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Country Rankings - United Kingdom


  • Sep 06, 2017   United Kingdom: steady

    Turning to the UK now, and at least the Conservatives, the party of power since 2010, can blame the problems with the tax credit system on the Labour Party, this being one of former Chancellor and Prime Minister Gordon Brown's signature measures. But as far as the last seven years of tax policy are concerned, they've only got themselves to blame for the huge levels of uncertainty dogging the UK tax regime. For business taxpayers in the UK, there has been plenty to cheer about tax-wise. This includes the substantial cut in corporate tax, which has fallen from 28 percent in 2010, to 19 percent this year, with yet more reductions to come. But, undeniably, there has been much chop and change in tax legislation and regulations, thanks largely to the announcement of, in effect, two Budgets per year, and sometimes three. Most taxpayers would probably agree that keeping up with one annual budget's worth of changes is hard enough. And, of course, the decision to leave the EU was made on the Conservatives' watch, which is the elephant in the room that everybody wants to talks about. Under such circumstances, the UK needs a safe pair of hands in Number 11, the official home of the Chancellor of the Exchequer. Somebody who can keep the excitement level down, and who isn't afraid to be labeled as a bit dull. Enter "spreadsheet Phil" Hammond, who has promised to bring tax stability to a nation rocked to its political foundations by recent events. But can he be trusted to deliver, or, more fittingly perhaps, to not deliver? Well, he doesn't possess an unblemished track record. His proposed National Insurance contribution hike for the self-employed was, appropriately enough given the Conservative Party's chosen color, a bolt from the blue. And the aftermath, when Prime Minister May pulled rank and had the measure shelved, was hardly Hammond's finest hour. But he has managed to dial back the razzmatazz and rabbit-out-of-hattery that accompanied many of the fiscal announcements of his predecessor, George Osborne. We must wait for the Autumn Budget to find out. But for a historically sea-faring nation, perhaps maritime phraseology is appropriate here. Steady as she goes is what taxpayers want. Not tacking into the wind, first one way, then the another, only to end up in the middle of the storm.
    Source: https://www.tax-news.com/news/Hammond_Promises_British_Firms_Stable_Tax_Policies____75122.html


  • Aug 22, 2017   United Kingdom: presumptuous

    We move on from new tax questions now to ones of an older provenance – tax avoidance by multinational enterprises – and from a tax point of view, Diageo's recently published annual report was revealing for a couple of reasons. First, it showed how large multinational companies are more often than not embroiled in at least one tax dispute across the many jurisdictions in which they operate. Second, in Diageo's case, one of these tax disputes concerned the United Kingdom's Diverted Profits Tax (DPT). And this development was interesting because this was one of the first times that the UK tax authority, HMRC, has assessed DPT against a company. The next development of interest will be what happens next in this dispute. And doubtless other multinationals with potential exposure to this charge will be keenly watching how it unfolds, with a view to strengthening their own defences against the tax. However, they'll need a long attention span. Because under the DPT legislation, after a taxpayer is issued with a DPT payment notice (the DPT is a "pay first, argue later" tax), there is a 12-month review period during which the charge may be adjusted. At the end of the review period the business has the opportunity to appeal against any resulting charge, potentially prolonging the dispute further, although the review period can be brought to a conclusion earlier with the agreement of both parties. It is unsurprising that, given the sum of money at stake, Diageo has chosen to pursue an appeal here. However, some tax experts have wondered, given the wide scope of the DPT legislation, and the fact that the odds seem to be stacked in HMRC's favor, whether taxpayers would be prepared to defend their tax positions if relatively small sums were involved. Indeed, HMRC's Accelerated Payment Notices (APN), under which those accused of using aggressive tax avoidance schemes must also pay up before appealing, has turned out to be pretty successful, and you could say that with the DPT regime, the APN scheme has effectively been extended to large corporates. It could be argued that the DPT and APNs load the dice too much in favor of the tax authority at the expense of potentially innocent taxpayers, that it presumes guilt before innocence. But hasn't it always been thus? Like governments and sin taxes, tax authorities often profit from your mistakes. Indeed, you could easy accuse them of having a vested interest in tax complexity, because the more complicated it is to complete your tax return, the more likely you are to make mistakes and be fined.
    Source: https://www.tax-news.com/news/Diageo_Reveals_Tax_Disputes_In_France_UK____75021.html


  • Aug 15, 2017   United Kingdom: sinful

    It's probably reasonable to say that governments around the world have an uncomfortable relationship with sinners. By which I mean those who prefer a chocolate cake for desert, rather than an apple, or who end the working day with an ice-cold beer and a cigarette rather than a pilates class and a sprout smoothie. Governments feel they have a role to play in discouraging people from indulging themselves into an early grave, so they tax alcohol and tobacco products – often very heavily – and, increasingly, are taxing food and beverages according to its sugar content. But, the dilemma is, governments collect enormous sums of revenue from sinners. Indeed, they have almost come to rely on them to make budgetary ends meet. So treasury ministers must secretly dread the day coming when people kick the habit and turn to pilates and sprout smoothies en masse. Recent evidence on this dependence on sin tax revenue emerged recently from the United Kingdom, where the Institute of Economic Affairs said in a recent paper that sin taxes have become a "cash cow" for the Government.  According to the IEA's paper, revenue from so-called sin taxes will total GBP24.7bn (USD32bn) by 2018, with the new sugar levy expected to raise GBP500m per year. This, it is argued in the paper, is more than enough to offset the undesirable effects of smoking, alcohol consumption, and unhealthy diets. But more shocking perhaps was the IEA's inference that the Government has a vested interest in people maintaining their bad habits, because they tend to die off sooner and therefore the state doesn't have to look after them in their old age. A wee dram 'afore ye go, anyone?
    Source: https://www.tax-news.com/news/UK_Sin_Taxes_Now_A_Cash_Cow_For_Government_Report____74970.html


  • Aug 09, 2017   United Kingdom: toxic tax

    We're told in many countries that owners of diesel vehicles (perhaps "keepers" is a better description, since hardly anyone actually "owns" a car anymore) won't be punished with punitive taxes in the wake of the "dieselgate" scandal and the realization that this particular fuel, when fed into an internal combustion engine, produces some very nasty toxins. And I should hope not. After all, it was the Government in many countries that encouraged people to purchase (okay, acquire) diesels because of their superior fuel economy. Therefore, it would be rich of them in the extreme to whack those who took the advice in good faith. Instead, new incentives to encourage drivers to get rid of their diesel vehicles are being talked about in France and the United Kingdom, which have just announced brave plans to ban the sale of gas and diesel-powered cars by 2040. And this seems like a fairly reasonable response. Still, I fear that some governments just won't be able to resist the temptation to slap new or additional taxes on diesel vehicles and their owners. Indeed, recent reports suggest higher diesel taxation will be announced in the UK by the end of this year. Not only this, there is the risk that taxes based on vehicle emissions will rise after the introduction of recalibrated tests. EU car makers certainly aren't kidding themselves. Better put the hours in if you want that Tesla though.
    Source: http://www.tax-news.com/news/EU_Car_Makers_Fear_Tax_Hike_For_New_Cars____74881.html


  • Aug 02, 2017   United Kingdom: action!

    It's been another mixed bag of a week for the United Kingdom. On the one hand, corporate taxpayers will have welcomed the publication of an updated 2017 Finance Bill, after the previous version became a casualty of Prime Minister May's decision to call a snap election. This should go at least a little way towards soothing concerns about tax uncertainty (if only a teeny weeny bit). In addition, many small businesses, freelancers, and contractors probably exhaled a sigh of relief when they heard the news that the Making Tax Digital project had been further postponed. But then there are the negatives, and unfortunately, they continue to be no trifling matters. The perception that the UK Government has no Brexit strategy was heightened again after pictures emerged of a folderless Brexit Secretary David Davis seated opposite EU negotiators behind bundles of documents. The camera doesn't always show the whole picture, however, and Davis could have had a suitcase full of papers just out of shot, ready to stun Michel Barnier with an intricately detailed Brexit plan which left no stone left unturned. Nevertheless, many taxpayers and business representatives in the UK are growing increasing worried that the Government has a rather blasé attitude to Brexit, and Trade Secretary Liam Fox's assertion that securing a post-Brexit trade deal would be a "simple" matter, doubtless quickened a few pulses in UK PLC. Fox may well turn out to be right. But it's probably fair to say that most businesses in the UK, especially those doing substantial volumes of business in the EU, don't share his level of confidence. Still, I want to focus on a positive, rather than engage in a round of Brexit-bashing. Figures from HM Revenue and Customs show record take-up of the UK film and television tax incentive last year, which suggests that if nothing else, the UK film industry is in good shape. The interesting thing to note here is that the UK had to run these tax breaks past the European Union before the measure could be introduced, in case they failed the state aid test. So when (if?) the UK finally withdraws from the EU, it presumably won't be required to seek Mother Brussels's permission to support other industries or economically depressed areas of the country with similar tax incentives. Indeed, a clean break from the EU's legal jurisdiction would give the UK a great deal more freedom over its tax regime. Such freedom would of course have to be exercised wisely by the Government and Parliament of the day, and that's by no means guaranteed. But if things do go wrong, then at least the country's movie theaters should be well attended.
    Source: http://www.tax-news.com/news/Record_Demand_For_UKs_Tax_Breaks_For_Creative_Industries____74783.html


  • Jul 06, 2017   United Kingdom: restless

    Now, I'm almost tempted to say that like flat taxes and the internal combustion engine, the United Kingdom might also have had its day. And if I did, it would only be in jest of course, Brexit and all that being such a sensitive issue. But I'm struggling to recall a time when an advanced economy experienced such legislative and political uncertainty, so it's difficult to ignore. But where does one start? Brexit? The budget deficit? Austerity versus growth? Trade? And what about the current government? Will it survive? And if so, for how long? One aspect that seems to have been forgotten in all of the hullabaloo over Brexit and trade is devolution, which continues to stream along beneath the surface. For example, in May this year, Wales enacted its first devolved tax, in the form of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill. Meanwhile, north of the border, Scotland has the Scottish Rate of Income Tax, and is consulting on a new air passenger duty. But as I've noted before, less centralization and more power to the people is a fine concept, but in the UK's case it poses practical difficulties on the ground. For surely one set of taxes is preferable to calculating multiple sets. Indeed, tax experts have said that this peculiarly British half-way house between a unitary and a federalized tax regime is going to cause confusion. The Association of Taxation Technicians for one has warned Scottish taxpayers to expect incorrect tax bills. A change is as good as a rest, as they say. But in the UK's case, perhaps a bit of rest would be preferable to yet more change. Taxpayers, including those with substantial investments in the country, are certainly getting restless.
    Source: http://www.tax-news.com/news/EUUK_Free_Trade_Deal_Uncertain_Says_UK_Brexit_Secretary____74558.html


  • Jun 27, 2017   United Kingdom: wait and see

    Perhaps one ray of light exists for taxpayers attempting to make sense of the United Kingdom's chaotic political backdrop – there won't after all be yet another "emergency" summer budget. Taxpayers have no doubt had quite enough of summer budgets, autumns statements, and spring announcements, and therefore the decision by Chancellor of the Exchequer Philip Hammond to forgo a post-election fiscal statement in favor of waiting for the scheduled Budget towards the end of this year could be interpreted as a sensible move, allowing time for the dust storm to settle. On the other hand, it could be argued that if there was ever a need for an emergency budget, it is now. For if attempting to leave the European Union with a weak Government wrought with internal divisions, and with a leader who in political terms looks increasingly like a dead woman walking, isn't an emergency, I don't know what is! Still, perhaps the pragmatic "spreadsheet Phil," as the Chancellor is rather unflatteringly known by his colleagues, has come to the conclusion that doing nothing, at least for the time being, is preferable to doing something that could quickly backfire (the shambles around raising the UK's social security levy springs to mind). Indeed, as the Government backfires its way through the Brexit negotiations, it's in danger of earning its own unflattering nickname from its EU neighbors: chitty chitty bang bang. It's to be hoped that the wheels don't completely fall off. As has been pointed out here before, the only other country to successfully leave the EU was Greenland. And the fact that this particular Grexit took years to come to fruition when the only serious issue at stake was fishing rights doesn't bode well for Brexit. Which is probably why the UK's cabinet minister for Brexit, David Davis, has more or less decided it's not worth trying to extract concession from the EU viz-a-viz the Single Market and Customs Union, and that it would be a better use of time trying to arrive at a mutually agreeable free trade agreement instead.
    Source: http://www.tax-news.com/news/UK_Tax_Burden_To_Rise_Chancellor_Confirms____74508.html


  • Jun 13, 2017   United Kingdom: wobbly

    I'm still not entirely sure whether last week's general election in the United Kingdom was a democratic exercise, or a mass psychological experiment, so often did Prime minister Theresa May try and penetrate the electorate's skulls with the mantra "strong and stable" in the hope they would vote Conservative. If it was, it failed. Weak and wobbly is what they voted for, if anything. Almost needless to say, these are hardly ideal foundations on which to conduct the Brexit negotiations. Indeed, the whole idea behind the calling of the snap election was to strengthen the position of the Conservative Government, based on a healthy lead then in opinion polls, and by extension the UK's hand at the Brexit negotiating table. This episode heaps yet more doubt on the direction of UK tax policy. The 2017 Finance Bill has already become a casualty of the election, and corporate taxpayers will be interested to hear if a number of business-related measures will make it back into the second bill, assuming one is introduced. Furthermore, the new deliberations about what sort of Brexit the UK should aim for has ramifications for long-term tax policy, since the strength of the remaining ties the country has with the European Union will determine such important things as legal supremacy, the jurisdiction of the European court, existing and future case law, and the applicability of EU tax legislation and regulations, notably in the area of value-added tax. There is already some evidence that these events are worrying businesses in the UK, which could obviously have repercussions for private sector investment in the country. According to a recent survey by EY, the UK, the US and Australia are now top tax risk jurisdictions as a result of legislative and regulatory uncertainty. And that they're ranked alongside India and China in the survey shows just how chaotic things have become. Another ominous sign was the result of the latest monthly business confidence survey from the Institute of Directors, which was published in the aftermath of the election result. This showed that 57 percent of the 700 respondents were either quite pessimistic or very pessimistic about the prospects for the UK economy over the next 12 months, against 20 percent who were optimistic. This translated to a "net confidence" score of -23, whereas last month it was -3. Compare and contrast that to France, where Emmanuel Macron has apparently breezed into power like a breath of fresh air, backed up by what is likely to be a dominant majority for his fledgling En Marche! party as a result of recent legislative elections. It wasn't so long ago that we were writing how France was being led by a government seemingly determined to tax the economy out of existence, and how it therefore faced a bleak and uncertain future. Meanwhile, the UK, brash and confident, was laying out the red carpet for France's entrepreneurs and executives, having announced a series of pro-business tax policies. My word, how things can change! If there's a lesson to be learned here, it's that nothing should be taken for granted. Include in that the reliability of technology. Anybody unlucky enough to have been booked to take a British Airways flight at the end of last month will be all too painfully aware how dependent civilization has become on computer networks. It's fine when such systems have backs-ups, but if they don't, or these fail too, cue chaos, paralysis, and sleepless nights on departure hall floors. The business of taxation has also become largely computerized now, a development which has been mostly welcomed by taxpayers. Tax returns can now be downloaded and submitted to the tax authority with a few mouse clicks, so there's no need to worry about vital tax information going missing in the post. Except that tax authority computer systems and databases seem just as susceptible to glitches, error, and fraud as any other network — often with devastating results. Take Australia, for example. In February 2017, the Australian Tax Office experienced a major systems outage that it took four days to recover from, and this came just weeks after a similar failure in December 2016. In the US, the Internal Revenue Service's computer systems have seemed particularly vulnerable to fraud, with around 200,000 taxpayer accounts having been comprised in a tax refund scam last year, and billions of dollars in tax credits having been paid out as a result of fraudulent claims and error. And the UK Government is still counting the cost of a botched IT system used to administer the income tax credit system, a public-private sector initiative which was recently described as "catastrophic" by a parliamentary oversight committee.
    Source: http://www.tax-news.com/news/UKs_Hung_Parliament_Puts_Some_Proposals_In_Jeopardy____74447.html


  • May 02, 2017   United Kingdom: clear as mud

    The United Kingdom is a prime example of this right now. Luckily for the country, it is still relatively highly regarded by international investors, as reflected in its impressive ranking of 10th out of 190 jurisdictions in the 2017 Paying Taxes Index. But the country really is not doing itself any favors. If the instability caused by a multitude of elections, including on such fundamental issues as its EU membership and the integrity of nation itself, wasn't enough to deter potential investors, there is the huge shadow cast by the Brexit process itself. And just when you thought the waters couldn't be muddied any further, along comes another election, and speculation that the Government could raise taxes in yet another Budget statement this summer. It's quite spectacular how the successive Conservative-led administrations in power since 2010 have undermined their good work on corporate tax with an almost compulsive desire to tinker with the finer points of tax legislation and regulations. Indeed, there has been an inverse relationship between the level of corporate tax and the length of annual (sometimes semi-annual) finance bills. While the corporate tax rate has fallen considerably, finance bills have mutated into outsize legislative monsters, with more fine print than an insurance policy. And the figures back this up. When David Cameron became Prime Minister in 2010, corporate tax was levied at a not-very-competitive 28 percent rate, and the finance bill enacted at the end of that year was a relatively snappy 108 pages. By 2012, corporate tax was down to 24 percent, but that year's finance bill weighed in, like an aging and increasingly bulky heavyweight boxer, at 686 pages. By 2017, corporate tax was a lean and mean 19 percent, but the pre-truncated 2017 finance bill (since slimmed down in order for it to squeeze through by June's election) was a bloated 762 pages. Apparently, it contained more words than JRR Tolkien's Lord of the Rings trilogy combined. I know which epic I'd rather read!
    Source: http://www.tax-news.com/news/UK_Government_Declines_To_Rule_Out_Future_Tax_Rate_Hikes____74060.html


  • Apr 27, 2017   United Kingdom: snap!

    Talking of being unpopular with the neighbors, we move once again to the United Kingdom, which set the cat among the pigeons again after Prime Minister Theresa May caught many off guard by calling a snap general election last week. Added to the weight of uncertainty already bearing down on the UK as a result of Brexit, the timing of this election is hardly ideal, and the announcement demonstrated just how flexible politicians can be with their views, with May having repeatedly rejected the idea of calling an early election to consolidate her and the Conservative Party's position in power on numerous occasions recently. But while this development could strengthen May's hand in the upcoming Brexit negotiations – provided, of course, she gets the comfortable victory pollsters are predicting – it is not, however, going to be very helpful for taxpayers. The 2017 Budget was announced only six weeks ago, and the Government has already performed a u-turn on the most significant proposal, the two percent increase in self-employed social security contributions. Now the Government faces a rush to legislate for the 2017 Finance Bill before parliament dissolves shortly before the June 8 election. And that won't be easy. The Chartered Institute of Taxation has pointed out that, under normal circumstances, we could expect two days of debate on the bill in the House of Commons, in addition to 14 to 20 standing committee sessions, and two days of report stage and third reading debate – in other words, plenty of parliamentary scrutiny of the proposed measures. Precedent suggests that, instead, the committee and report stages will be compressed into a single day. And such a truncated timetable, the CIOT warned, would not allow for adequate consideration of the matters it has raised, including areas such as loss relief and interest deductibility. The CIOT is urging the Government to drop the majority of the current bill and keep only those measures essential to maintain the Government's revenue-raising capacity, such as renewing the provision of income tax, and other measures that are required urgently, such as anti-avoidance provisions. It said that measures dropped could be reintroduced in a post-election Finance Bill where they can be scrutinized at greater length. We must wait and see if the Government listens to what seems like a reasonable proposal. And this gives taxpayers in the UK yet another reason to fret.
    Source: http://www.tax-news.com/news/UK_Govt_Calls_Snap_Election_Ahead_Of_Brexit_Talks____74032.html


  • Apr 11, 2017   United Kingdom: hasty

    However, government "e-tax" initiatives aren't always the panacea they are made out to be. They are fine of course when they actually lead to reductions in the time it takes to file forms and pay taxes, and result in fewer or shorter interactions between taxpayers and tax authorities – in other words, make life easier for everyone involved. Such schemes are not very useful if digitization of the taxation process has the opposite effect, though. But surely a government wouldn't be so silly as to use information technology to increase the workload on taxpayers? Given the litany of botched public sector IT projects across the world, it would be foolhardy to underestimate governments' ability to get these things wrong! And the UK Government might be about to commit another botch job if it doesn't heed the warnings of tax practitioners and members of parliament not to rush into place the "Making Tax Digital" (MTD) project, which the Government launched the pilot of earlier this month. The aim of MTD is to help small businesses and the self-employed to keep better track of their tax affairs. But in order to do so, taxpayers would have to update their new digital accounts at least quarterly, instead of annually as is usually the case with self-employment taxes at present. So, on the face of it, MTD will increase the number of interactions between taxpayers and the tax man, and could lead to them spending more time on compliance, not to mention more time worrying about compliance. Recently, the House of Commons Treasury Committee said that if designed and implemented correctly, MTD could greatly improve tax administration. Tax records would presumably be more timely and accurate, and the required information more easily obtained. But, on the other hand, if rushed into place, the committee warned the Government that MTD could be a "disaster," increasing costs and administrative burdens, and forcing more small firms into the shadow economy. Making Tax Digital? Making tax difficult, more like!
    Source: http://www.tax-news.com/news/HMRC_Launches_Making_Tax_Digital_Pilot____73898.html


  • Apr 04, 2017   United Kingdom: overwhelmed

    The United Kingdom has been told by influential figures within the EU that it can't have its cake and eat it — in other words retain those aspects of EU membership that benefit the economy, like membership of the Single Market, while rejecting those things it finds harder to swallow, like free movement of persons. The way things are shaping up, it won't be able to have a divorce settlement and a free trade agreement either, at least not at the same time. I touched upon how a hard Brexit could potentially affect taxpayers in the UK (and the EU) last week, and how businesses were less concerned with process, and much more concerned about how the legal landscape will look when terms are reached, or not reached as the case may be. However, we can't get away from the fact that the process is fundamental to how Brexit will play out. And it seems that if the EU gets its way, it could be a saga of many acts. Not surprisingly, the UK wants to hold talks about the exit settlement and the post-Brexit free trade agreement that it hopes will replace existing arrangements, in parallel, so as to ease lingering uncertainty for investors. This would also save a considerable amount of time. The EU, by contrast, wants each stage to be negotiated consecutively, rather than concurrently, starting with the withdrawal talks. Just how the EU expects this process to fit into the two-year negotiation timeframe that commenced with the UK's triggering of Article 50 last week is something of a mystery. Perhaps it is of the belief that the negotiations will be a breeze. Many experts on such matters think otherwise. We have no precedent to guide us on the likely timescale of EU withdrawal negotiations, since no full member state has ever attempted to leave before. What's more, on the evidence of recent negotiations between other trading partners – including the Comprehensive Economic and Trade Agreement between the EU and Canada, which is held up as model trade deal for the UK to aspire to – FTAs can take several years to come to fruition. All of which makes the two years allotted to finalize a member state's exit from the EU seem woefully inadequate, especially given that commentators don't expect talks to begin in earnest until both the French and German elections are decided, which won't be until the leaves are starting to change color in Europe. And other thing: how will the British Government find time to actually run a country while all this is going on?
    Source: http://www.tax-news.com/news/UK_Triggers_Article_50_To_Quit_EU____73864.html


  • Mar 30, 2017   United Kingdom: ready, steady…

    Last, but by no means least, we come to Brexit. And it was certainly no secret that the British Government intended to trigger Article 50 – effectively the starting gun on its EU exit negotiations – in March. But, for the sake of clarity, at least we now know the date that gun will be fired – March 29 – even if we don't know what the outcome will be. What is significant however, is that the mood music coming out of Brussels seems to be much softer in tone than it was a few months ago. The latent threat that the UK would be punished for leaving the EU with harsh post-Brexit trade terms seems to have dissipated – for now. Instead, the key actors on the EU side of the negotiations – particularly Chief Negotiator Michel Barnier and Commission President Jean-Claude Juncker – seem more amenable to a mutually beneficial free trade agreement between the UK and the EU. This may come as something of a relief to UK-based businesses currently trading in the EU. But it doesn't answer the many questions companies have about important tax matters in post-Brexit Britain, especially in the area of value-added tax. Indeed, the British Chambers of Commerce suggested recently that most firms care little about the actual Article 50 process, but care a lot about "an unexpected VAT hit to their cash flow." Since VAT is an EU tax, the UK Government could smooth the transition to Brexit by assuring companies that the UK VAT system would continue to mirror its EU counterpart for a certain period of time after the deal is done, say five years. This would, to a large extent, avoid the unappealing prospect of the two regimes diverging and causing firms considerable VAT compliance headaches as a result. This principle could also apply to the numerous other EU tax directives and regulations transposed into UK law. Ultimately there probably isn't much that either side can do to avoid at least some legal and regulatory upheaval. It's just a question of when this will begin, and to what magnitude it will shake things up.
    Source: http://www.tax-news.com/news/UK_To_Begin_Hard_Brexit_Process____73798.html


  • Mar 21, 2017   United Kingdom: backtracks

    Some government ministers learn about the value of consultation with taxpayers the hard way. And the most recent example was United Kingdom Finance Minister Philip Hammond, when, barely a week after he made a splash in his first full Budget by hiking tax on the self-employed, he was forced to retract the measure. Seldom has a government backtracked on a tax measure so rapidly. If there was a prize for fastest ministerial u-turn – the George H W Bush "Read My Lips" award perhaps – Hammond must surely be in contention! It remains baffling how Hammond could have misjudged the situation to such an extent. The backlash from the small business community and the five-million-strong self-employed community was one thing, but the rebellion within the ranks of the governing Conservative Party was also not surprising – it was always asking a lot for a supposedly pro-enterprise party to support what was effectively an anti-business measure, especially as it also broke a fundamental manifesto commitment. However, if Hammond had taken the time to consult on the wider issue of the taxation of the self-employed, which, appropriately enough, could have tackled the sharing economy at the same time, he might have made more considered decisions, and I wouldn't be writing about him in negative terms for the second week in a row. Another act worthy of an execration was Hammond's decision to index Air Passenger Duty to inflation, instead of reducing it, or, better still, scrapping it completely. It's coming to something when the plethora of taxes and fees added to the price of a long-haul flight ticket add up to well over half of the cost of the ticket, as I discovered to my amazement when flying out of Heathrow recently. Indeed, according to the International Air Transport Association (IATA), airlines and their customers are forecast to generate USD123bn in tax revenues for governments around the world this year, up from USD118bn last year. Considering that IATA expects the airline industry to make a total profit of just under USD30bn this year, that's a hefty whack.
    Source: http://www.tax-news.com/news/UK_UTurns_On_National_Insurance_Levy_Hike____73730.html


  • Mar 14, 2017   United Kingdom: injudicious

    British taxpayers, and more specifically those of the self-employed variety, were also promised reform in the 2017 Budget announced last week. Admittedly, not by the Government itself, but largely by a media anticipating the start of a generational shift in the tax and legal framework that recognizes how technological change and the emergence of the gig economy are fundamentally altering the world of work. They didn't get it. What they got was an unexpected increase in National Insurance (social security) contributions intended to align the taxation of the self-employed with the employed. This was Chancellor Philip Hammond's supposedly big idea to address tax concerns linked to the growing army of self-employed workers in the UK, which has reached about 5 million people. Not surprisingly, he's been on the defensive almost since the words left his lips on the House of Commons floor on March 8. Indeed, the floor is where many self-employed taxpayers would dearly like to put Hammond after he pulled this unpleasant surprise. Not that I ever advocate violence to solve arguments of course. In any case, there's a fair chance that aggrieved taxpayers taking this issue to their local Conservative Member of Parliament could find a friendly voice, for a significant number of Hammond's own governing party are threatening to rebel against the measure. The Government insists that critics have got their sums wrong, and that in actual fact the Budget overall will leave the lowest-paid self-employed taxpayers marginally better off. But that's besides the point. This measure has gone down like a lead balloon for a number of reasons. Firstly because it contradicts the Government's core message that it is pro-enterprise and the friend of aspiration, second because it broke a manifesto commitment not to raise tax or NIs, third because it fails to address the fundamental question of the changing work environment, and last because Hammond couldn't wait for the publication of a government review into this very issue, expected in the coming months, before moving. Perhaps he knows something the rest of us don't. Still, there's plenty of time for a u-turn, after Prime Minister May helpfully postponed legislating for the measure until the end of the year to allow for a period of "calm" reflection.
    Source: http://www.tax-news.com/news/More_Tax_Hikes_For_UK_Taxpayers_In_2017_Budget____73670.html


  • Feb 21, 2017   United Kingdom: merciful

    And on such a sombre note, we arrive at the final curtain. And many of us are well aware that our tax obligations are unlikely to stop even after we've met our maker. Indeed, the seemingly unending layers of tax we face, often on the same source of income, is one of the most frequent complaints about life in the modern world. If you're unlucky enough, you could be taxed on your earnings, taxed on your savings, taxed on your investments, taxed as a shareholder, taxed as a company, taxed in your retirement, and, finally, taxed on the inheritances and gifts you bequeath to your loved ones. So a small encomium goes Great Britain's way, where HM Revenue and Customs has waived tax on deceased taxpayers' individual savings account investments. True, it's a small gesture in the grand scheme of things. But when it comes to tax, we should be thankful for small mercies.
    Source: http://www.tax-news.com/news/UK_To_Waive_Tax_On_Deceased_Taxpayers_ISA_Investments____73439.html


  • Jan 24, 2017   United Kingdom: decides

    For all the anticipation, last week's revelation by Prime Minister Theresa May that the UK is headed for a "hard Brexit" wasn't quite the seismic shock it perhaps should have been. People have had so long to ruminate on all the myriad possibilities for the UK's post-Brexit relations with the EU that most have concluded that if out is to truly mean out, then hard Brexit it has to be. But at least we know now. As the EU's most influential figures have been insisting for the last six months, membership of the Single Market and the "four freedoms" that go with it are indivisible: you can't have one without the others. Otherwise, it would be a double market, or a triple, or a quadruple market, which defeats the whole purpose of the thing. It became fairly obvious early on that a "soft Brexit" i.e. the UK's continued membership of the Single Market, would necessarily entail continued interference – as Leave supporters perceive it – by the EU in the UK's political, economic, legislative, and social affairs. At the same time, the UK's influence in the EU would be substantially diminished, yet it would still have to stump up membership fees. In other words, the worst of all worlds if you are a Leaver, and certainly not what the (albeit slender) majority of voters wanted. Hard Brexit means there are going to be advantages and disadvantages for UK taxation once the deal is done. On the one hand, the government of the day will have a lot more freedom over tax policy. There will be no more worrying about state aid or discriminating against taxpayers from EU countries (in theory). Therefore, the UK will have much more scope to offer tax incentives (as long as they're not "harmful"). But disentangling the UK tax system from the EU is going to be no easy task. Think about all the EU legislation and regulations that have been transposed into UK law over the past four decades, not to mention the thousands of pages of case law issued by the EU courts. How will these be dealt with in the negotiations? How long will EU case law apply in the UK? And will the UK seek to repeal EU-related law wholesale, bit by bit, or in the interests of stability, not at all? And we haven't even mentioned VAT yet, the only tax which is "harmonized" at EU level. For UK taxpayers, the future either looks very exciting, or really quite scary. I haven't quite made up my mind which.
    Source: http://www.tax-news.com/news/UK_To_Leave_EU_Single_Market_Says_May____73237.html


  • Jan 16, 2017   United Kingdom: endorsed

    To give Rudyard Kipling's immortal words a 21st century spin, if you can keep your head while all about you are losing theirs and blaming it on you, you have something in common with Theresa May, the British Prime Minister. For sure, if reports are to be believed, there is some bungling afoot surrounding how the British Government appears to be handling Brexit – if there is a plan, it sure is keeping its cards squeezed tightly to its chest. I suppose May does deserve some credit for keeping her cool while tasked with arguably the UK's biggest challenge since de-colonization. But maybe May has been keeping abreast of recent tax developments and seen the recent news that, despite the UK's decision to leave the European Union, Snapchat has chosen to establish its non-US base in London. The announcement comes hot on the heels of McDonald's decision to transplant much of its non-US financing activity from Luxembourg to the UK. Both moves are being perceived as ringing endorsements of the UK corporate tax environment. Perhaps there's even more to it: perhaps businesses are not as concerned about the outcome of the Brexit negotiations as first thought. Reports of companies leaving the UK in the wake of the EU referendum are few and far between. Businesses appear to be saying that, fundamentally, the UK remains a good place for business, irrespective of whether the UK goes for a soft Brexit, a hard Brexit, or merely a slightly wobbly Brexit.
    Source: http://www.tax-news.com/news/Snapchat_Chooses_UK_Tax_Domicile____73191.html


  • Jan 09, 2017   United Kingdom: mixed

    Talking of robustness, one must have a pretty thick skin to be an economist these days. Particularly if you were one of those economic forecasters who pronounced on the future of the UK economy prior to the Brexit vote. Indeed, perhaps we now call it "eggs-it" instead. After all, it seems that many of these predictions were over-egged. Still, in the defense of the forecasters and analysts, those people who thought that the UK's vote to leave the EU would have had virtually no effect on the UK economy six months later are probably few and far between. And it is remarkable how the UK seems to be taking Brexit in its stride. Perhaps there has been a delayed response, and after the initial shock and excitement wears off, the pain will begin to be felt. It may be the case that companies and investors are just playing a game of wait and see before they decide to fully commit to the UK for the long-term, or retreat into the perceived safety of the EU. The signals coming out of European businesses are certainly mixed, according to a recent survey by RSM, which showed that significantly more companies view Brexit more as a threat than an opportunity. That said, less than half believe the UK will be a less attractive destination. Whatever happens, one thing is for sure: 2017 will certainly not lack for interesting developments, so taxpayers should strap in for a potentially bumpy ride!
    Source: http://www.tax-news.com/news/European_Businesses_Anticipating_Brexit_Fallout____73149.html


  • Dec 28, 2016   United Kingdom: fair share

    In many ways, it's been a year of numbers and milestones, particularly with respect to global anti-tax avoidance and tax transparency efforts. In late November, the OECD announced that the number of jurisdictions participating in the BEPS "inclusive framework" had reached the 90 mark. Later that month, 100 countries concluded negotiations on a multilateral instrument that will transpose BEPS recommendations into over 2,000 tax treaties worldwide. By late July, 101 jurisdictions had committed to exchange financial account information with each other automatically, and more than 50 of them will do so from next year. These are feats of multilateral cooperation around tax that probably seemed impossible to most just a few years ago, and they are an indication of how determined the international community is to stamp out aggressive tax avoidance and evasion. Yet, at the same time, it could be argued that perceptions about the level of tax evasion don't quite meet the reality, at least as far as corporations are concerned. For instance, a recent report by PwC showed that the total tax paid by the 100 largest companies in the United Kingdom increased to more than USD100bn this year. Nevertheless, even though USD100bn sounds like a huge amount in isolation, does this amount represent the "fair share" that many politicians and members of the public demand that big companies pay? Looking at the total amount of tax these companies pay as a percentage of profit might be a better way of tackling this question. PwC's report concluded that these companies are contributing close to 50 percent of their profits in tax costs – of which corporate tax is just one component – so they might argue that they are already paying their "fair share" to the public finances. And the UK is certainly not unique in having a total tax contribution around the 50 percent mark for companies.
    Source: http://www.tax-news.com/news/UKs_Largest_Taxpayers_Contribution_Grew_In_2016____73006.html


  • Dec 23, 2016   United Kingdom: endorsed

    In general, governments are continuing to move quickly in the area of taxation in the era of BEPS. Yet, a survey conducted by financial advisory firm Grant Thornton earlier this year found that the OECD BEPS project has had little impact on the way companies plan their tax affairs. As many as 78 percent of businesses have not changed their business's approach to taxation, the survey, published in September, found, despite more than 80 countries having agreed to adopt at least the minimum elements of the BEPS Action Plan at that point. Why should this be the case, when companies around the world are experiencing an unprecedented level of change and uncertainty? Well, the key word it seems is uncertainty. When you are uncertain of the right way to go to get to your preferred destination, and someone keeps redrawing the map at almost every step, it is probably better to stay put, rather than get yourself completely lost. Better still, why not follow in the footsteps of those before you that have worked out the path of least resistance. As Francesca Lagerberg, Global Leader of Tax Services at Grant Thornton International, concluded, "a number of companies will be reluctant to be the first mover in this area and may be looking to see what others are doing in their industry or region. Governments have not yet explained how or even if they will implement BEPS in some countries, so that leads to business caution." However, multiple other surveys also confirm that even if taxpayers are playing it safe, tax audits are on the increase, and companies are under scrutiny from tax authorities in so many different ways, including, we learned recently, with respect to the mobility of their work forces. It seems that in the current environment, the tax man is determined to leave no stone unturned, and as far as taxpayers are concerned, it could be a case of damned if you do, damned if you don't. But until the BEPS project tails off, and we have something resembling a permanent, coherent international tax structure, companies aren't going to have much choice but to ride out these turbulent times. How long this will take is anyone's guess. Though international corporate tax rules are in flux, one rule of the commercial universe no doubt still stands: multinationals will gravitate towards those countries where the fiscal conditions are most favorable. Last month, a KPMG survey revealed that many businesses located in Switzerland fear that the country will lose its competitive edge after the implementation of corporate tax reforms designed to assuage the concerns of the EU on harmful tax practices. The Netherlands, which has often been described rather unflatteringly as a tax haven, is also concerned about its tax competitiveness after committing to abolish special corporate tax regimes in response to BEPS. So, which countries are benefitting from this shift in sentiment? Perhaps it is too early to say, and we might have to wait a while before the corporate investment map is fully withdrawn. The United Kingdom, having slashed corporate tax, could be emerging as an early front runner. Earlier this year, KPMG concluded after a survey of over 100 senior corporate decision makers that recent tax policies have made the UK a more attractive location for businesses, with the country "now seen as much more competitive than its European peers [that are] generally viewed as having attractive tax regimes." The recent decision by McDonald's to pay tax on its non-US royalties in the UK instead of Luxembourg could be viewed as a ringing endorsement of these policies, given that the company probably explored many options for the restructuring of this part of its business. Certainly, judging by the company's statement, there are obvious operational reasons for this shift. But considering the uncertainty surrounding Brexit, does this move also represent a vote of no-confidence in Luxembourg, and the EU in general? Maybe it knows something we don't!
    Source: http://www.tax-news.com/news/McDonalds_To_Shift_Tax_Base_To_UK____72951.html


  • Dec 05, 2016   United Kingdom: messy

    I don't know why countries bother to sort out their trade spats through the World Trade Organization's dispute resolution mechanism. Typically both sides will claim victory irrespective of what the WTO panel decides. The most recent example was last week, when the European Union claimed a comprehensive victory against the United States in the latest round of the long-running saga over tax breaks and subsidies for aircraft production on both sides of the Atlantic. From reading the European Commission press release on the matter, you'd think it was a pretty open-and-shut case. Especially as the Office of the US Trade Representative hasn't commented on the ruling, at least not through the medium of its website. But then you get to Boeing's comments, and actually it's a pretty solid win for the state of Washington and the US after all. No wonder free trade is under threat! This is also ominous for the United Kingdom, which considers "WTO rules" as a fallback option if it fails to negotiate a suitable Brexit settlement with the EU. What "WTO rules" exactly? Staying with confusing matters, it emerged last week that the Scottish Government is proceeding with legislation that would give it responsibility over elements of individual income tax policy, under the negotiated agreement on tax devolution with the UK Government. For me, this process all feels a bit ad hoc and messy, and likely to put taxpayers into a tangle. But perhaps I should stop being so skeptical about these arrangements. Revenue figures relating to taxes already devolved to Scotland make for interesting reading, and suggest that Revenue Scotland, the body charged with collecting the devolved taxes, appears to be doing a good job. According to these statistics, GBP572m (USD718m) was collected from the Land and Building Transaction Tax and Scottish Landfill Tax in the first full year of the new tax department's operation. To me, this sounds like quite a lot, given that the population of Scotland is less than 5.5m and that these are two relatively minor taxes. When added to the revenues from the Scottish Rate of Income Tax, Scotland's tax revenues could grow to be fairly substantial, perhaps signaling the end of the complex block grant system which has traditionally financed Scottish public spending. Having said this, Revenue Scotland had better hope that Scots continue to make liberal use of their trash cans.
    Source: http://www.tax-news.com/news/Scotland_Legislates_To_Set_Devolved_Income_Tax_Policies____72854.html


  • Nov 07, 2016   United Kingdom: hullabaloo

    At least one country is actively trying to ease the tax compliance burden on users of sharing platforms. The United Kingdom is introducing tax allowances – albeit modest ones – to encourage the new breed of "micro-entrepreneurs." Except that the UK cannot claim to be the bastion of micro-entrepreneurialism just yet, after the London Employment Tribunal recently ruled that Uber drivers should be classified as employed and not self-employed. Not only has the ruling cast much uncertainty over UK employment laws, it has opened a tax can of worms. Will it mean that Uber is responsible for the payment of employment taxes, principally National Insurance (social security) contributions? Furthermore, the ruling could have value-added tax implications for Uber in terms of how drivers' supplies to consumers are treated. Perhaps the radical UK tax reform plan proposed by the Institute of Economic Affairs last week would help. Its proposal to scrap most taxes in favor of a few would likely strike a chord with numerous members of the ruling Conservative Party at any rate, coming as it did from a free-market think tank. If we were living in a more uneventful political era, the Government might have given some of these ideas serious consideration. Times are, however, far from dull, and the UK Government has rather more pressing matters on its plate. I refer of course to Brexit. And if the prospect of negotiating with an increasingly impatient – and possibly vengeful – EU wasn't daunting enough for a rookie Prime Minister like Theresa May, the waters have been muddied further by the High Court's ruling that Parliament must be consulted before the Government can trigger Article 50 and formally launch these negotiations. Potentially, this is a big problem for the Government. In the House of Commons, remainers outnumber leavers, so if a Brexit bill is put to the vote, MPs could reject it. And given that the UK's nebulous constitution never envisaged such events, no-one can be sure what would happen next. This state of paralysis may not come to pass. A further ruling by the UK's highest court, the Supreme Court, is anticipated in the coming weeks, and many remainers in the Commons have indicated that they would respect the will of the people and not stand in the way of the Brexit process. Nevertheless, despite the assurances that the parliamentary vote to trigger Article 50 would probably be a formality, at least in the Commons (let's not mention the House of Lords yet!), the reaction from the Brexit camp has been nothing short of vitriolic, as if the ruling were the result of a conspiracy by the pro-EU liberal elite to derail the Brexit process. This will be the most important decision the UK takes economically for generations, and surely it is only healthy that all the legal implications are examined. However, the legal proceedings do raise a tantalizing prospect: what if the Supreme court agrees with the lower court? What then? Will it be appealed to the European Court of Justice? How ironic that would be! Still, as entertaining as this situation is for an outsider, there's no denying that these developments have added ambiguity to an already highly uncertain outlook for the UK. For taxpayers, this might not have entirely negative consequences. Certainly, on the one hand, it is impossible to predict the nature of the post-Brexit relationship between the EU and the UK, so we are none the wiser about how EU tax legislation and case law would be applied in the UK. But on the other, we may see a period of relative calm and stability in the UK tax system in anticipation of potentially major changes ahead. Indeed, radical change in the area taxation of the magnitude advocated by the IEA is likely to be the last thing businesses want to think about right now.
    Source: http://www.tax-news.com/news/UK_Think_Tank_Calls_For_20_Taxes_To_Be_Axed____72638.html


  • Oct 25, 2016   United Kingdom: mind the gap

    Coincidentally, there have been a couple of other tax gap stories in the recent news. Official statistics released by the UK Government on October 20 revealed that the UK tax gap fell to a record low in 2014-15. And a few weeks ago, Canada released its first study on the extent of the nation's tax gap. However, just as headline corporate tax rates in isolation can be unreliable indicators of a country's competitiveness, can we really trust tax gap figures? I'm not sure we can. Why? Because surely it's impossible to measure a tax gap with any degree of certainty. The definition of a tax gap is the difference between the amount of money a government collects in tax, and the amount that is legally owed. The key word here in my view is "legally."The frustrating thing about most tax regimes is that they've grown so complicated over the years there's a multitude of ways to reduce what one legally owes. Who knows what is legally owed anymore. And the evaders are probably disinclined to inform us what deductions, exemptions, incentives, etc., they would have used if they chose to play by the rules. More to the point, if tax evaders are hiding their money, how do we know how much they've got, and how much tax they should be paying? So many economic variables and behavioral assumptions must be factored into a tax gap calculation that they can only ever be a ball-park estimate. Which is why they should be taken with a pinch of salt. Indeed, a lot countries don't go to the bother of trying to figure out their tax gap precisely because it is not really worth the effort. However, those that do go to the trouble often use tax gap analyses to justify the need for ever-tougher anti-avoidance laws. Like the UK. Or perhaps it's just a coincidence that the Government has been accused of steadily eroding taxpayer rights to virtually nothing in some instances during a period in which the "tax gap" has become increasingly publicized.
    Source: http://www.tax-news.com/news/UK_Tax_Gap_Falls_To_A_Record_Low____72536.html


  • Oct 12, 2016   United Kingdom: over-budgeted

    I suppose the UK Government is to be congratulated for finally laying down some sort of timetable for its Brexit negotiations and showing us that there is a plan of sorts behind the fog of indecision, although the announcement this week that Parliament will have a greater say in the direction of the negotiations may muddy the waters somewhat. Anyway, on the face of it, the announcement by Chancellor Phillip Hammond that he is preparing to announce a new direction for fiscal policy after months of speculation is also welcome. But... While it seems eminently sensible to attempt to be fiscally flexible, especially if Brexit does eventually slow UK growth and tax receipts in the years ahead, what Britain probably needs for the foreseeable future is a stable tax system, not more incessant tinkering in the style of Hammond's predecessor George Osborne. Yes, young George certainly did love a Budget speech (or perhaps he just liked the sound of his own voice, although he wouldn't be the only politician to be guilty of that misdemeanor). So much so that while most countries are content with an annual budget, the UK, ever the contrarian, has two. Not officially, but in practice. This is because the Autumn Statement has become a de facto Budget, when it is supposed to be, well, a statement about the state of the public finances. So when you add all these up, including the special summer budgets Osborne announced in the wake of two general elections in 2010 and 2015, and the one delivered by the soon-to-be-ousted Labour Government just prior to the 2010 vote, that's eight Budgets and six Autumn Statements or, in other words, 14 tax and spending policy announcements in less than six-and-a-half years. Does Britain really need a new tax policy? Businesses have generally welcomed the broad thrust of corporate tax policy since the 2010, but not enjoyed the time spent poring over increasingly long and complex annual Finance Bills. So perhaps it's time that Hammond gave that battered old red briefcase that Chancellors carry around with them a rest. The September 2016 edition of the Global Financial Centres Index was interesting for a number of reasons. First, London maintained its position atop the ranking, albeit with a more slender margin over second-placed New York, despite increasing regulatory uncertainty caused by the Brexit referendum. Second, Singapore remained ahead of Hong Kong in third position, a place long held by its fiercest rival until quite recently. And third, the report showed how far China's finance industry has advanced in the last few years; it is noteworthy that Shanghai, in 16th place in the index, is now pulling clear of the likes of Frankfurt, Geneva, and Paris.
    Source: http://www.tax-news.com/news/UK_To_Take_New_Fiscal_Policy_Direction_From_November____72405.html


  • Aug 18, 2016   United Kingdom: dubious

    Here's an interesting one. A government prepared to share the bounty of its natural resources directly with the people, instead of hiving off the proceeds to spend on vanity projects or various other things generally disliked by the citizenry. I refer of course to news that the UK Government is considering sharing some of the tax revenues derived from shale gas sales with residents living close to fracking sites. At first glance this seems like an uncharacteristically generous, yet reasonable, thing for a Government to do, given the potential for disruption to peoples' daily lives as a result of local fracking operations. But then again. Fracking is hugely controversial, and while some countries have forged ahead with the shale gas revolution in the name of energy security, it seems that nobody really knows what the long-term environmental consequences are of blasting the living daylights out of the substrata with a mixture of toxic liquids. And for countries with a high population density like the UK, you could say that it is especially important that we find out. With the UK's North Sea oil and gas fields becoming increasingly marginal, and the country more and more reliant on gas imports from Norway, Russia, and the Middle East, the UK Government's pragmatism regarding fracking and shale gas is understandable. However, its profit-sharing offer does have the whiff of bribery about it. Usually it's poor people who are affected by the blight of mineral extraction. This time, it's middle-class home owners in the heart of England's green and pleasant land. The type of people likely to vote Conservative, in fact.
    Source: http://www.tax-news.com/news/UK_Could_Share_Shale_Gas_Tax_Revenues_With_Residents____71923.html


  • Aug 04, 2016   United Kingdom: toils

    Britannia may no longer rule the waves, but it is still the world's fifth-largest economy, home to arguably the most important financial center in the world (I'm never quite sure how such things are measured, but it's right up there with New York), and remains something of a force on the world diplomatic stage. It is therefore unsurprising to see so many countries express an interest in doing trade deals with the UK. And, after a worrying period during which the country appeared to have politically decapitated itself, it is also encouraging to at last see the embryo of a Brexit plan emerge, with the Government now keen to sell Britain to key developed and emerging economies. A word of warning for the UK though: don't get your hopes up too soon. Despite the encouraging feedback the UK has had from the likes of the US, Mexico, Australia, and New Zealand, this isn't going to be plain sailing. Even relatively simple bilateral free trade agreements can take ages to conclude. Then, after months, maybe years of ironing out the wrinkles, negotiators face the prospect of watching all their hard work disappearing down the drain as legislators reject the texts they put together so painstakingly. Few people thought Brexit was going to be easy, but combined with the likely tortuous process of securing an EU withdrawal settlement, securing a network of suitable free trade deals will probably take years of blood, sweat, toil, and tears. Still, the British will hope that at the end of this arduous journey, they will have something positive to show for it.
    Source: http://www.tax-news.com/news/UK_To_Set_Out_Free_Trade_Ambitions____71817.html


  • Jul 26, 2016   United Kingdom: doughty

    The UK's process of decoupling from the European Union is much alike a marital breakdown or separation from a long-term partner. Everyone knows the scenario: two partners are coexisting with each other, unhappily, for a considerable amount of time, and yet it still comes as something of a shock when the bombshell is dropped and one decides to call it quits. Then there's that strange period of time immediately post-separation when nobody's quite sure what happens next. One will eventually have to go, but it won't happen overnight – there's so many things to arrange. So they stick around together for a bit. However, it doesn't take long for the other party to become thoroughly sick of the sight of the other, and after not very long their patience snaps: "So when exactly are you moving out," they ask? The UK and the EU have had an uneasy relationship with each other for a long time, but the EU thought the UK wouldn't have the courage to leave, so when the referendum result came through, it was a bit of a shock. But the UK didn't give much of a thought about life after the EU, hence it's sticking around, biding its time to bring up the prickly subject of how to divide their articles. In fact, there's so much to think about, and Prime Minister May insists divorce proceedings can't possibly begin before 2017. However, the EU is getting impatient and fidgety. "Isn't it about time you left?" President Hollande effectively told the UK last week. Indeed, many members of the EU family are now urging the UK to draw a line under this fractious relationship so everyone can move on. The danger for the UK is that it could come out of this divorce quite badly. The latest economic indicators suggest that it is already getting poorer, with confidence among manufacturers the lowest since 2009, and an economic contraction now firmly on the cards for this year. We already know that the situation is uncertain and financially volatile. But the future fiscal situation is also becoming increasingly foggy after new Chancellor Phillip Hammond said that he is considering hitting the fiscal "reset" button at this year's Autumn Statement, a sort of interim budget normally announced in the final weeks of each year. This would have major repercussions for tax and spending; effectively it'd be chucking out the last six years of fiscal policy and starting again. Looking back, it was certainly remiss in the extreme of the UK Government not to have planned for an "out" vote and drawn up at least a vague outline of a negotiating position for the final withdrawal agreement. But I suppose better late than never, and it is commendable that the UK has not, so far, been browbeaten to the negotiating table by a partner possibly in a vengeful mood. It is incumbent on the UK to get the best deal it can, and its strategy must be formulated carefully. It is certainly under no obligation to keep trying to make the EU happy. That's a large reason it decided to leave in the first place.
    Source: http://www.tax-news.com/news/May_UK_Will_Wait_Until_2017_To_Take_Brexit_Action____71755.html


  • Jul 11, 2016   United Kingdom: feelers

    And now to the Brexit, or rather the lack of progress towards it. I can't think of a major economy in recent history that has experienced the sort of a power vacuum-inducing bout of political paralysis as is enveloping the UK right now. On the one hand, you've got a Government led by a Prime Minister who is probably chomping at the bit to claim his ministerial pension and take early retirement, and on the other a political opposition that is fragmented and appears to be falling apart. What's more, it's going to take up to two months for Conservative Party members to choose their next leader (and Prime Minister) from a field narrowed down to two candidates. Surely the process needs to be, and could be, done and dusted inside two days, given the exceptional circumstances at play. The words fiddling, Rome, and burning spring to mind. Nevertheless, having chastised the UK yet again for the chaos it is visiting on taxpayers and investors across the EU, there are signs that some sort of plan might just be about to break out. I refer to UK Business Secretary Savid Javid's visit to India, where he is putting feelers out regarding a potential bilateral trade deal. Indeed, by the end of this year, Javid's air miles account is going to look pretty impressive, as he prepares to test the trade waters in China, Japan, South Korea, and the United States. This is all well and good, and worthy of an encomium this week, if only for the reason that the UK is being seen to be doing something about its future. Still, the bleak truth is that, as the EU and Canada prepare to seal what is being described as a highly ambitious trade deal, the UK is going to miss out on these sort of opportunities until the all-important trade agreement is sorted out – the one with the EU. And it is hardly starting from a position of strength.
    Source: http://p.lowtax.net/newsdb/story_edit.asp?storyid=79436


  • Jul 04, 2016   United Kingdom: drifting

    If Brexit is compared to a daring and bold exploration of new lands by a band of adventurers, you could say that said adventurers, let's call them the Three Brexiteers, have arrived at their launch point having forgotten to bring a map, or a compass, or indeed any navigational aids at all. And none of them are quite sure how arduous the journey will be, or what they expect to find at the end of it – will it be riches beyond their wildest dreams or their own slow, painful demise? Or something in between? Either way, perhaps they should have spent less time dreaming, and more time planning and preparing. Britain's fellow Europeans certainly seem keen that the Brexiteers commence their journey sooner rather than later, although they remain convinced that they won't find what they're looking for. And neither will any other member state inspired by the UK referendum to embark on a similarly foolhardy venture, according to the message coming out of the European Parliament, the Commission, and certain parts of the Council. Jean Claude Juncker is certainly keen for them to go. And preferably not come back. In fact, good riddance to these obstructive little islanders, he has more or less said. So, the Brexit saga rumbles on, and it is scarcely believable that it's been just a matter of days since the British people made their momentous decision – it's starting to feel like a lifetime. With coverage reaching saturation point in many parts of the media, but with virtually no progress towards an actual Brexit having been made, there's nothing I can really add here, except to say that my opening analogy points to the beginning of a very long process, rather than the end of one. But only if the explorers don't begin to have second thoughts about their venture into the unknown. Nevertheless, on more prosaic matters, there will be unavoidable consequences for tax in the UK if Brexit is achieved, as I wrote last week. Still, as the Chartered Institute of Taxation has pointed out, the Government might want to use any new-found tax freedoms wisely, and with a measure of restraint. And, ever the pessimist, Chancellor George Osborne is convinced that our intrepid explorers are doomed, as he broke his post-referendum silence to once again speak of the inevitability of tax hikes. At least the Brexiteers have received some encouragement for their project internationally now the initial gasps of shock have died down. A number of countries have expressed an interest in concluding free trade agreements with a post-EU UK, including Australia (although that might change depending on the outcome of elections), Mexico, South Korea, and the United States (albeit in the form of support from House Speaker Paul Ryan rather than the US Government). Nevertheless, this suggests that the UK isn't necessarily back of the trade queue.
    Source: http://www.tax-news.com/news/Osborne_Taxes_Will_Have_To_Rise_After_Brexit____71576.html


  • Jun 20, 2016   United Kingdom: torn

    There's not much more to be said about the Brexit debate. I mean, I've heard some pretty outlandish claims in election campaigns in my time. But I think I've heard them all now: come June 23, it's either going to be the beginning of the end of the world, or, at the very least, the end of Britain's world. Brexit, we've been told, will see Britain taxed out of existence, and that it will result in global economic turmoil, potentially prompting the unravelling of the post-war political order and it will represent the prelude to World War Three. "Remain" lets the rest of the world off the hook, but poor old Britain, according to the more vociferous Brexiters, will soon sink into the ocean under the weight of mass migration and red tape. So much red tape in fact, it would be possible to make a life-size model of the Palace of Westminster out of it, and erect it in Brussels to stand as a memorial to British democracy. I wonder who would build it? Unemployed Conservative MPs perhaps? At least they wouldn't have to work more than 48 hours a week. Anyway, by the time this is published, we'll be very close to knowing Britain's (and the world's) fate. So I'll say no more. Instead, it's time for a bit of escapism, into the world of the movies. Or, more precisely, those who finance and make them. And when it comes to choosing a location to shoot a movie or television series, or carry out other processes essential to the audiovisual and cinematic entertainment industry, producers are spoiled for choice these days. Not just because there are very few places on the planet that are now so remote and inaccessible that you can't send a camera crew there, along with a motley crew of actors, stunt doubles, technicians, and caterers. More because government incentives often make it well worth a producer's while to make a movie in one country, and pretend it's another. Thus, merry olde England on screen is quite likely to be 21st century Hungary in reality. Likewise, when you think you're watching a scene set in contemporary New York, it could well be contemporary Vancouver.
    Source: http://www.tax-news.com/news/Osborne_Vote_Brexit_Get_Tax_Hikes____71477.html


  • Jun 14, 2016   United Kingdom: question marks

    The world is a very uncertain place at the moment. Probably more uncertain than at any period in the post-World War Two era. And uncertainty forms the theme of this week's column. It can't have escaped many people's attention, unless they've spent their recent holidays on the moon, that one of the main sources of uncertainty at the moment is the United Kingdom's agonizing over its membership of the European Union. According to the economic experts – and politicians – backing the remain side, there will be at least some economic turmoil in the UK and Europe, and perhaps in the wider global economy also, if the British vote to leave. However, we must consider the whole spectrum of possibilities for a post-Brexit world: from not much happening at all, to all hell breaking loose. What the experts (and the politicians) do agree on though is that an economic downturn will inevitably knock the Government's fiscal consolidation plan off course, necessitating a combination of tax increases and public spending cuts, according to the Institute of Fiscal Studies, which has been one of the more level-headed contributors to the gamut of economic forecasts that the Brits have had to consider. A vote for remain won't necessarily alleviate the uncertainty either, at least not for the British. Having followed the campaign quite closely, it's difficult to see how the governing Conservative Party, divided between "euroskeptics" and Europhiles (or, more accurately, less vehement and more pragmatic euroskeptics like Prime Minister Cameron) can survive intact given how they have verbally been knocking lumps out of each other for a number of weeks. A vote for Brexit would surely be curtains for Cameron and probably more extensive change in the UK's political leadership. Will we be talking about Prime Minister Johnson in the coming weeks? At least one tax rise that the UK won't have to suffer is the EU financial transactions tax (FTT), which looks like it will be given its last rites in the next couple of weeks. But the UK should count itself lucky that the remaining member states still backing the idea can't agree on the tax's details, because UK financial institutions would have been paying a fair chunk of it without seeing a penny of the estimated EUR35bn in total FTT revenues, regardless of whether it is in the FTT zone, or even the EU. This is because the Commission's draft proposal was based on the principles of issuance and residence – in other words, tax liability hinged more on where a financial instrument was issued rather than traded – giving the FTT wide extra-territorial reach. With this is one of the issues the FTT group are currently grappling with, along with some basic parameters like tax rates and scope, it seems highly unlikely a final version will be agreed by the mid-2016 deadline it has set itself. Just as well. The tax is intended to reflect a fair contribution from the financial industry for its role in the financial crisis. But there must be better ways of doing it than disrupting financial markets, especially at such an economically uncertain time. So I award Belgium an encomium for reportedly turning its back on the FTT in May, possibly delivering the tax a decisive blow in the process.
    Source: http://www.tax-news.com/news/Brexit_Would_Require_GBP5bn_Tax_Hike_IFS____71339.html


  • Jun 06, 2016   United Kingdom: chilling

    For those of us who watch global tax developments, it is quite common to learn that one government or another has decided to allocate substantial sums of public money to the tax authority to help it fight against tax avoidance and tax evasion. For example, in 2010, the UK Government, which at the time was heavily in the red, gave HM Revenue and Customs almost GBP1bn (USD1.44bn) to spend on compliance activities. This is all well and good I suppose, if the ultimate rewards in terms of tax revenue outstrips the initial "investment." However, sometimes governments can take these compliance campaigns too far, and a balance must be struck against the needs of the exchequer and preserving the rights of taxpayers. The UK is one example where the Government is getting it wrong, as we have seen with the controversial Advanced Payment Notices (APNs) regime, which, mercifully, has been successfully challenged by a recent judicial review (if only in part). It also has proposed measures allowing the tax man to take owed tax straight from people's banks accounts, and all with very limited rights of appeal.
    Source: http://www.tax-news.com/news/HMRC_Has_Withdrawn_Hundreds_Of_APNs_RPC____71365.html


  • May 16, 2016   United Kingdom: attractive

    Elsewhere in the EU, there was further evidence that the corporate tax cuts delivered since 2010 have made the United Kingdom one of the most competitive economies in the industrialized world from a tax perspective. However, this all seems rather irrelevant at the moment as the Brexit debate goes into hyperdrive. Opinion polls would seem to suggest that, so far, British voters have been largely unaffected by "Project Fear," as the remain campaign has come to be known because of its increasingly apocalyptic visions of how a Brexit would play out economically. The numbers have suggested throughout the referendum campaign that those intending to vote "in" slightly outnumber the Brexiteers, with about 20 percent undecided. However, perhaps things will start to swing more decisively in the remain camp now that they have wheeled out their prize fighter Christine Lagarde. So far, the analyses of a post-Brexit landscape by the likes of the OECD and the British Government have predicted general economic ruination for the UK. And the IMF is due to publish its findings next month, more than likely with similar conclusions. It will probably be received with a similar level of derision by those sensible enough to realize that IMF economists don't possess a crystal ball. However, IMF chief Lagarde may have landed an early sucker punch on the leave campaign by homing in on the potential effect of Brexit on Britain's real estate market, and warning of a house price crash. Of course, like all the other doomy economic forecasts, this is just an assumption. But, since an Englishwoman's home is her castle, and the majority of voters do own their castles, perhaps the one thing likely to get the electorate scurrying into the poll booths to vote "in" is a scare about house prices. A low blow by the IMF? The Brexiteers might think so. But it could be a very effective one for the remainers. We shall see in just over a month's time.
    Source: http://www.tax-news.com/news/UK_Corporate_Tax_Rate_Increasingly_Competitive____71187.html


  • May 09, 2016   United Kingdom: capital idea

    Once again, we start our round-up in the United Kingdom, but mercifully for you, the reader, I'm not going to harp on about the whys and wherefores of the Brexit this week. Nope, I'm going to look at something I'm sure you'll agree is far more exciting: capital gains tax. Chancellor George Osborne received quite a bit of criticism for his decision to slash the rate of CGT in his most recent budget in March. This is because it was perceived by his opponents to be a tax cut for the rich, as it will largely benefit those wealthy enough to invest and to have built up a company. That may be true, but surely the corollary to that is a high rate of capital gains tax will discourage people from investing and building up companies? And what's the sense in that when economic times are already uncertain? The UK's business leaders certainly seem to think this was the right move at any rate, with almost 80 percent telling a recent survey that investing in small companies in the UK would be more attractive as a result of the new CGT regime. This is, however, something of a qualified encomium. For successive UK Governments have had an almost irresistible urge to tinker with capital gains tax over the last ten years or so, cutting it, tapering it, raising it, then cutting it again. Indeed, this is the second major change that Osborne has announced in his time as Chancellor. First, he split the tax into two bands of 18 percent and 28 percent in 2010, then he slashed these bands by 10 percent in the 2016 Budget. While the latest move has been welcomed, this chopping and changing, and these regular attempts to pick winners and losers in the tax system, certainly can't help from a tax planning point of view. Finance ministers seem to like to make their mark on the tax system, but sometimes doing nothing might be the better option. Indeed, many taxpayers might thank them for sitting on their hands for once.
    Source: http://www.tax-news.com/news/UK_CGT_Cut_Boosts_Confidence____71146.html


  • May 03, 2016   United Kingdom: warned

    My, they really want Britain to stay in the European Union, don't they! In the last few days, we've had no less than the leader of the free world imploring the UK to remain in the EU. Then, the OECD – which numbers many EU member states within its own ranks – chipped in to the debate with its own dire warnings about the UK's future outside the bloc. According to this report, Britain can only lose by leaving the EU. In fact, even under the most optimistic scenario, the outcome would be worse that the staying in the EU, says the OECD, apparently unaware of the irony of that statement (i.e. EU membership is somewhat more favorable than terminal, albeit slow, decline). Gosh, the future does look bleak for the Brits, doesn't it! President Obama was heavily criticized by Brexit campaigners for sticking his nose into a debate they say doesn't concern him, with the risk that the large contingent of undecided voters might be swayed towards the remain camp. London Mayor Boris Johnson for example remarked that it was rather rich of the American President to lecture Britain about the EU when the US wouldn't tolerate for one second the loss of national sovereignty implicit in EU membership. But you can't expect the President not to have a view on one of the most pressing political and economic issues of the day, especially as he was on an official visit to the UK. Otherwise, what was he going to say in response to questioning on the matter? "Er, sorry sir, I'll plead the fifth on that one?" And he was hardly likely to come down in support of Brexit when next on his itinerary was a meeting with Angela Merkel.
    Source: http://www.tax-news.com/news/OECD_Warns_Of_Brexit_Tax____71085.html


  • Apr 25, 2016   United Kingdom: between a rock and a hard place

    After having considered both sides of the Brexit debate, I've come to the rather depressing conclusion that the United Kingdom is in a no-win situation. I agree with those campaigning for Brexit that the Remain campaign is preying on voters' fears about the economic impact of Britain leaving the EU. I also agree that most of these doomy scenarios are based on highly questionable economic assumptions, including those on tax and spending. Yet, I simply can't see how Brexit won't have negative repercussions for the British economy, at least in the short-term. It's just that we don't know what those ramifications will be (although we can have a good guess: tanking pound, financial turmoil, plummeting foreign investment, etc.), or how severe they will be and how long they will last. I think the "out" campaigners are being disingenuous to suggest otherwise. I certainly can't accept the notion that once detached from the EU, the UK will happily set sail into the sunset towards some North Atlantic utopia of self-rule to the strains of Rule Britannia. There is no precedent for a country leaving the EU, so there would be hardly any rules for the negotiators to follow if Britain votes out, apart from Article 50 of the Lisbon Treaty, which is vague at best (probably because its authors thought it would never happen). But as "ever-closer union" has drawn the UK deeper and deeper into the European project, its laws and regulations are now tightly bound with those of the EU. Unravelling them, and reaching a divorce settlement that is acceptable to both sides, isn't going to happen overnight (the EU is a large family with 27 other members, plus the Commission, and the European Parliament).
    Source: http://www.tax-news.com/news/Osborne_Issues_Brexit_Tax_Warning____71004.html


  • Mar 29, 2016   United Kingdom: question marks

    Naturally, a great deal of the debate about the United Kingdom's future in the European is focusing on how a Brexit would affect the UK economy, and, to a lesser extent, the economy of the European Union. However, it is not just the UK and the EU that are facing highly uncertain futures. There are various other territories dotted around northern and western Europe that anxiously await the result of Britain's EU referendum on June 23, 2016, including the UK's Crown Dependencies, Guernsey, Jersey, and the Isle of Man, and Gibraltar, which is classified for the purposes of international law as a British Overseas Territory. Largely self-governing, none of these jurisdictions is fully "in" the EU, but they are inextricably tied to Europe through their strong constitutional links with the UK, which looks after their foreign affairs. Guernsey and Jersey, for instance, are part of the EU under the UK's accession treaty, but are not a part of the EU fiscal area. Similarly, the Isle of Man forms part of the EU single market and VAT area but is otherwise not part of the EU fiscal area. By contrast, Gibraltar is not a part of the EU VAT or common external tariff regimes, but has implemented a great deal of EU financial legislation to allow it to market investment funds and other financial products across the EU. So what happens to these territories if the UK sees through the Brexit? Guernsey, for its part, is confident that it would be business as usual. But, as the island's investment promotion agency recently acknowledged, investors, especially those in the lucrative new markets in the Far East, are beginning to ask questions, and perhaps its recent statement on the matter was designed to sooth these concerns as much as anything, because a Brexit would surely have some kind of impact on the Crown Dependencies. Gibraltar on the other hand isn't as bullish as Guernsey. Quite the opposite. Gibraltar is in fact quite fearful about a future where its protector, the UK, cuts loose and leaves it to sink or swim in the piranha-infested EU waters. Spain is probably already relishing the prospect of gobbling up this tasty little morsel once London's back is turned. The reality is that not even the most enlightened and far-sighted economist can fully predict the consequences of a Brexit. And, as a recent survey of senior company managers by KPMG confirmed, uncertainty is investors' enemy number one. For this reason, the UK takes a step back this week. The quicker all this is resolved, the better.
    Source: http://www.lowtax.net/news/Gibraltar-Urges-UK-To-Avoid-EU-Exit-70725.html


  • Mar 22, 2016   United Kingdom: attractive

    It's funny how when finance ministers miss their fiscal targets it's always somebody else's fault. According to Chancellor of the UK Exchequer George Osborne, global economic factors are to blame for his latest failure to bring down the UK's public borrowing requirement. And of course, as Prime Minister Cameron's front benchers are wont to point out on a regular basis, if the previous Labour Government hadn't been so spectacularly incompetent, Britain wouldn't be in the fiscal hole that the Tories are currently trying to dig it out of. For Labour's part, the ballooning of the UK budget deficit to double-digit figures in 2008/9 and the mushrooming of the country's public debt was all the bankers' fault. Nothing to do with a half-baked financial regulatory system. Oh, no, no. But then again, Gordon Brown was busy trying to "save the world" back in the dark days of '08 and '09, so perhaps history will forgive him for taking his eye off the ball at home. Then again, probably not. Anyway, as you've probably spotted, it was budget time in the UK last week. Or perhaps it passed you by. After all, they're becoming about as commonplace as red buses in Oxford Street nowadays. After last December's "Autumn Statement" (to all intents and purposes, a mid-year Budget announced in the winter), last summer's post-election Budget, and the swansong Budget of the former Lib-Con coalition last spring, this is effectively the fourth Budget delivered by Osborne in the space of a year. He must be all budgeted-out by now. We certainly are. Not that the youthful Osborne is showing any signs of becoming jaded. You'd think he'd be running out of ideas at this point, but the rabbits continue to come thick and fast. However, once again, Chancellor Osborne leaves me in a bit of a quandary. For while there's stuff in the 2016 Budget worthy of praise, as ever with George, it's a case of good and bad – and I dare say ugly as well. If you run a small business in the UK, or are planning to, you're probably quite happy. The additional corporate tax cut was also a surprise, as was the decision to slash capital gains tax. Then again, you can have too much change. A recent survey by KPMG concluded that the UK is now second only to Ireland in terms of tax competitiveness. But that same survey said that tax rates were fairly low on the list of things businesses consider when measuring up the merits of various jurisdictions. First was stability. Second was information about changes. Third was simplicity. Tax rates came in fourth. There are also nagging doubts about the public finances. The budget deficit, at 4.4 percent in 2015, is higher than Greece's, and some analysts are skeptical of Osborne's claim that the books will be balanced by 2020. All things considered, the Budget is just about worth an encomium, given the fact that the UK's attraction to foreign investors will probably be further enhanced. But it's a qualified one. Maybe it's time to leave the rabbits in the hat for a while, George, and take stock. And, really, when are you going to get the deficit down?
    Source: http://www.tax-news.com/news/Surprise_Tax_Policies_In_UKs_2016_Budget____70736.html


  • Feb 23, 2016   United Kingdom: uncertainty

    I caught up with an old American friend of mine during a shopping trip to New York recently. She has relatives in England and the last time we met she excitedly told me about her plans to buy a little bolt-hole in the Cotswolds for her regular visits to family and friends. "So how's your new pied-a-terre in England's green and pleasant land?" I inquired. "I haven't bought it yet," came the reply. "And why's that – surely you'd have found something you like by now, and the exchange rate is very favorable at the moment?" said I, to which she responded: "Well, they keep changing the property tax laws over there don't they. It's almost as if they are trying to discourage foreign investors!" I found it hard to disagree. Indeed, the UK hasn't been faring very well in these columns for a while. Certainly, the Government must take some credit for the country's economic recovery – the UK economy has outpaced almost all of its G7 competitors recently – but the same government must also take the blame for sowing the seeds of uncertainty, and not just with regards to the real estate market. Chancellor George Osborne seems to like the response he gets when pulling rabbits out of budget hats, but he ought to be careful that his magic tricks don't turn into a curse for the UK economy. If the Confederation of British Industry (CBI) is to be believed, much trouble is already being stored up for the future. According to CBI research, the policy change "burden" will end up costing British businesses GBP9bn (USD12bn) per year by 2020. But this isn't even the half of it. As most of you who follow European affairs will doubtless know, there is a level of uncertainty about Britain's economy at a much more fundamental level, as the country decides whether its future lays in the European Union or out of it. One could debate the possible consequences of the Brexit at length and still not decide whether it will be good for the UK economy or not. If Britons vote out of the EU in the referendum, which Prime Minister David Cameron has set for June 23, 2016, the consequences of a Brexit on the UK (and EU) won't be fully apparent until many years after. However, what interests me is the potential damage the EU referendum will inflict on the UK Government itself. Perhaps Cameron has made a strategic error by allowing euro-skeptic members of the Government to speak their mind in the referendum campaign, rather than towing the party line (which, I think, is "in" on the basis of a renegotiated settlement with the EU). This position may be admirable but may be misguided. Then again, he probably had no choice. But whatever the referendum result, there are going to be some bruised egos, and eggy faces. Indeed, the issue of the EU is the ruling Tory Party's Achilles heel. Former PM John Major's Conservatives were trounced in the 1997 election with the party openly at war with itself over Europe. Although the next general election is more than four years away, these wounds, if not allowed to heal, could simply fester. Will we see the Tories tear themselves apart over Europe again? And what if the country votes for Brexit? Will Cameron have to go? Will Boris Johnson be the one leading the Government into the next election? Lots of questions wait to be answered. If nothing else, there will be few dull moments in the months ahead.
    Source: http://www.tax-news.com/news/UK_Policy_Changes_To_Cost_Businesses_GBP9bn____70483.html


  • Feb 08, 2016   United Kingdom: messy

    Tax devolution in the United Kingdom? I told you nothing good would come of it. Especially given the very messy way that the Government has chosen to go about the task at any rate. Scotland hasn't even taken delivery of its shiny new tax power – the Scottish Rate of Income Tax, or SRIT – and already its politicians are talking about reforming it. For its part, the Scottish Labour Party says the Scottish Government should hike the SRIT, which isn't due to be introduced until April, while the Scottish Tories are talking about adding an additional bracket to it before it's even in place. At least Scottish Finance Minister John Swinney has taken the eminently sensible decision to leave SRIT well alone for the time being. However, people are now starting to appreciate how the SRIT could complicate life for individuals and employers. Indeed, HM Revenue and Customs was accused by professional services firm RSM last month of downplaying the potential impact of the SRIT. RSM said that there is still a widespread lack of awareness of the impending changes among those likely to be affected by them. And for employers, these changes could be quite significant. While it won't be up to them to decide whether an employee receives a new "S" prefix in their tax code or not, they will have to be geared up to withhold Scottish tax regardless of where the company is located. And even if they have just one designated Scottish taxpayer, they'll still need all the relevant administrative systems in place, such as new payroll software, to cope with the new code. So it could be costly. The "f" word (federal) is usually frowned up by the governing UK Conservatives down in Westminster. But, as the Institute of Economic Affairs suggested recently, maybe it would be better for the UK to go the whole hog, and go federal, rather than persist with a dog's breakfast of a system.
    Source: http://www.tax-news.com/news/MSPs_Call_For_Debate_On_Scottish_Tax_Reform____70321.html


  • Feb 01, 2016   United Kingdom: self-righteous

    And last, but certainly not least, Google. I'm not sure whether to laugh or cry when I hear politicians bleat on in righteous indignation about how multinationals in the tech sector get way with paying hardly any tax in the countries in which they do most of their business, like the UK, when it is those very politicians who set and oversee the tax rules that allow the Googles of this world to do just that. I'm going to defend Google to a degree – which admittedly isn't a very popular thing to do – because what is a "company" if it's not a bunch of people? By people I mean employees, directors, and shareholders. Employees and directors pay tax on their incomes. They then go and buy many goods and services, much of which is also taxed, directly or indirectly. Shareholders pay tax on their dividends. Companies usually own assets of some kind, which will be taxed if sold at a profit. So the bigger the company, the bigger its tax footprint. Google isn't a huge employer in the UK – about 2,000 currently work for the company in Britain – but to say it pays no tax at all is slightly misleading. Nevertheless, I can understand that cozy deals between tax authorities and big business don't look good at a time when the tax man is coming down on small businesses like a ton of hot bricks for relatively minor infractions, which seems to be happening in the UK by all accounts. Clearly something has to change, but I just don't think BEPS is the answer. As far as I'm concerned, BEPS will make the situation worse. It gives a lot of discretion to governments to implement the recommendations as they see fit, or not to implement them at all, which will leave more tempting gaps in the international tax jungle for multinationals to thread their way through. And at a time of fear about the global economy, it will make doing business and paying taxes far more uncertain than it is already in many countries. Maybe corporate tax should just be abolished altogether, and then the game of cat and mouse would cease at a stroke. I'm sure there's plenty of other things governments could find to tax instead.
    Source: http://www.tax-news.com/news/Cameron_Defends_UKs_Google_Tax_Deal____70291.html


  • Jan 18, 2016   United Kingdom: sweet and sour

    Usually, a government's response to an increase in undesirable activity by its citizens and companies is to tax that particular activity. Therefore, with many of us intent on gorging ourselves to death on an abundance of deliciously sugary and dangerously cheap sweetmeats and drinks, sugar taxes have become the weapon of choice as health authorities seek to combat growing obesity. The UK looks like it could be the next country added to the expanding list of nations with a sugar tax, following calls for such a levy from the British Medical Association and latterly members of parliament. But will a sugar tax save the UK from what Prime Minister Cameron called an "obesity crisis"? Well, as far as I can see, the evidence in support of sugar taxes is fairly scant. Recently, the results of a study into Mexico's sugar tax were published in the BMJ medical journal and they suggested that there was a direct correlation between higher prices for sugary drinks and a fall in their consumption. On the other hand, Denmark scrapped its controversial "fat tax" in 2012 after only one year because reports pointed to job losses in the food processing industry and Danes crossing the German border to buy cheaper products. The US tax policy research organization the Tax Foundation also noted a serious flaw in the reasoning for junk food taxes in a 2011 study: that even when selective taxes on certain food products do cause individuals to consume less, those same individuals replace the calories avoided with other foods, resulting in no net decrease in caloric intake. Adding taxes to certain foodstuffs is, according to the Foundation, "a clumsy and inefficient strategy" on the part of governments. But ultimately, does all the analysis really matter? Governments make a huge amount of money from our vices in the form of "sin taxes," so it could be argued that they don't really want us to be virtuous anyway! For Governments, you could call it a virtuous circle of vice.
    Source: http://www.tax-news.com/news/Cameron_Hints_At_UK_Sugar_Tax____70148.html


  • Jan 11, 2016   United Kingdom: stifling

    Now if there's one group of people that is supposed to have the ear of government at all times, it's the backbone of the economy, salt of the earth type of people who run their own businesses. Except, as a number of recent reports show, the ear in question must sometimes be hard of hearing. It's difficult enough being self-employed when you have to account for and pay your own taxes – and woe betide anyone who happens to get it wrong, innocently or otherwise – as well as make provision for your retirement and very often your healthcare too. And forget about regular paid vacations. As HMRC in the UK tells us, thousands of self-assessors spent Christmas Day and New Year's Eve away from the festivities, blinking into their computer screens to complete their tax returns while the families and friends were making merry. Yet, in some places, governments seem to be making things harder, not easier, by imposing unfavorable tax rules on the self-employed. Exhibit number one is Ireland, where those working for themselves seem to be in a much worse position with regards tax than their salaried counterparts, and where small business owners have repeatedly implored the Government to ease the tax burden on them. Exhibit number two is the UK, where Chancellor of the Exchequer George Osborne has just undermined the work the Government has supposedly done to create a dynamic, flexible workforce the envy of Europe by withdrawing tax relief on travel for contractors and those who work largely from home. In my view, this is exactly the wrong way to go about things. Governments should be doing all they can to nurture a culture of enterprise, not stifle it. Many governments claim to be the friend of small businesses, no doubt well aware that SMEs employ around 90 percent of the workforce in many countries. But who needs enemies when you've got friends like these.
    Source: http://www.tax-news.com/news/UK_Travel_Tax_Relief_Reforms_Raise_Concerns____70100.html


  • Jan 05, 2016   United Kingdom: the force

    It's a little known fact that Santa traditionally uses his New Year break to catch up on some of his favorite television shows and movies. I'm told that he was particularly looking forward to watching Star Wars: The Force Awakens this year. Unfortunately, it looks as if he'll be filling out tax forms from now until spring time. Nevertheless, in a funny sort of way, if it wasn't for tax, the new Star Wars blockbuster might not have been made at all – or could have looked considerably different. There is some debate about the cost effectiveness of tax incentive schemes directed at the film and TV industry. However, governments themselves seem convinced of their merits. Movie and TV productions, especially big-budget ones, employ large numbers of skilled technicians, so they are good for jobs. What's more, they buy goods and services from local businesses, so they're good for the economy in general. And films and TV shows often serve as a shop window for a country's tourism industry – just look at New Zealand, which is now synonymous with the dreamlike landscapes of Lord of the Rings and The Hobbit. The prospect of this economic multiplier effect probably explains why countries have been falling over themselves in recent years to offer tax breaks to producers, no doubt spurred on by the success of such schemes in certain other countries, like the United Kingdom, where film tax relief has supported around GBP8bn (USD12bn) of production expenditure since its introduction, according to the Government. Indeed, a great deal of the new Star Wars movie was produced in the UK, and it can't be entirely a coincidence that other locations used in the movie were places where tax incentives are on offer, including Abu Dhabi, Ireland, and New Mexico.  However, a recent study by the Tax Foundation suggested that in the United States at least, such schemes have had their day because lawmakers have realized that they "are a windfall for movie studios but provide few benefits to taxpayers." In 2010 alone, eight states eliminated or suspended their programs, namely Arizona, Arkansas, Idaho, Iowa, Kansas, Maine, New Jersey, and Washington. A telling statistic is that in 2002, only four US states offered this type of tax incentive. By 2010 that number had grown to 44. The producers were spoilt for choice. But in the end it can't all be about tax. Producers will gravitate to those locations where the industry is well established, the technical talent is abundant, and taxes are fairly benign – places like Louisiana, the UK, and New Zealand. I guess the moral of the story for governments is beware of bandwagons.
    Source: http://www.tax-news.com/news/UK_Hails_Record_Year_For_Film_Industry_Tax_Relief____70031.html


  • Nov 02, 2015   United Kingdom: messy

    For a high-tax European economy, the United Kingdom usually fares quite well in Doing Business, and even in Paying Taxes (it was ranked 6th this year in Doing Business, and 16th in the most recent version of the Paying Taxes). I'm starting to wonder though how long these positive ratings will last, as the country descends deeper and deeper into the mire that is tax devolution. Those with a fairly peripatetic lifestyle, or who have left home for pastures new, will know all about the pitfalls of tax residence, either trying to establish it or shaking it off. That's fairly par for the course when you're moving between two countries, have interests across several jurisdictions, or live within a federalist system. However, the UK is trying to create two tax systems – actually, more like one-and-a-half – within one jurisdiction (the United Kingdom is still, in a strict constitutional sense, a united kingdom), and to me it sounds like a car crash waiting to happen. In order to help those taxpayers who might be affected by the changes, HM Revenue and Customs has published a battery of guidance, including some more recently on how to identify a Scottish taxpayer. However, I've got my own advice if you happen to identify a Scottish Taxpayer [Caledonius Tributum] in the wild. First and foremost, DO NOT APPROACH! Having just received his first Scottish tax return, Caledonius Tributum may very tired, extremely confused, angry, and liable to lash out. Second, slowly back away Caledonius Tributum, preferably without being spotted; Caledonius Tributum has magical properties and may confer on you Scottish tax status without you even noticing. Third, scurry back down south as fast as possible!
    Source: http://www.tax-news.com/news/HMRC_Publishes_Guidance_On_Identifying_Scottish_Taxpayers____69534.html


  • Oct 26, 2015   United Kingdom: indecisive

    Given that legal certainty is prized above all by investors, the cardinal sin of tax-law making, apart from legislating retrospectively, is to keep changing your mind about a particular proposal. In this regard, the UK Government has done itself no favors by continually u-turning on the tax status of non-domiciled individuals. As part of plans to make sure that non-doms pay their "fair share" (that hollow phrase again), the Government has proposed they should pay tax on loans secured by foreign assets. However, HM Revenue and Customs has changed its position on the matter twice in the last 18 months, and now it transpires that non-doms won't have to pay this additional tax for past years. However, if I was a non-dom, I wouldn't be counting my chickens just yet what's to stop HMRC changing its position yet again? Indeed, one aspect or another of the non-dom tax rules must have changed every year since former Chancellor of the Exchequer Alistair Darling first introduced the "remittance basis charge" back in his 2008 Budget. Some non-doms must now be wondering whether the tax benefits of their status are worth the hassle of trying to claim them, when the goalposts seem to be constantly shifting but maybe that's the Government's intention. Add to this the popular view that non-doms are wealthy foreign tax dodgers who contribute little to the UK economy a view that might be justified in a small minority of cases, but by no means in all I might be tempted to catch the next flight out of Heathrow.
    Source: http://www.tax-news.com/news/HMRC_Reverses_Position_On_NonDom_Loans____69458.html


  • Oct 12, 2015   United Kingdom: decentralizes

    Finally, I've mentioned before how UK Chancellor George Osborne is something of a policy magpie, claiming some of the opposition's better ideas for himself, and in doing so further condemning them to live in the electoral wilderness. So I couldn't resist mentioning the Chancellor's latest act of political piracy: his proposal for the the devolution of business rates (the equivalent of local business taxes in the UK) to local governments. It seems like a good idea, because it will allow councils to set their own business rates, hopefully leading to cuts in this much-maligned tax. However, it didn't work for the Labour Party when they included it in their last election manifesto – a proposal criticized by the Conservatives at the time – with the Party promptly trounced at the ballot box. But then Osborne seems to have the Midas touch at the moment. One wonders whether he can sustain it for another four or five years, at which point the governing Conservatives will be choosing a new leader – perhaps then he'll be in line for a promotion to the top spot.
    Source: http://www.tax-news.com/news/New_Look_UK_Opposition_Unveils_Tax_Plans____69290.html


  • Oct 07, 2015   United Kingdom: silly

    To the UK now, and on the face of it, "boy" George Osborne has had a good record as Chancellor of the Exchequer as he approaches his sixth year in the post. He has slashed corporate tax, business that fled the erratic tax policies witnessed at the end of the previous Labour administration are coming back, and he has presided over some of the strongest – and most surprising – rates of economic growth seen in the G7. He's also been a very canny Chancellor and hasn't been too proud to lift popular policies previously espoused by opposition parties, thereby enabling the Tories to outflank their opponents and consolidate power. Yet, I think his record has been mixed. Interspersed with these achievements are some tax measures that wouldn't have looked out of place had Francois Hollande presented them. Some of these have been quite anti-small business, which is odd considering the Government in general likes to champion the "kitchen table" CEO. The latest of these is the idea to restrict the amount of expenses that self-employed contractors can claim for travel, subject to a test based around whether contractors are directly supervised while they work in an office. Why? Because HMRC is cracking down on "false" self-employment as part of its wider anti-avoidance and anti-evasion work. Which is all well and good, but self-employed groups are warning that thousands of genuine contractors, many of whom earn quite modest incomes, will be scooped up in HMRC's dragnet, and won't have the financial means to challenge any tax punishments meted out to them. What will the result of this be? Contractors will probably have to increase their charges, to cover travel costs. But then companies might decide it's cheaper to keep things in house. Or contractors might think it's not worth the hassle or the risk to be self-employed anymore. Indeed, the Association of Independent Professionals and Self-Employed has already warned that 45,000 freelancers could be driven out of business if the UK Government proceeds with these plans. So much for the flexible UK workforce that Osborne likes to take credit for. Silly boy!
    Source: www.tax-news.com/news/Plans_To_Cut_UK_Workers_Travel_Tax_Relief_Criticized_____69332.html


  • Sep 22, 2015   United Kingdom: fractious

    Ignorance is sometimes bliss as they say, but not if you live in Scotland, where ignorance could mean a nasty surprise in your paycheck next year, when the new "Scottish Rate of Income Tax" (SRIT) comes into force. Then again, you might be pleasantly surprised to find that the Scottish Government has decided to cut your income tax. We just don't know yet, because the new income tax rates and thresholds haven't been announced. Which is my reason for mentioning (execrating) the SRIT this week, because all this tax devolution is getting very confusing. And don't take just my word for it, have a read of HM Revenue and Custom's e-brief on the matter, published last week, for what's in store for those with connections to Scotland. I wasn't that surprised to learn that awareness of the SRIT among individual taxpayers is virtually non-existent, according to a poll by Ipsos MORI, although large companies and payroll agents are more clued up. This result does make some sense, as the majority of the individuals questioned are probably salaried individuals, who don't necessarily need to know the finer points of income tax law, while the companies withholding tax from their salaries do. However, it does kind of make a mockery of this clamor in Scotland for greater fiscal autonomy from the UK, when most people don't seem to care what the tax changes actually entail. Another point worth mentioning is that the SRIT, with its complex residency rules, could be a nightmare for mobile self-employed workers, not to mention small firms, which don't typically have small armies of tax experts on the payroll to figure these things out – ignorance almost certainly won't be bliss for them.
    Source: www.tax-news.com/news/HMRC_Publishes_Brief_On_Scottish_Rate_Of_Income_Tax____69171.html


  • Aug 17, 2015   United Kingdom: illogical

    One reason given for the speed and scale of the United Kingdom's surprising economic recovery is its flexible labor force. Not only are the UK's employment laws more favorable for employers than those of other western European countries but a vast army of self-employed persons have joined the workforce in recent years, reflecting changing working practices and the prevalence of new communication technologies. HM Revenue and Customs, however, seems to be stuck in another age. At least, that's the only way to explain its obsession with enforcing the "intermediaries" legislation. The legislation, generally referred to as IR35, was introduced in April 2000 and was designed to combat the avoidance of tax and national insurance contributions (NICs) through the use of intermediaries in circumstances where an individual would otherwise, for tax purposes, be regarded as an employee of the client. However, despite taking hundreds of contractors and freelancers to court for being falsely self-employed, HMRC has collected next to nothing in revenue from these enforcement actions. Data disclosed under the Freedom of Information Act shows that IR35 raised just under GBP9.2m (USD14.3m) in six years of operation. In fact, according to the UK Association of Independent Professionals and the Self-Employed, of the over 1,500 IR35 investigations and cases it has been involved with, HMRC has been successful in just 10. How much HMRC spent on administration and litigation in these cases remains a mystery, but it wouldn't be outlandish to suggest that these costs substantially outweighed revenues. When the government changed in 2010, the new coalition pledged to review IR35, leading to hopes that it would be scrapped. But that turned out to be a false dawn, and the freelance community remains as confused as ever over the application of the law, and HMRC's intentions. What really grates here is not just the apparent lack of common sense being displayed within HMRC in pursuing these cases – presumably at not inconsiderable cost to the taxpayer – but that this policy goes against everything the Conservative Party has been preaching, both in the former coalition Government and now as the party in power – that individuals prepared to take the risk of starting a business and going it alone should be empowered rather than encumbered. Go figure!
    Source: www.tax-news.com/news/Recruitment_Firms_Challenge_UKs_Proposed_IR35_Reforms____68826.html


  • Aug 10, 2015   United Kingdom: summary justice

    It was so often the case, under the UK coalition Government, that Britain took one step forwards, and then one step back. Nothing seems to have changed now that the Conservative Party is governing outright. The UK has won plaudits from investors for the scale of the corporate tax cuts that have taken place since 2010, and there will be more to come over the course of the current parliament with the rate due to fall below 20 percent, which seems to be something of a psychological marker these days, separating the mainstream economies from the "tax havens." Yet the Exchequer needs tax revenues, and needs them badly if the budget deficit is to be eliminated, and public debt, which has risen to 80 percent of gross domestic product, at last put on a downward track. Consequently, HM Revenue and Customs has been handed some sweeping powers to collect back taxes. As I always say in this column, tax evaders deserve to feel the full force of the law. However, there has to be checks and balances in the system, and those accused of a crime should – if a country claims to be civilized – be entitled to a fair hearing. This no longer seems to be the case if HMRC suspects you might be playing fast and loose with the UK's tax laws. Now, HMRC takes the money it thinks it is owed first and asks questions later, as with the Accelerated Payments Notice regime, which was upheld by the High Court last week following a judicial review. Now HMRC is consulting taxpayers on a proposed new law that will create a new criminal offence for facilitating tax evasion. This is designed to ensure that corporations can be held accountable under the criminal law for failing to prevent their agents from facilitating tax evasion, which, on the surface, sounds reasonable enough. However, the proposed legislation is extremely broad geographically, with foreign corporations, as well as UK ones, falling within its scope. It is unclear how HMRC will enforce the law, but companies are probably going to wonder whether it is worth the additional administrative hassle and risk to their reputation to do business in the UK, low taxes or not.
    Source: http://www.tax-news.com/news/HMRC_Wins_Accelerated_Payments_Challenge____68764.html


  • Jul 27, 2015   United Kingdom: brave

    The UK Government might also be careful what it wishes for as it presses the Office of Tax Simplification back into action to study merging the income tax and National Insurance systems. National Insurance contribution (NICs) were first introduced just prior to World War One to help working people insure against periods of unemployment and illness. They were expanded immediately after World War Two to help pay for the new National Health Service. However, revenues from NICs have long ceased to be ring-fenced and, in reality, the National Insurance system is just another item of general taxation. Merging NI into income tax would achieve huge administrative savings for both governments and employers, and the proposal is strongly supported by business, which sees NICs as a large tax on employment. Yet, the Government is on dangerous territory here. For starters, merging NICs into income tax would make personal taxation much more transparent, showing people just how much tax they are really paying on their salaries: if employer NICs, charged at 12 percent on wages, were combined with income tax, the basic rate of income tax would rise from 20 percent to 32 percent. And unless significant changes were made to the rate structure, there would be some bizarre results. The Adam Smith Institute calculates that effectively there would be 10 tax bands if the two systems were merged under their current parameters, with those earning over GBP100,000 paying from 42 percent to 62 percent. There are also other issues. Pensioners don't pay NICs, so they would have to be put on a separate regime with lower rates. There is also the employer National Insurance contribution of 13.8 percent to consider, and it is unclear how this would be absorbed into the new system. Moreover, merging the two regimes, which have entirely separate IT systems, could be highly disruptive, expensive, and time consuming from an administrative point of view, which is one of the reasons why the Government didn't pursue this reform in the last parliament. George Osborne has at times been a bold finance minister. This move, if he goes ahead with it, could be the bravest of the lot.
    Source: www.tax-news.com/news/UK_Looks_Into_Simplifying_Income_Tax_Social_Security____68662.html


  • Jul 13, 2015   United Kingdom: competing

    Many politicians try to be all things to all people, but few manage to achieve it. George Osborne, the Chancellor of the United Kingdom Exchequer (aka, the Minister of Finance), is making a very good claim to be inducted into the "few that manage to achieve it" hall of fame in later life after announcing a quite remarkable "emergency" Budget last week. Indeed, it was a budget statement that could justifiably earn Osborne a new nickname – The Borrower – for he seems to have borrowed key policies from political opponents vanquished recently at the general election, particularly from the Labour Party, including a big increase in the minimum wage and the virtual extinction of non-dom tax status (although, now he's taken them, he can't really give them back, can he!) I can recall that when the UK first got its minimum wage in 1997 – a key Labour pledge – the Conservatives, then in opposition, were dead against it, fearing it would increase employment costs and lead to job losses. However, the Conservatives now plan to force companies to pay a so-called "living wage" about 20 percent higher than the current minimum wage as part of Osborne's plan to create a "high-wage, low-welfare" economy. The idea behind this is that those on low pay will no longer have to have their wages topped up by the welfare system in the form of wage tax credits – a hugely expensive yet cumbersome system, which was one of former Labour Prime Minister Gordon Brown's flagship policies when he was Chancellor. Osborne's interference in the labor market to this extent would have been unthinkable under previous Conservative administrations, particularly those led by Margaret Thatcher. In fact, there is almost a slightly Nordic flavor to this Budget, and in Osborne's intentions to create a high-skilled, high-value-added type of economy. However, this is probably as much about politics as it is with ideals. In fact, Osborne has become the consummate pragmatist in his five years at the Treasury. With this Budget, the first Conservative one for 20 years, many think that Osborne has performed a political masterstroke, with the center ground now well and truly seized, and with it many votes that might have gone to Labour next time around. It leaves Labour, already struggling for a new direction, with only one way to go – left – which will probably see them in the political wilderness for a generation, until a new Blair emerges – if a new Blair emerges, that is. Perhaps the real genius of this Budget though is that Osborne has made many people feel like they're getting a tax cut. In fact it raises taxes by more than GBP40bn, with more revenue due to contribute to deficit reduction than ever before. All in all, it's a curious mix of economic liberalism and social democracy. Another measure also stands out for me: with another 2 percent corporate tax cut in the pipeline, all things being equal, by 2020 the UK will have a corporate tax rate just 1 percent higher than Singapore's and 1.5 percent higher than Hong Kong's. UK corporate tax rate will also be less than half the combined federal/state income tax rate currently faced by firms in the US. Few commentators have picked up on the significance of this, but if nothing else it confirms that, unlike much of the EU, the UK Government still firmly believes in the merits of tax competition.
    Source: http://www.tax-news.com/news/UK_Budget_Targets_18_Percent_Corporate_Tax_Rate____68549.html


  • Jun 29, 2015   United Kingdom: not excelling

    So, after five years of work, the UK’s Office of Tax Simplification (OTS), launched in 2010 with high hopes of hacking back the jungle of tax reliefs, has come up with… a spreadsheet! Well, excuse me if I don’t fall off my chair with excitement. This so-called complexity index is supposedly aimed at measuring the relative complexity of the UK tax system. The OTS goes on to explain that the spreadsheet divides the tax system into 107 (107!) different areas. Surely this statement alone is all one needs to know to conclude that, yes, taxation in the United Kingdom is very complex! The UK Government has actually had a fairly decent track record on taxation since 2010, given the size of the budget deficit it inherited from the previous administration, especially in comparison to some if its European neighbors. It has managed modest cuts in personal income tax, while corporate tax has been slashed by 8 percent. However, its record on tax simplification has been pretty dismal. Gordon Brown must shoulder much of the blame for rising tax complexity in the UK. As Chancellor of the Exchequer for ten years from 1997, his propensity to tinker with the tax system, often undoing measures he himself had brought in, saw the UK tax legislation guide swell from 5,000 pages, when Brown entered Number 11, to 10,000 by 2008. But the coalition, which the supposedly pro-business, de-regulating low-tax Conservatives dominated, didn’t fare much better. Indeed, the multitude of anti-avoidance provisions included in successive budgets and fiscal statements have probably made the situation worse. I’m not sure we needed a spreadsheet to tell us that!
    Source: http://www.tax-news.com/news/Office_Of_Tax_Simplification_Finalizes_Complexity_Index____68445.html


  • May 12, 2015   United Kingdom: coalition-free

    Well, I suppose it would be somewhat remiss not to mention the UK election, which was keenly watched by investors around the world. But really, what was all the fuss about? After all, the result was never in doubt! That is, if you ignored every single opinion poll produced during the election campaign (I wonder if any pollsters will be joining Miliband, Clegg, and Farage in the queue for a new job). Move along, nothing to see here. By the time this blog is published, David Cameron will be a few days into his second term as Prime Minster with a small but eminently workable majority, making all those predictions about unholy alliances and Faustian pacts between parties look like mere scaremongering. In the end though, the Conservatives used scaremongering very much to their advantage in something of a masterclass in negative campaigning. The Scottish bogeyman, in the form of the SNP, hasn't completely gone away, having almost completely swept the board north of the border, but it won't now have the ability to tear up the former coalition's economic plan in cahoots with Labour. So business as usual then? Well, not quite. Businesses were heard calling for more tax cuts just ahead of the election. But the Government is going to have bigger fish to fry. The fallout from the SNP's annihilation of the Labour vote in Scotland (one result the pollsters did get right) will probably mean more fragmentation of the United Kingdom. (Is there be a more inappropriately named nation in the world?) It could mean maximum devolution for Scotland, if not complete independence. But then things will start to get messy, with talk of English votes for English laws, an English Parliament, and more regional assemblies. And we haven't even mentioned Wales and Northern Ireland. What investors are really worried about though is the UK's position vis-à-vis the EU. The Tories have promised to hold an "in/out" referendum by 2017, and unless Cameron achieves the seemingly impossible and negotiates a transfer of powers back from Brussels to London, there's a very real chance that the UK's membership of the European club might be cancelled. Irrespective of whether this will be a good decision for Britain or not, it's going to mean two more years of uncertainty and sweating over opinion polls. A familiar refrain from Cameron throughout the election campaign was "vote Miliband, get (SNP leader Nicola) Sturgeon." What the British appear to have done is vote for stability, but got chaos!
    Source: http://www.tax-news.com/news/UK_Entrepreneurs_Hope_For_Corporate_Tax_Cuts____67998.html


  • May 08, 2015   United Kingdom: election fever

    By the time this blog is published, we will be very close to finding out the identity of the next Prime Minister of the United Kingdom. Then again, perhaps not, given that there is almost certainly going to be a hung parliament, followed by several days, maybe even weeks, of horse trading to form a coalition. So we have more time yet to ruminate on the increasingly desperate last-minute tax gimmicks of the main contenders. This week, it's the Conservative Party's pledge to leave rates of income tax, social security tax, and value-added tax on hold for the life of the next five-year parliament. It sounds good doesn't it? But that's just it – it sounds good. But I don't necessarily think it is that good. What I don't like about the idea is that Prime Minister Cameron wants to "lock" this pledge into place by enshrining it in legislation. Why would a Conservative Government want to limit itself in this way? What's more, if these taxes are to be "locked," does it mean that the Tories are ruling out cuts to these taxes, as well as increases? Cameron wasn't very clear when announcing the proposal, which is ironic as this is supposed to promote tax stability rather than uncertainty. Either way, it looks to me like the PM could be setting himself up for a fall. Although the British economy has performed relatively well recently, the effects of the financial crisis continue to linger, and as much as I'm against high taxes, I'm not sure that the UK can afford to be so confident about its fiscal health. I mentioned in last week's blog how President George Bush senior's infamous "read my lips" pledge on the campaign trail in 1988 led to one of the more embarrassing u-turns in modern times. But it seems that, when it comes to tax and elections, politicians rarely learn from history.
    Source: http://www.tax-news.com/news/Cameron_Pledges_FiveYear_Tax_Lock____67962.html


  • Apr 21, 2015   United Kingdom: up to its neck

    So silly season – aka, the general election campaign – has officially commenced in the United Kingdom. All the significant parties have now released their manifestos, but to be truthful there's nothing really radical or scary in any of them. The Labour Party, whose leader has been dubbed "Red" Ed Miliband by the right-wing press, won't exactly soak the rich with its tax plans, which are fairly predictable: the restoration of the 50 percent top rate, a so-called "Mansion Tax," a levy on tobacco firms, a vague promise to restrict "non-dom" tax status, and a crackdown on offshore tax havens, including an unworkable proposal for public beneficial ownership registries. On the fringe, the UK Independence Party wants, of course, to cancel the UK's EU membership, and it also promises to abolish inheritance tax, but as popular as the party seems, it probably won't get enough seats to influence anything. What's more worrying is that the election is likely to result in a hung parliament, and so the fringe parties are probably going to have a major say on who the next Prime Minister will be. Unless, that is, one of the main parties attempts to have a stab at minority government, which raises the prospect of watching either Cameron or Miliband stagger from one crisis to the next. Hardly a recipe for stability. And there is evidence to suggest that companies are holding back their investment plans accordingly. If he does lose the election, Cameron could be forgiven for wondering what he did wrong, having reduced the budget deficit, cut taxes, and overseen a growing economy. Indeed, IMF chief Christine Lagarde was recently heard praising UK economic policies. Not everyone is so enamored with the Coalition's track record though. In a somewhat amusing, yet quite alarming, piece of analysis quoted in the press, Albert Edwards, who heads Société Générale's global strategy team, observed in a note to the bank that, following five years of the Con/Lib's policies, the UK economy looks like a "ticking time bomb" waiting to explode after the election, with the country "up to its eyeballs in macro manure." According to Edwards, this is largely because Cameron's Government has failed to deal with two key deficits, the fiscal one and the trade one — the latter is at its widest for 60 years. Eventually, Edwards predicts, "the stench will fill the nostrils of currency markets with the inevitable result – another sterling crisis." So, with voters' choice essentially boiling down to a Conservative-led Government which talks a lot tougher than it acts on the deficit, and a Labour Party with a reputation for fiscal irresponsibility, possibly in coalition with the free-spending SNP, perhaps the really scary thing is not what the parties intend to do, but what they're going to avoid doing: shoveling the muck.
    Source: http://www.tax-news.com/news/Mexican_Senate_Proposes_FTA_With_Cuba____67826.html


  • Mar 26, 2015   United Kingdom: winning over the "gray vote"

    It's difficult to know what to make of George Osborne's sixth budget as the UK's Chancellor of the Exchequer (that's finance minister to the rest of the world). In the days leading up to the last budget of the current Parliament, Osborne promised that headline-grabbing gimmicks would be absent from his speech. But with the general election less than two months away, he would have been almost foolish not to have sprinkled the Budget with at least some fairy dust in the form of tax cuts for low- and middle-income workers and pensioners – winning over the substantial "gray vote" is one way to ensure electoral success. And sprinkle he did. The taxation of savings will be more or less abolished for ordinary savers, while another increase in the personal income tax allowance will ensure that most low-paid workers will be lifted out of income tax altogether. Pension rules will be further relaxed to give people more control over how they spend their retirement savings. By the time of the election, corporate tax will be 20 percent, further supporting the Chancellor's claim that the UK has the most business-friendly tax regime in the G7. The fact that the UK is growing faster than most advanced economies – as Osborne never tires of telling us – has given him room for these and other tax giveaways and permitted him to announce that the Government's fiscal consolidation program will end a year earlier than planned in 2019/20. That'll be just before the next general election. (Coincidence? I don't think so.) The UK's relatively strong economy allowed Osborne to claim that the sun was coming out again for Britain's taxpayers. But is this position of economic strength merely superficial? Looking at the situation objectively, it's perhaps overegging the pudding somewhat to suggest that boom times are returning to Britain. With much of the eurozone crashing and burning, the UK probably looks like it's doing better than it actually is. Yes, the budget deficit has been halved from its peak of 10 percent during the banking crisis. But under the Government's original plans it should have been eliminated by now. He also didn't mention that, under his new fiscal plan, the squeeze on public spending will be greater in the next two years than at any time during the current Parliament. That Osborne kept schtum about this is unsurprising when there's an election to be fought. On balance, he probably deserves an encomium. However, the Chancellor's silence on other issues of quite fundamental importance to the UK economy spoke volumes. Maybe the most worrying aspect as far as the UK is concerned is its chronic under-productivity, which the current Government seemingly has no answer for. UK productivity has been stagnant since the crisis, and now lags well behind the leading industrialized nations. As wage growth has virtually frozen, it is perhaps unsurprising that tax receipts have been relatively subdued, in spite of the UK's growing economy. What's more, the 2015 Budget was not all sweetness and light. There is plenty of devil in the detail: the ill-conceived diverted profits tax remains; and there will be a further erosion of taxpayer rights as the Government intensifies its crackdown on tax avoidance, including the presumption of guilt for those with undeclared offshore bank accounts. And the banks were up in arms after Osborne once again increased the bank levy. Not that they'll get a great deal of sympathy from voters. The measure is expected to raise around GBP900mn a year, which is probably the size of a large banking group's annual bonus pool. It's almost worth an encomium on its own.
    Source: http://www.tax-news.com/news/Osborne_Delivers_UK_Budget____67580.html


  • Mar 19, 2015   United Kingdom: fragmenting

    Well, the constitutional situation in the UK just gets all the more confusing, doesn't it? Scottish voters rejected independence in last September's referendum, yet Scotland is to receive more powers over tax and public spending. Effectively, members of the UK Parliament in London no longer have a say over purely Scottish affairs because most of these issues are now decided by the devolved Parliament in Edinburgh. But Scotland can still elect MPs to sit in Westminster, who can vote on matters affecting the whole country. In a highly ironic twist to Britain's devolution saga, the Scottish National Party (SNP) – naturally not satisfied with the pre-referendum bribe of shiny new tax powers – is expected, following May's general election, to have a sizable contingent of MPs in Westminster, mainly at the expense of the opposition Labour Party. And they intend to use this representation to good effect. The SNP has previously promised, in something of a gentleman's agreement, not to vote on issues affecting England and not Scotland. But in a move worthy of Machiavelli, they appear to have at least partially reneged on this pledge because, argues party leader Nicola Sturgeon, the effect of major public sector reforms in England, such as the ongoing and unpopular restructuring of the National Health Service, could creep north of the border, therefore requiring the SNP's input. What's really happening here is the SNP getting ready to flex its new muscles in its, and Scotland's, interests. Once the precedent is set, it is likely that they will vote on other issues not specific to Scotland. Certainly, the SNP could be a real thorn in the side for the next government, forcing concessions out of it in return for support on crucial votes. Almost unbelievably, the SNP could actually be part of the next government, because none of the mainstream parties are expected to win an overall majority. Indeed, it is not beyond the realms of possibility that the SNP could hold the keys to Number 10 come May 8 and end up as power broker in a coalition – most likely with Labour. So from wanting to cut ties with the UK altogether, the SNP could end up helping to govern it. If you can't beat them, join them, I suppose. Still, as interesting as the election plots and sub-plots are, they're not doing Britain's prospects much good, says Sir Martin Sorrell, Chief Executive of WPP. He warned, in the company's preliminary results for 2014, that election uncertainty may "crimp" the UK economy as companies contemplate the referendum on Britain's EU membership promised by the Tories and all the uncertainty that brings, or the prospect of a Labour/SNP Government "bashing business." A "Morton's fork" of a choice, according to Sir Martin.
    Source: www.tax-news.com/news/IFS_Examines_Impact_Of_Scottish_Tax_Devolution____67535.html


  • Feb 26, 2015   United Kingdom: sees sense

    Many people, including increasing numbers in government, are convinced that discouraging environmentally harmful activities with taxes, and encouraging environmentally virtuous deeds with tax breaks, will go a long way towards saving the planet. I'm not so sure. For starters, we are going to have to wait quite a long time before there is enough evidence to show that carbon taxes and carbon trading schemes have resulted in meaningful cuts to emissions. If the majority of climate scientists are to be believed, this might be time we haven't got. But there is a more fundamental problem. A bit like the OECD's BEPS project, surely there is going to have to be a globally level playing field on carbon taxation if companies aren't going to indulge in carbon tax arbitrage, moving their operations to those countries with the lightest tax burdens, or those with no carbon taxes at all. Let's remember that, while a handful of US states are introducing carbon taxes, there is no real desire to introduce one at federal level. The trouble is that – despite their good intentions – governments tend to put their own self-interest first, and revenue production, rather than carbon reduction, is often the primary motive for "green" taxation. The United Kingdom's air passenger duty (APD), hiked massively during the financial crisis, is probably the best example of a revenue-raiser masquerading as an environmental tax. The major flaw in the APD is that it is essentially a ticket tax, which is charged on a per-passenger basis, with the amount payable varying depending on distance and class of travel. This leads to some perverse results, the most obvious of which is that less tax may be paid by the passengers of a half-empty plane than a full one, despite the fact that the former may be emitting considerably more carbon per passenger than the latter. The banding system also seems to have been designed by someone with a limited grasp of geography; passengers flying to the Caribbean, for example, pay more APD than those bound for Florida, despite the two destinations being roughly equidistant from the UK. Somehow, Hawaii is also deemed nearer the UK than the Caribbean. APD has also done damage to the UK's aviation and travel industry, and at least one airline has scaled down its UK operations in response to swinging increases in the tax in recent years. Yet, at the same time, the Government's avowed policy is to ensure that London remains Europe's major aviation hub. Go figure! At long last though, the UK Government appears to be listening, and confirmation of plans to overhaul the structure of APD just about merits an encomium from me this week. A complete rethink might have been a better idea though; surely, the way forward is to encourage research into clean-burning fuels and to reward the companies investing in them, not clobbering a family going on its annual vacation.
    Source: www.tax-news.com/news/UK_Confirms_New_Air_Passenger_Duty_Structure____67318.html


  • Jan 29, 2015   United Kingdom: stupid

    The United Kingdom has been getting a lot attention in this column lately, and not a lot of it has been very kind. But it's hard to avoid the temptation to give Her Majesty's Government the treatment when it behaves so stupidly on such a regular basis. This time, it's the Government's plans for transparency of beneficial ownership of companies registered in the UK. I thought that the coalition might quietly shelve these proposals in the melee of the upcoming general election campaign but apparently not, for the Government confirmed on January 15 that companies will need to keep a register of people with "significant control" from January 2016, and file such information with Companies House from April next year, provided such legislation is approved. "Ah, here she goes again" some of you might say. "Last week she defended tax dodgers by attacking FATCA, now she's defending criminals by opposing public beneficial ownership registries." But as I pointed out in my previous blog, a determined tax evader will just find another way to hide his money. Similarly, money launderers, terrorists and other undesirables aren't going to be scared by these plans either. They will just go deeper to ground, making the paper trail even more difficult for law enforcement authorities to chase. Or they could just set up a series of companies outside the UK's jurisdictional reach, because few other countries have expressed the slightest bit of interest in this idea, beyond the usual lip service at the G8; even the EU has backtracked on this. In fact, why would anyone want to have a company in the UK at all, if every Tom, Dick and Harry can know your business? I've yet to see a really convincing argument in favor of this. Prime Minister Cameron said in 2013 that "for too long a small minority have hidden their business dealings behind a complicated web of shell companies." But, David, they will just continue to do so with or without a beneficial ownership registry. Just like FATCA, compromising the privacy of the vast majority seems like a very high price to pay to punish a small minority. At all events, it is a junior minister in the Department for Business, Innovation and Skills, who goes by the official title of "Parliamentary Under Secretary of State for Employment Relations, Consumer and Postal Affairs" who seems to have been given the unenviable task of pushing through these proposals. The minister, whose resume does not display any obvious direct business experience, has been sent on a fool's errand indeed. Cameron and Chancellor Osborne should know better.
    Source: www.lowtax.net/news/UK-To-Be-First-Mover-On-Public-Beneficial-Owner-Registries_67035.html


  • Jan 15, 2015   United Kingdom: march of the SPADs

    In my final blog post of 2014, I lamented the rise of Government by Internship in the world's leading nations. Like the United Kingdom. You know the sort: studied politics, philosophy and economics at Oxford; graduted with a 2:1 and became an MP's researcher or ministerial "SPAD" (that's a special advisor for the non-politicos among you); won a seat in parliament in their 20s; promoted to government in their 30s; senior minister by 40-odd; retired/washed up/roving global ambassador by 50. And all the while dutifully toeing the party line without having had the misfortune to experience anything of the "real" world. But perhaps there is hope. Occasionally, as happened in the House of Commons recently, signs of life do twitch in the dying beast that is democracy. Prime Minister's questions can be electrifying, even if it's really a carefully rehearsed pantomime for television. The best debates often take place in a sparsely-populated chamber when the majority of MPs are relaxing at Annabel's. In this case, the debate was on the UK's controversial Diverted Profits Tax, a proposal which even got pulses racing at OECD HQ in Paris. On the spot was Andrea Leadsom, Economic Secretary to the Treasury (your guess is as good as mine as to what this post actually involves, although apparently it's the fifth most senior position in the British Finance Ministry), who fielded some awkward questions from a cross-party group of MPS, like (and I paraphrase) "why has the UK so spectacularly jumped the gun ahead of the OECD's BEPS report?" and "won't this measure effectively destabilize the UK corporate tax system?" and "how do you fancy renegotiating all 100-plus UK tax treaties?" All of which were fended off by Leadsom with an admirably straight bat, as they say in England. Not that the Government is likely to listen to parliament anyway. It will probably only change its mind when businesses vote with their feet. And by then the damage will have been done. Which is why Britain gets a downgrade this week.
    Source: www.tax-news.com/news/UK_Parliamentary_Hearing_Held_On_BEPS_Response____66929.html


  • Dec 22, 2014   United Kingdom: jumping the gun

    From one type of "Google tax" to another now. I praised the UK Government 's Autumn Statement last week for its long overdue reform of stamp duty land tax on property purchases – but against my better judgment as it turned out. They often say that the devil is in the detail of Government Budget statements, and it transpires that the Autumn Statement is home to a particularly ugly demon taking the form of the so-called "diverted profits tax." One can see why people get hot under the collar about corporate tax avoidance, when most individual taxpayers see a quarter to a half of their pay taken by the Government before it even hits their pockets and with few legal avenues open to reduce individual tax liability for most salaried workers. But it's one thing for a Government to talk tough on multinational tax dodging, and quite another to destroy a carefully cultivated reputation as a friend to business with the stroke of a pen. Actually, it's more than one stroke, as OECD Secretary General Pascal Saint Amans observed last week. The draft DPT legislation stretches to 18 pages, and it's certainly saying something when the OECD appears bamboozled by a tax measure. Which is, indeed, one of the problems with the proposal. I'm not sure what the worst thing about the DPT is – the tax itself, or the fact that others are keen to ape it. Australia's Finance Minister Joe Hockey, prominent among them, doesn't seem to realize how bad an idea it is; not only does it undermine the OECD's BEPS work – with Saint Amans, too, criticizing the UK for jumping the gun – it is also riddled with flaws. It's aggressive and punitive in nature, and the proposal, as drafted, once again stacks the dice against the taxpayer by handing sweeping powers to HMRC to determine who is playing by the rules and who isn't, with few rights of appeal built in. It's also at odds with the UK's obligations under its vast network of double tax treaties, the result of which could be a cornucopia of tax litigation. I'm willing to give Osborne the benefit of the doubt that he hasn't completely taken leave of his senses. Perhaps this is a calculated move – a suitably timed piece of multinational bashing with a general election six months down the line – rather than an attempt to curry favor with Gurría and Saint Amans et al. The UK is banking on the fact that by next year it will have the lowest corporate tax rate in the G20, and so multinationals will no longer be tempted to shift profits to tax havens, but perhaps the stick now outweighs the carrot.
    Source: www.tax-news.com/news/UK_Diverted_Profits_Tax_Interesting_But_Renegade_OECD____66747.html


  • Dec 11, 2014   United Kingdom: rabbit out of the hat

    An "autumn" statement delivered in December? Sounds a bit late to me. Unless you are in the southern hemisphere of course, in which case it could equally well be early. Anyway, I refer here to UK Chancellor George Osborne's Autumn Statement, which used to be a dry summary of the United Kingdom fiscal balance sheet, but latterly seems to have morphed into a sort of pre-budget Budget. And with a general election due in May 2015, Osborne must have wanted to ensure that the 2014 Autumn Statement grabbed the attention of voters. To a large degree it has. The most substantial rabbit pulled out of the hat by Osborne was a reform of the absurd stamp duty land tax, which, until midnight on December 3, used to apply under a "slab" system. For example, if you bought a property for over GBP250,000, at which price the rate of stamp duty climbed from two percent to five percent, you paid five percent on the whole amount, not just the portion above GBP250,000. So if your house was worth somewhat above GBP250,000 and you wanted to sell it, good luck with that! It represents a fairly hefty tax cut in the order of nearly GBP1bn a year. And packaged as it was with a series of minor tax concessions for businesses, and small firms in particular, it is clear that the Conservative Party is keen to bring the young and upwardly mobile back into its fold in time for next year's election, putting "clear blue water" between it and the main opposition Labour Party. But yet more evidence of this Government's schizophrenic attitude to taxation emerged from the Autumn Statement, like the 25 percent "diverted profits tax" on company income artificially moved out of the UK to avoid tax. The success of this measure will surely rest on the interpretation of an "artificial arrangement." But I suspect that the Government cares little about that anyway. It is a populist move designed to show the voters and the OECD that it is cracking down on corporate tax avoidance. Nevertheless, the UK's thirst for tax revenues is almost unquenchable at the moment, and yet again we saw a fiscal statement littered with anti-avoidance measures. This is because the Government has spectacularly undershot its target for the deficit, which was supposed to have been eradicated by 2015. That won't happen now until 2020, provided the Conservatives, if re-elected, can oversee the largest squeeze on public spending since the Great Depression (the 1930s one). So while the likes of Greece, Ireland and Spain are talking about an end to austerity, in Britain the austere times might only just be beginning…
    Source: www.tax-news.com/news/Osborne_Delivers_UK_Autumn_Statement____66610.html


  • Oct 16, 2014   United Kingdom: disintegrates

    Given the sorry state of the eurozone's economy at the moment, the turn-around in fortunes for the United Kingdom's economy looks remarkable, especially as the former is one of the latter's main export markets. Prime Minister David Cameron also made the right noises on tax at the recent Conservative Party conference, calling for a substantial and long overdue increase in the threshold at which the 40 percent rate of income tax kicks in. It used to be that you had to be earning significant amounts of money before the Government took almost half of your pay. Now somebody earning not much more than 40,000 pounds is considered rich, and the UK isn't the only offender in having intermediate and top rates of income tax applying at criminally low levels of pay. Anyway, this is something of a digression, because it's time for an execration, and while Cameron may pretend that all is rosy in England's garden, the reality is that the UK remains vulnerable. The Government has fallen well short of its original deficit reduction target and the reality is that the UK deficit, in percentage terms, is still well above those of many eurozone countries which have received bail-outs of one description or another. And if the eurozone economy goes down, the UK will probably be dragged down with it, EU or no EU. Another, fairly predictable, worry now is that the Scottish referendum has unleashed nationalist forces across the Kingdom that London is struggling to contain. Yes, the Union might have been saved, but the price is more powers to Scotland, including over taxation. Now its Wales's turn to get its piece of the action. And since the referendum we have heard that it is now time for an English parliament. But cities in the UK's former industrial heartlands are also hankering for greater autonomy. How far is this going to go? Towns? Villages? Hamlets? Streets? Not that I'm a friend of highly centralized, micro-managing governments. But if you are a Brit, the way things are going you soon won't be able to figure out what tax you are supposed to be paying to whom. In many respects, the Government doesn't have much choice but to accept this, having let the devolution genie well and truly out of the bottle; I suppose it shows that it is prepared to listen to people who consider themselves cast to the margins of the Kingdom. But in hard economic terms, I don't see much good coming out of it.
    Source: www.tax-news.com/news/Wales_To_Be_Given_More_Say_On_Income_Tax_Policy____66058.html


  • Sep 25, 2014   United Kingdom: better together

    Those who might have dismissed the Scottish independence debate and last week's referendum as a rather localized, parochial sort of issue were mistaken. Many parts of the world took a great interest in the outcome of the plebiscite. In the final hours of the campaign, President Barack Obama took to twitter to express his hope that a key ally remained strong and united. And the Scottish question has been keenly watched in Europe, where there have been pockets of nationalist pressure waiting to burst forth on the back of a "Yes" vote, notably in Spain, Belgium and France (Corsica). Even in Germany, seemingly the most settled of countries, the impending referendum was front-page news, given the potential of Scottish independence to destabilize an already unsteady European Union. One paper even reported a spike in sales of whisky in Germany and other EU countries, with those fond of a little scotch worried that their favorite tipple might in future be subject to new customs duties. And we saw how the markets reacted to the possibility of an independent Scotland as traders dumped sterling and UK stocks and ratings agencies warned of downgrades for a truncated UK, whatever the new country would have been called (Lesser Britain perhaps?). Although one suspects they would have got used to the idea pretty quickly. With the referendum all over bar the shouting (and there has been plenty of that by all accounts) and a fairly decisive victory had by the "No" camp (although the 45 percent who voted "Yes" represents a substantial minority), these concerns are no longer pressing. But it can also be said that this is just the end of round one. Regardless of whether Scotland went independent or not, Edinburgh is going to get more powers over Scottish affairs, including taxation, under the Scotland Act. And in a desperate last-minute bid to save the Union, Chancellor George Osborne announced shortly prior to the referendum vaguely-defined plans to give Scotland even more freedom over taxation north of the border. A new constitutional settlement between Scotland and the rest of the UK will also have to be negotiated to stop Scottish MPs in Westminster having a say on affairs in England when their Right Honourable English friends can no longer vote on many Scottish issues. I neglected to mention Wales and Northern Ireland in this negotiation, which is apt because they are now feeling rather ignored by London and its deference to Scottish sensitivities. Why not a Welsh income tax too? And shouldn't businesses in Belfast be able to compete on a level playing field with less fiscally-restrained firms in the Republic paying corporate tax at 12.5 percent? Even the possibility of an English parliament is now supported by supposedly pro-union Conservatives and federalist liberals alike. Given the shaky foundations of the Scottish National Party's economic plans – in essence an expanded welfare state bankrolled by oil and gas reserves which are already substantially depleted – and the uncertainties surrounding other vital economic issues like currency and EU membership, the result is probably the best one for the UK overall. Then again, if you're sitting on the outside and contemplating a major investment in the UK, the prospect of what could turn out to be an unholy mess in terms of tax and regulation can hardly be doing wonders for your confidence. See what nationalism does? It might be a cathartic force for some, but overwhelmingly it's a negative one. Perhaps the only winners so far in all of this are the distillers. A wee dram anyone?
    Source: www.tax-news.com/news/UKs_Osborne_In_LastMinute_Scottish_Tax_Powers_Promise____65772.html


  • Sep 04, 2014   United Kingdom: bad cop

    Now we move from the bullying of smaller nations by their larger neighbors, to the bullying by nations of their taxpayers. And the UK is coming across as a most unpleasant bully in this respect at the moment. I have condemned David Cameron's Government in this blog in the past for giving HM Revenue and Customs powers to take money from people's banks accounts. If you evade taxes, you deserve everything you get, the compliant taxpayer might say. And this is true. But there must be checks and balances in place, and punishing people before they've even had a chance to defend themselves is no way to go. Now the UK is going even further: it wants to apply the "strict liability" standard to establish whether an individual has evaded tax with an offshore bank account. This means that even if there has been no intent to evade tax, but HMRC finds that taxable income has been under-declared, the accused could face an unlimited fine and prison. It's certainly going to make filling out a tax return a stressful experience for some if this becomes law. Some commentators suggest that this is a stepping stone to making offshore bank accounts illegal, and I have to say that the way things are going this is not a completely outlandish conclusion. Let's hope members of parliament are busily reviewing their own tax records to ensure they aren't embarrassed by this rule. Then again, let's hope not!
    Source: www.tax-news.com/news/HMRC_Consults_On_Strict_Liability_Tax_Penalties____65640.html


  • Aug 14, 2014   United Kingdom: good intentions

    A bit of an individual theme to this week's blog, and we start in the United Kingdom where Prime Minister David Cameron would "love" to give financially hard-pressed Middle England (in the income sense) a tax cut by raising the earnings threshold at which the 40 percent income tax rate kicks in. This year the starting point of this intermediate rate is GBP41,865, although effectively it bites after the first GBP31,865 of income once the GBP10,000 tax allowance is factored in. Historically, such upper rates of tax have been designed to hit wealthy, high income taxpayers. However, few people earning just over GBP40,000 a year would consider themselves "wealthy" these days. But then governments can play all sorts of sneaky tricks on taxpayers using progressive tax rates, often without them realizing. For instance, although the UK's top rate of personal income tax is 45 percent, the highest marginal rate is actually nearer 60 percent for those earning between GBP100,000 and GBP116,000, because for every GBP2 earned above GBP100,000, GBP1 of one's personal allowance is lost. However, although everything seems to be going swimmingly for the Coalition Government in economic terms – the UK will likely have the highest rate of growth in the G7 this year – it is only part-way through a fiscal retrenchment program and has put most of its tax eggs into the business basket by giving companies a substantial eight percent income tax cut, leaving little room for tax gifts for individuals; personal income tax receipts account for almost a third of the Government's overall tax take – the largest single of revenue – and corporate tax is relatively small by comparison. It's probably no coincidence that Cameron chose to talk about this with a general election less than one year away and Middle England (in the income and geographical senses) a key election battle ground as ever. At least his intentions are good even if he knows nothing will change drastically anytime soon.
    Source: www.tax-news.com/news/Cameron_Would_Love_To_Raise_Higher_Rate_Threshold____65418.html


  • Jul 17, 2014   United Kingdom: presumption of guilt

    One does have a modicum of sympathy for Her Majesty's Revenue and Customs, albeit a tiny one. Regularly lambasted by Parliament's Public Accounts Committee (PAC) – led by Labour MP Margaret Hodge, who has emerged as Britain's answer to Senator Carl Levin in America – and the mainstream media for being soft on corporate tax avoidance and cosying up to large multinationals in a series of so-called "sweetheart" tax rulings, HMRC is also castigated by the same set of critics for an increasingly heavy-handed approach in its numerous tax compliance campaigns. Damned if you do and damned if you don't, you could say. On the first point, the criticism of the department has been a tad harsh. HMRC can only uphold the laws which are set by parliament in the first place, and a study of five sweetheart deals by the public spending watchdog the National Audit Office (NAO) in 2012 found that they actually were pretty good value for money for the taxpayer. Although the NAO expressed concern about the transparency of these private tax rulings, it concluded that the revenue derived from them was "reasonable" in four cases and "better than reasonable" in the remaining one. More worrying perhaps was that the NAO said there was no clear answer as to what represented the "right" tax liability for these five taxpayers in the first place. So if this is the case, should HMRC be handed the power to take money straight from people's bank accounts or insist that those who have used a tax avoidance scheme pay disputed tax upfront before the case has been decided, apparently with no appeal mechanism? It's almost like serving a prison sentence before the jury has decided whether you are guilty of the crime or not. The difference is I suppose that at least you will get your money back if HMRC are proved wrong. Time on the other hand is non-refundable. Statistics show, however, that the department, with a much larger pot of money for lawyers than your average taxpayer or small business, has a success rate of about 80 percent in tax litigation. So on the second point, HMRC has been rightly grilled for proposed new powers that could see it act as prosecutor, judge and jury and possibly executioner of many an SME. As we keep pointing out in this column, tax evasion shouldn't be condoned; but neither should the vesting of such sweeping powers in an organ of state, and a pretty unaccountable one at that. Magna Carta? What's that?
    Source: http://www.tax-news.com/news/New_HMRC_AntiAvoidance_Rules_Could_Trigger_Insolvencies____65193.html


  • May 08, 2014   United Kingdom: charging entrances fees

    One thing the USA is probably not going to do, unlike many other countries world-wide, and even next-door companion-in-arms, Canada, is to sell citizenship. It is a popular sport nowadays, although many people find something unseemly in the spectacle of white-gloved butlers ushering the rich into a national club by the front door while the great unwashed try to scale the walls at the back of the house, to be beaten back very often, sometime physically, or even shot. These people will not like the fact that the UK is dining out on tax receipts from so-called "non-doms," while deporting refugees and denying social benefits to legitimate immigrants from recent EU entrant countries. In fact there are dozens of countries with active programs to encourage incoming rich individuals: a recent report claims that the average incoming "citizenship" investor has net worth of a stunning USD200m. As ever, I am in favor of competition, and this seems an entirely healthy process, in which individual choice is improved, richer people get to subsidize poorer people, and investment is encouraged, although there may be some less beneficent impacts on the housing market. I would massively expand such top-end experiments to allow a worldwide market in citizenship: thus, citizenship in country A (warm, low taxes, good educational system, no conscription) would be worth X, while citizenship in country B (cold, high taxes, antiquated schools, compulsory military service) would be worth Y (a small fraction of X). The relative prices would be set entirely by a market-discovery process. Competition between countries to attract individuals would immediately become intense. There are some language issues, of course, but they are rapidly losing traction. Before you start back in horror at such a prospect, please consider that this is exactly what is already going on in the shadows: people make their choices based on the relative value of residence in prospective domiciles, but the process is extremely inefficient because they lack information, and, in particular, there is no feedback loop to influence the behaviour of governments. An open market would be far more transparent. And please don't tell me that the result would be a polarized world society with "rich" and "poor" segments – especially don't tell me that while you're in Hamilton, Bermuda, or the back-streets of Delhi.
    Source: www.tax-news.com/news/UK_Income_Tax_Paid_By_NonDoms_Hits_Record_High____64542.html


  • May 01, 2014   United Kingdom: bets away

    The UK's tax collection agency, HMRC, also has its fair share of travails, and is under constant attack from its parliamentary minders for real or imagined sins of commission and omission, but it can at least point to a rising trend in overall tax receipts. This week it will not be happy to read that major betting firm William Hill will be closing more of its UK network due to a proposed increase in Machine Games Duty from next year. The Treasury's figures show that revenues from betting and gaming have risen from GBP1bn in 1990 to GBP2bn in 2013; but that is just about in line with the GDP deflator (i.e. revenue has been static), in addition to which more than all of the increased revenue is due to new taxes, particularly the lottery duty, which didn't exist at all in 1990. So the apparent success actually masks a disaster, although HMRC is arguably not to blame for the wholesale shift of classic betting and gaming to offshore and the Internet. It will be interesting to see whether the Government's proposed 15 percent "place of consumption" gaming duty, in place from the end of this year, will make any difference. I'm betting not!
    Source: www.tax-news.com/news/William_Hill_Blames_Closures_On_UK_Tax_Burden____64504.html


  • Apr 24, 2014   United Kingdom: does nice coffee

    Coffee, anyone, with your double Irish Dutch sandwich? That'll be Starbucks, then, especially if you're at say Oxford Circus or Trafalgar Square. The firm has announced that it is moving its European HQ from the Netherlands to the UK. Although the company was fairly unclear about its motives, it can't be irrelevant that the UK's corporate tax rate will be down to 20 percent from next year, while the Netherlands sticks with its 25 percent rate and has no plans to reduce it. Of course, that's not the whole story: the Dutch withholding tax regime is hard to beat, although the UK's participation exemption is by now not that different from the Dutch regime; and the Dutch patent box rate of 5 percent is still much better than the UK's 10 percent rate. I would not have guessed that serving coffee is such an R&D-heavy business, but lift the lid on an expresso and you are confronting a miracle of modern science, it seems. It's difficult to know where that process ends: the cups are probably coated in a proprietary stain-resistant glaze, developed at vast expense in an underground laboratory in Newcastle-on-Tyne; the ergonomically perfected chairs are made to be just that tiny bit uncomfortable so that you don't stay too long with your cooling coffee (the glaze on the inside is heat-absorbing, while on the outside it is an efficient black-body radiator); and the sandwiches, well I won't even start to try to understand, whether they are bread ones or tax-efficient ones. Presumably both. At all events, a bouquet to George Osborne, even if his Treasury has brought out some fairly unpleasant anti-taxpayer initiatives lately. Well, he would call then anti-non-taxpayer initiatives, I guess. Difficult to know whether Starbucks executives will welcome the hop across the Channel; the Dutch personal tax system is quite a bit nastier than the equivalent English one, and there is not much contest in cultural terms. They'll be digging deep into their savings to live in London, though, so watch those bonuses go up next year.
    Source: www.tax-news.com/news/Starbucks_To_Move_European_HQ_To_UK____64428.html


  • Apr 10, 2014   United Kingdom: dares to cross the OECD

    How good to see someone challenging the current OECD-inspired tax gospel with a comprehensive dissing of the BEPS heresy. The tax boss of the UK's ACCA must have swallowed hard before accepting the report they had commissioned, but he has bitten the bullet. I'm not going to drown you in statistics, just one will do: Germany's revenue from corporate income tax was 15 percent higher in 2013 than in 2012. Now how are you (well, I don't mean you, I mean "they") going to square that figure with the prevailing consensus, at least among politicians and tax collectors, that MNEs are getting away with blue murder? It's just a bundle of politically-inspired, or maybe I mean debt-inspired balderdash. Everyone needs to remember at all times that, whatever usefulness it may have had in the past, the OECD is nowadays simply and only a rich-country pressure group whose goal is the destruction of tax competition. The whole BEPS farrago is giving a lot of innocent amusement to governments, accountants, journalists and legislators; but in terms of adding to the wealth of nations, it is a waste of space. In fact it is counter-productive, because it distracts attention from the need to develop a coherent set of principles to apply to transfer pricing. Pending the abolition of corporation tax, which as my regular readers will know is both desirable and inevitable, there is an existential need to apportion income between corporate locations on a basis which will be accepted as fair, and the OECD has indeed done some moderately useful work in this regard when it sticks to its knitting. I wonder indeed if there is not a dichotomy within the OECD between the sensible economists who are trying to craft reasonable international agreements, and a more militant tendency which represents in a loose sense the regiment of barking, cash-strapped finance ministers of the Western world? And I wonder which lot drinks more of all that claret they have stored in the cellars beneath their palatial Parisian mansion? No prizes for guessing what I think.
    Source: www.tax-news.com/news/Base_Erosion_A_Myth_Says_ACCA_Study____64257.html


  • Mar 27, 2014   United Kingdom: sails serenely forward

    By George! The UK's Chancellor (Finance Minister) seems to have brought off the impossible by announcing a budget which everyone agrees with. Of course the Opposition (its duty is to oppose, as they always say) sent up some ritual distress flares, but they illuminated more of Labour's distress than Osborne's. Different commentators had different takes on the cleverness of the Budget, from very clever to surpassingly clever; but no-one called it stupid. Everyone realizes that it is an electoral Budget; that is hardly worth saying. What is perhaps worth observing is that there is no doctrine in the Treasury at present; there is just a cold calculation of how to retain and increase political power. Like it or not, this is the most impressive governing engine that has been seen in Whitehall for decades. And in fact there is quite a bit to like. In particular the abolition of forcible annuities for pensioners is a move in the right direction. It has long been an outrage that 75-year-olds are compelled to convert their pension savings into annuities at contemptible rates dictated by a small coterie of unaccountable City insurers. Not only is it morally correct that people should be able to make their own choices of how to deploy (or waste) their savings, it will almost certainly increase the tax take at the same time as increasing personal freedoms. It is not given to many politicians to achieve both in one stroke. Old Etonian or not, it is becoming difficult to see how George Osborne can avoid becoming Prime Minister at some point. If there is an agreement to that effect between him and his friend, David Cameron, as there was said to be between Tony Blair and his ill-starred Chancellor Gordon Brown, it has not been revealed. They are much too clever to talk about such a thing in public.
    Source: www.tax-news.com/news/UK_Budget_Supports_Businesses_To_Deliver_Growth____64108.html


  • Feb 20, 2014   United Kingdom: promises, promises

    It may be our own news, but I have to say that the promised removal of stamp duty by Welsh Tories is not the week's most compelling development, given that those self-same Tories are expected to score less than 20 percent in the next election. At least I suppose that the UK Independence Party will do even worse in Tudor country. And to be fair, there are large numbers of English cottage-owners in Wales who probably have their votes in Surrey and may be influenced by their Welsh comrades-in-arms. I cannot however resist telling you about a drunken escapade that I (as a Chelsea resident) took part in, probably in 1971, when five of us went to Wales one Saturday in order to buy a cottage on offer at GBP100, which was about the cost of one weekend's gin-and-tonic consumption between the five of us. We found it, eventually and rather surprisingly, perched on the edge of a 200 foot escarpment. The particulars said that there was a water supply ten yards in front of the cottage, and in the twilight (it had taken us all day to get there) we could indeed dimly make out a pump at the foot of the cliff, although it wasn't clear how it could be reached other than by parachute. They didn't have hang gliders in those days. There wasn't even a pub in the village, not that there was a village in any case, and we didn't find one until we had crossed back over the English border. That's Welsh cottages for you, stamped or otherwise; but I want to add in the interests of total accuracy that my boy-friend at the time was Welsh, and even he saw the joke.
    Source: www.tax-news.com/news/Welsh_Tories_Pledge_Stamp_Duty_Cut____63694.html


  • Jan 23, 2014   United Kingdom: against the EU

    David Cameron and George Osborne have been EU-bashing again this week, and they mean what they say as regards the financial transactions tax and financial services regulation. It's not clear that they mean what they say as regards immigration: they have to pretend to be against it in order to placate would be supporters of UKIP and other lunatic fringes. In fact, as they know very well, the UK has benefited enormously from successive waves of immigration resulting from illiberal and repressive policies pursued by successive Continental tyrants, from Huguenot weavers in the seventeenth century to Jewish scientists in the 20th. Countless surveys have shown that immigrants add value to the UK, work harder and are less of a drain on the social services than native Brits; but if they want to get re-elected Tory leaders have to pretend otherwise. Cameron's rather vapid demands for change from the EU are somewhere in the middle of these two scenarios: he can see that the EU would benefit from major changes to its economic policies, and can get electoral benefit from making threatening noises; yet in his heart he probably doesn't believe that changing the EU is feasible. That's sad, because the UK's economically liberal, internationalist stance, shared to some extent by Denmark and the Netherlands, along with some of the newer Eastern European member states, is badly needed as a counterweight to the statist, Colbertian attitudes of the core Continental EU members led by France and Germany. Sensible EU leaders, and there are some, know this, welcomed the arrival of the UK, and would regret its departure. From the 1970s to the 1990s, the general stance of the UK towards Europe was positive, and the British establishment tried hard to be involved, usually with good results. That has changed. It's trite to say that the Tories under John Major or Labour under Tony Blair were anti-European, rather than just being euro-skeptic, yet that was the period during which the Westminster establishment disengaged from Europe; and the subsequent Tory administration has had a surly, combative attitude towards Brussels which has done nothing to burnish British credentials. Now it's too late: win or lose (and most likely the latter) Europe has hitched its wagon to the "social partners" model and has ditched economic liberalism as a guiding principle. There probably still are economic liberals in Brussels, and on the margin, in such areas as trade relations, they are still effective, but to this day, the only country in Europe that has had a Thatcherite revolution is the UK, and we are long past the point at which the British could have affected the Continental drift towards nanny statism. This column thinks that the British should leave, by all means preserving the single market (itself increasingly indistinguishable from the WTO's regime and other multilateral agreements), but dumping the regulatory carapace that the EU is imposing on financial services and the labor market, and becoming an independent trading nation once again. If Britain's rulers really meant to do that, and if Brussels really believed they meant it, then there would be a faint last chance for Europe to halt its decline. Otherwise, and much most probably, Osborne and Cameron will continue to whinge, Europe will continue to ignore them, and the whole caboodle will decline gracefully into irrelevance.
    Source: www.tax-news.com/news/Osborne_Renews_Attack_On_European_FTT____63400.html


  • Dec 12, 2013   United Kingdom: steady as she goes

    The Tory toffs who are running the British Government seem to be doing a reasonable job, despite the LibDem barnacles encrusting their hull and slowing progress. The Chancellor's Autumn Statement last week had some disappointing aspects, but by and large it does the right things, particularly by helping small businesses in various ways. I don't know quite what to make of the grandiose package of tax avoidance measures: surely it is mostly grandstanding? Having committed themselves so thoroughly at the Lough Earne G20 summit to abolishing BEPS, they probably had no choice but to make a big song and dance about it. But most thoughtful commentators have by now concluded that the whole BEPS circus will change very little in the real world. So there is no point in criticizing the Brits for continuing to push the bandwaggon along. Even the imposition of capital gains tax on non-resident property owners is probably just another case of gestural politics, meant to de-fang the mansion tax threat from their LibDem "partners". The real problems the Government has are the deficit and the debt pile, and there is little to be done other than to keep noses to the grindstone and hope that the Fed doesn't start tapering too soon, which would send interest rates skyward and rip apart the British fiscal tight-rope act. Not to mention the similar French, Italian and Spanish turns. Mario Draghi would have to shovel another couple of trillion euros down the throats of European banks if tapering happened. It's a mystery to me how all of this money creation doesn't result in more inflation. Sooner or later it has to; but perhaps for now the global economy is still in a state of shock. George Osborne must be hoping it stays that way for quite a long while.
    Source: www.tax-news.com/news/UK_Chancellor_Delivers_Autumn_Statement____62945.html


  • Sep 19, 2013   United Kingdom: loves offshore

    The UK's crown dependencies have been falling over themselves this last week, culminating with a panegyric from the the Isle of Man, to welcome David Cameron's declaration in the House of Commons that they are no longer to be regarded as "tax havens." Cameron's statement also applied to Bermuda and the Caribbean jurisdictions. The fact of the matter however is that the British "ex-offshore" pearl necklace of the one-time disregarded rocky oceanic outcrops which make up the majority of the world's low-tax jurisdictions are no more but also no less tax havens than they ever were. They still for the most part offer absence of taxation to incoming corporations and prefer to give jobs to their local inhabitants. Most of them also overcharge for places to live and other expat necessities. What has changed is that whereas twenty years ago they were seen as bolt-holes for over-taxed, diamond-encrusted individuals (Lady Docker, anyone?), they have come to be essential cross-border financial tunnels for over-taxed companies, and an indispensable support for FDI. Among contemporary acronyms, BEPS would surely be the winner of any competition in terms of sheer frequency; but FDI would top any Finance Minister's list of national essentials. Just as Mauritius is crucial to India's FDI, accounting for the strange reluctance of the Indian Government to renege on the two countries' tax treaty while continuing to moan bitterly and incessantly about its workings, so also the British Government now depends too much upon the constantly dredged offshore channels of Jersey, Guernsey and the IOM to do more than offer ritual opposition to their existence while privately (and now even, publicly) extolling their virtues.
    Source: www.lowtax.net/asp/story/front/IoM_Treasury_Minister_Welcomes_UK_PMs_Endorsement____62046.html


  • Sep 12, 2013   United Kingdom: on the wrong side

    Speaking of Russia, and indeed the US and the UK, these were the ringleaders of the G20's attack in St Petersburg last week on tax avoidance, by making automatic exchange of tax information the global standard, and agreeing to steps for cracking down on base erosion and profit shifting (BEPS). Vladimir Putin said that they planned to adopt a joint Action Plan for the prevention of BEPS; and the end-of-meeting declaration said that the G20 has been in talks with the OECD to create a single global standard for the automatic exchange of information. Now it's very easy for international political leaders to climb onto the morality bandwaggon and pontificate about how awful it is that individuals and companies evade tax, but to me the whole world has gone topsy-turvy. The present parlous state of the global economy and threadbare national treasuries is directly and unequivocally the fault of political leaders who have luxuriated in debt and spending over the last 20 years. Taxes and debt are both the highest they have ever been in almost all of the G20 countries, except in some places which are lucky enough to have plenty of black gold (Russia being one of them, actually). But instead of turning their efforts to cutting back on wasteful spending, which is of course politically very unpopular, these spendthrift politicians send up a barrage of criticism directed at "tax havens," which they would of course like to exterminate, and at companies which can't defend themselves and don't have votes. "In light of ongoing budget consolidation, the budget revenue base should be expanded. It causes widespread anger when companies operate in one country, pay taxes in the other, and take profit out of the countries where they operate and render services," says Russian Finance Minister Anton Siluanov, while Vladimir Putin says that the implementation of the G20's Plan should result in "a significant reduction in the practice of channeling profits into offshore accounts and an increase in tax payment in the jurisdiction where a given product or service is produced." In other words, increase already high levels of tax. That's all they seem to be able to think of. Why can't people see that it's the politicians who are the problem? Rhetorical question, of course; and the media are largely to blame for permitting and even encouraging the game to be played. So the grandstanding and the waste will continue, and a whole generation of young people in Europe face a bleak future. NEETs, they are called: Not in Employment, Education or Training. On a long-term view, what is happening is a shift of economic power from over-taxed and over-governed "old" countries to economically younger parts of the world, although that's no comfort to the NEETs.
    Source: www.lowtax.net/asp/story/front/G20_Forging_Ahead_With_AntiAvoidance_Action____61970.html


  • Aug 29, 2013   United Kingdom: in the 19th century

    The concrete blocks don't constitute a brick-bat for the UK, but what does is HMRC's cock-eyed attack on self-employment. The consultation document issued in May downplays HMRC's intention to re-classify partners in LLPs as employees, claiming that it will have little effect. But in that case, why bother? It has elicited a real storm of complaint and anguish from LLPs and professional associations. What is really going on, of course, is that HMRC has been trying to extinguish self-employment for decades, and having largely failed with a piece of legislation known as IR35, is now resorting to cruder weapons. It's a fact that self-employment offers advantages to workers: payment of tax is deferred; you can claim certain types of expense against income; and social security contributions are lower. And it's a fact that many people claim self-employment unjustifiably. But that is not a good enough reason to attack an entire segment of the professional classes. Successive governments have done quite a good job of modernizing the professions, something that was important to maintaining the UK's international business appeal. LLPs have played a major role in this transformation, and it is retrograde for HMRC to take a chain-saw to the fast-growing forest of business infrastructure that has resulted. The Government should put a stop to this Luddism on the part of the Treasury.
    Source: www.lowtax.net/asp/story/front/More_Criticism_Of_HMRC_Partnership_Taxation_Plans____61821.html


  • Jul 04, 2013   United Kingdom: a win for the courts

    The UK tax authority, HMRC, is being forced to come out into the open by a High Court judge over its treatment of QROPS cases (it doesn't matter what QROPS stands for – it sounds like a kind of dinosaur, but actually it's a way for UK expatriates to clamber out of HMRC's antediluvian and oppressive pension annuity rules). The pensions adviser in the case complimented HMRC over its treatment of QROPS cases, but only because it has to work with HMRC on a daily basis and wouldn't dare to criticize them for fear of damaging its clients' interests (and yes there is a vast structure of tax-payer rights, appeals tribunals and ombudspeople in the UK). It took a judge to point out HMRC's obscurantism. HMRC now has until mid-July to clarify its rules, something which is not anywhere near being achieved by the hundreds of pages of guidance so far published.
    Source: http://www.lowtax.net/asp/story/front/Judge_Tells_HMRC_To_Make_Statement_On_QROPS____61209.html


  • Jun 13, 2013   United Kingdom: flogging a dead horse

    Speaking of Mr Šemeta, he hasn't had a good week on the dossier which must be keeping him awake at night, which is needless to say the Financial Transactions Tax. He began the week with a ritual denial that the tax was to be scaled back – well he would, wouldn't he – and then took a series of body blows from opponents of the tax, beginning with another attack from the UK when George Osborne (bonus point for him) wrote scathingly to Guido Ravoet, Chief Executive of the European Banking Federation (EBF), calling the tax "poorly designed, badly-timed, and, we believe, unlawfully extraterritorial." Then, from an unexpected quarter, came another blow when Gérard Mestrallet, the president of financial markets organization Paris Europlace, told French Finance Minister Pierre Moscovici about his concerns about the future of the Paris financial center, and stressed his opposition to the tax.Mestrallet warned of the "devastating risks" of the European Commission’s plans for an EU FTT, saying that, in its current form, the proposal would have "systemic effects," not only on all financial activities in Europe, with the risk of a relocation of activities outside of Europe, to the benefit of international competitors, but also on corporate financing, including the financing of small- and medium-sized companies and intermediate-sized companies.
    Source: www.lowtax.net/asp/story/front/UK_Chancellor_Makes_New_Attack_on_EU_FTT____60991.html


  • Jun 06, 2013   United Kingdom: makes a save

    A cheer for UK Chancellor George Osborne who says that he will square the country's budgetary circle in 2015 with savings from government departments rather than by increasing taxes. I don 't know what the Treasury gave visiting IMF officials to drink two weeks ago, but it must have been something quite strong with pixie dust mixed in because just for once the IMF didn't suggest raising taxes, and broadly supported the coalition's stance. I say "the coalition," but minority partner the LibDems are facing electoral wipe-out, damaged perhaps beyond repair by the very fact of joining the coalition, in which they have had to support an economic program that is the exact converse of everything they have ever preached. It's wonderful what power does to people's sense of judgment. The Tories probably have little to fear from the LibDems in the next election, and Labour is sinking under the weight of another feckless leader. You would have thought they had learned the lessons of Michael Foot and Neil Kinnock, but no – and they have a serious funding crisis to deal with as well. The Tories' problem is the burgeoning UKIP (UK Independence Party) which is supported by a plurality of the UK population in wanting to leave the EU. If UKIP can manage to shed its unpleasantly racist fringe, a Tory/UKIP government becomes a real possibility, and then there would be a referendum on EU membership by 2018, with a fairly predictable result.
    Source: www.lowtax.net/asp/story/front/UK_Chancellor_Rules_Out_Further_Tax_Increases____60912.html


  • May 09, 2013   United Kingdom: rolls the credits

    One swallow doesn't make a summer, and we can't herald an outbreak of competition in the European Union just because the UK has announced an expansion of its fiscal support for film-making. But coming on the heels of the announcement of the Patent Box, and further reductions in the rate of corporation tax, it does show that there are ways for a country to compete even within the strait-jacket of the EU's State Aid rules. It seems illogical and even perverse that Brussels allows a range of national corporation tax rates from 10 percent to 33 percent, yet will not allow say an SEZ in the waterlogged fens outside Cambridge with an incentive rate of 10% for technology start-ups. Of course that situation is not the Commission's choice – they would prefer a harmonized tax rate across the Union. Let's hope they never get their wish: it would be like entering a boxing match with your hands tied behind your back. One obvious case where a lower rate would pay dividends is Northern Ireland: at present they have to compete against a 12.5% rate in the rest of Ireland with the UK's 20% rate. With freedom of movement across the border for workers, who would start up a new company in the North?
    Source: www.lowtax.net/asp/story/front/Creative_Sector_Tax_Reliefs_Launched_In_UK____60609.html


  • May 02, 2013   United Kingdom: behind bars

    The UK's tax authority, HMRC, is doing quite well at reaching its goal of criminalizing the entire population. If they can keep up the 53% increase in prosecutions they managed last year, they should double the prison population in just 14 years. But that will have unfortunate consequences because once they're in prison people don't contribute taxes any longer, plus there's the cost of all those new cells. I'm being facetious, I know; but the serious message is that tax authorities, like the finance ministries of which they are usually part, should try to follow Colbert's famous maxim, and obtain more feathers by being gentler. HMRC's strident trumpeting of its successes at locking people up, presumably pour encourager les autres, simply gives them a hard-faced image and exacerbates the poisonous relationship between taxman and taxpayer. Of course HMRC must pursue fraudsters; but must it display quite such relish when it catches them?
    Source: www.lowtax.net/asp/story/front/Number_Of_Individuals_Prosecuted_By_HMRC_Doubles____60543.html


  • Apr 18, 2013   United Kingdom: mistreat China

    One country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.
    Source: www.lowtax.net/asp/story/front/China_Sees_Itself_Subject_To_Increasing_Trade_Friction____60398.html


  • Mar 28, 2013   United Kingdom: balancing things

    Like a curate's egg, they say, meaning good in parts, is how to describe the UK budget, which has to be given high marks for reducing some taxes and not increasing any of the main ones, although continuing with the Air Passenger Duty is a triumph of Treasury arithmetic over economic good sense – they just don't dare to believe that scrapping it will generate far more than is lost in terms of income from tourism. Or perhaps the house rules don't allow speculative accounting: I can easily believe that without the GBP8bn the books just won't balance. This is an election budget, in case you hadn't noticed: it's two years away, but it is already casting a long shadow over British politics. That's the reason for the worst feature of the budget, which is the insane plan to prop up the housing market with loan guarantees. It's scarcely credible that when they haven't even finished cleaning up the mess from the debt crisis, they are eagerly going about creating the next destructive housing market bubble. It's like the first injection of morphine: you can always come off it afterwards, you tell yourself, and it's wonderful without the pain. But any watching doctor knows that it's the beginning of the end.
    Source: www.lowtax.net/asp/story/front/UK_Chancellor_Delivers_ProBusiness_Budget____60198.html


  • Feb 07, 2013   United Kingdom: on the warpath

    The UK seems determined to go ahead with its GAAR, and perhaps one shouldn't pay too much attention to the chorus of disapproval coming from the professionals who will have to cope with it. Still, at least insofar as it will apply to corporate tax, it does seem an unnecessary turn of the screw which is likely to add cost to the tax-gathering process without increasing the take. There is really nothing the UK government or any other government can do about multinational taxation short of a wholesale reorganization of the international system, which is not going to happen any time soon, and they must know this, so they are being opportunistic, climbing aboard the current anti-Starbucks bandwaggon in order to slide in a measure which is aimed squarely at domestic corporates, who are over-taxed already. It's not the actual rate of corporation tax, which is relatively low, and heading for 20%; it's the combination of income tax with payroll taxes, property taxes and the rest. Sure, there are doubtless many companies which push the envelope in an attempt to reduce the tax burden; the issue is whether the GAAR will be an effective way of clawing back the "lost" tax, and most independent commentators seem to doubt it.
    Source: http://www.lowtax.net/asp/story/front/ACCA_Slams_UK_AntiAvoidance_Plans____59508.html


  • Jan 31, 2013   United Kingdom: attacks the EU

    This year, the best moment may have been David Cameron's carefully calculated challenge to the EU. Let's leave aside the ritual attack on corporate tax avoidance; by now it's about equivalent to saying grace before a meal, and about as effective, some might think. More important is that he has been brave enough to throw down the gauntlet to the mad dogs of Brussels, who are systematically destroying Europe' competitive advantage, and need to be stopped. Of course everyone says that he is doing it for selfish political purposes, but it can happen that politics, national advantage and economic sanity may inhabit the same place at the same time; and that's the role that the UK can play in the next five years, if Cameron sticks to his last. Naturally the Continentals are throwing every kind of negative propaganda at him; but the more they do it, the more I think he must be right. After 50 years of corporatist, social partner gibberish, the EU has become hidebound, trapped in its own sententious verbiage. So, go for it, David!
    Source: http://www.lowtax.net/asp/story/front/Cameron_Attacks_Tax_Avoidance_At_Davos____59415.html


  • Jan 10, 2013   United Kingdom: maybe not so bad after all

    The Washington Follies at least provided a piece of real news during a period of the year when almost every legislator and politician is on holiday, "in the bosom of their family" so to speak, which means that we unfortunate scribes who have to write every week are left scratching around for events. So I am seizing on Martin Sorrell's radio interview in which he explained why he is returning his company to the UK, fiscally speaking, in order to give a prize to the UK government for improving its tax regime for multinationals. But what he said merely underlined the fact that paying corporate taxes is almost completely optional for most multinational businesses. There are some articles in this week's issue about corporate tax behaviour, from different perspectives, and this subject will surely be one of the most talked-about in 2013. But I don't see what can be done, if indeed anything needs to be done. There will be proposals from all sides for "unitary" taxation, which won't get anywhere, and the sempstresses of the OECD will construct ever more finely patterned sets of transfer pricing rules which will be beyond the wits of national tax authorities to implement. Meanwhile corporate tax planners will continue to make good use of no-tax locations like the British Virgin Islands, as in last month's monster Russian oil and gas deal. Curious that a state-owned corporation (Rosneft) should play such games; I suppose the Russkis reckon to get their rubles out of royalties, so they're not too worried about corporation tax. Rosneft proudly states that it is the biggest taxpayer in Russia, which is no doubt the case, but I had to laugh when I looked at their 9 months' financial statements and found that the corporation tax charge is a credit, yes, a credit, of 78 billion rubles!
    Source: http://www.lowtax.net/asp/story/front/WPP_Chief_Comments_On_UK_Corporate_Tax_Row____59059.html


  • Dec 20, 2012   United Kingdom: getting everything wrong

    Full marks to Channel Islands Jersey and Guernsey for standing up to the UK's bullying over FATCA, and by the same token, a black mark to the UK. The UK Treasury regards the UK's offshore dependencies (Jersey, Guernsey and the Isle of Man) as so many little puppy dogs to be ordered around at its convenience, despite frequent reports showing that they provide tens of billions of pounds' worth of benefit to the mainland every year through tax-efficient investment which would otherwise flow to Hong Kong or elsewhere in the world. The UK shows no gratitude or recognition whatsoever, on the contrary, punishing the islands whenever it can. Recent outrages include changes to the Isle of Man's VAT settlement which worsen the IOM's finances by at least GBP100m a year, standing by with arms folded while the EU's Code of Conduct Committee (Star Chamber) forced changes to the islands' income tax regime, and the use of British courts to abolish low-value consignment relief (which actually forms part of settled EU directives) for the islands, but not for anyone else, which chopped hundreds of jobs away from these tiny economies, at the behest of UK retailers. I ask myself, why don't they quit, and demand full independence from the UK and the EU? Especially now that the rolling tide of financial EU directives is impinging more and more every day on their economies. The AIMFD is just one example of the wave of nannying, obstructive and unnecessary legislation which will harm the islands for decades to come. The dependencies have very large cash balances saved up from the good years, even if they are running temporary minor deficits, and can well afford to stand on their own feet.
    Source: http://www.lowtax.net/asp/story/front/Channel_Islands_Rebuff_UKs_FATCAStyle_Plans____58771.html


  • Dec 13, 2012   United Kingdom: busy killing geese

    Corporate panic at Starbucks this week led the company to promise what one commentator has called a charitable donation to UK plc. This silly piece of behaviour will no doubt be rewarded as it deserves, and within two days criticism is already rapidly overtaking stunned surprise in the media. But of course it is the UK which is the villain here, through one of the most villainous pieces of political posturing that I can recall. The Public Accounts Committee of the House of Commons has got no formal power, but enjoys the pretence of power through torturing people like Rupert Murdoch, or in this case executives from Google, Amazon and Starbucks. Just like US Congressional hearings, it's good television but poor economics. Here are companies with tens or even hundreds of thousands of workers in the UK, paying heaven knows how much in withholding (employment) taxes and VAT to the national exchequer, not to mention property taxes and a raft of other imposts, and what do they get for their pains? A self-indulgent whipping from ignorant politicians. The very last thing they should be doing is to present government with money which they don't owe. If the British government wants corporate tax revenue, it has to compete for it against the likes of Ireland, Malta and Luxembourg, not to try to shame its corporate citizens into bribing it to stay silent. Now of course there is a torrent of criticism being directed against multi-nationals by the EU, multilaterals such as the OECD, and national governments. Just ignore it, is my advice, and keep believing in the market.
    Source: http://www.lowtax.net/asp/story/front/Starbucks_Offers_To_Pay_Extra_UK_Tax____58690.html


  • Dec 06, 2012   United Kingdom: on its high horse

    The OECD and the UK House of Commons Public Accounts Committee are both disbelievers in the "less is more" mantra. Both of them are on the trail of under-paying corporates this week. The PAC says that Google, Apple, Amazon and other techno-giants are "immoral" for arranging their tax affairs to pay less tax in countries like the UK and channel their turnover through countries like Luxembourg or Ireland where the tax rate is lower, while the OECD met in Tokyo to discuss "schemes that illegitimately use corporate vehicles to mitigate tax". This (mostly) European witch-hunt is presumably going nowhere, although they may shame some of the corporates into paying a bit more tax for a time. Brussels will wave the CCCTB around like a magic wand, and there will be much talk of "formulary taxation", ie apportioning turnover on the basis of national sales and taxing accordingly. It didn't work in California when it was tried and it won't work now. Anyway, what makes anyone think that Ireland, Luxembourg, Cyprus and other low-tax member states are going to sign their own collective suicide note? A black mark to the UK for such anti-corporate blather.
    Source: http://www.lowtax.net/asp/story/front/UK_Lawmakers_Slam_Aggressive_Transfer_Pricing_Strategies____58602.html


  • Nov 29, 2012   United Kingdom: stealing your savings

    Perhaps I shouldn't penalize governments for just thinking bad thoughts, and it's not as if UK finance minister George Osborne is likely to be influenced by what I say, although I am sure that Global Tax Weekly is required reading in the Treasury; but if it's true that he is going to launch a further attack on pensions in his Autumn Statement then he thoroughly deserves a spanking. Successive British governments have undermined saving in every possible way in the last fifteen years, beginning with Gordon Brown's notorious theft of untold billions when he removed tax relief from pension funds' investment returns and culminating in the recent limitation of tax-privileged pension pots and contribution levels. Worst of all, the continued debasement of the currency through spendthrift government policies has contributed to agonizingly low annuity rates. It's true that the government can't be blamed for greater life expectancy, which is equally a factor, in fact it probably should be praised for providing care and supporting medical research. But the balance sheet is overwhelmingly negative. You can see that to a Treasury official, allowing a rich person to put GBP50,000 a year of income into a pension, tax-free, just amounts to giving away precious tax money, almost half of which 'belongs' to the government. But that's the wrong way to think. Hands off our pensions, please, Chancellor!
    Source: http://www.lowtax.net/asp/story/front/Osborne_Mulls_More_Changes_To_UK_Pension_Tax_Relief____58409.html


  • Nov 22, 2012   United Kingdom: payroll pain

    Why does the UK's HMRC want its spies inside your payroll computer? Its "Real Time" initiative amounts to a direct electronic link between every company's payroll and the tax authority's computers. Presumably it will be able to download software upgrades, and who knows what nasty pieces of intrusive code they will contain? It's already scary that Microsoft, HP, Google and the rest can change my computer without my knowing about it, but at least they are subject to fairly stiff privacy laws and commercial imperatives, which gives me some sort of comfort. But HMRC, like every national tax authority, considers itself to be the guardian of fiscal virtue, and behaves as if it is above the law. Anyway, morality aside, this scheme is going to be a technical and operational nightmare not just for the myriads of small companies and their payroll providers, but also for HMRC, which has convinced itself based on its trials with a handful of highly sophisticated larger companies that the system can be rolled out nation-wide - and next year! Every single large IT project it has attempted over the last twenty years has collapsed in ruins. Why would this one be any different? Spooks are scary at any time, but an incompetent spook is deadly!
    Source: http://www.lowtax.net/asp/story/front/UK_Real_Time_Reporting_Impossible_Accountants_Say____58285.html


  • Nov 15, 2012   United Kingdom: on a witch-hunt

    Pity the Beeb! The UK's state broadcasting authority, the BBC, is having its annus horribilis, and one of the ways in which it is being mortified is over its payroll arrangements. "We know no spectacle so ridiculous as the British public in one of its periodical fits of morality," said Lord Macaulay, and the rest of the media is having a whale of a time biting pieces out of Auntie's helpless carcass. The journalists having all the fun are no doubt mostly self-employed themselves, but that doesn't stop them from criticizing the BBC for paying lots of people through companies or via contracts, instead of employing them. MPs and ministers are leaping on the bandwaggon, forcing the Beeb to agree to transparency in all such arrangements, as if it was somehow a crime to pay someone for a service if the recipient then fails to account for tax on it. The results will presumably be extremely negative for the BBC's ability to attract and keep high-calibre artistes and suppliers. "Now let's see," says the compliance manager in the properties department (all departments will have such officials in future): "You are renting us a zebra for the re-make of Downton Abbey, and I have here an invoice from your Zambian company, yet you live in Regent's Park. We are going to have to ask you to explain." Exit zebra, stage right.
    Source: http://www.lowtax.net/asp/story/front/BBC_Changing_Employee_Relationships_In_Tax_Row____58205.html


  • Oct 11, 2012   United Kingdom: UK not in denial

    It's party conference season in the UK, and you'd have to say that the Tories won handsomely, being able to ignore coalition partner LibDem pleas for a 'mansion tax'. The LibDems face low and declining poll ratings, while Labour is more than ever in thrall to the unions - because that's where the money is - and their leadership doesn't convince. By the end of the Tory conference (last of the three) their leadership felt confident enough to say that austerity was here for long past the next election, while also launching an innovative scheme which would allow employees to receive tax-free shares in small companies in exchange for abrogating many of their employment rights. If that doesn't give heart attacks to union leaders, I don't know what will.
    Source: http://www.tax-news.com/news/UK_Mansion_Tax_Ruled_Out____57685.html


  • Sep 20, 2012   United Kingdom: listens to business, for once

    The UK is on the same path, announcing some quite significant relaxations in audit requirements this week for small companies and subsidiaries. That's good as far as it goes, and the government is also planning (but only planning) to improve the ghastly employment tribunal system, which for a quarter of a century has acted as a serious disincentive to hiring people, has been a charter for vexatious claims and has wasted incalculable quantities of management time. There is only so much that the government can do, because of the dead hand of EU employment law, but at least they seem to have got the message at last. What they don't realize, or don't want to realize, is that the combined pressure of high individual taxation, social security charges and the ever-increasing burden of regulation makes the UK a thoroughly unattractive place to start a business. People still do it, because if you are an unemployed shipyard worker in Belfast you don't have much choice; but they only do it once they've exhausted the possibilities of working 'on the black'. A job is still a job, you might say, whether the government knows about it or not, but it's a crazy system that forces people into illegality. Indeed, from that perspective, just about every major European country has a crazy system.
    Source: http://www.lowtax.net/asp/story/front/UK_Reduces_Business_Accounting_Reporting_Requirements____57213.html


  • Sep 06, 2012   United Kingdom: keeps trying against all the odds

    So we have to give a star to the UK, despite the fact that it is going to miss its debt reduction targets and has achieved only a tiny percentage of the cuts it promised two years ago, to recognize the fact that it is continuing to try, and will not give in to the siren calls for stimulus. What's the point in stimulating a near-dead patient in intensive care?
    Source: http://www.lowtax.net/asp/story/front/UK_To_Miss_Fiscal_Targets____57041.html


  • Aug 30, 2012   United Kingdom: the Treasury flatters to deceive

    The UK Treasury is considering a tax-free mini-jobs scheme. It's the silly season, so perhaps they are making these stories up in Fleet Street, not that it exists any more. El Vino's is still there, however. The principle of a tax-free mini-job would be that if a worker is going to earn less than the personal allowance (ie wouldn't pay any tax anyway) then they (and perhaps more importantly, their employer) shouldn't be subject to the PAYE withholding tax regimen, and, even better, wouldn't pay national insurance. But that's difficult because they would lose pension entitlement, so perhaps that aspect would only apply to the employer's contribution. You can imagine what the unions will have to say about such a scheme: 'All out, bruvvers!'
    Source: http://www.lowtax.net/asp/story/front/UK_Treasury_Considering_TaxFree_MiniJobs_Plan____56937.html


  • Aug 23, 2012   United Kingdom: hates expats

    So the UK's HMRC continues its role as nanny of the universe by destroying the Cyprus QROPS industry, fresh from its blitzkrieg of Guernsey's 300 QROPS operators. For decades, the UK tax authority has forced UK savers to keep their pensions money in approved institutions and will not allow them to convert more than 25% of the money into cash when they retire, so that they have to take the miserable annuity rates offered by the few remaining UK pensions companies, which have been comprehensively ruined by Gordon Brown's tax grab and the government's desperate attempt to keep interest rates low on its debt pile by printing money ('quantitative easing'). Not surprisingly, the increasing numbers of UK expats don't like this thieves' compact, and have used loopholes to extract their hard-earned assets from the Treasury's grasp. QROPS (don't ask) allowed this, but HMRC realized it had made a mistake, and is now back-tracking for all it is worth. Another example of how governments will steal your money by the back door if they can't take it 'legitimately' through the front door.
    Source: http://www.lowtax.net/asp/story/front/Cyprus_QROPS_Struck_From_HMRC_Approved_List____56844.html


  • Aug 16, 2012   United Kingdom: waves goodbye to its millionaires: Lady Docker left 50 years ago

    Whatever lunacy possessed the British government to add a 50% rate is hard to discern. What's not hard to discern that the country's millionaires are heading for the exit before the Chancellor gets richer than they are.
    Source: http://www.lowtax.net/asp/story/front/Millionaire_Monitor_Grim_Reading_For_UK_Coalition____56804.html


  • Jul 26, 2012   United Kingdom: we're all criminals now

    When I read that UK Treasury Minister David Gauke thinks that paying cash to someone for a service is 'morally wrong' on the grounds that they may or may not pay tax on the money, I automatically assumed that he was a LibDem - no Conservative could mouth such an illiberal sentiment, surely? Wrong. He is a Conservative. But of course I was forgetting that he is in the Treasury, where they believe as an article of faith that every single citizen outside Whitehall (and a good few within it) is a criminal. Well, I have news for Mr Gauke: it's he that is the criminal; he and every other Treasury denizen that subjects British citizens to extortionate, grasping tax rates to raise money to be spent on futile, wasteful redistributive programs. He should be ashamed of himself. Perhaps the hostile response to his gauche remark may convince him that he was wrong, but don't count on it. They are all petty tyrants in the Treasury, and exceedingly arrogant besides. As for Mr Gauke, he is already dead meat.
    Source: http://www.lowtax.net/asp/story/front/UK_Unveils_New_Plans_To_Tackle_Tax_Avoidance____56493.html


  • Jul 05, 2012   United Kingdom: is too scared of Brussels to help its provinces

    Imagine: you live in Ardenough Common, 500 yards away from the river Ardenough, while your uncle lives in Ardenough Bottom, 500 yards the other side of the river. You both run units of the family business, which is poultry farming (probably you had South African or Brazilian ancestors). The firm is successful, with large export volumes to France, Russia, South Africa and Brazil. There's just one problem: your uncle pays 12.5% corporation tax on his profits, while you pay 24% on yours. Needless to say, all family investment goes into Ardenough Bottom, and your workers spend most of the day working for your uncle. The border guards turn a blind eye; they've been doing it for nearly 100 years, and they're good at it. Anyway, they're mostly cousins. You've guessed by now: Ardenough Common is in Northern Ireland, while Ardenough Bottom is in Eire. So why doesn't the British Government do something about it, like, for instance, reducing Northern Irish tax rates to something closer to those in the South? It would like to, to be fair, but it doesn't because of a piece of madness called the Block Grant. This is basically a vast bribe paid by the British Government to Northern Ireland in order to buy the votes of Ulster MPs in the Westminster Parliament, and the EU won't allow the corporate tax rate to change unless the missing tax is offset against the Block Grant. Geddit? If you can solve this one, you're a better man than I am, Gunga Din!
    Source: http://www.lowtax.net/asp/story/front/No_Deal_On_Northern_Ireland_Corporate_Tax____56100.html


  • Jun 21, 2012   United Kingdom: strikes a blow for competition

    The UK government is going to give tax breaks to its 'creative' industries, ie animation, video games and 'high-end' television, whatever that is. It's a long time since I saw a piece of television that could be described as 'high' anything, except perhaps high camp. Anyway, congratulations on pushing through common-sensical measures in support of competition, despite the lunatic anti-competitive policies of the European Union. In order to scrape under the bar of State Aid (verboten), qualifying projects will have to be 'culturally British'. This wheeze was invented by the French in order to protect their own 'high-end' film sector, and now forms a settled part of EU policy. So I suppose video games will display against a washed-out backdrop of the cross of St George, which now adorns car roofs, municipal flower beds and chavs' faces, while animated characters will have to speak in regional dialects which are incomprehensible to anyone south of the Humber (Celtic will be OK, too, of course), and 'high-end' television will encompass endless biopics of Delius and Handel (both German).
    Source: http://www.lowtax.net/asp/story/front/UK_Creative_Industries_Tax_Breaks_To_Be_Worlds_Best____55961.html


  • Jun 15, 2012   United Kingdom: turns the sublime into the gor-blimey

    I don't know which is sadder: the news that some of the UK's 8,000 Olympic torch-bearers are selling them on-line before the Games have even started, or the fact that HMRC saw the need to issue a bulletin to explain the tax consequences of selling a torch. If I was lucky or honoured enough to be invited to stagger along a country lane in a remote part of Cornwall bearing a torch, presumably accompanied by a bevy of police motor-cyclists, the press corps, and perhaps a helicopter overhead, I would have it up on my sitting-room wall in no time surrounded by photos of the great event, as if it was an Oscar. I can't imagine selling it. Surely only a tiny proportion of torch-bearers are going to be so crass as to sell their torches? So what is HMRC responding to? A few sales by people who are so spiritually and financially poor that they will humiliate themselves in this way? The problem is that HMRC regards the British population as a collection of universal criminals, and has jumped unnecessarily and presumably expensively onto the band-waggon, making an ass of itself in the process.
    Source: http://www.lowtax.net/asp/story/front/UK_Clarifies_Tax_Position_Of_Olympic_Torch_Sales____55792.html


  • May 31, 2012   United Kingdom: flees from pastygate

    The UK wins this week's first encomium for abolishing a tax. Mind you, the government hadn't much choice after it was heaped with ridicule during 'pastygate'. In England, pasties are a rather down-market food often bought by poorer people hot from take-aways, big on pastry and potato, with a token piece of meat hiding somewhere in the middle. Operators of take-aways said they would let the pasties cool off before selling them (avoiding the tax) and install diy ovens for customers to re-heat them. But the best was that neither the Prime Minister nor the Chancellor (both seriously rich toffs) could remember whether they had ever eaten one. Probably not!
    Source: http://www.lowtax.net/asp/story/front/UK_Pasty_Tax_Plans_Binned____55662.html


  • May 17, 2012   United Kingdom: fails to help SMEs

    Now here is a real disgrace: in a week when the UK government is pulling out all the stops to encourage growth in the economy by assisting business, the retrograde, stick-in-the-mud tax authority, HMRC, has dealt a savage blow to small businesses by refusing to abandon its vindictive and destructive IR35 legislation, which attempts to turn entrepreneurs into wage slaves. Joined up government? Do me a favour!
    Source: http://www.lowtax.net/asp/story/front/UK_Government_Blasted_Over_IR35_Proposals____55397.html



 

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