Tax Break

John Fisher, international tax consultant

Archive for the month “May, 2014”

Deading The Fat Man

In God We Trust

In God We Trust

Moral Dilemma – two words that do not feature prominently , jointly or severally, in the tax advisor’s lexicon.

In the first half of the 20th Century when world wars were all the rage,  moral dilemmas evolved from the gritty reality of combat.  By the late sixties serious debate was banished to the periphery of existence along with Bras and the Bible.

In 1967 the ubiquitous moral dilemma that had every moral philosopher  thinking involved a trolley hurtling out of control along a railway line towards 5 people bound to the tracks. All 5 were bound to die unless the chap with the moral dilemma diverted the trolley to a siding where a single individual would be unavoidably sent to kingdom come. Was the loss of one life preferable to the loss of five where there was an, albeit indirect, contribution to the lone death?

By 1996 the search for sound-bytes, together with advances in the human condition, had led to the addition of a bridge over the railway with a slobbering fat man sitting precariously on the parapet.  Our friend with the moral dilemma now had a number of choices. He could pull the lever and be the indirect cause of the unpleasant demise of the single person on the siding; he could let the 5 on the track go west; or he could – very directly – push the fat git off the bridge , thus dispatching him to an oversized grave while stopping the trolley in its tracks. (The chap with the moral dilemma would not sacrifice himself because (1) he was too thin to stop the trolley and (2) moral philosophers are often people with their heads up their own backsides who have difficulty practicing what they preach).

Although the Utilitarian answer to this conundrum would be a toss-up between diverting the  trolley or deflating the fat geezer  (a 5-1 win for the human race), it was established that  the most likely outcome would be to watch in horror as the 5 are trampled. Coming in second would be diversion of the trolley. The Fat Man would survive to spill over both sides of  the middle-seat on an economy flight to Australia, as well as to invariably eat the last cake on the plate.  Even though they could not  stand his guts –  normal people would shy away from actively taking the man’s life.



Last week I read in The Economist, however, that according to a recent book “Would You Kill the Fat Man?” when the question is posed to respondents in a foreign  language,  it is more likely that they will elect to kill the bridge-balancing- blubbery- baboon. This has nothing to do with xenophobia. (I must apologize to any rotund gentlement reading this post if I am sounding unintentionally offensive. I am currently on a diet trying to shrink my girth and I figured that, just like anti-Semites never become Jews and the English never become Irish – if I am disparaging enough about fat people, I will have conquered obesity for ever – fat chance).

The reason  cited for the different results when talking in a foreign language stems from something I mentioned in my blog of April 28:

Nobel Laureate Daniel Kahneman in his book “Thinking, fast and slow’ talks about “expert intuition” – a Fire Chief who senses exactly when to leave a burning house before it collapses or a Chess Master who can instinctively advise the next three moves in somebody else’s game. It turns out that this comes from enormous practice and experience and not some magical eureka moment –  a combination of System 1 (automatic) and System 2 (conscious) thinking. This allows for quick, highly complex, thoughts.

It turns out that when you are thinking foreign, you slide into System 2 thinking most of the time. As a result, while the Natural Born English Speaker instinctively decides he cannot shove the Fat Man over the edge, the foreigner is forced to ruminate more slowly over the question and is more likely to come to a utilitarian decision,  which might just explain why Germany started two world wars.

This has consequences for tax consultancy (and just about every other verbal interaction for that matter). Last week I met with a gentleman from   Southern Europe who, for the purposes of this post, we shall refer to as Umberto. Now, because Umberto was not called Frank, Henry or Michael, as we sat over some pretty complex tax issues I realized that, even putting my mouth into low gear and applying the hand brake, he was left hanging on for life to the rear bumper. Until I read the Economist article I assumed it was just a matter of language but now I realize that our thought processes were probably working on two different planes. The upshot is that, given that there are far more of them than us, English tax advisors should be forced to attend a course in English as a Foreign Language in which they are brainwashed into thinking in Pidgin.

What would he have made of it all?

What would he have made of it all?

It is parochial and naive to think that English has conquered the world. It is the world that has conquered English.

I think I am going to start speaking like Borat. It’s a very nice.


Go ahead punk, make my day

The good old days

The good old days

“This tape will self-destruct in five seconds.” In the 1960s, while the mission may have been impossible, information protection was very possible. Burned, swallowed or – until a bunch of  bored  students  were looking for something to do at the US Embassy in Teheran – shredded, there was no difficulty eradicating the evidence from the face of the earth.

How times have changed. I stayed late in the office last night to complete a compulsory on-line course on “Information Protection Fundamentals” concerning  the myriad risks to information confidentiality. Once upon a time you could buzz through the fifty-odd slides  (would I do such a thing?) and home in quickly on the test at the end. No more. Now you have to listen to a computer-generated Australian woman reading the entire caboodle at the speed of someone who really wants to inflict mental anguish. And just in case you were thinking of letting the lady talk away while you carry on with seriously chargeable time – should you forget to remind her regularly of your existence, she will self-delete and send you back to “Go”.

The presentation included a loveable rogue showing how easy it is to steal information. Although I am sure I must have missed something, it appeared to me that the deliverable was that you need to take the entire contents of your office with you (including the wastepaper basket) when you go out to lunch. Passwords must never be written down but should be so complex that they are impossible to remember in order that, in the event of the employee being waterboarded by representatives of a foreign government, his lips would remain sealed (however much he might like to spill the beans).

But what caught my eye was the bit about keeping the door open for strangers.

I was brought up to always check behind me as I went through a door and, if anyone was there, hold it open until the follower was able to take my place. Back in the 1960s they called this politeness. Not any more. Before letting anyone follow you without slamming the door  in his face, you are supposed to, albeit politely, make sure the visitor has a valid office pass. If not, you are instructed to escort him to the security officer who will then wrestle him to the ground and tie his arms behind his back before discovering he is the CEO of the firm’s biggest client.

No sooner had I completed the test with the unbelievable score of 90 (please don’t wake the neiighbours with your standing ovation) than I heard somebody trying to force the door of my floor. I ignored this at first on the grounds that this is what you expect to happen in an accounting office at 9.30 at night, but eventually decided to go and investigate. As I approached, I saw a rather unsavoury type  a few years younger than me (not your run-of-the-mill Big 4 client) rattle the handle one last time before passing an employee tag over the electronic sensor, thus gaining entrance.

Armed with my fresh doctorate in Information Protection Fundamentals, I politely asked him if I could help him. He looked at me nonplussed.

“Are you an employee of the firm?” I ventured firmly but respectfully (knowing full well that, even the most  Generation Y member of staff would have learnt on his first day how to use an electronic tag).

No answer.

“Could you tell me who is hosting you this evening?”

“I am with somebody out there.” At least it spoke.

What I thought I was doing

What I thought I was doing

I continued my friendly interrogation: “Can I see the name on your electronic tag please, or, I am afraid, you will have to leave the building?”

“I want to p***, you retard”.  He stared me down in absolute fury. “I am going to p*** and you can call the police if you want.”

Why is it that courses, online or otherwise, as well as Hollywood movies are always theoretical? The undesirable either comes quietly, runs off, or shoots the inquisitor in the head. The inquisitor is never left with the moral dilemma of whether to let the suspect relieve himself.  Not having much choice in the matter, I watched him thunder off in the direction of the bathroom and decided to await his return (the risk that he would make off with the faucets under his shirt did not reach the level of ‘more likely than not’). On his way back, he did his best to break another door before remembering what the electronic tag was meant for, and proceeded along the corridor towards me screaming insults directed at myself and my late mother. I genuinely believe he was about to hit me when a Y Generation employee – and owner of the tag – turned up and grabbed his arm.  It turned out, thankfully, that he was not a client (I remember an unkempt jeans-clad bloke once wandering into my office by mistake, and my treatment of him with mild but friendly sarcasm, assuming he was a workman who had lost his bearings. It turned out he was my next meeting – an extremely wealthy player in the local market. Fortunately, he took it well). This creep was involved in some project or other that we were checking – and I was relieved (sorry) to learn that there were no plans for him to darken our portals  again.

Who needs him?

Who needs him?

Although Information Protection in our technological world is absolutely crucial, I do wonder whether the practice can ever match up to  the theory. This has been particularly on my mind since the OECD reached a long-expected decision on May 6 that there is to be automatic exchange of information between members. Financial Institutions will be required to provide the tax authorities with information on foreign investors which will then be automatically transferred to their counterparts in countries of residence. Although miscreants may think they can take comfort in the authorities’ inability to deal with mounds of information, with the rate of progress of Data Analytics – sorting the wheat from the chaff – they are probably gravely miscalculating. As for the world’s tax authorities, although there will be conditions of confidentiality, the wide circulation of such information is bound to lead to horrible leaks  on the principle that “three people can keep a secret as long as two of them are dead”.


Tracking tax avoidance

"You drive"

“You drive”

” U.S. Lawmakers Slam Caterpillar Over Tax Avoidance”. That headline last month in one of our drab but professional  trade mags brought a sardonic smile to my face as I imagined a black-windowed Hummer careering around Capitol Hill jam-packed with Senators. At the vehicle’s wheel was Carl Levin who suddenly screamed “Ya-hoo” ,or whatever 80-year-old  Americans from Michigan scream when they are excited, as he pushed his foot to the floor so as not to miss the multipede innocently sauntering across Pennsylvania Avenue in search of a tax-free leaf.

Of course, if they had tried that schtick with the Caterpillar the lawmakers had in mind, what was left of the Hummer would have been humming sweet melodies while the occupants queued at St Peter’s Pearly Gates.

The April 1 hearing of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations smacked of deja vu-vu-vu. Having belatedly discovered that half the American Economy has taken up skiing in Switzerland or boozing in Ireland, rather than dealing with the root of the problem, the Senate appears to be picking the multinationals off one by one to ‘out ‘ them – this time, Caterpillar.  The  heavy machinery group’s international tax planning looks pretty standard fare for US companies in the last twenty years (Switzerland, IP, Transfer Pricing – you can join the dots yourselves) and, although nobody would suggest comparison,  it is interesting to note that that very committee, in a former guise, was chaired in the early fifties by one Senator Joseph McCarthy of Wisconsin.

That committee has, however, come a long way since the Witch-hunts  and this was no blanket kick in the pants.

Regular readers will recall that, around 18 months ago,  the British Parliament held an auto-de-fe for Starbucks, Amazon and Google in which I do not recall hearing a single word of dissention as Margaret Hodge fanned the flames.

What interested me was how the members of the committee quoted in the article showed once again just how divided American politicians are on you-name-it-they’ll-argue-it.

Carl Levin (Democrat) implied that this sort of thing had to stop, John McCain (Republican – Sarah Palin’s side-kick) said that it was the law that needed changing, while Rand Paul (Tea) apologized for dragging the company’s representatives there in the first place.

On the other hand, at least nobody came out with the claim that Caterpillar is immoral, which has become the mantra of every self-respecting  European legislature, even the French one.

I found myself sympathising with all three senators – American companies paying minimal taxes has to stop, the law needs a radical overhaul and why drag busy people to Washington when they are only doing their job of maximizing profits for their shareholders?



Maybe there is hope for the American political system after all.

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