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Archive for the tag “International Tax”

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!’

 

Christmas Cheer

Charles-DickensThe spirit of Christmas Present materialized in the wake of the sensational success of  ‘A Christmas Carol’. Britain which, despite French whinging, was – in 1843 – the world’s superdooperpower, had been struggling with Christmas traditions and what-not for years. Dickens’s simple short story of a tyrannical, lonely employer mirrored against his put-upon employee (the latter having a loving, but tragic, family life) caught the nation’s mood. In a tale that, to borrow  from John Lennon, is more popular than the Nativity, the eponymous Scrooge eventually sees the light, and everyone – including the sick child that Dickens threw in for extra pathos – lives happily ever after. Amen.

The gifts didn't improve much over the years

The gifts didn’t improve much over the years

For me, a non-Christian, Christmas has long been defined by an event exactly 100 years ago today. The organized football match between the Allies and the Hun is probably apocryphal (nobody can agree on the score), but what is certain is that there was an informal truce on the Western Front for a number of hours on Christmas Day 1914. The Germans seem to have started it (as every good Englishman knows, they always start everything) by singing Stille Nacht (a passable translation of Silent Night). Before long, both sides were out of the trenches exchanging gifts of tobacco, black bread and buttons – and, just maybe, starting the Hundred Years War that has seen Jerry winning four World Cups to our one. (Fortunately, the World Wars went the other way.)

The truce over, the troops climbed back into their respective trenches and spent the next four years ensuring that at least 10 million of their number would never again sit around a Christmas tree exchanging gifts in the bosom of their families. Indeed, in December 1915, the order went out that any repeat of the events of a year earlier would result in a Court Martial and the Firing Squad, not necessarily in that order.

And THAT is Christmas. Once a year, mankind is enveloped in a vague haze that colours its eyesight and addles its brain. For a few short weeks, minds turn to gift-buying and peace and goodwill to all mankind. Come January 2nd, the miserable self-seeking world is back to normal  (from what I am told by Christian friends, it can start on Christmas afternoon when out-of-town guests – like three-day-old fish – start to stink). Someone who in mid- December would volunteer to save the world would, come  New Year, not give the drippings of his nose to a person dying of thirst.

Why do people insist on comparing me to these guys?

Why do people insist on comparing me to these guys?

This is the reason why, perhaps ironically, I believe in Taxation. While there are countless wonderful individuals and organizations out there who help the less fortunate, only the enlightened, collective self-interest of a people delegating the responsibility for its poor to its elected representatives, has the chance of ridding a country of the scourge of poverty. However enticing the Christmas message of peace and goodwill to all men sounds today (December 25th), Scrooge was right when he called it ‘Humbug!’

In any event, a heartfelt Merry Christmas to everyone celebrating today.

For Whom The Bell Tolls

Mr Turner wasn't always a Romantic

Mr Turner wasn’t always a Romantic

The scene – a church graveyard in Middle England. A respectable crowd, trussed-up in winter clothes, surrounds an open grave. As the coffin is lowered into the gaping hole, the priest declares: ‘The Mother of Parliaments gave, and the Mother of Parliaments hath taken away.’ A sharply dressed gentleman throws the first clod of earth onto the coffin-lid, almost obscuring the gold plaque: ‘Double Taxation Treaties 1872 – 2014. Taken In Their Prime. RIP’.

George, for that is the chief mourner’s name, turns towards the gate, followed by Dave, Nick and Ed. An intimidating, middle-aged woman tarries at the graveside, a sardonic smile engulfing her harsh face. ‘Margaret!’ calls Ed. ‘Move your arse. If we don’t hurry, the Tories will destroy the capitalist system before we  get the chance.’

Not fair. The lady is not gigantic

Not fair. The lady is not gigantic

Sounds gothic? Welcome to  Chancellor of the Exchequer George Osborne’s pre-election Autumn Statement (Budget Preview). After Labour MP Margaret Hodge successfully mauled executives of Starbucks, Google and Amazon back in 2012 over the immorality of shifting UK profits to low-tax jurisdictions, it was only a matter of time (election time, to be precise) before the Conservative Government sought to retake the moral high ground.

Many thought it enough that David Cameron had taken the lead in pushing the OECD BEPS initiative at the G8 Summit in Northern Ireland in 2013. Wrong. Last week his Finance Minister spewed out possibly the most radical piece of international taxation legislation since JFK nuked the world with the Controlled Foreign Corporation (CFC) on October 16, 1962 – the first day of the Cuban Missile Crisis (CMC).

google taxThe  Diverted Profits Tax – already affectionately  dubbed the Google Tax – will tax profits rightly belonging to the UK but currently denied it due to the inconvenient permanent establishment provisions of Britain’s double taxation treaties. It will also tax payments to low-tax jurisdictions unless there is a jolly good reason for them, irrespective of OECD transfer pricing provisions. In order to ignore the existence of a century-and-a-half’s worth of international agreements, the new tax is to be precisely that – a new tax, not a subdivision of the Corporation Tax. It will be levied at a higher (25%) rate and, Mr Osborne hopes, will be beyond the clutches of the EU, OECD and substantially every country participating in the United Nations General Assembly.

Happily, the legality of this aggressive move is to be examined by the Tory party’s nemesis – the European Commission. There are also strong arguments that the new tax does not succeed in side-stepping treaties, being ‘substantially similar’ to existing taxes.

What is hateful about the proposal – which has enormous support in the UK – is that it potentially undoes 140 years of international tax cooperation. Ironically, that cooperation was started by the British – the first ever double taxation treaty being concluded with the Swiss Canton of Vaud in 1872. Moreover, such international cooperation has never been more marked than in the last two years. The BEPS Action Plan, while unlikely to be implemented in all its detail, has, together with FATCA-inspired Automatic Exchange of Information, already started to shake-up the international scene in a big way.

Farage proves he can multi-task

Farage proves he can multi-task

So why has the British Government decided to risk bringing the whole international tax edifice crashing down, encouraging  other countries to retaliate with beggar-thy-neighbour treaty avoiding provisions? David Cameron has been a safe pair of hands as Prime Minister and is deserving of praise, but this latest gambit can only be explained in terms of cheap electioneering. It follows a developing trend that started with immigration bashing, and continued with threats to leave the EU. The paranoia of Britain’s ‘Knees up Mother Brown’, beer-swilling, fag-smoking UKIP party dodos has become contagious. Cameron did not see things done this way on the playing fields of Eton. The Prime Minister would do well to go back and read John Donne’s ‘No man is an island’.

Cry for Argentina

Tax Advisor's traditional battle dress

Tax Advisor’s traditional battle dress

Any professional Opinion Letter writer knows that the invention of the footnote was a godsend. Enabling the eternally cautious tax lawyer or accountant to throw caution to the wind in the main body of his document, the footnote can be stuffed with endless bits of what the paying client calls ‘fudge’ and the expert refers to as  ‘caveat’.

Hilaire Belloc, the writer of those early twentieth century ‘Cautionary Tales’, penned the most famous footnote in literature:

He had a lot of stocks and shares

And half a street in Buenos Aires*

*But this pronunciation varies

Some people call it Bu-enos Airés

Read today, it appears  ironically prescient that a Cautionary Tale resorted to Argentina as the seat of a person’s wealth. A hundred years ago, in 1914, Argentina was among the world’s 10 leading economies, a showcase of what South America could achieve. Today, in 2014, Argentina is a basket-case – a national cautionary tale, if ever there was one.

One of Argentina's more successful exports

One of Argentina’s more successful exports

After a hundred years of intermittent catastrophic military rule, as well as not much less catastrophic civilian administration, Argentina’s last century is best remembered for Evita!, The World Cup, and the Falklands Fiasco. Not much of a record. At times it has looked like it might disappear down the plughole of history.

Current Argentine President, Cristina Kirchner, is agonizingly playing out the last year of her disastrous administration. Inflation is thought to be running at over 40% (Government Statistics are known to be in the ‘damned lies’ category), the country defaulted (again) on its sovereign debt this summer, and the peso has been in free-fall. Meanwhile, the Vice President has been indicted on fraud and corruption charges, but – and why not, indeed? – hangs on to office.

What is interesting is that, despite all this nonsense, the Argentine Revenue Service is going strong and to hell with the economic consequences, as if it were 1914 all over again and Argentina were on the way to overtaking the US.

Among the less exciting developments, thanks to Exchange of Information with the French, the authorities have uncovered a thousand unreported foreign bank accounts. Although nobody is making the connection, it may be no coincidence that a number of HSBC employees have been arrested for allegedly enabling tax fraud. Tax Amnesties are now being offered to those who come out with their hands up, waving a cheque book.

At the same time, the Revenue Service has gone to town on Transfer Pricing. They have shot broadsides at such  companies as Procter & Gamble and GE. In the case of P&G they even suspended their operations for a while recently, which could not have been conducive to the sweaty population’s personal hygiene.

In taking on the multinationals, Argentina should remember that it takes two to tango

In taking on the multinationals, Argentina should remember that it takes two to tango

Of course, the Argentines have a history of picking their wars. They thought Mrs Thatcher wouldn’t hit back when they invaded the Falklands in 1982, but were comprehensively taken to the cleaners. It will be interesting to see how this widening conflict with multinationals pans out. I reckon it will all end in tears.

And meanwhile, the Vice President, facing fraud and corruption charges, carries on in office….

 

 

 

The Gentle Tax

Spot the player who had never heard of Germaine Greer

Spot the player who had never heard of Germaine Greer

There was a time when the mere mention of the name Germaine Greer – pioneering feminist author of ‘The Female Eunuch’ – made grown men (and only grown men) adopt the Direct-free-kick-defensive-wall position favoured by all modern footballers. I had no such reaction when, the other day, I turned on my car radio and was sucked into the middle of a BBC panel show in which she was participating. Greer has long been an occasional, articulate and humorous guest on  such programmes. A few years ago she even eulogized one of my all-time heroes, ‘I’m Sorry I Haven’t a Clue’ Chairman Humphrey ‘Humph’ Lyttleton, describing him as ‘salacious’. Salacious translates into Street English as ‘Dirty Old Man’- an adjective painstakingly earned by the deceased octogenarian, who was the master of double-entendre and, hence, an unlikely guru of the guru of feminists. But we all grow up eventually.

I can forgive Greer and her bra-burning cohorts just about everything, but I cannot accept the pathetically small-minded assault they made on the English language. I refer, of course, to the default pronoun. For  centuries the default pronoun has been ‘He/His” (A good  student always does his homework). Even if some crazies thought this was not appropriate, there was always ‘They/Their’ (A good student always does their homework) or ‘One/Ones’ (I cannot be bothered with an example). But no, Greer and Co were not satisfied with equality, they wanted liberation (or was it the other way round?)  So, ‘She/Hers’ started popping up. And nearly half a century after The Female Eunuch, it looks like the bloody thing is taking off. I recently stopped reading a new, much acclaimed, English Style book because my eyeballs started going in opposite directions around my head at the consistent use of ‘She’. And then, yesterday, my beloved Economist – supposedly slave to the bestselling Economist Style Book – succumbed.

Language undoubtedly evolves, but that evolution – especially in the case of the chaotic English language- should be natural and gradual. This She/He business is pure tampering.

Dressed like that, it is no wonder he got away with so much rhetoric in his inaugural address

Dressed like that, it is no wonder he got away with so much rhetoric in his inaugural address

An example of a material, but natural, change in the English language over the last few decades is the reduced use of rhetoric. Asked to reach for your favourite speech (‘your’ is yet another way of getting round the gender-bender issue), you will probably go for something out of 20th century history: Roosevelt’s ‘Nothing to fear but fear itself’; Churchill’s “We will fight them on the beaches’; Kennedy’s ‘Ask not what your country can do for you’. Chances are you will not come up with  George W Bush’s, ‘You teach a child to read , and he or her will be able to pass a literacy test’ (which is why he definitely should have stayed with the default pronoun),  or even Barack Obama’s…… well, let’s face it, he has simply never said anything worth remembering.

Rhetoric, once a staple of any English-speaking child’s education, has pretty much gone out of the window. People are nowadays as well-educated as those who lead and try to influence them, so rhetoric tends to sound naff. Nevertheless, as pointed out in an article last week in the New York Times by Mark Forsyth (who, even Ms Greer would allow me to refer to as ‘he’), rhetoric still has a central place on Madison Avenue.

I thought it would be fun to see what slogans a tax wonk could come up with based on rhetoric.

Boring

Boring

‘Intel Inside’ is an example of Alliteration, as is a method for stopping dogs fouling our footpaths: ‘Tax the Turds’ (with a background picture of a traffic warden handing out a ticket).

‘Bond, James Bond’, ‘Be all you can be’, and ‘Home, sweet home’ are diacopes, as is: ‘Tax, your tax’ (with a picture of a Victorian hospital corridor full of occupied beds).

An example of a chiasmus is ‘Mankind must put an end to war, or war will put an end to mankind’.  How about a Republican slogan: ‘America must lower taxes, or taxes will lower America’?

Enallage is a deliberate grammatical mistake for effect such as ‘We was robbed’. That could be a good line against a background of a picture of any Finance Minister at any time in history.

But the daddy (or, Ms Greer, should that be ‘mummy’?) of them all is the Tricolon:  ‘Friends, Romans, countrymen’; ‘Liberte, egalite, fraternite’; ….’Tax, fraud, prison’.

 

 

Hungary for knowledge

What you get when people have no knowledge.

What you get when people have no knowledge.

1984 (the 326 page book, rather than the 366 day year of the same name) describes how a totalitarian regime could keep a lid  on knowledge through a Ministry of Truth, Newspeak’s Doublethink, and the dreaded Thought Police. Democratically elected governments have, traditionally, had more trouble in keeping a handle, let alone a lid, on their populations’ perceived excesses.

Of course, even democratic societies were not always as liberal as they are today. As I have written previously, until the middle of the 19th century, tolerant Britain applied punitive stamp duty to newspapers. The aim was to prevent the rabble from being able to afford to read the subversive political pamphlets that proliferated over the combined Hanoverian  reign of the various Kings George.

With the two World Wide Wars receding into distant memory, and the World Wide Web taking off in the 1990s, even hitherto totalitarian regimes had to adjust their bugging policies. The idea that it was possible to control the flow of knowledge started to look passé.

Hungary also had the best football team in the world

Hungary also had the best football team in the world

And then there was Hungary. Hungary, the country that had courageously revolted against the Soviets in 1956. Hungary, the country that led the way out of the Warsaw Pact and, in the 1990s, was a trailblazer for the new Europe. Hungary, the established member of the European Union.

Under its right-wing leader since 2010, Viktor Orban, Hungary has been looking increasingly smelly. Last month, the Government announced a draft law that would impose on internet providers a 150 forint (60 cent) tax on each gigabyte of data.  Coming as it did around the anniversary of the 1956 revolution, the people got quite shirty. Realizing that their internet bill was going up, all hell broke loose, and the other day Mr Orban had to backtrack.

Of course, the whole thing was probably a lot more sinister than that. A democracy cannot tell people what to think but, like the governments of all those German Georges back in the old days,  access to information can be squeezed by price.

The world fought long and hard for its freedom throughout the 20th century, including ridding itself of the Austro-Hungarian Empire. Freedom of expression, and access to opinions so expressed, is a critical part of that achievement.

Boy George who will be King

Boy George who will be King

A prominent Rabbi once told me that, when his grandfather fled a Russian pogrom early in the last century, he determined to make a new life in America. Stopping off for a few days in England, he went to Hyde Park’s Speakers’ Corner on Sunday morning. Standing on a soap-box, one of the many speakers was insulting Britain’s indolent King (not called George, but his son, grandson, and great-great-great-great grandson were/are). He decided that any nation  that allowed its people to freely criticize its monarch must be a great country and cancelled his plans to continue to the New World. Good choice.

And now for something hardly different

Speaks for itself

Speaks for itself

The surviving members of the Monty Python team must be cock-a-hoop over the cover of the (just about) current issue of The Economist. Under the headline: ‘Europe’s Economy’, a parrot lies dead receiving an infusion, while Angela Merkel comments, ‘It’s only resting’. No further explanation required. Forty-five years on, the Parrot Sketch is part of the lingua franca.

The other instantly recognizable  Python sketch is ‘The Four Yorkshiremen”, in which a group of wealthy, aging northerners  each vie for the distinction of  most deprived childhood. In fact, that piece is almost a case of imitation being the sincerest form of flattery. It started life in the 1967 series “At Last The 1948 Show”, was adapted for the radio series, ‘I’m Sorry I ‘ll Read That Again’ in 1969, and only made it to Python in a live show in 1974.  ‘Almost’ imitation, because Cleese and Chapman were co-writers of 1948, together with Marty Feldman (the  most unlikely Jewish Yorkshireman ever) and Tim Brooke-Taylor (who did ISIRTA together with Cleese).

Tax authorities take this imitation business quite seriously, even if their material is far less original than Monty Python’s.

What's in a name?

What’s in a name?

Despite the hammering of Harmful Tax Practices, first more than a decade ago by the OECD and EU, and more recently by the OECD BEPS project and an extensive transfer pricing review, there has been an upsurge in the introduction of copy-thy-neighbour special IP regimes. To fool the enemy, they carry all sorts of different names and precise terms – Patent Box, Innovation Box, and – the latest Irish smokescreen –  Knowledge Development Box.

The ostensible justification for these schemes is the incentivization of R&D expenditure by offering reduced tax rates on associated revenue. But, with the exception of the UK innovation box, which was for self-defense, what countries are clearly doing is standing on street corners raising their skirts above their knees in an effort to attract new clients. Switzerland is proposing a scheme, as it preempts the forcible closure of its House of Ill Repute by undertaking a comprehensive tax reform. Ireland, meanwhile, no longer able to tempt Apple with its harmful double-Irish position, can at least claim not to be plagiarizing – it had the first scheme in the early seventies which it discontinued in 2010.

Innovation boxes are currently, effectively, under a three-pronged attack but are still spreading. There is Action 5 of BEPS dealing with Harmful Tax Competition – and what could be more harmful tax competition than this race to the bottom? Then there is Action 8 which deals directly with intangibles and the concept of value creation.  Finally, there is the long-running saga of OECD Working Party 6 on ‘The transfer pricing aspects of intangibles’. All these projects seek to prevent the maintenance of intangibles in ‘the second draw, third office along’.  Even if the whole caboodle gets caught up in bureaucracy and self-interest, and is not adopted internationally, something is bound to stick. And that something is likely to be the need for boots on the ground in any jurisdiction claiming the right to substantial returns due to intangibles ownership.

Where countries support large workforces of savvy individuals, the on-the-ground development  of intellectual property makes sense. But if all the country is offering is a crisp suit, a law office and a plaque, the whole thing could easily unravel.

Some called this British humour too

Some called this British humour too

A couple of years ago I made a one day trip to England to see Tim Brooke-Taylor and his colleagues doing a live recording of a long-running radio show – ‘I’m Sorry I Haven’t a Clue’. Over its forty-year run, shows have often ended with the announcement of late arrivals at some ball or other. Among the late arrivals at the Aggressive Tax Planning Ball might have been: ‘From the Republic of Ireland, Mr and Mrs O’Vation- Box and their son N. O’Vation-Box.’ You get the idea. It is called British humour. Patent Boxes and Innovation Boxes are full of it.

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