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Archive for the tag “International Tax”

Yes, Minister

yes_minister (1)

Keep it simple…

Looking confused next to the overhead locker of my assigned Business Class seat on a British Airways flight from Heathrow to New York last year, I was approached by a helpful flight attendant (if that is what stewardesses are called these days) who offered assistance. Pointing to the little picture indicating which mini-compartment was 12A, and which 12B, I told her I was unfortunately pictorially dyslexic. She looked momentarily sympathetic before bursting out laughing: ‘What do you mean, pictorially dyslexic? There is no such thing!’

For all I know, she was right.

The fact is that our brains have become so used to hard-edged information being pureed into easily digestible mush, that many of us find it hard coping with anything more taxing than a Facebook intelligence test. (I was recently informed I had an IQ of over 160 because I knew a photograph was of Adolf Hitler, rather than the other choices of Donald Trump and Michael Bloomberg. Surely everyone knows that neither Trump nor Bloomberg has a  moustache.)

If you think I am being unfair, take literature. In this day and age, if you want to be published, you have to keep sentences short, and multiple adjectives locked up. So, you would think that chucking the following paragraph – which doubles up as a sentence – at the reader on the first page of a 500 page novel might have condemned the author to obscurity:

‘In consideration of the day and hour of my birth, it was declared by the nurse, and by some sage women in the neighbourhood who had taken a lively interest in me several months before there was any possibility of our becoming personally acquainted, first, that I was destined to be unlucky in life; and secondly, that I was privileged to see ghosts and spirits; both these gifts inevitably attaching, as they believed, to all unlucky infants of either gender, born towards the small hours on a Friday night.’

Thankfully, the book saw the light of day  in 1850, not 2017, and  David Copperfield became one of Charles Dickens’s most-loved novels.

Until fairly recently, I believed that one area of intellectual pursuit that had escaped the brain surgeon’s knife was taxation. Taxation is complicated, and advisors have kept it complicated. How often have we watched with satisfaction as our clients’ eyes have glazed over, knowing at the end of a tortuous meeting that they will just tell us ‘to deal with it’?

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…or not.

 

Then – Shock! Horror! – in 2010 the British Treasury came up with the Office of Tax Simplification. 450 recommendations later – including such game changers as simplification of the corporation tax computation and out-of-date procedures still requiring paper confirmation for stamp duty transactions (themselves an anachronism) – the OTS published its first annual report. Apart from a ‘first annual report’ issued seven years after inception being a leading candidate for the accolade ‘the triumph of hope over experience’, the wording itself left hope for tax professionals:

‘The OTS is in a unique position to highlight issues, stimulate debate and act as a catalyst for positive change, being strongly connected within government, having exceptionally wide access to a range of deep expertise from outside government and speaking with an independent voice.’

Charles Dickens couldn’t have written a better paragraph (doubling up as a sentence) himself. In fact, it almost looks like the Office of Tax Simplification could come to rival Little Dorrit’s Circumlocution Office.

The spirit of Bleak House’s Jarndyce and Jarndyce lives on. Mercifully.

 

Some like it hot

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Will this save the planet…?

Political fossil Al Gore’s sequel to his Oscar winning environmental documentary ‘An Inconvenient Truth’ – ‘An Inconvenient Sequel’ – may have underwhelmed at the box office this month, but it provided a timely counterweight to President Donald Trump’s announcement some weeks earlier that the United States was pulling out of the Paris Agreement. Despite the protestations to the contrary of substantially every-government-that-is-not-America’s (as well as several of the States that enable the United States to be called the United States), without Federal US involvement all bets for preventing environmental Armageddon appear to be off.

Until recently, the Tax World’s contribution to the fight against this threat to our future generations had taken the form of airing the concepts of ‘Cap and Trade’ and ‘Carbon Taxes’ – the former involving the auction and trade of emission permits that seek to limit total pollution from certain gases, the latter a hit or miss, essentially regressive, tax on fossil fuels and suchlike.

Then, last month, things hotted up.

In his State of the Nation address, President Rodrigo Duterte of the Philippines told mining companies that ‘he would tax them to death’ if they did not clean up their act. Coming from anyone else, the statement might have been filed alongside Benjamin Franklin’s ‘nothing can be said to be certain, except death and taxes’, but Duterte has, for some time now, been proudly having drug pushers and other undesirables knocked off wholesale in extra-judicial killings. The message is clear – the president clearly reckons himself the biggest threat since Mohammed Ali throttled Joe Frazier in the Thrilla in Manila.

Indeed, Duterte also announced that, you-couldn’t-make-up-its-name, ‘Mighty Corp’ has agreed to pay the government a cool half a billion dollars to settle the mining giant’s alleged catalogue of criminal tax evasion offences. Simple when you have the method sussed.

And, to cap it all, any additional tax take from the mining sector is to be earmarked for local communities damaged by the mines, while processing of mineral resources is ‘requested’ to be performed in the Philippines before export, thus adding to employment.  Interesting, if worrying.

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…or will this?

With all due respect to Mr Gore’s valiant efforts, if the environment is to get back on track, the mob that elected Trump doesn’t need a staid documentary – it needs exciting Alternative  Facts. So, perhaps the real existential question now is whether there is enough material for Quentin Tarantino to make a movie about taxing environmental terrorists. The climactic scene: an Internal Revenue Service agent, in sleek black suit and Ray-Ban shades, standing with his foot pressuring the windpipe of a prostrate business executive, two revolvers cocked and pointed at the entrepreneur’s trembling head, spits, ‘You’re going to clean up the river in this goddamn town, or we’re going to tax you to goddamn death’.

All’s fair in love and war. And, if Mr Tarantino is looking for a working title, how about: ‘Kill Fake Bills’?

Was the Battle of Europe lost on the playing fields of Eton?

holy-grail-knight

What was that about Freedom of Movement in the EU?

‘History doesn’t repeat itself, but it often rhymes.’ That aphorism, attributed to Mark Twain, has been much on my mind  lately.

Anybody wanting to get inside the minds of the wrong-headed majority that tragically voted the UK out of the EU (and probably lit a fuse to both those abbreviations) could do worse than read one of Dickens’s less known novels, ‘Barnaby Rudge’, about the Gordon riots against Catholic legislation.

Although the situation in 1780 became violent while last week’s referendum ensured peaceful mob rule,  the cynical manipulation and ignorance that led to the riots should have been a cautionary tale taught to every schoolboy and schoolgirl  in the last century and a half.

In the weeks, months and years ahead experts will assess the carnage to be irrevocably wrought on the UK and Europe, .

From a tax viewpoint, the immediate damage would appear to be to the UK Holding Company regime, as well as Finance Companies and IP ownership. This arises from the future removal of the parent/subsidiary directive, and interest and royalties directive. These two directives guarantee exemption from dividend withholding tax and withholding tax on interest and royalties, respectively,  when paid by the other 27 EU countries to the UK. Following the UK’s withdrawal from the EU, withholding tax will be applied according to treaty. This will mean that Holding Companies, exempt from tax on their dividends, and Finance Companies and Patent Box companies paying low tax, will be at a disadvantage compared with EU jurisdictions. As the UK does not withhold tax on dividends according to domestic law, the UK is currently very popular as a holding jurisdiction – a popularity that is likely to disappear very quickly (like, tomorrow morning).

Thanks to the OECD’s BEPS project, most other disadvantages of the Brexit will already have been swept up in wider international agreements, while there may be some small advantage in not being penalized by the EU for offering State Aid to companies.

It is well known that Boris Johnson and David Cameron studied at the same elite school. While the Duke of Wellington may have declared that the Battle of Waterloo was won on the playing fields of Eton, it would appear that  the Peace of Europe may have been lost on that same dot of England’s green and pleasant land.

It’s simply not cricket.

Pupils huddle during the Eton Wall Game at Eton college in Eton, near London

Meeting of a future Tory Cabinet

 

 

 

 

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.

 

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.

 

 

 

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.

His Kingdom For A Hearse

With England burying one of its monarchs today, 530 years late, I thought it appropriate to re-post this item from March 25,  2012.

Greatest Britain

What makes Britain great? There is, of course, no single answer (and the French would suggest there is no question), but the nation that gave the world its principal parliamentary system, its principal international language and (sorry, Yanks) its principal sport must have something in its national DNA that sets it apart from all the rest.

It seems to me that a major factor is Britain’s innate conservatism as described and promoted by the 18th century philosopher and politician, Edmund Burke. British society doesn’t change – it evolves. And evolution produces strength, step-by-step. There have, of course, been potholes in the road over the years – most notably the Civil War and Protectorate of Oliver Cromwell in the 17th century – but, let’s face it, after a few years of that miserable puritan they brought back Charles II whose head had fortunately not been cut off along with his father’s. When things went haywire again a quarter of a century later, the King (the last James we are likely to see) was booted across the water and none other than John Locke, the very man who challenged the divine right of kings in his “Two Treatises of Government”, was charged with schlepping the new king and queen from Holland.

There was a marvelous example of British evolution a few months back that, typically, went almost unnoticed. One Friday morning an announcement was made in Perth (the Aussie one) – which is just about as far as you can get from Buckingham Palace without jumping on a spaceship – that henceforth the first born of the monarch (etc) will be the heir to the throne irrespective of gender. In a stroke, countless centuries of common law and statute were set aside and Britain and its Commonwealth moved on (I am aware that political correctness dictates that I should be talking about the United Kingdom – but, frankly, I am a bit ambivalent towards Northern Ireland). And what about Decimalization 40 years ago? After watching sterling evolve over centuries into the quaint system of pounds, shillings (20 in a pound) and pence (12 pence in a shilling) – instead of changing the currency they just dropped the shillings and recast the pence. To maintain an element of originality in the change, instead of using a normal date (like January 1 used for introduction of the Euro) they went for the totally obscure February 15 1971 – which could, at least, have been identified as the middle of the month – in any month other than February.

Which brings me to the central point. I have a hunch (but not an ounce of evidence) that we may be heading for another of those evolutionary changes in the next few years.

Last week, in the month of March as from time immemorial, Chancellor of the Exchequer George Osborne presented the Government’s budget for the coming fiscal year. The Government’s fiscal year starts April 1 but, for the purpose of income tax the year starts on April 6. Why April 6? The story is simply wonderful.

New Years Day used to be recognised in Britain as March 25. That date represents Lady Day when, according to Christian tradition, the Archangel Gabriel informed the Virgin Mary she was going to conceive (count nine months and you get to Christmas Day). The Treasury understandably collected its taxes based on the year commencing March 25. When, in 1582, Pope Gregory XIII instituted his calendar replacing the old Julian version European countries gradually adopted it. The Protestant English, however, gave him the two finger salute and hung on until 1752 when, in addition to adopting the Gregorian calendar New Year’s Day was moved to January 1. The tax year was left untouched but for one small point. Adoption of the Gregorian calendar required an eleven day leap forward in the date (there were riots reported at the time of people claiming they had been robbed of part of their lives). Not prepared to give up on tax revenue, the Treasury moved the collection period forward by the said eleven days – meaning that the new tax year would start on April 5. As part of the calendar change leap years are generally skipped at the turn of the century – in 1800 another day was added bringing the start to April 6; in 1900, the Treasury was magnanimous and left the date alone; 2000 was a leap year, so we will never know what Gordon Brown might have done.

It is hard to see how this system can go on forever. I recently had to do some foreign tax credit calculations for a client invested in real estate in the UK – I felt like getting out an abacus (and hitting someone over the head with it). I would assume that one of these years when the economy is doing well and a government is in the middle of its term there will be a quiet announcement from somewhere like the Isle of Skye (if it is still part of Britain) that the next tax year will start on April 1 – but then everyone will probably assume it’s an April Fools joke. Happy New Year.

Greecing the wrong palms

'This is what you get for telling teacher'

‘This is what you get for telling teacher’

Sneak, snitch, grass – those one syllable words do not convey an aura of approval. In school, where we imbibe the morality that plagues us for the rest of our lives, a telltale can expect a bigger punishment than the class-mate he is squealing on. The sheer number of synonyms (I have just used five) shows how frowned-upon the practice is.

Governments – rarely the symbols of propriety we would like them to be – have a long history of encouraging informants. I have always been haunted by W. F. Yeames’s portrait of a boy being questioned as to the whereabouts of his father during the English Civil War. And then there were all those ‘Wanted $$$$$$’ posters plastered across the Wild West, not to mention the bank whistle-blower payouts over the last few years.

But the Greeks (who else?) have now raised the rat stakes a notch. Desperate to placate the Troika (now for some reason referred to – in deference to the Greeks – as the ‘European Commission,  ECB and  IMF’), the new Government has proposed employing tourists as tax spies.

The Greek Government does not seem to have thought through where tourists will hide the surveillance equipment

The Greek Government does not seem to have thought through where tourists will hide the surveillance equipment

The idea is that tourists will be asked, in return for  an hourly fee, to be wired up to audio or video equipment that will provide evidence of cash transactions between themselves and their Greek hosts.

I am afraid that I cannot get my head around this particular kind of international espionage.  I am a fan of spy novels – I have read almost the entire product of John Le Carre’s fecund imagination – but there is an underlying assumption that a spook is: (a) operating for his own government against a foreign government (a patriot); or (b) for a foreign government against his own government (a traitor); or (c) for his own government against a foreign government while making the foreign government think he is working for them against his own government –  and vice versa (double agent); or (d) for his own government against his own government (a shtinker). The CIA/MI6 exams do not have an ‘(e) none-of-the-above’ option, even when allowing for the widest possible definition of the word ‘government’ – but that is precisely what the lunatic Greeks are proposing.

The idea is both obscene (that word has plenty of life beyond porn) and insane. Greece has long passed into the realm of obscenity, but insanity should still worry them. Do they not realise that, by recruiting tourists who are coming to Greece for a good time, they risk destroying the whole underbelly of the Greek tourist industry – its goodwill? What is more, visitors from countries where the National Tax Authority is a feared institution, similar to a man-eating shark, are not likely to want to play with the Greek version, even if continues to prove it has no teeth.

Harry, watch where you take that photograph

Harry, watch where you take that photograph

Sorry, Mr Alexis Tsipras, you are going to have to do better than that if you don’t want the Troika to tread hard on your oxygen tube. This is one potential tourist who will now definitely not being coming to Athens this year. I think I will go to Russia instead – at least there they do things the right way round,  and will probably be spying on me.

A drop of golden sun

 

Punching above his weight

Punching above his weight

From Wolfgang Amadeus Mozart to Adolf Hitler to Conchita Wurst, little Austria has always punched above its weight. It is ironic that the country that gave the world half its great classical music and, so far, all its World Wars, should be almost exclusively associated today with one kitch movie.Fifty years ago this week, a British actress appeared over a grassy horizon and, after the umpteenth  take, belted out ‘The Sound of Music’. And the rest, as they say, is (highly distorted) history.

Well, all the fuss over the Von Trapps this month – including the excellent  impersonation of Ms Andrews at the Oscars by Lady Gaga (an aspiring novice nun if ever there was one)  – brought back nostalgic memories of Austria and tax planning.

Austria’s tax system is quite a boring one – as one might expect. An off-the-peg 25% corporate tax rate and 50% individual top rate send the tax consultant skipping on through the alphabet for greener pastures.

Nevertheless, Austria does have one point of interest that, amid the ennui, deserves not to be ignored.

Boring Austria

Boring Austria

Like most tax-enlightened countries these days (ie those not called the United States of America), Austria operates a Participation Exemption regime. For the uninitiated, that means that most dividends from affiliated companies and capital gains on their sale are not liable to corporation tax in the hands of the Austrian holding company. When an exemption to tax from profits from foreign branches is added, the overall result is that Austria taxes the profits of a corporate group on a territorial basis.

The jewel in the Habsburg crown however is that, whereas most countries with territorial corporate tax reporting insure themselves with Controlled Foreign Corporation legislation (CFC), Austria has a very watered down alternative. CFC rules in their various forms, first introduced to the world by John F Kennedy on the first day of the Cuban Missile Crisis, are designed to ensure that companies do not resort to chutzpa in their foreign operations. Although also applied to worldwide tax systems, they are of particular importance to territorial based systems where there is an enhanced  temptation to drive income offshore to low tax jurisdictions, thus depriving the home country Treasury of its life-blood for ever and ever. CFC permits the immediate taxation of certain foreign profits.

Austria is one of the few countries that does not have a CFC regime,  encouraging night-trips from nearby Transylvania by tax vampires (aka Advisors) to drink its life-blood.  To stem the flow, the Austrians have replaced the exemption on dividends with a credit system for foreign income that was clearly diverted for tax purposes. The big difference with CFC, however, is that the tax is not payable until the income is remitted. Depending on the rules in the ultimate jurisdiction of a corporate group, this can facilitate indefinite tax deferral – which, in these BEPS-induced, substantially-reduced times for tax gurus, is a very big deal.

Little Austria has a generous child  benefit scheme

Little Austria has a generous child benefit scheme

Having seen the Sound of Music when it first hit the screens in 1965, I have been an unashamed fan ever since. Back in 1995, on a trip to England, I dragged my then 9 year-old son to a 30th anniversary showing in the West End. Any illusions I had of passing on my enthusiasm to the next generation were shattered when, similar to a Rocky Horror Show Redux, the freak audience jokingly recited all the lines along with the cast. Well, to celebrate fifty years, I have decided to have a second go, this time with HIS children. It will be a Home Viewing, and all parents and uncles will be commanded to shut their trapps. Where is the Captain when we need him?

Celebrity Squares

1101500102_400Adolf Hitler is, for me, ancient history, while Churchill is almost pinchable. Why the distinction regarding two implacable foes, the height of whose infamy and fame coincided exactly? It is simply because, by the time I was born, Hitler had been dead for over a decade, while I remember Churchill’s funeral,  50 years ago next week, vividly. Hitler was in black-and-white. Churchill was in colour.

We tend to think back on our childhood as steady-state. I was 10 years old when Colour TV came to Britain and  have always thought of it as a major revolution in British life. In fact, although the BBC had started broadcasting in 1936, few homes had TVs until around 15 years before Colour hit the living room. The story of the last hundred and fifty years has been one of continuous change.

Change has been as true of Celebrity as of any other field. Although the early twentieth century brought images of mute silver-screen stars to the world’s movie theatres, it was Charles Lindbergh who, thanks to his groundbreaking transatlantic flight in 1927, was the first true international celebrity. World leaders were not seriously heard until the 1930s, so that, when the British people had the lion’s heart in the dark days of 1940, Churchill’s roar was quite a novelty. It wasn’t surprising that the Old Man was crowned Time Magazine’s Man of the Half-Century in 1950 (he was beaten for the full century by Einstein), or that he was later voted, almost by acclamation, as the Greatest Englishman, whatever that may mean.

High Flyer

High Flyer

Through the second half of the twentieth  century, celebrity had two significant branches – entertainment and glitzy wealth on the one hand, and politics on the other. If you were not an embarrassing extrovert or a politician, you could expect to live your life in blissful anonymity. Then came the Information Revolution. Everybody was out there with the potential to reach the world – even if the world wasn’t really that interested in being reached by most of them. But who cared? It was cheap and worth a go.

Which brings me to my point. I am a tax advisor. I am, despite what it says in the sub-headline to this blog, boring. Tax advice is something to be practiced behind closed doors by consenting adults. Should I ever become a celebrity, it will not (or at least, should not) be because I dispense advice about the laws and practices of taxation.

But, it appears, the times they are a’changing. After the OECD Centre for Tax Policy and Administration aired its maiden internet TV broadcast last year, its head – the drop-dead gorgeous Pascal Saint-Amans – has now been declared Person of the Year by none other than Tax Notes International (which you will be forgiven for never having heard of). In a wide-ranging interview on the progress of the world-famous BEPS project, he declares that he is ‘the luckiest person in the tax world’. Now, go steady there, Pascal. A tax attorney who pocketed a $10 million success fee might argue that you are in second place. We know you are an important bloke, and you and your team have to philosophise a lot about the future of taxation, but – as I have written in the past – philosophy is to international taxation what a bicycle is to a fish. You, and the world-famous Tax Notes International, may think that the BEPS project is up there with the Theory of Relativity and World War II, but frankly it isn’t.

Dazzling

Dazzling

When tax bureaucrats become celebrities – and I stress that I am sure Mr Saint-Amans is amazingly good at whatever he does from 9 to 5 – it is time to think about hanging up ones Oxford Shoes.  A good tax advisor is someone who has a broad view of the business and political environment around him. There is plenty more to read about than irrelevant bla-bla regarding  tax people similar to himself.

So I say to the editors and my fellow readers of Tax Notes International: ‘Get a life!’

 

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