Tax Break

John Fisher, international tax consultant

Archive for the category “Britain”

Fish without an aye?

saltire1The only thing I am prepared to learn from this Scottish Referendum lark is that, if you give people an overdose of democracy, their brains come flying out of their ears.

By the time some of you read this, the whole farce may well be over – decided one way or the other: the only statistical certainty in the entire, tiresome process. Friday’s  papers will either be starting the countdown to secession, or painfully analyzing why the polls were so wrong (I predict a 60:40 No vote, and assuming I am right, am prepared to explain why the polls were so wrong, using a valuable analytical tool called ‘common sense’. If I am wrong, I will be analyzing why the polls got it so illogically right).

The big problem, it appears, is that, while the No campaigners have explained convincingly why, economically, independence is the stuff of fairy tales, the Yes campaign has hijacked half the ‘nation’ on a psychedelic ‘Lucy in the Sky with Diamonds’ trip.

Worth going to war for

Worth going to war for

If, as has now been promised by Gordon Brown, former Prime Minister and fellow Jock, the Jocks are given devolved powers of taxation and  control over certain spending in the event of a No vote, any remaining hard-hatted economic arguments of that  Fish without an Aye (pronounced ‘I’) Alex Salmond, will evaporate as fast as an open bottle of whisky in a salmon smoker.

Of course, given half a chance, the average  Scotsman in the Glen is bound to take the opportunity to be seen on TV by his mum, declaiming on the future of his nation free of King Edward Longshanks. Scotsman’s mum, meanwhile, sits huddled next to a wood fire in her cottage in the Outer Hebrides which, thanks to successive Conservative and Labour governments, is attached to the National Electric Grid despite the doubtful value to anybody other than her. The lady is only watching the news because she is eagerly waiting for the fresh episode of  Downton Abbey – a series about a bunch of English toffs.

What I really fail to understand is, why the Scots (whoever they are, and however they are described for the purposes of this vote) get to decide alone on the future of the United Kingdom. It is not just about them. Scotland is not a British Colony or Mandate suing for self-determination. It is an integral part of the Three (Two-and-a-half?) Kingdoms and has to take responsibility for the effect on the others. While Ireland really was buggered by the democracy that was two wolves (England and Scotland) and a sheep (Ireland) discussing what to eat for lunch, Scotland has produced a disproportionate number of Prime Ministers, some of whom – notably James Ramsay Macdonald – have made a perfectly  good job of buggering up  the United Kingdom without resorting to independence.

This vote should have included the entire UK electorate. David Cameron must have been having a bad day when he agreed to the current format – one presumes he assumed the No vote would be a formality.

The American who could lead the Scots to vote 'Yes'

The American who could lead the Scots to vote ‘Yes’

And, even if it was right to restrict the vote to the Scots (which it was patently not), what about the Scottish diaspora? On a decision of this magnitude that will affect all future generations of Scots, why was the vote not offered to Scots and their descendants? As the son of a Scot, I should have a say in the long-term future of the country I have visited once in my lifetime. In fact, I feel passionately about Scotland. If  I were interviewed by the BBC, why would I go for the boring ‘No, I like it like it is’ (that I actually believe in), when I could give an emotional speech about the glory-days of Braveheart that might get me onto the evening News? It wouldn’t have to affect how I actually voted in the secret ballot. But let’s wait and see if the polls were right.

The Good Old Days?

These two would have sorted out Islamic State

These two would have sorted out Islamic State

By the time you get to my age (I, just about, remember what I was doing when I heard JFK had been shot), there are not many childhood ambitions you have either not fulfilled or not given up on. I made it to the Volvo, but not President of the United States (an early disappointment reading a DC Comic – if being born on Krypton ruined it for Superman, Stoke Newington wasn’t going to do much for my chances).

Well, last Saturday night I finally fulfilled an ambition that first entered my head one Spring day in 1970. I remember walking into the school library, the most junior of juniors, and asking the duty prefect to order a copy of John Galsworthy’s “The Forsyte Saga”.  I had been gobsmacked  by the 26 hour BBC adaptation that had been showing in 1968/69 and I thought I would have a go at the original. Either because the prefect knew that the book was about something resembling incest (inbreeding), or because he was an illiterate moron,  instead of encouraging my literary pretensions, he threatened me with detention. Illiterate moron. Definitely.

Last Saturday night, having logged out from normal life  for four complete Saturdays in a row, I finally finished the trilogy that is the Forsyte Saga. It did not disappoint.

It possesses  one of those story lines that would not disgrace ‘The Bold and the Beautiful’ (which I saw for the first time on Friday – somebody told me a number of the characters were thinking of taking up acting; I hope not). I will try a short synopsis (if you are under 18, despite the word ‘incest’, this is a family  site, so I suggest you clear off). Names are a bit of a bind: there is Jolyon and Jo and Jolly and Jon – not to mention, June. So I shall use letters.

Spot the one with two heads

Spot the one with two heads

Back in the 1880s, Mr A and Mr B are first cousins who don’t like each other very much. Mr A marries first but later runs off and marries his daughter’s governess, abandoning his daughter (A minor)  to her mother and his father (Mr Old A – the wives’ names are not important). Mr B marries Mrs  B (her name is very, very important) but she cannot stick him. Mrs B steals A minor’s fiance, who proceeds to top himself . Mrs B walks out on Mr B. Mrs B falls in love with widower Mr A, and Mr B names them both in a divorce suit. Mr A marries Mrs B, while Mr B marries a French woman who is not important. Mr A and Mrs B have a son (AB minor), while Mr B has a daughter (B minor). AB minor and B minor fall in love and want to get married. This cheeses off just about everybody. Just to add to the fun, Mr A has two children from the governess, one of whom dies in the Boer War, while the other marries Mr B’s nephew (this is a daughter – which would have been stating the  obvious in the 19th century), her second cousin. She is the only really sensible one in the whole book, deciding not to have children because – thanks to the family connection – they might be born with two heads.

There is, however, something that was, to the best of my juvenile memory, completely missing from the BBC series. The trilogy is about unabashed capitalism – Soames Forsyte (Mr B), the books’ main protagonist, along with almost all the Forsytes, is obsessed with property and the individual’s right to own as much of it, in all its forms,  as possible. That fits well with late Victorian England, but there is a great leap to the last book from 1901 to 1920, which Nobel Laureate Galsworthy was writing in real-time (published 1921).

This was immediately after the Great War, when the aristocracy and middle classes were living in real fear of what might happen to the country. Income Tax had already been hiked before and during the War. But, while Soames and various Forsytes bewail the inroads the income tax and super-tax are making into their fortunes, they live with a far greater fear which, given the timing of the book, is almost palpable. Three years earlier, King George’s doppelgänger cousin, together with his family,  had been murdered by the Bolsheviks. In Britain, with universal suffrage (that is ‘the vote’ for any under-18s who did not heed my advice above), the Labour Party was rising rapidly and there was a real concern of either outright revolution or wanton nationalization.  As it turned out Labour foamed and fizzled, it requiring another World War to deliver them a sustainable parliamentary majority. Meanwhile, ignorant of what the future held, Soames (and Galsworthy) hid their Top Hats and flashy cars in the hope of not being noticed.

Spot the one with a brain

Spot the one with a brain

A hundred years on, and it is interesting to note that the Social Protests as well as the writings of the likes of that Frenchman Thomas Piketty have not led the nouveau-riche to hide their  wealth. Quite the opposite – they appear to flaunt it.  It will be interesting to see how this one pans out. Whatever happens, I will not be around for the BBC series in 2068 (although, I imagine ‘The Bold and The Beautiful’ will still be going strong).



The Balls In Her Court?

1966 all over again?

1966 all over again?

What with the World Cup and Wimbledon, the last few weeks have been jam-packed with balls – an appropriate time, perhaps,  for the British Labour Party to present its ideas for the future of tax policy should it win the next General Election. But more of that later.

I grew up thinking the Queen was so prim and proper that if any man were to use fruity language in her imperial presence (even her colourful husband), he would be hoisted on a gibbet outside the Tower of London.

Then, in 1992, the BBC  aired a documentary, the title of which they had filched from an old series about someone else entirely: “Elizabeth R”. In contrast to the earlier, professional production which starred Shakespearean superstar Glenda Jackson, this latest offering was Reality TV in its infancy, a camera crew following the matriarch of a rather dysfunctional family for an entire year as she happened to run into just about everybody who had the power to destroy the world (Celebrity Big Mother).

Among the documentary’s many fascinating scenes was one dealing with the preparations for a State Dinner at Windsor Castle in honour of the, then, President of Poland:

The Queen is observed  in an anteroom with her family waiting to escort the President and his wife to dinner. Passing the time of day with her daughter, Princess Anne, she informs her that she has been showing Lech Walesa (the former Gdansk shipyard labourer) around the Castle. She cheekily mentions that,   amazed by the size of everything,  every time he had entered a room he had uttered the only two words he knew in English, “Quite interesting words”. Anne stops her in mid-flight: “Was it ‘Good Heavens’?”. “Bolder than that,” comes the reply. The Queen produces a wry smile, implying that her sense of humour may be slightly more ribald than one might have imagined.

Michael Foot always had a sense of occasion

Michael Foot always had a sense of occasion

Well, if Labour wins the election next year, one hopes that – as she approaches 90 – Her Majesty is still game for a laugh. For the party that once tried unsuccessfully to put a “Foot”  in No. 10 Downing Street is now likely to put “Balls” in No. 11.

Shadow Chancellor, Ed Balls, gave an interesting talk at the London Business School last week.  Surprisingly for a Labour Economics man, he  informed his audience that a Labour Government would provide tax breaks for businesses, especially small ones.

Before announcing the positive news, however,  being Labour Balls had to dampen the good cheer of the satanic captains of industry crowding the auditorium – so he announced that a Milliband Government would reverse the current Government’s  corporate tax rate reductions. The rate would, however, be kept at the lowest in the G7, that is less than Canada’s 26.5% (Karl Marx, bless Mother Russia for annexing the Crimea and getting kicked out of the G8). Against this there would be substantial Business Rate  (local property tax) reductions, which would serve as a significant incentive to small and growing businesses. There would also be provisions to encourage the long-term holding of shares.

The most controversial announcement, however, was that Labour is considering an “Allowance for Corporate Equity”.  The concept is not new and has been tried in Croatia (failed), Italy (failed),  Brazil (as always, different), Belgium (EU Commission trying to make it fail) and Australia (gave up trying).

The basic concept of ACE is that debt financing and equity financing are equated. In an ideal world this would lead to less volatile companies – a case in hand being Manchester United, a once great football team, that was saddled with tax-deductible debt by its unlamented late owner, Malcolm Glazer. By providing a notional deduction against a company’s capital (and assuming interest and dividends to shareholders are treated similarly), there is effectively no tax on a risk-free investment – tax only applying to “super-profits”.

The potential advantages of such a system, in addition to canceling the debt/equity advantage, are that:  there is tax neutrality regarding investment; it cancels out the effect of differing depreciation rates (the higher the depreciation rate, the lower the capital on which the allowance is calculated); and inflation can be compensated for through changes in the notional rate of deduction.

The downsides are that: in a global economy, the headline corporate tax rate is highly relevant in attracting foreign investment; and there can be issues with foreign tax credits. Then there is the small question of how to calculate the risk free rate  that achieves neutrality.

Seen in this light, it appears far more sensible to follow the approach taken by several countries in recent years to restrict interest deductions to a fixed percentage of EBITDA (earnings before interest, taxes, depreciation and amortization), thus widening the tax base and permitting  reductions in headline rates. But at least the Labour Party, under its soft-left leader, is not threatening the raining down of fire and brimstone  on British Industry.

Power couple?

Power couple?

Of course, should Labour fail in its bid to form the next Government in 2015, the likeable young  Milliband will almost certainly be sent packing. While Mr Balls was a credible candidate in the last leadership contest in 2010, it is thought that, this time, he will support the candidacy of his wife, who is shadow Home Secretary (Interior Minister). Should Mrs Balls make it to No 10 in 2020, the Queen will doubtless be thankful that Yvette Cooper had the good sense to keep her maiden name when she married. If, on other hand, Ms Cooper makes her husband Chancellor of the Exchequer, they will be neighbours. What would that do to the, by then,  ancient Queen’s constitution?



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.

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.

What’s in a name?

View Of A Pig

View Of A Pig

The first poem I studied in secondary school began: “The pig lay on a barrow dead, motionless”. Poet Laureate Ted Hughes’ ensuing nine sickeningly graphic, non-rhyming stanzas made me want to vomit and scuppered any chance that Wordsworth, Byron or Shelley might offer the  key to my romantic soul.

It was not surprising, therefore, that the death of Nobel Laureate Seamus Heaney a few weeks ago caused nothing but a slight flutter in the iambic pentameter of my heart.

Heaney,  like  many modern poets who had studied the works of William McGonnagal – the world’s worst practitioner of the art – did not feel constrained by the need for the perfect rhyme-ending. He would happily plump for the partial rhyming of assonance (rhyming vowels) such as: “Between my finger and my thumb/ The squat pen rests; snug as a gun” or consonance, which is the same concept but with the consonants matching rather than the vowels: “We trekked and picked until the cans were full”. Assonance and consonance are, evidently, great ways to get a message across into the readers subconscious. Had I started my poetry appreciation career with Wordsworth’s “On Westminster Bridge” rather than Hughes’ pigswill, I might now be in a position to explain this – but I didn’t so I aint.

In recent years the heavily oil dependent economies of the western world have been energized by the development of “FRACKING” – the hydraulic fracturing of underground rock formations by the high-powered injection of water and other liquids to free enormous quantities of shale gas and oil. The Americans, particularly, have discovered that by widespread FRACKING they can raise the proverbial digit to the medieval dictatorships of the Middle East who have, for 40 years, been able to periodically  hold the world to ransom for a barrel of the black elixir. FRACKING is helping to fuel  the US economic recovery.

What is interesting is that  British hunting for shale gas has been less successful than in America. This has been largely due to greater public discourse on the subject and a much more significant populist backlash than across the Atlantic.

The Economist ran a leader a couple of weeks ago on the successful protests in a South East English village against FRACKING. Objections are based on environmental issues – there is a fear of greenhouse gas emissions and water pollution (not to mention earthquakes and the implosion of the earth’s crust), as well as the disruption caused by the diviners. The free-market Economist dismissed the environmental thing as balderdash (and who am I to argue?) but chose to understand the NIMBY (Not In My Back Yard) argument.

The neighbours make less of a fuss about this

The neighbours make less of a fuss about this

The reason FRACKING has worked in America, the Economist claims, is that landowners own the rights to what is under their fields and the States (rather than the Federal Government) tax the extracted oil and gas – pumping the revenue back into the local economy.  In Britain the State (strictly, the Crown, which is the thing the Queen wears on her head sometimes) owns the rights and almost all tax revenue flows to the central government coffers. Thus, the NIMBYs do not feel any advantage rising from the ashes of their disadvantage. As with so much else in the Tax Conundrum, ordinary people need to feel ownership of their taxation  – be it fracking, health care, education or bombing Syria – to make the system work. For once, the British should take a leaf out of the Americans’ book.

However, I think there is more to it than that. What’s in a name? For a word that does not officially exist (you try and find it in a respectable dictionary), FRACKING has penetrated the English language most effectively. In its various fictitious forms it is a noun, a transitive verb, an intransitive verb and, even, an adjective, closely shadowing its most infamous consonantal relative.

To the delight of the protesters, FRACKING even has a construction as a phrasal verb in the imperative  form followed by a particle. As a result, the protesters have been winning support waving banners with a short, punchy message that gives  more bang for its buck.  For those of you who spent your time in school studying the various metres in English Verse rather than English Grammar, the imperative in this case is FRACK and the “particle” is “OFF”. A hyphen between the two words is optional.  By association, FRACK is not a nice word, FRACKERS are not perceived as nice people and, as for FRACKING – absolutely “Not In My Back Yard”.

Perhaps the Power of Speech has taken on a new meaning.  Could it be that Consonance is helping to screw up the recovery of the British economy?

Funeral Blues

23664Margaret Hilda Thatcher. She will always be Margaret Hilda Thatcher to me.

You see,  for well over a hundred years now, when the English have  entered Polling Booths to vote in a General Election, they have  in the main been faced with 3 candidates – Conservative, Labour and Liberal (or hyphenated Liberal or hyphenated Labour or – for a blink in history – Social Democrat). That was my experience when I voted in my first election that swept Mrs Thatcher to power. By the time the second election came around  all hell had broken loose. My ballot paper contained 17 names – including the legendary Screaming Lord Sutch of the Monster Raving Loony Party and TWO Margaret  Thatchers.

Living in the Iron Lady’s constituency of Finchley, the Local Conservative Party popped a flyer in my letter-box reminding me to vote for Margaret Hilda Thatcher. And if Finchlonians like me had not taken notice of the Hilda, the modern history of the world might have turned out very different. I say “Finchlonians like  me”  because I did not actually vote for her (or the other Thatcher for that matter – and I cannot for the life of me remember who I did vote for but he was definitely a member of the Liberal Party).

I had studied at the hotbed of British Monetarism in the early Thatcher years – the head of our department went on to become the Head of the Policy Unit at No 10 – and I could never (and still cannot) quite swallow the idea that if you just controlled M3 (the broad money supply in those days) you were guaranteed a stable economy. Then there was the heavy-handed way in which the economy was overhauled, the results of which were clear to me long before Billy Elliott became a ballet dancer.

But, what has been clear from the vast majority of the comments aired in the Press since she died yesterday, is that, while Mrs Thatcher was undoubtedly a divisive figure, there was much to be admired about her by friend and foe alike. I thought Neil Kinnock, her punchbag through much of her term in office (he was leader of the Labour Party), summed it up very fairly for the Opposition in a short piece in this morning’s leftist Daily Mirror: “She was not a malicious person. She was a person who couldn’t see, or didn’t  want to see the unfairness and disadvantaging (sic) consequences of the application of  what she thought to be a renewing ideology.”

It was very sad that some actually rejoiced at her death (apart from the “parties” there were some very negative comments by union leaders and ex-miners). She was not a dictator – she was democratically elected three times, she did not practice Tyranny of the Majority against the North of England which had been in decline relative to the South for years, and she did not (to the best of my knowledge) order the elimination of swathes of the population opposed to her policies.

Rejoicing at a person’s death should be reserved for true despots like Hitler, Stalin and one of my neighbours. Mrs Thatcher’s crime was telling the Nation: “There is no such thing as public money. There is only taxpayers’ money”. She may (or may not) have got aspects of her policies wrong but, as Kinnock said,  she was not “malicious”. In fact ,she is known to have shown great compassion to political friends and foes alike when they had personal problems.

I remember talking to an elderly former quango chairman who had recently been widowed, during a Department Christmas Party at University. In the course of the conversation I asked him what he was doing for Christmas, it being the first without his wife. He replied that Mrs Thatcher had invited him to Chequers; (when I met him after the hols and asked him how it went he produced a wad of Downing Street notepaper that he had “lifted” surreptiously).

However, it was an African who, in remembering her this morning,  got it absolutely right and reminded us at the same time of the true meaning of democratic government (even though, ironically,  he led a one party State). Zambia’s first president, Kenneth Kaunda, who clashed bitterly with Britain over its ambivalence to apartheid, told the BBC how he had broken the ice with Thatcher. On a visit to Zambia he arranged a dance and invited her to take the floor with him. “We wanted to show her that we did not hate her. We hated her policies”. That could be a good lesson today for the boys  in Washington and several other western capitals.

An undoubtedly remarkable woman, a major world leader and, from personal experience, an absolutely superb constituency MP – requiescat in pace

House warning

Moving house knocked her out completely

The expression “Moving House” is the sort of English up with which Winston Churchill would, famously, not have put. In point of fact, moving a house is exceptionally difficult and,  other than in natural disasters, very rare. Believe me – I know. Every weekday evening for a year and a half I used to speed out of the office car park only to be halted by the horrendously slow traffic lights at the end of the street.  As a matter of habit, I would turn my head and observe the snail’s pace progress in arranging the moving of a couple of remarkably unremarkable houses a distance of no more than twenty metres to permit the widening of the road that was the raison d’être for the traffic lights.They spent millions upon millions to dig under the foundations and put a few 100-year-old houses on rails. Preserving 100-year-old houses of the German Templars in Israel, a country that boasts its fair share of genuine antiquities (just last week I stood in the middle of a sea-front Roman Hippodrome imagining chariots racing around me) was undoubtedly an act of folly. Indeed the houses were (and, if you swing your gaze twenty metres, are) reminiscent of  the sort of buildings on the other side of Berlin’s Brandenburg Gate that a United Germany has not yet got round to demolishing.

Precisely because houses are so hard to move they are exceptionally popular when governments are, like now, looking to replenish the national coffers with giant helpings of  taxes. After all, when was the last time you heard of a semi-detached in your neighbourhood disappearing overnight and turning up on a sand dune in the Cayman Islands? And what about all those nice tax planning devices to reduce profit or, indeed, induce losses? With real estate, even if you improbably find ways to avoid capital gains tax, there is always property transfer tax (under one of its many aliases) and annual property taxes that date from time immemorial when nobody worried about progressive tax rates and the redistribution of income.

Fortunately for the owner, his tax adviser could not find a big enough envelope

Britain and Germany are taking part in the latest game of “Plug the Deficit with Bricks and Mortar”. This week sees the deadline for public comment on the British Treasury’s Consultation Paper “Ensuring the fair taxation of residential property transactions”. The proposal is aimed at nuking the ‘enveloping’ of high value residential properties in corporate structures so as to avoid Stamp Duty Land Tax on sale and, in the case of foreign residents – exemption from capital gains tax. The SDLT to be paid by a non-individual buying a residential property valued at more than £2 million is a whopping 15% of the value of the property. Meanwhile, wrapping such properties in an envelope will – from 2013 – attract an annual charge of between £15,000 and £140,000. In feeling the need to justify the imposition of capital gains tax on enveloped properties held by foreign residents (virtually every other country in the world already charges tax on the basis of where the property is situated) the paper seems to miss several beats – but it does not really matter. What is pretty clear is that, if this proposal becomes law, the days of non-commercial corporate ownership of residential properties  are numbered and everybody is going to be paying 7% SDLT (up from 5%) which is quite a lot really.

The Germans are also at it. In between dealing with the woes of the Euro, they found time to come up with a series of proposals to close annoying  tax loopholes that have been costing them a cent or two. Buried deep and largely out of sight is a suggestion to clobber an almost ubiquitous device to avoid Real Estate Transfer Tax (RETT). The transfer of properties in corporate structures by sale of shares has been widespread in Germany for some years and has traditionally succeeded in avoiding the RETT. However, the indirect transfer of at least 95% of a property also triggers the RETT . To avoid this, Germans started establishing RETT blockers – entities that facilitate a split in ownership 94.9:5.1 and avoided the problem. Well, it looks like that one may be on the way out if the Bundestag and Bundesrat can get their act together when Mrs Merkel returns from her Italian walking tour in September.

Mutual Friend? Never mind. Even the greatest novelist of all time could have bad grammar days.

While abuses of language  roll on unhindered, this year the Oxford English Dictionary, to my absolute chagrin, ditched the word “Growlery” from the English lexicon. The most famous Growlery was the wealthy, benevolent and cheerful John Jarndyce’s private room at Bleak House where he allowed himself to be angry and depressed. There will be a lot of wealthy people in England shutting themselves off in rooms in their mansions angry and depressed over their frustrated property tax avoidance schemes. What a pity that they will not have a name for the room. Mind you, at least they will be able to think about “Moving house”.

God save the queen from taxes!

She is the one in the top right-hand corner

The Queen (there is only one “Queen”) was often lampooned in the  1980s TV series “Spitting Image” . It starred a bunch of incredibly elastic, outrageously exaggerated latex puppets. My favourite sketch had the Queen at her desk, surrounded by her totally dysfunctional latex family, writing Christmas cards to foreign countries. Completing the last card  she announced “Right, I’ll just put the stamps on” and proceeded to turn her latex head sideways and thwack it down onto a giant inkpad on the desk followed by a further wallop of the head onto an envelope, producing a passable impression of her profile.

Truth be told, there is nothing strange about this. The Royal Mail is Her Majesty’s postal service and it would be absurd for her to pay for delivery.  And before I get placed in the stocks by members of the loony left – sorry lads, this is not about “primus inter pares”; HER prime minister is “first among equals”. The Queen is not one of us. She is not part of our democratic tradition. She is  the Mothership. 

“She is driving home. They can’t book her”

Forget petty things like the Royal Mail – the Queen is even above the law. Put simply, the courts belong to her.  If she fancies, she can go through the Green Channel at Heathrow Airport carrying 2 bottles of whisky and 400 fags – and nobody can stop her. If she is wandering around Windsor Tescos and decides to pocket a  six-pack of Heineken and a packet of  smoky bacon crisps, the police officer called to the scene of the crime will just unctuously genuflect  while waiting for an unmarked car to whizz round from the castle and bundle her in. If she has one over the eight on Christmas Eve and takes the Landrover out for a drunken winding tour of Sandringham (Christmas might be Balmoral) the local constabulary sirens will remain impotently silent.

In fairness this all sounds extremely strange to 21st century western man (or woman). But, if it wasn’t that way she would not be the Queen but just another Reality TV star.  I imagine she does not even have a passport. Nowadays, we are all stuck with that ubiquitous burgundy creation of the EU, but the wording on the inside cover of the British version still reads: “Her Britannic Majesty’s Secretary of State  requests and requires in the name of Her Majesty…to allow the bearer… to pass freely without let or hindrance…” What would she have had on her passport? “Don’t mess with me. I’m the Queen”?

The British don’t like their queens third-hand (or with bulbous noses)

Of course, it is not quite as extreme as I have described. Suspension of the British (or previously English) Constitution has always been an option. When King Richard III got a bit too trigger happy (at least according to Shakespeare) he ended up wandering around a battlefield offering his kingdom for a horse before being conveniently slain by his successor. And then there was that poor chap Charles I (for the benefit of non-native English speakers the “I” is pronounced as it is spelt – “The First”)  who, on a cold day in January 1649 was left without a head upon which to wear his crown and replaced for a few years by a boring republic. Indeed, if Her Majesty was feeling a bit gung-ho she need only look at the fate of her grandfather’s first cousin (not to mention his poor family) who copped it good and proper in the Russian Revolution. Meanwhile, minor misdemeanours like sharing the royal prerogative with married women (for clarity, this one refers to kings) could be dealt with by the government proposing early retirement, as was the case with the Queen’s uncle Edward VIII (pronounced Duke of Windsor, spit, spit).

However, there is one gaping hole in the consistency of the system. Since 1993, the Queen has paid income tax and capital gains tax. The Queen cannot be liable to  tax. Taxes are collected by Her Majesty’s (that’s her folks!) Revenue and Customs. And before some bright spark mentions (I really wish people WOULD add comments below) that, as sleight of hand, she pays the tax and takes it back in government funding – let’s get the record straight.

Kings and Queens used to be self-financing. For historic reasons – normally murder, rape and pillage – successive generations of the monarchy have succeeded in accumulating vast fortunes. By the time James II fled England in the Glorious Revolution, Parliament had had enough and his successors (the husband and wife team of William and Mary) were the first monarchs to have the Crown’s peacetime revenue fixed by Parliament with a sum to defray the costs of running the Royal Family and Civil Government (civil service, judges, ambassadors etc.) – the Civil List.

Since 1789 America has had 44 presidents and Britain 9 monarchs. The Watergate break-in occurring a few weeks before Edward VIII’s death, there has been 1 abdication apiece

When George III (the one that lost America) came to the throne in 1760 it was decided that he should surrender the income from the Crown Estate (with the exception of the Duchies of Lancaster, Cornwall and other bits and pieces) for the period of his reign in return for an updated Civil List that no longer included responsibility for civil government. And that has been  the situation ever since. (As an aside, it is interesting to note that in the 252 years since Georgy-Porgy bit the bullet,  3 monarchs have covered almost 75% (George, Victoria and Elizabeth) of the period.)

But to celebrate 250 years of the glorious Civil List system, the government announced its abolition in 2010. With effect from 2013, in place of the Civil List and specific grants for certain expenditures – there will be a new single Sovereign Support Grant. While this sounds like a welfare payment (“We will give this old age pensioner an extra  million quid for Christmas to cover her heating costs”),  it is indeed a radical new system in that it is based on a percentage – initially 15% – of the revenue from the Crown Estate. Anti-monarchists should note that if the Monarchy was abolished peacefully the Queen would presumably get all her income back from the Crown Estate. So, apart from the loss of  tourist revenue that would accompany a republic, the Treasury would be down just based  on the simple arithmetic.

So, why on earth is she paying taxes? In 1993, following a major fire at Windsor Castle for which the government had to foot the bill,  the Queen “announced” that she would voluntarily pay tax on her private income (not the Crown Estate that , going forward, is going to be taxed at an effective rate of 85% – high even by Francois Hollande standards). This was, effectively, to silence the mob – ie the British public who could not comprehend why they should pay for the repairs.

The best way to describe this policy is populist and potty. The Queen cannot pay taxes for one simple reason – because the Queen cannot pay taxes. If they want to tap her for a few bob why not just reduce her new Support Grant by a percentage of her private income (which just happened to be at the current personal tax rate)? That would be a legitimate sleight of hand and the sort of creative accounting some accountants used to like in the good old days  before Arthur Andersen got its comeuppance.

Sixty years of devoted service

This weekend marks the official celebration of the Queen’s Diamond Jubilee. As a constitutional monarch she reigns but does not rule. Perhaps one of her most  endearing qualities is that she does not exploit her privilege. Here is a true story never told in print before. Several years ago an old acquaintance, turning a London corner in his Jaguar, was inadvertently caught up in a Royal Cavalcade. Worse, he rear-ended the Queen’s car. Now, in every civilised country when you rear-end somebody it is your fault and, if it happens to be the Head of State you are probably going to wish you were not born. In the event, an aide got out of the Rolls, strolled over to the Jag, presented the driver with a card and told him to bring the bill for his repairs to the tradesmen’s entrance at Buckingham Palace where he would be (and was)  fully reimbursed. End of story. That is class. God save the Queen!

Should auld acquaintance be forgot?

Salmond likes to meet world leaders

Alex Salmond, the bank manager-faced First Minister of Scotland, has been making  headlines lately due to a referendum planned for 2014 to decide on Scottish independence. What a pity.

On a visit to Westminster Abbey a few years ago, I collared a verger and we went on a hunt for the grave of Andrew Bonar Law, the United Kingdom’s shortest serving prime minister of the twentieth century. The verger didn’t think it was there. I did.  After patiently weaving  around the columns of the Nave – where  Pippa Middleton would later catch the attention of the world –  I was proven right.

Worse than me? Impossible!

Bonar Law was the Canadian-born son of an Ulsterman and a Scot. He grew up in Scotland, considered himself a Scot and, when he became prime minister of the United Kingdom in 1922 he was the THIRD Scottish prime minister in just twenty years. And it didn’t stop there. Less than a year after his retirement No. 4 walked into No. 10; if Bonar Law had the sad distinction of being the shortest serving prime minister of the last century, James Ramsay MacDonald had the sadder distinction of being the worst. Not to labour a point, the tradition has carried on ever since (the last two prime ministers – Gordon Brown and Tony Blair – were born in Scotland).

So, if Scotland is so totally entwined in the tapestry of British life,  what is Alex “no you can’t have a mortgage, Mrs Finlay” Salmond piping on about?

The answer, of course, is pounds, shillings and pence, which is what bank manager-faced people understand – or think they do.

The Flying Scotsman (or should that be the Flying Salmond) appears to balance  his economic reasoning for independence on two planks: Scotland will get the revenue from North Sea oil and gas  that the Sassenachs south of the border are currently pocketing and Scotland will be able to lower its corporate tax rate to  the Irish rate of 12.5%.

 It looks like Salmond is fishing in the wrong sea.

North Sea  supplies are starting to flicker. Some of the wells have been totally depleted and other sources  are becoming harder to get at. According to some estimates, the net revenue from the North Sea  is likely to be similar to the current subsidies being paid from Westminster – and that will eventually disappear.

He can kiss good-bye to all that on a 12.5% tax rate

As regards clubbing the tax rate Robert the Bruce style –  as a full partner in a highly developed first world nation as opposed to a relatively poor island that had already been independent from Britain for 60 years, how do you convince your citizens to live with significantly lower social benefits ?  And if you think the Laffer Curve (which seeks the best rate of tax to maximise government revenue) is going to help – forget it – it looks like Britain’s corporate tax rate is on the right (that should be ‘left’) side of the optimum rate.

Leaving other considerations aside, the race to the bottom on tax rates presupposes that investors will choose you. The Irish ingeniously identified that they had something rare to offer the Americans – the ability to offshore their operations thereby pushing off draconian tax bills back home while dealing with a workforce of native English speakers. That is presumably Mr Salmond’s rationale for Scotland to join in the celebrations.

Not so fast.

You should see me with a microchip

The American authorities  are now busy looking for ways to repatriate foreign operations as well as profits to the United States. The Obama Administration has spoken clearly about this in the lead-up to this year’s election. Assuming that they can get their legislative system to work logically long enough to pass a law that does not look pieced together by a love-sick monkey – Ireland will be sunk. Is this the time for Scotland to be dipping its toe in the same water? Then, even if the American legislation is deadlocked,  there is the small question of language. Frankly, the Americans who are not only monolingual but also have difficulty with anything stronger than a Deep South accent will have no less hard a time understanding the Scots than the Poles (OK, before I get a rock through my window with “a Glasgow Kiss, especially for you” embossed on it , I would like to point out that my mother was  Scottish and, although her voice was silenced forever nearly half a century ago, a refined Lowlands accent still calms me like no other. BUT I AM NOT AN AMERICAN.) Then there is the  matter of negotiating Scotland’s entry to the EU – they hate the Irish tax rate already – it can be safely assumed that the Europeans will extract a guarantee from Scotland before offering membership.

But Scotland need not fret. Apart from tourism, it has something glorious to offer which is not particularly sensitive to tax rate and means they do not need to resort to Irish low ball tactics.

Taste great with a glass of cognac

Just as Germany has a reputation for high quality manufacturing which no amount of Japanese, Chinese, Burmese and Everythingese competition can seriously challenge, and just as Britain has a reputation for services (especially the financial variety) which – the way it looks – Niko Sarkozy is not going to be around to snarl – Scotland has a reputation  in one, very significant, field.  Thanks to its unique position in the Single Malt Whisky market, the word “Scotland” is synonymous with “Quality”. It needs to build on that in other luxury food areas – as long as they get it right the idle rich (and not so rich) around the world  will lap it up.

So, when the future is looking rosy, why go and mess it all up? What will independence give them other than the trials and tribulations of a small country unprotected from shocks by a bigger, more diversified, whole?

He has at least one thing in common with Churchill - his figure

The last time a Scottish ruler misbehaved Queen Elizabeth (the original as opposed to the current sequel) had her imprisoned and beheaded at Fotheringhay Castle. But thereby hangs a cautionary tale – just 16 years later Mary Queen of Scots’ son King James VI rode into London as King James I of England and Ireland thereby bringing the 3 kingdoms under a single – Scottish – crown. But then, the British do keep on electing Scottish (and Welsh) prime ministers. Let’s hope Salmond doesn’t manage to swim all the way to Downing Street – he looks far too wet for the English.

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