Reading about the road pricing petition filed on the Number 10 website, I wondered whether there would be any interesting petitions on tax. Surely there would be one demanding the prime minster abolished IHT?

Lo and behold, there was.

Click here for the Economics and Finance petitions.

Top of the list is a petition to abolish IHT, which has attracted almost 100,000 signatures, and calls IHT 'immoral' and a tax that penalises 'hard work and thrift'. What, even when estates which have been handed down from generation to generation. How much hard work goes into those?

More interestingly there is one about input tax and VAT, signed by 368 people, calling for HMRC to repay withheld input tax.

There is one calling for the government to scrap the non-domicile rules. 157 signatures so far, and still open.

There is a closed one about the Monaco millionaires. No government response yet, but it will be interesting to see what that is if and when it finally comes.

As yet, I can't find one on private equity and the tax breaks PE firms take advantage of. It can only be a matter of time...

February 26, 2007 | Permalink | Comments (0)

I find the Institute of Directors report into CGT and IHT curious.

The main question I have is not related to its conclusions, which are the usual menu of difficult to support conclusions about taxes that you expect. There isn't a great deal of evidence for what the body says, only clever ideas about how you could tweak this or tweak that.

We know that, you could say.

What surprises me is that the IoD is engaged in the exercise at all. What, after all, does IHT and CGT have to do with them?

This, remember, is a business lobby group. It acts in the interest of company directors and articulates their concerns. IHT and CGT are paid by individuals. This is personal, not corporate, tax.

It just so happens that a lot of company directors are wealthy and probably pay both taxes (though it's a moot point as to whether anyone pays IHT on their own estate - they'll be dead by then and probably won't care).

But that isn't a justification for the body to lobby against IHT and CGT. If rich people want to campaign against the taxes, they should do so in an honest and open way, in a body devoted to it.

'Rich people against tax' is not a great slogan of course.

Slipping these subversive views through a body that is supposed to be about something completely different strikes me as verging on the offensive.

February 22, 2007 | Permalink | Comments (0)

Much has been written about Sir Mike Rake's elevation to BT, and much will no doubt still be written.

I think some of it is a bit unfair.

Dennis Howlett asks on his blog why Sir Mike hasn't fallen on his sword over the US tax avoidance schemes.

I think there's a couple of reasons for that. He was involved in dealing with the US authorities over the eventual fine (when the row escalated) but certainly not with marketing or devising the tax schemes, nor I think with the initial responses to DoJ enquiries about them. Others may disagree, but the very fact of having been global chairman at the time does not mean in my opinion that he should have been the fall-guy.

Separately, there's a discussion on Richard Murphy's site as to why he has gone now. There seems to be some bemusement.

Well, he was senior partner in the UK, but stepped down last year. He stayed on as global chairman then because, as I understand it, there was noone at the time ready to take on the role. This was largely due to the early death of US boss Eugene O'Kelly in 2005 at the age of 53. The US was due to take on the role in the traditional alternation between the US firm and someone else from around the world, but there was noone with the requisite experience to take it up then.

He stayed on to oversee a difficult period in the firm's history, and is taking a pay cut to move to BT (he got £825,000 as KPMG International chairman, and will get £600,000 now).

He told us in March of last year that his ideal life after KPMG would be as follows: 'Family life might be one option. I would like to get some balance [back]. something with an international background would be interesting, not multiple different directorships.'

Working at BT with its global ambitions, for three days a week, seems to fit that bill.

As for his view on tax issues generally, for which he is getting a bit of stick in general KPMG terms, I wouldn't describe him as one of the most forward thinking people in the industry, certainly. In my dealings with him he tended to ascribe the current avoidance crackdown as just the flavour of the month, as something that related to a fiscal squeeze on the part of governments. I think that's a bit dismissive.

But at the same time, I think the Big Four have to be given a bit of credit for stepping back from the most aggressive forms of avoidance, as they have done over the last few years. That was in part motivated by the disclosure regime, but on things like charity tax schemes, they had a choice, and they chose not to indulge. Sir Mike gets some of that credit.

Critics of KPMG may well get their way in one respect over the job moves and their relation to tax schemes, however. The US might expect to get the global chairmanship role once Sir Mike steps down, but I have a sneaking feeling the reputational risks of the tax scheme saga may still work against them.

We report tomorrow that Rolf Nonnenmacher from the German firm is the major rival to current US chief exec Tim Flynn. Appointing Nonnenmacher would send out a positive message about the global integration path KPMG is taking.

Don't bet against it.

February 21, 2007 | Permalink | Comments (1)

The latest judgment from the Court of Appeal on Marks & Spencer is, I think, more significant than some are suggesting.

Jonathan Bridges of KPMG said it was 'good news but not huge news for M&S and other taxpayers,' but, though I can't claim the raft of qualifications he can, I think I disagree.

The case, you'll remember, is about losses incurred in EU subsidiaries which M&S, and other companies, want to set off against UK profits.

The nub of the current argument is a ruling by the ECJ that such losses could be offset where opportunities for relief in the other EU countries had been 'exhausted.' (or, in an alternative formulation, where there was 'no possibility' for the losses to be relieved).

That left the field wide open for the most extraordinary interpretations of 'exhausted'. Does that mean that if, in future years, you could use them, you would have to wait until those possibilities expired? Was it a theoretical or factual offset you were talking about (in that the opportunity could exist in tax law, but you might not have factual profits in the EU sub to offset against).

The government weighed in in the 2006 Budget with a further point; that you could only claim a loss that could be claimed in the UK under UK accounting and tax rules, and that at the same time, you could only claim an amount that you could have claimed elsewhere. The loss would have to be whichever was lower: the UK or foreign loss.

The Court of Appeal judgment seems refreshingly straightforward.

Paragraph 49 says that there must be 'no real possibility' of relieving the losses elsewhere, which, though sounding similar, takes a lot of the theoretical sting out of the original ECJ judgment. You don't have to think about parallel universes in which your company realises huge profits in ten years time that you didn't predict, and could have offset the losses against. You just have to think of a 'real possiblity' in the here and now.

The judgment goes on: 'a real possibility is one which cannot be dismissed as fanciful.'

I think this adds a lot of clarity (though advisers and inspectors will likely argue it further), and I think that that is signficant both because it helps to resolve this argument, and also because where EU tax arguments are concerned, clarity is such a rare commodity.

A judgment that is not only helpful to the taxpayer, but comprehensible to the taxpayer. A huge win.

February 21, 2007 | Permalink | Comments (0)

I interviewed Lloyds TSB group FD Helen Weir this week (sorry for the tardy link). She had some interesting comments to make about tax, especially with regard to HSBC's recent noises about moving out of the UK. Here's the relevant section;

HSBC’s finance issues have also been in the news recently, with a senior official at the bank suggesting it might move offshore due to the UK’s declining competitiveness on tax.

‘We are primarily UK-based. I am not sure where we would go to offshore,’ says Weir, implying that if Lloyds TSB were even thinking about similar moves, the plans are not exactly well advanced.

But she adds: ‘We are one of the largest UK taxpayers and operate within the rules set down by HM Revenue & Customs .We take our tax paying responsibility seriously, but are not in the game of disadvantaging shareholders by paying more tax than we are required to pay.’

An admirably robust point of view

February 8, 2007 | Permalink | Comments (0)