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Archive for the month “March, 2014”

In Memoriam

There would be no problem if one of these boys delivered our newspapers

There would be no problem if one of these boys delivered our newspapers

Venturing downstairs at the crack of dawn every weekday morning, my first conscious daily act is to open the front door and hunt for the newspaper. Invariably within a five yard radius of the letter-box, it is pot luck if it is in pristine condition on the path, lying face-down in a puddle in the self-irrigating flower-bed, or sporting a black tyre-mark right across the front page.

Everybody has their set order for reading the newspaper and I am no exception  – after a cursory glance at the front page I spread-eagle the broadsheet over the kitchen table and go straight for the bottom of Page 2 – the Obituary. It is the same thing when the Economist arrives – only this time it is the back page (the whole delicious expanse of it).

The discerning Obituary buff will know that  obituaries do not come in a one size-fits all format. One day it can be a serial murderer, the next a long-forgotten statesman and the following day a combination of the two.  With  the Great Reaper inundated over the last few weeks with politicians leaving the world stage – Adolfo Suarez, the former prime minister of Spain (one of my 1970s heroes), Anthony Wedgwood Benn, an off-the-wall  British cabinet minister (one of my 1970s bogeymen) and Ahmed Tejan Kabbah, former president of Sierra Leone (nice to know Sierra Leone had a government), I was intrigued by a piece a few days ago devoted to Randolph W Thrower who died at the tidy age of  exactly 100. Mr Thrower’s main claim to fame was that, for a brief moment in history, he was IRS Commissioner.

Thrower was clearly a decent man. As a young lawyer in Georgia in the late 1930s he defended blacks facing the death penalty on trumped up charges. In a speech on legal ethics  towards the end of his life  he stated “Every lawyer in the South was not an Atticus Finch of “To Kill a Mocking Bird”, to refer to one blemish of the past”; but he clearly was, and the point was missed by every serially plagiarizing obituary I read.

The acceptable face of taxation

The acceptable face of taxation

In his short 18 month tenure as Commissioner he was instrumental in reforms that helped the black community and the poor. However, it was his ouster that won him his place in the New York Times death column.  Reminiscent of a recent witch-hunt of political not-for-profit organizations that cost the Acting Commissioner and other senior officials their jobs, Thrower was not comfortable with the pressure coming from the White House to investigate the tax affairs of journalists and politicians. Not being armed with the benefit of hindsight and sure the President would be disturbed by the actions of his staff, he decided to request a personal  meeting. Unfortunately for Thrower and – it would later transpire – the entire American people, the President at the time was  Richard M. Nixon, himself a lawyer born the same year as the Commissioner, who would not have wasted his valuable time defending innocent blacks in the 1930s when there was far too much work to be done preparing to lynch the entire country. Thrower never got the meeting, but he did receive a personal phone call from John D Ehrlichman firing him.

Those infamous White House Tapes record that, when they were looking for a successor to Thrower, Nixon demanded “I want to be sure he is a ruthless son of a bitch, that he will do what he is told, that every income tax return I want to see I see, and that he will go after our enemies and not go after our friends.” Now that is fighting talk (in fact the sort of talk you would expect from gentlemen managed by another very recent deceased – world famous boxing promoter Mickey Duff). King Richard Nixon  playing President Richard Plantagenet (try reading the Soliloquy – “Now is the winter of our discontent etc etc” imagining Nixon as Richard III –  it works). This was Machiavelli without, as Kennedy pointed out to Ted Sorensen on the night of the 1960 election, any Class.

Evidently, Thrower’s problems with the White House started in 1970 when they sent him G Gordon Liddy as candidate to head the Bureau of Alcohol, Tobacco and Firearms. “He was a gun nut,” Mr Thrower said. “They wanted me to put a gun nut in charge of guns.” In the event Liddy later had a celebrated short-lived career planning the Watergate break-in. No shots were fired.

Rehabilitation gone nuts. Look who got centre stage

Rehabilitation gone nuts. Look who got centre stage

If I am not mistaken, whilst in the country whose yoke the Americans shook off a couple of hundred years ago taxes are technically paid to the monarch, in America they belong to the people. Mr Nixon, who was busy at the time creating the Imperial Presidency, evidently lost sight of this, as – to a lesser extent – other executive officers (but perhaps not presidents) have done since. Nixon really did represent just about everything that could go wrong with democracy and it was a remarkable act of courage, tolerance and, perhaps, folly on the part of Bill Clinton to eulogize him at his funeral.

Reading Thrower’s obituaries, another line  from that late-life speech of his seemed appropriate. It was a quote from Robert Browning:”Ah, but a man’s reach should exceed his grasp, or what’s a heaven for.”  As for Nixon, back in 1968 when he was running for the Presidency, both  he and the utterly decent Hubert Humphrey made  compulsory appearances on the zany show of the day “Rowan and Martin’s Laugh-in” which launched the careers of, among others, a bikini-clad Goldie Hawn. After much debate among his advisers he performed Judy Carne’s weekly catch-phrase. Staring into the camera Tricky Dick exclaimed: “Sock it to me!” More’s the pity one of  Mickey Duff ‘s clients didn’t hear his request.

Rest in Peace, Randolph W. Thrower, a man of integrity. The Tax World is indebted to you.

A Tale of Two Cities

I should have stayed in bed

I should have stayed in bed

Arriving at a hotel in the heart of Dickens country late last Monday night, I was asked by the receptionist if my day had been a pleasant one. I replied that, having woken in one country, worked a full day in another and being now about to go to sleep in yet another, I did not feel qualified to answer the question (or, for that matter, any question).

We live in a mad, frenetic world.

Not many hours later, beating the dawn to its daily task of rousing the city from its slumber, I decided to fulfill a life-long ambition (or more precisely an ambition since the first year of grammar school) to greet the sunrise from the centre of Westminster Bridge – mimicking  what William Wordsworth experienced when he stood in the same spot “Upon Westminster Bridge” on September 3, 1802. Well, all I can say is that either Mr Wordsworth was high on some interesting substance when he wrote “Dear God! the very houses seem asleep; And all that mighty heart is lying still!” or London has changed a bit in the last two hundred-odd years. At 6am The city was alive with motorists, cyclists, joggers, river boats and pedestrians. Even the Underground was working.

Later in the day, sitting  in the jump-seat of a Black Cab (which was not black), bombing up the Mall from Buckingham Palace to Admiralty Arch, I was alerted to the sight of a horse-drawn carriage crawling in the opposite direction and creating an almighty traffic jam in its wake. It was  being driven by two men in full 18th century livery carrying,  whom I assumed to be,  the rotund Ambassador of an African nation on his way to present his credentials (and from the way he was dressed – possibly  his bed sheets) to HMQ.

Hopefully the first and last Crimean War

Hopefully the first and last Crimean War

Later still, my colleagues and I pulled up in another Black Cab at the Cavalry and Guards Club in Piccadilly, where we were warmly welcomed by our host, a club member, who had kindly invited us to lunch. The whole marvellous experience was quintessentially British and utterly timeless. We had been advised in the invitation that “Gentlemen are required to wear a tailored jacket and tie” (my wife had queried whether, while my suit might be acceptable for an officiating undertaker it would not meet the enhanced standards of a gentlemen’s club). Taking my cue from the other diners in the room, the jacket did not come off throughout lunch despite the unseasonably hot weather and the elbows did not, even once, as much as graze the table.

My entire day was a tug-o-war between London Present and London Past. What kept coming to mind was something I had mentioned that morning in a short breakfast lecture – “Management and Control”. Over a century after the phrase was coined by a British Judge, while  it remains one of the mainstays of the international taxation system, it is also one of the most confusing.

Time for a bit of mischievous conjecture.

Tuesday July 31,  1906 – Lord Loreburn  is sitting in his usual armchair at the National Liberal Club  with a copy of the Times in his lap. He is approached by a young, balding MP, cigar in hand, who – after the usual niceties – he politely invites to take the seat  next to him.

MP: Lord Chancellor, congratulations on your judgement in the De Beers diamonds case yesterday. I understand it created quite a stir among the legal fraternity.

LL: Y’know, old boy, it was time the South Africans remembered who’s in charge. Those bounders were claiming that, just because the company was registered down in Boer Country – I know how much you love that part of the world – it was not British. Balderdash, I said in no uncertain terms. Told ’em that you had to try and imagine that a company was like an individual that cannot eat or sleep but can keep house. I thought that was quite clever. Anyway, I rounded it off with : ‘A company resides … where its real business is carried on … and the real business is carried on where the central management and control actually abides’. I  actually don’t have the faintest idea what I meant but, to cut to the chase, because all the chaps running the company are in London, it can jolly well pay its tax here as a British resident. Otherwise, the revenue will go to helping those damned Boers who don’t deserve a bean. And as for…

MP: If I could interrupt, Lord Chancellor. Don’t you think  this idea about tax residence being where the “Central Management and Control” resides could lead to all sorts of uncertainty in the future? Allow me to challenge you with something fanciful I saw in The Times the other day. You will have heard of those two American bicycle builders  – the Wrights,  I think they are called – and their early success. Well they  patented an improvement to Flying Machines a few weeks ago which they claim enables them to control flight so that they will be able to fly to specific destinations rather than their current circus act of reaching somewhere in the next field. What if one day, a company director were able to climb aboard one of those flimsy contraptions with his top hat tied firmly to his head and, holding tight to his seat, fly to another country in a day or two and make decisions there. Where would the Central Management and Control be then?

Safe travel

Safe travel

LL: Oh, you are a card! Could you really imagine a British gentleman submitting himself to one of those flying machines? Quite preposterous! Next you are going to tell me that he would be served fine whisky and a fresh copy of The Times! Ha Ha. Listen, old chap,  I was talking to Ismay of the White Star Line the other day. He is thinking of commissioning three (!) new ocean-going liners to compete with Cunard. By 1912 he expects to have the biggest passenger ship in the world sailing between Southampton and New York – with swimming pools and billiard tables – and totally unsinkable. That is the future for gentlemen. Safe, luxurious travel. Not some flimsy piece of wood with a bit of canvas stretched over it, all held together by string.

MP: You are probably right. They will be much more use for throwing bombs from when there is another war. Well, I must be on my way, Lord Chancellor. It has, as ever, been a pleasure talking to you.

MP walking across the room (to himself): Good Lord! That fellow is stuck in the 19th Century.

LL (to himself): Precocious young whippersnapper.  Lacks his father’s self-discipline. Must be the mother’s American influence. I don’t know what Campbell-Bannerman saw in him to make him Under-Secretary of State for the Colonies. Gentlemen in flying machines, indeed. And what was that idea of bowling bombs from them at the enemy?  Heaven help the country if he ever achieves a position of real power. Somehow, with ideas like that, I  don’t think we will be hearing too much more of  Mr Winston Churchill.

The sky’s the limit

"What did I do wrong? I only asked for the top floor"

“What did I do wrong? I only asked for the top floor”

Winding my way up the world from Western Australia last week, the doors of my mind opened on a vision of Elisha Otis . Elisha Who? Who Otis? Who Who? Odds on, anyone reading this blog has seen the name at least once in the past 24 hours. At the New York World’s Fair in 1854 Otis daringly demonstrated his safety mechanism for elevators that prevented them from falling in the event the cable broke (a device now ubiquitous but generally absent from Hollywood disaster movies).  Otis, the founder of the first (and still largest) elevator company that bears his name, made skyscrapers possible, King Kong an icon and Hong Kong an eyesore.

Taking up on that last point, arriving in Hong Kong last week I decided to try a repeat of my first visit to New York a third of a century ago. Then, striding out of Grand Central  onto 42nd Street I was gobsmacked by the sight of the Art Deco Chrysler Building, the tallest building in the world for a brief 11 month reign until brashly superceded by Al Smith’s Empire State. Exiting Hong Kong Central I expected to be dumbstruck by the fabulous Business District Towers that appear in pictures taken from nearby Victoria Peak. The reality was somewhat different. Walking along a labyrinth of roofed concrete walkways with occasional offshoots to building entrances along the way, I eventually came to an escalator that took me down to what I assumed was ground level because, firstly, there were no more stairs going down and, secondly, there were antiquated trams, up-to-the-minute buses and cars going by at speed on the narrow road. I am sure that, had I been a contortionist, I could have enjoyed the surrounding architecture but, as a mere mortal, I would have had to lie flat on my back to have any chance of getting a view from the compressed concrete mass in which I found myself. That, in turn, would have meant being sliced by a tram, flattened by a bus or trampled by 3000 blissfully unaware commuters engrossed in their smartphones, faceless thanks to green standard-issue surgical masks, like something out of Pink Floyd’s “The Wall”.

My first impressions of Hong Kong were, I am afraid, underwhelming. Traveling along Hong Kong Island and into mainland Kowloon on the MTR Subway, popping up to street level at random stations like a mole with a mission, everywhere seemed much the same – tall buildings, people, relatively narrow streets, more people, shops and even more people.

When it comes to tax, however, Hong Kong is quite overwhelming. Styled as an ideal holding company location with the same longing for respectability as the massage parlours  advertised on the euphemistically worded signs propped up by young ladies on street corners, there is much to recommend this overpopulated enclave. Offering a territorial basis of taxation, the 16.5% corporate rate looks respectable but is generally heavily diluted. In recent years, recognizing that the days of privacy are up, Hong Kong has pursued an energetic programme of  tax treaty negotiations. An educated population with sky-high average IQ means that there is a ready supply of plausible managers for holding companies; there is also a well-oiled legal system and a fully functioning stock exchange.  The local managers of a company occupying no more than a single drawer in a Trust Company’s office  may be able to successfully argue that the company is legitimate as there is no room in Hong Kong for a company occupying two drawers. Only royalties face withholding tax but, in any case, the building of a factory required to pay them would probably displace thousands of residents into the South China Sea  – space is of the essence and manufacturing no longer seems quite the thing.

Human face of Communism

Human face of Communism

The only downside of Hong Kong as a Holding Company Location (dare I say, Tax Haven?)  is that it is tucked under the armpit of a rather large country not known for its championing of laissez-faire and existentialism (or any  big words other than “communism”). A rather big downside.

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