Tax Break

Who said tax is boring?

07 Nov 2015

Putting a Price on Morality

The only relationship between morality and tax?

The only relationship between morality and tax?

‘If you prick us, do we not bleed?’ Well, not if we are a company. This was the point on which I was reduced to a state of heckling at the Lisbon conference described in my previous post. A Breakout ‘Conversation’ – Breakout ‘Sessions’ are SO last decade –  on ‘Tax and Morality’ was irresistible. (Look, when you are choosing between ‘Documentation requirements under BEPS’ and ‘Tax and Morality’,  irresistible is a relative concept.)

That the first question was simply whether tax and morality went together like a horse and  carriage (not precisely those words, but definitely the idea) was unacceptable. Corporate Tax and Personal Tax, as conceded by the moderator in dealing with my outburst, needed to be treated separately, even if the ultimate conclusion might be ‘yes’. Companies are Children of a Lesser God (their shareholders), and it is nigh impossible to pin anything high and mighty on them.

To me, all this populist corporate morality  posturing over the last few years, embarrassingly sparked off by a British Parliamentary Committee chaired by the alleged beneficiary of a Liechtenstein trust, has been one long yawn of poppycock. The most convincing argument regarding Corporate Morality came from a British colleague and old friend, who managed to dredge up the Parliamentary Proceedings leading to the enactment of certain joint-stock companies in the 17th century, that included some kind of public purpose. (I have been unable to confirm this in independent research, but he is a good bloke, so he probably knows what he is talking about.)

On returning home, thanks to an obituary in The Economist, the issue of Morality and Personal Tax was placed into focus. Irwin Schiff, who died in a Federal Prison last month, was a self-styled libertarian who refused to pay Federal Tax in the United States and, often with time on his hands in various open facilities financed by the idiots who did pay their taxes, wrote several books on the subject.

What was remarkable, and so typical of the different approaches of Europeans and Americans to tax, was that his lifelong struggle had nothing whatsoever to do with morality. In America, to this very day, morality is to taxation what a bicycle is to a fish. You pay taxes because the law forces you to. If the law is an ass and doesn’t close a loophole that allows you not to pay tax, you are an ass if you pay. C’est tout.

The late (literally, and with his tax filings) Mr Schiff attacked the income tax on the basis of it being unconstitutional. Now, I admit to not understanding this (and, neither, it appears did various US judges over the years who sent him to cool off in correctional facilities). The income tax was never popular. It was instituted during the Civil War when, to get at citizens clearing off from the land of the free and the home of the brave, it wasn’t escaped by leaving the US – a price still being paid by US Citizens overseas , and currently copied only by that other regional superpower, Eritrea. It was removed in the 1870s and only made it big-time when Congress passed the 16th Amendment to the Constitution in 1913 (the wrangle in recent years over Obamacare revolved around whether the required federal payments by individuals fell within the Amendment).

I personally do believe (as discussed in a number of earlier posts) that there is a moral responsibility on individuals to pay personal tax. However, there is something simple and attractive about the American approach. We Europeans could not begin to understand Mr Schiff. He lived (when not incarcerated) in Nevada, who few would dub the moral capital of the world. He dressed like a second-hand car salesman and represented himself in court (presumably because no self-respecting lawyer thought he had a case – his arguments  drew heavily on ridiculous sophistry).

Promo or mugshot?

Promo or mugshot?

Schiff made a fortune with such Pythonesque titles as ‘The Biggest Con: How the Government is Fleecing You’ and ‘How Anyone Can Stop Paying Income Taxes’, but the bit I find hardest to comprehend could best be summed up in that wonderful exchange between the legendary Jack Benny and a thug: “Your money or your life?….Look bud, I said ‘Your money of your life’.” …”I’m thinking, I’m thinking!” Forget morality, it seems even freedom has a price in the land of the free.

 

 

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27 Oct 2015
2 Comments

Let slip the dogs of war

Even the Portuguese have a Triumphal Arch (what for, exactly?)

Even the Portuguese have a Triumphal Arch (what for, exactly?)

I have just emerged from a fascinating two-day conference in rain-soaked Lisbon. Despite the headline title, the real theme was inevitably the prospects for the Base Erosion and Profit Shifting project of the OECD, the rump of which is due to be approved by the G20 shortly.

The public proclamations on BEPS have displayed populist triumphalism while, in the course of the two days – to anybody who had any doubts before – it became clear that the actual prospects are far more modest.

Firstly, by not allowing the Americans to think this was an extension of their work on FATCA, the OECD didn’t manage to bring them to the party. The Americans never join anything anybody else comes up with first – take the Second World War, for example, where the fun only started after Pearl Harbor.

Secondly, by making the Digital Economy the flagship topic, even if the Yanks had been convinced it was all their idea, they were not going to Kamikaze pilot themselves into their own ship – all Digital Economy reforms are, by definition, anti-American.

Thirdly, as two former senior politicians, gentlemen who almost gave me back the naive faith in politicians of my youth, made blatantly clear – no nation, be it America or the other God-knows-how-many countries currently on Earth, was going to give up on any serious opportunity to tax.

Then there was Pascal Saint-Amans, the Frenchman behind the BEPS project, who  explained how he had charismatically convinced everybody to accept his proposals. It was a case of working towards ‘consensus’ rather than ‘unanimity’. And that says it all. Never trust a Frenchman with your wife or long English words. Consensus is a synonym for unanimity. He was trying his luck on us, a group of grey accountants, for whom words are things to be kept under the bed (where the Frenchman may also be hiding). Obfuscation (go on Pascal, look that up in your Collins English-French Dictionary) seems to have been the name of the game. Sell the OECD a pile of words and confuse everyone into thinking something is happening. People may think Saint Amans has worked miracles (if the Pope canonises him will he be Saint Saint-Amans?), but the real deliverable looks a lot more down to earth.

That is not to say that BEPS is a failure (you may be wondering, after all I said above, how I am going to climb out of that one). Transparency – Country-by-Country reporting, international exchange of rulings, examination of holding and conduit companies, and dispute resolution will all become reality, alongside the unrelated Automatic Exchange of Information.

But, sorry Pascal, you don’t get all the credit for that.

BEPS was trumpeted as the first major breakthrough in international taxation in a hundred years. In reality, there has been some breeching of the fortifications, but no breakthrough.  Thanks to populist ‘uprisings’ following the 2008 Financial Crisis, taxation has been under the spotlight. Transparency is the minimum required to appease the masses, and even that would probably  have fallen  apart had it not been for the American obsession with FATCA. Many mistake the noise made by the British and French legislatures over the lack of tax being paid by American multi-nationals as part of the equation. Wrong. These are unilateral acts by Governments looking after themselves – the diametric opposite of the BEPS philosophy.

The G20's greatest internationalist

The G20’s greatest internationalist

The end result looks remarkably like the Allied approach to the Second World War. Frenchman Pascal Saint-Amans, like General De Gaulle,  made a lot of noise, was overrun, but declared victory. The British plodded on alone trying to break the multi-national enemy. And then the Americans came in and did whatever they wanted. I am not sure where the Russians fit in – but let’s wait and see what surprises Putin has up his sleeve if he is invited to the G20 summit (which, otherwise, will not be the G20). Interesting tax times.

 

Posted in International Tax and tagged , , ,
11 Aug 2015

Send in the clowns

Traditional Silly Season Fare

Traditional Silly Season Fare

One of the highlights of my week is reading The Economist from cover to cover (normally starting with the Obituary at the wrong end). Several hours of sanity and good syntax. Come August and the Silly Season each year, I know I can take my foot off the pedal and glide through the depleted pages of archived material and non-news. Not this year. The world didn’t stop as Europeans headed for sand and sun. Ironically, though, the one country that was missing from last week’s edition – for the first time in living memory – was Greece, the silliest of European countries. This was clearly more an issue of fatigue, than not having anything to write about.

So, that leaves me to fill you in about the goings on in South East Europe’s favourite loony-bin.

As everybody knows, last month the Greek Parliamentary Circus approved an agreement reached by its leading clowns, headed by the comi-tragic Alexis Tsipras, to sell Greece out to the European Union, European Central Bank, IMF and Universe. Pivotal to the success of the agreement will be Greece’s ability to substantially increase tax revenue. Enhanced tax collection and enforcement in a country that sees no wrong in tax evasion is going to be a real trapeze act, but it was the VAT reforms that caught my eye.

The European Union does not have a unified VAT rate system – as long as a country’s standard rate is at least 15% and there are no more than two reduced rates of at least 5%, members can do what they like. Members other than Greece, that is. Already toting a standard rate of 23% with reduced rates of 13% and 6%, the Government had to find another 1% contribution to GDP from ‘the silent killer’. Taking the standard rate any higher would have been the equivalent of a collective downing of hemlock, so the solution was ‘found’ in scrapping the reduced rates on all sorts of things.

This would be far more palatable to the Greeks

This would be far more palatable to the Greeks

The 13% rate is now to apply only to basic food, energy, hotels and water (hotels were previously at 6.5%, so they don’t really count as a benefit). What is amusing is that a new super-low rate of 6% will apply to, wait for it, pharmaceuticals (logical), books (ugh?) and theatre (they’re having us on). As much as I love literature and the performing arts, they can hardly be classified as No. 1 in Maslow’s Hierarchy of Needs. In any event, Homer, Herodotus and Plato are all pretty much out of copyright,  so their works tend to be quite cheap anyway. And, as far as theatre is concerned, while it might be reasonable for the desperate Government to be praying for a Deus Ex Machina to get them out of this appalling Greek Tragedy, Sophocles is not going to do it for them this time.

I would actually expect the conniving Greeks to take a leaf out of the Spaniards’ book. When Spain was hit with the need for reform at an earlier stage of the Euro crisis, some Spanish theatre owners found a novel way to get around the increased VAT on tickets. They sold carrots (which due to their basic food status were taxed at the reduced rate) at inflated prices and added a theatre ticket free of charge.

Holidaymakers in Greece can no longer afford everything

Holidaymakers in Greece can no longer afford everything

The other great change in Greek VAT is that the Aegean Islands are to lose their reduced VAT rate status from October 1. The result will be that, whatever nudists save on their holiday clothes will now go on their hotels and food. Bare-faced cheek, if you ask me.

Have a wonderful summer.

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14 Jul 2015

Cogito ergo sum

Good old British liberal education

Good old British liberal education

Arguably, the greatest contribution to society of a liberal education is perspective. ‘Dah da dah da dah. DISCUSS’ was the way it went when I was at school, as opposed to the ‘A, B, C, D, E. Tick one’ of the modern era. Today, July 14, is only significant to the vast majority of the world’s population for being the day after July 13 and the day before July 15. In France, it is a national holiday. Back in 1989, the bicentenary of the storming of the Bastille, it was Oxford educated Margaret Thatcher who pointed out in an interview with Le Monde that: ‘ ”human rights did not start with the French Revolution,” a perspective the French were not prepared for.  Fortunately for the Iron Lady, she was guillotined by her own Government the following year, before the furious French could get their act together. Earlier today, the massively anticipated sequel to Harper Lee’s ‘To Kill a Mockingbird’ hit the bookstores. The fictional superhero of my youth ( along with Clark Kent and Bruce Wayne), Atticus Finch, now turns out – in his author’s eyes – to have been a bigot. We all missed that one.

So, with the gradual movement from education to knowledge cramming, it is perhaps no surprise that the entire tax world is out on a fanatically dogmatic witchhunt, not even stopping to breathe and get the whole thing in perspective. And it is embarrassing.

I refer, of course, to the twin tax bugbears of western society, BEPS and Automatic Exchange of Information. Europe (did somebody whisper OECD?) has decided that American (did someone say ‘foreign’)  companies pay scandalously and imorally little tax in their jurisdictions, and the world’s leading economies (did someone shout ‘the entire world’?) are singlemindedly trying to sort this out (with a constant look over their shoulders to check if the Americans are going to throw a wobbler and crush the whole thing). Meanwhile, thanks to the Americans (who feel that – far from taking too much tax away from the Europeans – their taxpayers are hiding their income there),  everybody is trying to make sure that their tax residents declare all their ill-gotten gains.

He tried to take shares in somebody else

He tried to take shares in somebody else

Dogma rules. If this can be sorted out, we are told, the world will be a fairer place. Perhaps. But there are two small issues here that should have been factored in. Firstly, it is by no means clear that companies should pay tax.  While Shylock could ask, ‘If you prick us, do we not bleed?’ joint-stock companies, like Pinocchio, do not have the same luxury. Companies are a legal fiction – the Walt Disney of the business world. As they do not have feelings (an accusation often aimed at me), they cannot suffer taxation. Taxation is paid by flesh and blood people – it is the customers who pay higher prices , the shareholders who make lower profits, and the employees who receive lower income. The company just sails on regardless – and, if it dies, does not even warrant a marked grave. There has always, therefore, been a strong movement to abolish company taxes in favour of taxes on individuals – income tax, withholding tax, value added tax. Company taxes, it is argued, distort economic performance.

Secondly, while the search for the hidden treasures abroad  of individuals is highly laudable,  white man speaks with forked tongue. The latest example of Orwellian Doublespeak is last week’s British budget where non-domicile status (institutionalized tax avoidance) was, with much fanfare, marginally tweaked. Rich foreigners will still be able to enjoy the English weather for substantial periods.

While BEPS and Automatic Exchange of Information are undoubtedly an improvement on the international tax scene that has been around until now, they are not a Utopian goal resulting from deep thought and discussion. They are  the result of an ‘I want’ philosophy of the electorates of the world’s leading nations. The elimination of company tax is controversial and may be totally impractical, but it, and other ideas including a simple move to regressive VAT as the main source of revenue, should have been part of  the debate that never came. Instead, the new world tax order – like so much else in the modern world – is being led by populism. And populism – thanks to a biased, disingenuous and largely ignorant press – is becoming increasingly dogmatic. Look what happened to the French in the 1790s.

 

 

 

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22 Jun 2015

Unfrozen Assets

Prime Real Estate

Prime Real Estate

I think the main reason I have been cautious and conservative all my life is a particular madness I observed in the 1970s as I was on the threshold of adulthood. There was a property boom in the UK and people were making a packet buying and selling anything with a front door. One fine day, a wealthy property dealer from our neighbourhood went spectacularly bust – at that time the biggest bankruptcy in UK history. In the months that followed, news surfaced of local rent collectors, shopkeepers and assorted minnows being declared insolvent for millions that they clearly had never possessed. It transpired that a combination of recommendations and guarantees by bigger players, together with banks thirsty to expand their balance sheets, meant that many idiots went from fashionably poor to unfashionably bankrupt without enjoying the fruits of their lack of labour for even a day.

Prime Real Estate

Prime Real Estate

When the Financial Crisis hit in 2008, it was deja vu. Here were Ireland and Spain going belly-up thanks to property speculation, while the Greeks didn’t even make the effort to invest in property – their country just produced bankruptcy out of thin air. But, it was Iceland that really caught my eye. Igloos not being subject to the same rules of property bubbles as other countries, and Iceland not having Greece’s ability to mug the EU, they had to think of something else. And for a country that had little to offer in the form of blood, toil, tears and sweat – what better luftgesheft than Finance? When everybody was doing it, who would notice little Iceland? When Iceland unsurprisingly slipped under the ice, the whole world looked aghast at how it managed to get there in the first place.

Well, it appears Iceland is finally coming in from the cold. Earlier this month the Government announced that it is relaxing the capital controls its predecessor was forced to impose during the 2008 meltdown, meaning that investors with money tied up in frozen Icelandic assets will be able to pull it home, while Icelanders will be allowed to buy forex. The rub is that any foreigner owed money by the country’s bankrupt banks will either need to agree to a substantial haircut or pay a 39% tax.

Now, when you see an offer like that you start to understand why the Icelandic economy crashed. I was, in fact, already at the end of the next sentence of the article I was reading when my eyes did one of those  typewriter carriage returns, boomeranging back across the page for a second-take. What difference can it make to a foreign investor whether the bit of his money  lopped off by the Icelandic Government is a haircut or a tax? The only thing I could think of is that a haircut will invite a capital loss at home which the disappointed investor might be able to use against other foreign capital gains, while a 39% tax on a capital asset is meaningless tosh.

This nation of fishermen, fresh from fooling the world that they were bankers, seem to think they can do it again – you can fool some of the people all of the time. Now that the chips are down once more, investors should smell something fishy and freeze them out.

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11 Jun 2015

Virgin Alpine

He was surprised to discover which nunnery she belonged to.

He was surprised to discover which nunnery she belonged to.

Hamlet’s outburst at Ophelia to ‘get thee to a nunnery’ was intentionally ambiguous. In Elizabethan times a nunnery was either a convent or a brothel. Were the Danish Prince alive today, he could merrily get away with the same line aimed at Switzerland. What happened to the once VIP Escort Agency that, on its way to legitimacy, managed to skip the world’s standard hypocrisy, and within six years achieved a pose of pious humbug. ‘I knew the bride before she was a virgin’ could have been written across the Welcome Hall at Geneva Airport.

There is no need to relate the bawdy history of this mountainous paradise – it will suffice to mention the last century’s safe-haven for the loot of Nazi war criminals, and the recently exposed shenanigans of FIFA, football’s world governing body based in Switzerland (and led by a Swiss citizen – one of the most reviled people in the world not serving time for pedophilia or war crimes).

After telling the US back in 2009 that it would not allow UBS to release records of undeclared bank accounts, now, with all the zeal of the convert,  it is publishing lists of individuals subject to requests for information from other governments.

Switzerland has also joined the OECD’s global transparency initiative, according to which there will be automatic exchange of information without the need for a request from another country. And as for  that bust last month of seven FIFA officials in a Zurich hotel…..

Gentle persuasion

Gentle persuasion

Viewing all this from the comfort and security of my own lily-white country, Switzerland is less the zealous convert, and more the faceless (do you know the name of the Head of State?), small-time con who, when put under the swinging lamp, squeals loud and clear.

I wouldn’t trust Switzerland any further than the next US investigation. A leopard doesn’t change its spots – or at least not so fast. Switzerland is to be avoided, nay evaded, by individuals until such time as it settles down to some form of hypocritical normality like the rest of the world. In the field of corporate tax, on the other hand, where international populism has forced Switzerland into change,  the hypocrisy in offering new incentives to replace the old disgraced ones is Switzerland at its cheekiest best (or worst). Nothing to worry about there (other than the possibility that the rest of the world will get wise to them).

Hero with admirer

Hero with admirer

In the meantime, Switzerland will be feeling just a little more self-righteous – and deserving of the centuries-old honour of providing the Pope’s Swiss Guard.

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09 May 2015

The Party’s Over?

Exhibit A

Exhibit A

The most poignant scene in the aftermath of the British General Election was defeated Labour leader Ed Milliband’s ‘victory’ speech at the declaration for his  Doncaster constituency. True to custom, he used the opportunity to recognize the enormity of Labour’s defeat, and effectively conceded the election. But it was not the words of this left-wing, intellectual misfit’s eulogy that got me; it was the fact that behind him stood fellow candidate Nick the Flying Brick of the Official Monster Raving Loony Party. As Milliband all but resigned the leadership of his party, it was as if fate had decreed that Labour supporters look carefully into the eyes of the nutter at his rear, ready to step up to the plate and probably give the Labour party as much chance of election in 2020 as Red Ed had now. Although the Party Manifesto was centre-left, just about everybody –  the ‘somebody-help-me’ areas of the North and  their brother inner-cities that returned Labour MPs, and everywhere else that did not – seemed to believe that Milliband’s gang would not manage to keep their high-taxing, statist paws behind their backs.

It was King Solomon in Ecclesiastes, later echoed by The Byrds, who told us that there is a time for everything. Well, there was a time for statism. Had I been voting 100 years ago, I may well have voted for the Labour Party. The Liberal Government of the time  had been the most radical government in history, bulldozing reforms for the benefit of the wider  population in the pre-war years. But, by the time the Great War  was over, its coalition with the Conservatives had (you’ve heard this one before) guaranteed its obliteration. The  Labour Party was still embryonic immediately after the First World War, but it came fully into its own after the Second. When I did vote 30 years ago, I chose Social Democrat (ie Liberal Democrat in today’s sad terms). It was time for a change in the mix of the mixed economy,  gradually working away from the statism of the post-war years. Had I been able to vote in the  election this week, I would have voted Conservative. The country has changed beyond recognition.

It is more understandable with the Greeks

It is more understandable with the Greeks

The challenge of the 21st century is not the exploitation of labour by the owners of capital; it is the fast-approaching lack of need of labour by the owners of capital. The world needs new solutions to old and new problems  (including the perennial wealth gap), all within the concept of a global economy. The tired old mantras cannot and, indeed, should not be allowed to persist. If anyone doubts this, they need only look at the Official Monster Raving Loony Syriza Government in Greece – a Greek Tragedy waiting to happen.

When the Greatest Generation came back from the Second World War, there was an urgent need for mass employment and the rebuilding of the country. The British Electorate, unswervingly grateful to Churchill for leading the nation to victory, brilliantly recognized the dichotomy between War and Peace, and promptly charged Clement Attlee’s Labour Party with the task. When, a generation later, Margaret Thatcher set about the necessary task of dismantling Attlee’s enterprise (albeit, IMHO, too fast), she was still able to refer to him admiringly as ‘all substance, and no show’.

Labour has elected much worse

Labour has elected much worse

Well, there were 13 years of Labour Social Democratic government under Blair and Brown. The election of Ed Milliband to lead the party in 2010 looked at the time to sane observers, not as an exorcising of the progress made in the previous two decades, but  as the swan song of the, yet unburied, left on its way to a waiting grave.  It almost guaranteed a decade-long Tory stewardship. I, for one, never feared that the British electorate would be stupid enough to send Milliband to Downing Street. It wasn’t. The leadership election in the coming months will probably decide whether it is only a decade. Let’s just hope that in 2020, the leader of Her Majesty’s Loyal Opposition is not an Official Monster Raving Loony Party doppelgänger.

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28 Apr 2015
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Who said tax is boring?

Still at it

Still at it

I was at dinner with friends late last year when one of the female guests announced that her husband was taking her skiing ‘for her special birthday’. My in-built accountant’s abacus went into immediate action calculating the lady’s possible age. This took into account the ages of her children, her looks, and the milestones of her life, as shared with anyone who had been willing to listen between the chopped liver and the soup. In a state of complete disbelief, I disingenuously told her how wonderful she looked for 50. ‘No, I am 55 actually,’ she replied, to my absolute lack of surprise. ‘What the hell is special about 55?’ I thought too loudly. ‘Aren’t you planning on making it to 60?’

I mention this incident because, for some months, I have been debating how to celebrate this, my 150th post. If truth be told, 150 is not a landmark – the Americans hardly bothered with the anniversary of the end of the Civil War and Lincoln’s assassination, earlier this month. But, at the rate I am writing these days, number 200 is looking dangerously  post-mortem.

I figured it was about time I revisited the tab which has  been up there at the top of the page from the start: ‘What is this blog?’ The first paragraph bemoaned my marginalization at social gatherings – anyone and everyone running a mile when they heard I was a tax geek.

Well, 150 – I hope vaguely entertaining – posts later, I found myself late the other night sitting around a friend’s kitchen counter with a senior tax official (with whom I have been on excellent terms for years), and a tax lawyer whose name I, mercifully, still do not know. The tax official (a woman) and I were sharing reminiscences of some of the quirks of the tax authority in our early days twenty years back. Among the memories, there was the period when, if the head of the main tax office – later Tax Commissioner – saw me in the corridor, he would stroke my arm and say soothing things to me because he had evidently been convinced by his deputy that I was a potential mass murderer (I had my own doubts about the deputy).

Some time into our conversation, the nice tax lawyer gentleman whose name I still don’t know decided to get in on the act. He asked us about our experience with tax levies on the employers of Sub-Saharan refugees. When we both said that we had no experience, he launched into a 40 minute monologue on the subject, pausing occasionally to ask our views, just to make sure we hadn’t dropped off. In fact, I don’t know if it was only 40 excrutiating minutes because, at 12.45am, my wife thankfully came over to whisk me home. He was still going strong, apparently oblivious as to whether he had an audience or not.

So, I can state categorically that there is nothing more boring than listening to someone talking tax. If you see me walking into a room, you will be perfectly within your emotional rights to look the other way. ‘Who said tax is boring? It was me, actually.’ Nothing has changed.

Posted in Musings and tagged , ,
22 Apr 2015

Spaghetti Westerners

He has been there before

He has been there before

The word around the Roman Forum is that Italy is on the verge of a Renaissance. After three years of recession, modest growth is expected this year.

Regular readers may recall Giovanni and Guiseppe, two Italian plumbers who tried their luck in England about three years back. Thanks to improved employment prospects, they have returned to their beloved homeland and have found work in the movie industry. Their photogenic faces not quite photogenic enough for the cameras, they have had to settle for being responsible for the fitting and maintenance of the portable toilets on the set of ‘Spectre’, the new James Bond movie. They handle their S-bends every bit as well as any stunt driver on the open road, while their high-speed drill leaves occupants shaken, not stirred.

Fellini's original Paparazzo in La Dolce Vita (lousy taste in whisky)

Fellini’s original Paparazzo in La Dolce Vita (lousy taste in whisky)

Strolling in the evenings  down the Corso Vittorio Emmanuele II, Giovanni and Guiseppe notice that the potholes have been filled so that Daniel Craig doesn’t hit his bonce speeding his Aston Martin (sadly, not the original) along its length. They have to wait for a seat at a restaurant next to the Ponte Sisto, while revellers gabble to each other in accentless English about their day on the film-set. As they take their seats, there is sudden confusion as a gaggle of long-forgotten paparazzi appear in the entrance, furiously snapping the gorgeous Monica Belucci – Bond’s latest Girl – as she glides to her table. The pick-up in the international film industry has had a knock-on effect across the economy.

Why this revival of Hollywood on the Tiber? Answer: Incentives. Now, incentives are an international tax purist’s nemesis. They distort the allocation and location of labour and capital, and – if they could be brought to life – should be shot. Just occasionally though, they are justified. The incentives given by the Italian Government to Film Production in 2009 and grudgingly renewed in 2013, are a good example. Italy is a natural location for location filming – it possesses exquisite beauty and preserved history.

The 1950s and 60s were Italy’s heyday as a Hollywood host while nurturing the amazing homegrown output of the likes of Fellini. By the 1990s, Bulgaria, Romania and the Czech Republic had gracelessly stolen Italy’s thunder through cheap alternatives. Italy’s legislation – providing tax credits to locally registered production companies that could be used against, in addition to corporate tax, deductions against wages – has not created a distortion; it has relieved one. And the world of cinema is a better place for it. Watch out for the remake of Ben Hur.

If you cannot imagine Churchill in a swimsuit...

If you cannot imagine Churchill in a swimsuit…

Orson Welles was at the Hotel Excelsior in Venice some time after World War II trying to convince a White Russian to finance his next movie (I believe it was the Italian produced ‘Black Magic’). As he walked into the dining room with his prey, he spotted Winston Churchill – whom he had met briefly during the war and who had attended a performance of Othello – at a corner table. Noticing Welles, Churchill gave a polite nod of recognition. This sent the White Russian crazy – and he proceeded to offer Welles everything he wanted. The next day Welles spied Churchill paddling in the hotel pool. Wading over to the Greatest Englishman, he told him what had happened and thanked him profusely. That evening, when Welles and the Russian entered the dining room, Churchill stood up and bowed low. Britain’s past and future prime minister was clearly an international  patron of the arts – and a decent comic actor, to boot. More’s the pity he had to play opposite Hitler and Mussolini, rather than Marlene Dietrich and Sophia Loren.

 

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07 Apr 2015

Brazil gone nuts

Getting through the in-tray

Getting through the in-tray

The Circumlocution Office in ‘Little Dorrit’, where everything became bogged down in bureaucracy,  represented Dickens’s visceral satire on Government. A century and a half later, it might be time for novelist José Sarney to pick up, in his own country Brazil, where Dickens left off.

Brazil is a bureaucratic blast, nowhere more so than in the field of taxation. Over thirty types of taxes mean that 2,600 man-hours are wasted on compliance each year by an average medium-sized company, as opposed to 334 in Mexico, another country in the Lost Continent south of the Rio Grande.

Sarney is particularly qualified to write the book as his 9 to 5 job used to be President of Brazil. The Foreword might be penned by one of his successors, Fernando Henrique Cardoso, who was responsible for the plethora of taxes but, in a lecture I attended in Sao Paolo some years ago, made clear that he thought it was time for almost all of them to go.

When all else fails - its time to Carnival!

When all else fails – its time to Carnival!

Meanwhile, it was announced last week, that successive governments had been cheated of around $2 billion in tax revenue over the last decade. And, thereby, hangs a cautionary tale.

The Finance Ministry has a department that hears appeals by taxpayers who feel they have been given a rum deal by the tax authorities. As a tax advisor, this sounds to me like good bureaucracy. The problem is we are talking Brazil.

It turned out that half the  ‘arbitrators’ were drawn from government and half from industry. In many instances, by paying between 1% and 10% of the foregone revenue to a non-tax-specialist law firm for ‘consultancy’ services, it is alleged the disputed amounts were miraculously decided in favour of the taxpayers. Somewhere in the labyrinth of  Brazilian law, that is probably called ‘bribery’; ‘corruption’ and ‘fraud’ also come to mind.

Brazil 2014

Brazil 2014

So, another bunch of suspects gets lined up alongside those already facing prosecution in the State-run Petrobras Oil scandal. It would be nice to say that, at least, the fifth largest country in the world could be proud of its football – what with a record five World Cups to its name. But, after their drubbing by Germany last year, they have grown remarkably quiet on that front.

Time for a President Pelé?

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