Tax Break

Who said tax is boring?

Archive for the month “December, 2013”

Socking it to Santa

Go ahead...

Go ahead…

Experience suggests that my telephone conversation with some extremely pleasant folk from Colorado last Thursday will prove one of my last international work calls before Christmas. Although I have never visited Denver or its environs, I am assured that their courtesy was typical of that, and other, Western States. My research suggests, however, that if you ever happen to be passing through the Centennial State and, in need of directions, knock on a random door that happens to be unlatched, DO NOT STEP OVER THE THRESHOLD. If you do, your nostrils are likely to come face to face – so to speak – with the twin barrels of a double-barreled shotgun. Unless you believe in life after death, the memory of that slightly boss-eyed view of the gun’s chambers is likely to be your last. You see, Colorado has, what they refer to as, a Make-My-Day law so liberal (or should that be, conservative?) that the vaguest threat of the vaguest violence by an intruder in your home is sufficient reason to blow them to eternity, Dirty Harry style.

The source of this Stand-Your-Ground law is the English Common Law doctrine of “An Englishman’s Home Is His Castle”, although the English are far more conservative (or should that be, liberal?) in applying this in practice. That English approach should be particularly comforting at this time of year to a certain rotund Finn in a wooly jumpsuit who annually breaks into most of the homes in the western world. Particularly disturbing to the 21st century psyche, but somehow lost on several billion people,  is that he specifically creeps into the children’s bedrooms and creepily stuffs gifts into their socks and stockings. It is all accompanied by a “Ho-Ho-Ho!” – enough reason, on its own, to call the boys in blue.

Is she selling, too?

Is she selling, too?

But the connection of Englishmen and Castles has become strained in recent years. High-end real estate has increasingly found its way into the hands of Foreigners (a broad term meaning Russian Oligarchs and Arab Sheikhs) who have the ready cash to help inflate prices.

For no apparently coherent reason, other than it seemed a fun thing to do at the time,  George Osborne – Britain’s Chancellor of the Exchequer –  announced in his Autumn Statement earlier this month that, for the first time, foreign resident individuals are going to be charged to Capital Gains Tax on sale of residential property in the UK. Tax is to be applied on increases in value from April 2015 and it is estimated that the tax revenue raised will barely cover the costs of administration.

In truth, I have never fully understood why Britain, as opposed to just about every other country in the world, has not exercised the right enshrined in double tax treaties around the globe, to tax the ownership of real estate, irrespective of residence. It was only this year that foreign resident companies owning property were brought into the tax net. I suspect, but have no proof, that it has something to do with Empire. When Britannia ruled the waves before the First World War, British governments thought of  the island of  Great Britain as a sort of Aircraft Carrier (without , prior to 1903, the aircraft) for launching British colonists around the globe. Half the world was British, so why would anyone be nitpickingly proprietorial about a few bits of the mainland? As treaties took shape after the War, Britain still hung on to its Empire even though its Navy had lost its supremacy.

Well, substantially the only Empire Britain now has left is the Empire, Leicester Square (where I once saw a Clint Eastwood movie) and, tax efficient or not, it is time for George Osborne to bring his nation in line with the rest. There is, however, no indication that he is planning any restrictions on Santa Claus since British Parliamentarians are generally very tolerant of  suspicious old men in red fur-trimmed cloaks, who regularly fill their second chamber.

The chimney might have been easier

The chimney might have been easier

Late one night, around the turn of the current century, when the members of the Taxbreak family were fast asleep in their beds, I heard noises way downstairs. Deciding not to disturb Mrs Taxbreak, I crept nervously out of our bedroom and descended the first flight of stairs to the middle floor, carefully negotiating the 180 degree mid-flight turn . Nothing. Now in a cold sweat, I started down the lower flight. As I reached the turn I was confronted in the dark by an unshaven 17 year-old I quickly identified as a friend of my eldest (soundly sleeping) son. “Hello!” he greeted me cheerfully. “What are you doing here?” I asked in an exclamatory manner (or words to that effect in an exclamatory manner). “I came to play on the computer”, he coolly replied. “But it’s  3 o’clock in the morning! How did you get in?” I enquired in a no less exclamatory manner. “Through the window”, he retorted matter-of-factly. I gently suggested he go home (in an exclamatory manner). Had this been Colorado, there might have been one hell of a mess to explain on the stair carpet the following morning. As it was he lived, so that I could tell the tale and he could become a software developer. We are still in touch and he continues to be a welcome visitor to our home, though these days he always uses the front door.

Charge your glasses

I preferred the Beatles' version

I preferred the Beatles’ version

The highlight of my year as a young teenager  was undoubtedly Summer Camp. It was not really a camp at all. Public (that means private) schools bearing varying degrees of similarity to Hogwarts were hired for a fortnight and staffed by post-pubescent volunteer counselors, hand-picked by the ever-so-more-mature officers of our local youth club. With average pedagogic training approaching that of an apprentice lollipop man, the fact that nobody ever died was no fault of the organizers.

When, at the ripe old age of 21,  my turn came around to be the big “I am”, I decided to play it super-tough. Making my grand entrance into the Dining Hall on the first evening (and being totally ignored by all the little runts in the process), I waited a few moments and then screamed for silence. In the words of Desmond Tutu at yesterday’s memorial service for Nelson Mandela, you could “hear a pin drop”. Proceeding in the footsteps of all my illustrious predecessors, I laid down the rules for the next two weeks: no water-bombs; lights out at 11; no late night dormitory raids; no midnight feasts. Anyone caught committing one of these heinous crimes would be sent home on the Milk Train (I think I first heard that beauty at the age of 10).

By the time I sat down with the counselors late on the second night, I was in despair. “Why are they all so damned well-behaved? Nothing is happening! Don’t they know that they are SUPPOSED to disobey me? That is all the fun.”

"I think I'll have another pint"

“I think I’ll have another pint”

That event nearly 35 years ago came back to me the other day on noticing that it was the 80th anniversary of the end of Prohibition in the United States. Although there were, undoubtedly, sound moral reasons why Prohibition was introduced in 1920 and equally sound moral reasons why it was abandoned in 1933, the underpinning of both was taxation. The introduction of a Federal Income Tax in 1913 enabled the miserable sods in Congress  to rid the nation of the scourge of liquor as the said income tax compensated for excise duties on alcohol. In contrast,  the effect of the Great Depression on revenue from income tax necessitated the topping up of the Treasury’s barrels.

Generations of politicians have publicly spoken of duty on alcohol as a Pigovian Tax or, more popularly, a Sin Tax  – one that is designed to achieve socially desirable results ie a reduction in  consumption.  That, I am sure, is very moral and reeks of the old Temperance movements.  Meanwhile, our elected elite know that they would be lost without liquor – excise taxes on alcoholic beverages in the UK, for example,  are estimated to cover around a sixth of the costs of the National Health Service. And if you ever thought that they really wanted you to be on the wagon, remember that Finance Ministers often lower duties when economic conditions are ripe so as to encourage greater demand for the stuff. White man speaks with forked tongue.

In fact, excise duty on alcohol is a violently Regressive Tax –  affecting the less well off far, far more than the top one per cent. There is, I am told, a limit to the number of beers one man can drink, whatever his station in life. And when was the last time you saw a toff walking into a pub and asking for a pint of Dom Perignon and a bag of Salt ‘n Vinegar crisps?

Come December each year, of course, the moral arguments are sent into hibernation. Drinking becomes a spiritual, even divine, experience. Indeed, around the middle of the month there is an acute feeling that companies and advisors in several European countries start to fade out , rather than break, for Christmas as alcohol levels start to rise above the eye-brows. I was rather amused  talking to somebody in Ireland the other day when he assured me that Ireland keeps going until December 23rd – according to a survey I read recently, Ireland has the second highest per capita alcohol consumption in the world; on the other hand, maybe the Irish can hold their drink (ha, ha).

For illustrative purposes only

For illustrative purposes only

I was so successful avoiding fatalities in that camp, that they had me back the following year for an older clientele. Free with the public (private) school came an ancient 1950s bus, the Green Goddess,  and its far more ancient driver, Jock. Now, if Jock had ever made it up Mount Olympus he would have teetered off pretty fast because he was in a recurring state of inebriation. In fact, whenever he took us anywhere, I put someone on Jock duty to make sure he didn’t make a bee-line for the local watering-hole. On one occasion, up in a Peak village,  he managed to give his guard the slip. Finding the Green Goddess parked with two wheels up on the pavement outside the village pub I decided to ride shot-gun on the way back to the school, ready to grab the wheel at a split-second’s notice. When I informed him that he had just driven through a red light in the town of Buxton, he exclaimed something about going forth and multiplying and continued on his (and our) way singing Scottish ditties to himself as he went (and I sat with my eyes glued to the road ahead).

It was blatantly clear that Jock drank too much – he couldn’t function properly in his chosen profession (unless, of course, his chosen profession was ‘mass murderer’, although, come to think of it, he was useless at that, too). On the other hand, drink appeared to make him happy. It seemed, from the vantage point of my then immense 22 years experience, that Jock needed drink but he also needed brakes (on his too frequently raised right arm as well as the Green Goddess’s wheels). Perhaps the ‘social contract’ on alcohol that governments have with their electorates, is not so woozy after all.

Stuck Behind Chocolate Bars

Pit Stop

Pit Stop

Predictably, perhaps, Belgium does not feature prominently in Patricia Schulz’s “1,000 Places To See Before You Die”.  Given my disdain for “Harry, take a photograph” tourism, it was serendipitous that the only foreign place I was taken to see in the ten years after I entered this life was Belgium. And I loved it.

My father spent the closing months of 1944 in newly liberated Antwerp and made the one great investment of his life (from my point of view): giving his army chocolate ration to the 10-year-old daughter of a local family he befriended. When he went back with me in tow twenty years later, parents and daughter showered me with non-army-issue Belgian chocolate and toys that, in Wilson-era Britain, were beyond my wildest dreams.

Antwerp has always held a certain magic for me and, while I have traveled several times to Brussels over the years, my single return to Antwerp in the course of the last half century was  to catch a train to  Amsterdam, leaving the myth intact.

It was, therefore, with a twinge of sadness (but with more than a smattering of amusement) that I read a front page article in the International New York Times last week detailing a triumph for the Antwerp police in breaking a criminal ring.

"Put that in your moustache and smoke it"

“Put that in your moustache and smoke it”

Hercule Poirot was, without doubt, one of the brightest Belgians who never lived. With the analytical brain of a middle-aged Englishwoman, the canny detective brilliantly solved every case that came his way. Inspiring generations of real-life Belgian detectives, Poirot’s protegés must be feeling especially proud these past  weeks. Employing the state-of-the-art techniques of their craft, Antwerp’s finest succeeded in uncovering a massive tax fraud involving members of that venerable city’s diamond trade and a Swiss affiliate of a British bank claiming historical association with the former colony of Hong Kong and a large Chinese city beginning with S.

The genius of the Belgian Force knows no bounds: not only did they cotton-on that something was afoot with the squeaky-clean diamond industry, but they also understood that the list of account holders provided by a whistle-blowing former employee of the said bank a few years back might mean something. Putting two and two together, after a couple of years of playing now-you-see-us-now-you-don’t with local dealers, they finally swooped in dawn raids six weeks ago and made a series of arrests. What is remarkable is that there was anybody left to arrest; it can only be surmised that the suspects had their usual faith in the capabilities of the Belgian police.

In fairness, nobody would ever willingly suspect the Belgian Diamond Industry.  Perceived as upright – and the police force as vigilant – the Belgian tax authorities have for years rewarded the industry by applying to it something called the Fiscal Plan. Like mere tax compliant mortals, dealers are required to prepare accounts for submission to the tax authorities, but each year the selfsame tax authorities inform them as to the minimum they owe according to their independent assessment of the industry,  based on a percentage of turnover. So successful has this idea proved that it has been exported to Israel (Tachshiv),  while there are plans for its adoption in India (Presumptive Taxation).

Of course, this alternative “who-are-you-trying-to-pull-one-over-on?” taxation system still rests on the turnover being reported. Although media articles on the current alleged fraud are a bit short on the facts, it would appear that there might have been a slight under-reporting of sales, with payments decoyed through multiple tax havens in a classic Agatha Christie-era tax evasion scheme. Of course, the great advantage of diamonds over, say heavy industrial equipment, is that they are classic carry-on baggage – even if the mode of carry-on sometimes involves walking with a rather peculiar limp.

It was only as an adult that I realized that Belgium is one of the great chocolate producers of the world. That ersatz stuff my father gave to the young Renée probably tasted nearly as bad to her as Hershey’s tastes to me – but I suppose after four years of German Occupation anything will do.

Pure Heaven

Pure Heaven

About fifteen years ago, I traveled to Brazil with a Senior Vice President of a chocolate company and his colleague. At lunchtime on the first day we were apparently forgotten by our hosts and hunger started to kick in. Due to my peculiar dietary requirements I then, as now, came prepared. Opening my briefcase I proceeded to slam a 500 gram slab of Cadbury’s Dairy Milk on the boardroom table (nowadays it would be a 100 gram energy bar) and declared it: “the best chocolate in the world”. The SVP gave me the greasy eyeball, to which I retorted; “If you don’t want it, don’t eat it”. He partook. Not so much as a thank you. I think I will stick with the Belgians.

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