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Archive for the month “July, 2013”

The life and times of Prince George

British Open Champion July 21, 2013. Love the hat

British Open Champion July 21, 2013. Love the hat

The late editor of Punch, Alan Coren, informed a friend after his first golf lesson that it was ” a hideous, hideous game and, as for the bunkers, it was no wonder that Hitler died in one.” Following the communique at the end of the G20 meeting in Russia last week, it remains to be seen whether the 15 point OECD Action Plan on Base Erosion and Profit Shifting  adopted there ever makes it out of the difficult bunker from which it is being driven. My money goes on much of it landing up in the rough.

What is likely to be heading for a hole-in-one, courtesy of the G20 meeting, is  Automatic Exchange of Information – which, despite press confusion, is separate from the Action Plan. Thanks to the Americans’ successful siege of the world’s financial institutions through its FATCA legislation, the rest of the world’s big governments are going to have an easy time flattening the small ones.

Now, the immediate reaction (in other words,  what modern newspaper reporters do for a living) of most of us is that this automatic information idea is a slam dunk good thing. According to the Tax Justice Network, it seems,  there is enough undeclared income hidden in the sand to raise and launch the Lost Kingdom of Atlantis.

Difficult to argue with that. The problem is what Hollywood action movies spend most of their multi-million budgets doing- collateral damage. In chasing the crooked few, there is yet another attack on the privacy of Joe Public. Furthermore, the policy will encourage economic timidity. As regular citizens face increasingly stringent reporting requirements (inevitable when you give power to faceless bureaucrats) they will increasingly retreat to their financial bunkers, investing in domestic low risk products through their local banks who will look after their withholding tax requirements. That is an assault on capitalism at its most positive.

Although, thanks to the populist knee-jerk media, there is no chance of it happening – the international community needs to treat this issue with tender loving care.

While on the subject of Mr Public’s privacy and tender loving care, this week, of course, Britain and much of the world welcomed the safe arrival of the third in the queue for Britain’s top job (Charles has to be the epitome of the patient English “queuer”) . But it has clearly all been too much. This poor child has been hounded since before he was born and is going to be under a microscope for the rest of his life  even though he is not likely to become KIng George VII until late in the century. In an act of public mindedness I have, therefore, decided to leave young Georgie alone –  and hound his father instead.

William, you are in England, remember?

William, you are in England, remember?

What on earth did the future King William V think he was doing when he left the hospital with his wife and child? Swinging the baby-seat (with baby on board) like a picnic basket he proceeded to the driver’s side, plonked him in the back, jumped in to the driver’s seat, belted up and drove off.  The driving bit was funny. Even though he drives a helicopter in his spare time, he (and most of the royal family), when caught on camera, always look like they have just passed their test. Purposely adjusting the mirrors, woodenly lifting and letting off the hand brake, sitting bolt upright and forgetting to look round for traffic before pulling off are the actions of a novice. The driver I always aspired to emulate was my late Uncle Denny who had started driving before they had driving tests. In his sixties he would lounge in his Ford Cortina, cigarette or cigar in mouth, arm resting on the open window ledge, changing gear according to mood rather than engine revolutions, driving the car as if it was his favourite armchair with a 1600 cc engine up its backside.

What was NOT funny was the seemingly novice handling of Next-King-But-Two’s Baby Seat by Next-King-But-One. While I may claim to know a thing or two about taxation I am a positive expert on Baby Seats. With five strapping children and three gorgeous grandchildren, I have done my share of strapping in. And, however much I love them, it is not a pleasant experience – for them or me.

Firstly, wherever else modern fashion/safety standards dictate the seat should be placed (front passenger seat, middle back seat, roof etc) you do not place it through the open door on the driver’s side. While Kensington Palace may have a Carriage Drive, when William, Kate and George arrived at proud grandparents Carole and Michael’s two-up-two-down in Bucklebury, Prince William would have had to deal with passing cars and dust carts (not to mention insidiously silent milk floats).

Secondly, you cannot just plonk the thing on the back seat. As was abundantly apparent from the HD pictures, the illustration on the side of the car-seat made clear to every Englishman or immigrant (but evidently not future monarch) that it needs a seat belt. Believe me, putting a seat belt around a baby seat for the first time and finding the right lock in the middle (there are always two – because of the middle seat) is one of the most annoying experiences known to man. How often have I found myself , back aching, sweat pouring from brow, face-in-face with one of my poor grandchildren as I toil to get it right.

And then he jumped in the car and just drove off. You ALWAYS turn round to  check the kids are alright before driving off even if the mother (only one day after giving birth – poor girl) is in the back seat.

Normal people

Normal people

All I can say is that, when they got to Carole and Michael’s place, I hope Carole sorted him out – she seems a sensible sort of woman and the more time the little fellow spends there with normal people and out of the public eye the better a king he will one day be.

Having grown up with stories about stuffy royalty, I cannot help but smile when I think of Carole, a few years from now, coming down to the kitchen during school holidays and making egg on toast for two future kings. I assume protocol will not require her to curtsey twice.

Crime and Punishment

The German answer to  British schadenfreude

The German answer to British schadenfreude

Of all the words that have made it across the much-trampled terrain of Western Europe and the inhospitable waters of the Channel into the welcoming arms of the English language, one of the most improbable must be “Schadenfreude”. Adopted into the language after the defeat of Germany in the First World War and the imposition of punitive reparations, it was  appropriate that  the expression of malicious joy in the misfortune of others should be in a tongue the bastards about whose misfortune the Brits were most maliciously joyful could freely understand – the bayonetting of the wounded, so to speak.

I believe that we all  have bouts of Schadenfreude from time to time. For the last few years the Germans have been positively unbearable over the plight of the Southern Europeans. I admit that the first section I instinctively turn to on receipt of my monthly English accountancy magazine is “Disciplinary Hearings” – one day they will get the fish-faced obese manager who insisted on me making his morning coffee at the outset of my career.

There was no joy whatsoever in following the climax of the Magnitsky case in Russia last week . Despite the fact that this was a Tax Attorney convicted of major tax fraud – the sort of thing that brings our profession into disrepute (ho, ho) – there were a few mitigating circumstances.

Firstly, there but for the grace of Tsar Nicholas go I. Had George V’s doppelgänger not “encouraged” my grandparents to move residence to his cousin’s green and pleasant land in 1905 , I suppose I could have been in this fellow’s position.

Enough material for a book

Enough material for a book

Secondly, Sergei Magnitsky – along with his co-defendant William F Browder, an American/British Fund Manager and financier – was almost definitely innocent of  all charges concerning the fraudulent claiming of tax benefits for the employment of disabled persons . The two gentlemen had uncovered a massive tax fraud by government officials and decided to blow the lid on it. This was a bit like standing in a forest trying to explain to an eight foot high grizzly bear, in perfect Russian, that you had clipped its cub’s earhole because it had rudely said “Boo” to you. Not a sensible time to renew ones monthly bus pass.

But the saddest, and maddest, thing of all was that Mr Magnitsky is, well, a bit dead  – and has been since 2009 when, already a year in custody, he was denied critical medical treatment. This did not seem to be enough to stop the Russian wheels of justice from continuing to grind. Indeed, if it was not all so sad and macabre, the story would be funny.

The courtroom had the standard posse of security guards even though there were no defendants in the dock (Mr Bowder was in London and, in a rare act, Interpol told the Russians to scuttle off when they applied for his arrest. Mr Magnitsy, as I have already pointed out, had other difficulties in being present). After finding Magnitsky guilty, the judge – in an act of great courage in standing up to the rotten State – did not impose a custodial sentence on Mr Magnitsky thereby giving official sanction to his continued resting in peace.

The most brilliant, and incriminating, line came from none other than President Vladimir Pukedin as reported in the New York Times: “I don’t know the details, but I know anyway that Mr. Magnitsky died not from torture — nobody tortured him — but from a heart attack,” .  I sympathise Mr Spewtin. Forget the details. It would be unfortunate, after all,  for you to be confused by the facts, wouldn’t it? Vlad’s ventriloquist dummy Prime Minister (or whatever title the Impaler ordered him to take this week) Medvedevdevmedved etc,  told Bloomberg TV that “He was a corporate lawyer or accountant, and defended the interests of the people who hired him.”  Well Mr Medwhateveryoucallit, I think that you will discover that, beyond the walls of the Lubyanka Prison and the ranks of the KGB, that is what lawyers and accountants are supposed to do. And, if I already have your wooden ear –  it wouldn’t hurt you to touch up on your facts either. Was he a “corporate lawyer or accountant?”. Maybe tell your aides to lay off the clear liquid for a while and prepare your briefs a little more diligently.

The ongoing tragedy from this circus is that, in retaliation for a US move subsequent to Magnitsky’s death to prevent Russian human rights abusers from traveling to the United States, Mother Russia banned  the practice of adoption of Orphans by US families denying them the chance of a decent future. Go figure.

I would like to take this opportunity to thank Tsar Nicholas posthumously ( readers will recall that he ended up being peppered with bullets together with his family) for helping my grandparents with their relocation and ensuring that I grew up in a free society.

Reading “War and Peace” many years ago I learnt that Russian high society used to like speaking French, so “plus ca change, plus c’est la meme chose” – this week there was yet another Russian Show Trial.

Rest in peace

Rest in peace

Meanwhile,  President Putin is hosting a G20 summit a central feature of which is the war on tax evasion. I rest my case.

Populist leaders are ruled. OK?

G7 Summit Advanced Quiz. The chap from the EU makes it harder to spot the Italian

G7 Summit Advanced Quiz. The chap from the EU makes it harder to spot the Italian

Never one for crosswords or brain teasers, in my younger days I got my quiz kicks from lineups of leaders at  G7 Economic Summits. Always familiar were the Presidents of the US and France, the Chancellor of Germany and the Prime Minister of the UK. The Canadian premier would generally give himself away by the jutting jaw honed by evolution to fell a tree with one bite, while the Japanese PM was invariably, well, Japanese. That left the one  nobody recognized because he had never been in the job more than 3 weeks – the bloke from Italy.

It was nostalgic to view the line-up at the G8 last month – Russia has now come in from the cold – and, as in days of old, stare blankly at the Italian (I still don’t know his name).

Probably because the Summit was in one of the most God forsaken places on Earth (Northern Ireland) – the leaders turned their minds to taxation. A politician trying to deal with taxation is much like a bomb disposal expert trying to deal with unexploded ordnance – only without the expert bit. Those of us deemed by politicians (!!) to be of perverted mind and questionable morality proffer thanks therefore to the Great-Tax-Collector-in-the-Sky for ensuring the issue was kicked into the long grass of this months’s G20 Summit  in the utterly not forsaken St Petersburg (fka Leningrad fka Petrograd fka St Petersburg). Nothing, but nothing, will be achieved there other than strengthening the hand of the OECD. While the tax gurus at the OECD are impossibly slow in arriving at decisions, they do at least understand the intricacies of our ignoble craft and are the best bet the world has for getting things straight.

The communique issued at the end of the G8 Summit listed the three Ts: trade, tax and transparency. In the field of taxation the leaders plan automatic exchange of information between tax authorities as well as a central register of beneficial ownership of companies, both of which should help combat tax evasion – difficult for even the most hardened of tax hacks to argue with . Joining the populist revolt against Multinationals, the leaders declared that “On tax avoidance, we support the OECD’s work to tackle profit shifting and base erosion” – laudably reserved language given that the host of the event, David Cameron, had been quoted in the left-wing Guardian as saying: “Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues”, while urging multinationals to “wake up and smell the coffee”.

Starbucks HQ

Starbucks HQ

Other than the obviously crude reference to Starbucks who managed to turn the method for making a cup of coffee into low-taxed, high value, intellectual property, I fail to understand what was percolating through  the Prime Minister’s brain when he came up with that daft metaphor. But usage of the term “ethical” in the same sentence as “avoidance” makes my kettle boil.

Does Mr Cameron need reminding that, while he may be in a morganatic marriage with a bunch of toenail-picking lefties, his party is the standard-bearer of Capitalism? Emotive words like “ethical” and “moral”, let alone “avoidance”, do not cosy-up  with “Capitalism”. Capitalism is not an ideology, it is not weighed down with subjective value judgments. The only brakes on Capitalism should be laws passed by parliaments to curb its excesses. A good capitalist will always be looking for ways around restrictions to enhance the march of Capitalism because that is his job. He is naturally centrifugal rather than centripetal. He might throw in a bit of Social Conscience along the way out of the goodness of his throbbing heart – but it is the function of legislatures to rein him in.

While popular protest movements have every right to object to multinationals like Apple, Starbucks, Google and Amazon paying less tax worldwide than Warren Buffett’s secretary, populist leaders and legislatures would do well to take a break from their brown-nosing and reflect on who is really to blame rather than labeling companies”immoral”. If they came up long enough for air they might realize that, instead of  bellyaching with the protesters, it is their job to ensure that the right laws are in place.

If truth be told, the main problem with multinational non-taxation is what that bastion of bankrupt socialism the Guardian angrily identified as “the practice of transfer pricing”. Consistently applied rules across nations by multinationals based on the three pillars of: functions, assets and risk have indeed enhanced the mobility of profits to unlikely corners of the Globe. But who put those nutjob rules in place? Waitforit……the OECD – the darling of the G8 which is now being entrusted with the job of getting all these nasty companies back in line.

The arbiter of morality - the newspaper that supported Hitler and Mussolini in the 1930s

The arbiter of morality – the newspaper that supported Hitler and Mussolini in the 1930s

Accusing an inanimate corporate entity of immorality is beyond the realms of even my fertile imagination, but if the OECD is to get anywhere “before”, as Mr Cameron might have said, “the coffee goes cold”, all 34 member governments plus others with observer status are going to need to instruct their international tax teams to cooperate beyond their narrow interests to arrive at rules that are workable and fair in a multinational context. Experience to date does not  bode well for the future. In the meantime governments should accept that, in the interests of capitalism, the tax fraternity will continue to seek out loopholes as they seek to maximise market efficiency. Brains and pens at the ready. Let the battle begin.

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