using thousands of family trusts. They are used by the biggest landowning families, such as the Duke of Westminster, and by a number of current and former ministers to hold family fortunes. Investigations like the Laundromat series and the Panama Papers have revealed how such vehicles are also used to move and disguise fortunes derived from crime and the proceeds of political corruption.
Trusts are a favoured money-laundering tool because of the secrecy that surrounds them. There is currently no public register listing the names, beneficiaries or holdings of any UK trusts, but the new EU directive is designed to change this.
The tax office currently keeps a register of all trusts that pay UK tax. The new directive means that register will be expanded to cover all trusts, whether they pay tax or not. It will include those with UK resident beneficiaries, settlors or trustees, and foreign trusts that own property in the UK or have business dealings here.
The information will be accessible to law enforcement, to professionals with a duty to make money-laundering checks, such as lawyers, accountants and estate agents, but also, for the first time, to members of the public with a good reason for accessing the information.
However, the government’s consultation paper makes it clear that the Treasury is minded to take a cautious approach to information sharing. Those wanting access will need to already have evidence from another source linking the trust or its beneficiary to money-laundering or terrorism, and that evidence will have to be shared with the government.
Even then, the government reserves the right to refuse to share data if it impedes ongoing law enforcement investigations. Unlike freedom of information requests, the government intends to charge for access to the data. Its consultation paper suggests the charges could be significant, stating: “The government expects to apply fees proportionate to the costs involved in checking and compiling the information.” …”
“EU orders UK to recover illegal tax aid from multinationals”
It has been said this was one reason why some people were anxious for an early hard Brexit – and one company mentioned is the Daily Mail!
“BRUSSELS (Reuters) – Britain will have to recover millions of euros from some multinationals after EU antitrust regulators ruled on Tuesday that an exemption in a UK tax scheme was illegal.
The European Commission’s decision, following a 16-month investigation, is part of an ongoing crackdown against multinationals benefiting from sweetheart tax deals offered by EU countries.
The EU investigation focussed on Britain’s Controlled Foreign Company (CFC) rules, which are aimed at attracting companies to set up headquarters in Britain and discourage UK companies moving offshore.
The EU competition regulator said an exemption in the scheme for interest income earned by offshore subsidiaries between 2013 and 2018 – which had been criticised by tax campaigners as a major loophole – flouted EU laws.
“The UK gave certain multinationals a selective advantage by granting them an unjustified exemption from UK anti–tax avoidance rules. This is illegal under EU State aid rules,” European Competition Commissioner Margrethe Vestager said.
The Commission said the exemption could be justified if interest payments received from loans did not result from British activities. However, if they were derived from UK activities, the exemption would not be justified.
The Commission did not say which multinationals are affected nor did it give an estimate for the amount Britain would recover, leaving it to UK tax authorities to reassess the tax liabilities.
BBA Aviation, Chemring, Daily Mail & General, Diageo, Euromoney, Inchcape, London Stock Exchange, Meggitt, Smith & Nephew and WPP are some of the companies which have mentioned the EU investigation in their accounts.
Vestager has already ordered Apple, Starbucks, Fiat Chrysler and several other multinationals to pay back taxes totalling billions of euros to various EU countries.”
https://uk.reuters.com/article/uk-britain-eu-subsidies-idUKKCN1RE0WB
Tax changes: Poor loose out big time, rich gain
“… In total, there are 35 tax, benefit and pension changes coming into effect on 6 April, plus the increase in the minimum wage from 1 April. The winners are those in higher income bands – up to £100,000 – who will gain significantly from the rise in tax thresholds, although some of that will be pegged back by NI rises.
The losers are those on very low incomes, who gain little from the increase in the personal allowance, and whose benefits will be frozen again. An ongoing work and pensions select committee inquiry suggested affected households will be between £888 and £1,845 worse off in real terms in the coming tax year as a result of the various caps and freezes since 2010-11. …”
“Tories cling on to tax exiles’ right to vote for life despite bill delay”
“The government has said it remains committed to passing a law that could allow tax exiles the right to vote and donate to political parties for life, after it failed to pass through the House of Commons.
MPs, including the serial filibusterer Philip Davies, tabled dozens of amendments to the overseas electors bill for debate on Friday, resulting in it being dropped after parliamentary time to discuss it ran out.
Under current law, British expatriates can remain on the electoral roll, allowing them to vote and make donations, for 15 years after they leave the UK. The overseas electors bill proposed removing the time limit, giving all expats the right to vote and donate for life.
Speaking on behalf of the government, the cabinet office minister Chloe Smith told the House: “The government remains committed to scrapping the cap.” The Conservative party pledged to bring in the law in its 2017 manifesto.
Anti-corruption campaigners and Labour MPs had expressed alarm at the bill. Margaret Hodge, the former chair of parliament’s public accounts committee, described the bill as “shocking” and warned it would “increase tax haven billionaires’ influence and allow dirty money donations to political parties”.”
Want to know which tax haven companies own property in your town?
“IN September 2015 Private Eye created an easily searchable online map (see below) of properties in England and Wales owned by offshore companies. It reveals for the first time the extent of the British property interests of companies based in tax havens from Panama to Luxembourg, and from Liechtenstein to the South Pacific island of Niue. Most are held in this way for tax avoidance and often to conceal dubious wealth.
Using Land Registry data released under Freedom of Information laws, and then linking around 100,000 land title register entries to specific addresses, the Eye has mapped all leasehold and freehold interests acquired by offshore companies between 2005 and 2014.
Using this data the Eye published a series of exposes of the companies, arms dealers, oligarchs, money launderers and others who use offshore companies. Now Private Eye, using the same data, is also publishing a database of all properties acquired by offshore companies from 1999 to 2014, showing the address, the offshore corporate owners (some have more than one) and, where available, the price paid.
To download the 1999-2014 database,follow instructions on the website
Download the FREE Tax Haven Special Report follow instructions on the website.
No anti-corruption move on property ownership since promised in 2016
“More than £100bn of property in England and Wales is secretly owned, new analysis suggests. More than 87,000 properties are owned by anonymous companies registered in tax havens, research by the transparency group Global Witness reveals.
The analysis reveals that 40% of the properties are in London. Cadogan Square in Knightsbridge, where the average property costs £3m, hosts at least 134 secretly owned properties. Buckingham Palace Road is also home to a large number, with a combined estimated value of £350m.
The revelation comes as parliament’s joint select committee on the draft registration of overseas entities bill meets on Monday to hear evidence on the impact of property ownership by anonymous companies.
The government committed to introduce a register of UK property owners at its anti-corruption summit in 2016, but since then progress has been slow.
“It’s increasingly clear that UK property is one of the favourite tools of the criminal and corrupt for stashing and laundering stolen cash,” said Ava Lee, senior anti-corruption campaigner at Global Witness.
“This analysis reveals the alarming scale of the UK’s secret property scandal.”
The combined value of the properties was at least £56bn, according to historical Land Registry data at the time of their acquisition. Once inflation is factored in this would exceed £100bn.
Some 10,000 of the properties are in Westminster, while almost 6,000 are in Kensington and Chelsea. Camden is home to more than 2,300 of the anonymously owned properties while almost 2,000 are in Tower Hamlets.
Global Witness says its investigations have shown how criminals and corrupt politicians use the UK property market to hide or clean dirty cash, and to secure safe havens for themselves and their families.
In 2015 it revealed how the mystery owner of a £147m London property empire owned via a network of offshore companies could be linked to a former Kazakh secret police chief accused of murder, torture and money-laundering.”
Government pulls bill which would have uncovered money launderers
“Ministers have pulled a financial services bill from the House of Commons, fearing the government was almost certain to be defeated on an amendment requiring Jersey, Guernsey and the Isle of Man to clamp down on money laundering.
The Conservative MP Andrew Mitchell and Labour’s Margaret Hodge want the crown dependencies to introduce public share ownership records by December 2020, which the three territories are resisting.
Mitchell said the government had pulled the bill “in face of certain defeat” because it was backed by a group of rebel Tories as well as Labour and the other opposition parties. But the former cabinet minister added that the amendment would be put to the vote whenever the bill was resubmitted.
Hodge said the government had taken an “outrageous step” to pull the bill because “they knew we commanded a majority. I hope the government will accept our proposals but if not we will continue to campaign for public registers.”
Anti-corruption campaigners believe public records of share ownership would restrict the use of anonymous offshore companies by terrorists, dictators, corrupt politicians and criminals. …”
“MPs attack ministers over delay to tax havens’ public registers”
You can guess the rest of the article…..
Tories welcome tax haven stand at their conference
Hot on the heels of this story about Swire lauding a company that is registered in the Cayman Islands:
comes this nugget:
Hugo meets Exmouth’s Tristram – and praises the company he works for – incorporated in the Cayman Islands
Nice story about Swire meeting Tristram Harris from Exmouth:
“Tristram, from the Merchant Exmouth, was invited to the House of Commons to celebrate the 200th general manager appointment from Stonegate’s Pub Company’s pool of home-grown talent, having successfully completed the company’s award winning ‘Accelerator’ programme.”
http://www.exmouthjournal.co.uk/news/bar-to-boardroom-for-tristram-1-5713102
At least it would be nice if Stonegate Pub Company wasn’t incorporated in the Cayman Islands. And its directors were not all non-Devon based and with fingers in many, many pies and pints.
East Devon Watch 