Death and taxes

Before we begin the post proper, I should warn you that the author is feeling rather pleased with himself (verging on smug) and, even more worryingly, seems to be referring to himself in the third person.  The reason for the former will become clear in due course, the reasons for the latter you will have to decide for yourself.

As the title suggests, today’s post will tackle universal themes in an attempt to broaden the appeal of GofaDM.  Working backwards (through the title), in the UK, as the beginning of April looms, we are told that “tax doesn’t have to be taxing” – most recently, so far as I know, by Moira Stuart (unless someone else has captured this highly desirable gig).  For rather more than a decade, the splendid folk of the Royal Bank of Scotland’s Personal Tax Service have managed my interactions with HMRC – helping to avoid unwanted interactions with HMP and fines, despite my occasionally erratic approach to the process.  However, for reasons unknown, the RBS have decided to abandon this nice, safe business – perhaps to spend more time on its core business of irresponsible gambling?  Anyway, this leaves me to worry about the future earnings of the lovely people who have been looking after me over the years and to find a new accountant to take over the keeping of me on the straight-and-narrow tax-wise.

I have decided to go local with my new accountants, so rather than a remote presence by phone or mail, I can be a real physical nuisance invading their lives.  Their offices are a mere 5 minutes stroll from my urban garret – so it will be all too easy to drop-in unannounced (though obviously, in an ideal world, I’d prefer to place my card on a silver tray and then be formally announced by a suitably-attired butler).  Anyway, in the sunshine of yesterday afternoon I wandered up the road to drop off the paper formalising our new relationship – thus saving the cost of a stamp and any post-related delays.  As I was already halfway to the Common, I continued on my way for a stroll through managed countryside and to check on the progress of Spring.  The season was making satisfactory progress and so I rewarded myself with an ice-cream cornet for my fiscal prudence and supervisory acumen.  I have decided that in future all tax-related correspondence will be carried by hand (either left or right) on a sunny day, so that the messenger can enjoy a walk and an ice cream – which brings a whole new meaning to having plain-vanilla tax affairs.

To maximise the chance of the availability of sunny days, it seemed wise not to leave preparing the data for my tax return until the last minute (and winter).  So, given the rather wet and windy weather today in Southampton I have spent the morning compiling all the information needed for my tax return.  This represents a personal best for me, time-wise – hence, a portion of my smugness.  Well, almost all my tax affairs are in order: “the man” has yet to render unto Caeser (or even me) his P11D – and apparently may not do so until the second half of July (I guess these things can’t – or won’t – be hurried).  Still, when it does finally come I shall be ready and, on the first ice-cream friendly day thereafter (though readers should bear in mind I did have an ice-cream on the seafront at Bexhill on Boxing Day), I shall deliver my tax documents to my accountants.

However, that isn’t all.  Oh no!  Not only did I sort out my tax this morning but, for the first time in my life, I took a proper grip on the disposition of my pension.  I rather feared I was over-invested in the UK – and found these fears were extremely well grounded (even more so than expected).  So, time for a little geographical diversification of my risk.  Luckily (though this is no coincidence), I have prepared the groundwork for this using the advice from another bright chap with time on his hands (OK , a bright chap with …) and the excellent advice of John Kay.  Mr Kay’s advice came in his book The Long and Short of It (subtitled “finance and investment for normally intelligent people who are not in the industry”) which despite the subtitle I found very informative (and amusing): it is also, by some distance, the pinkest think I own.

All of this sudden lurching towards financial responsibility was complete by half-past one – and that included time to make and eat my lunch – which explains my cat-like self-satisfaction (however, I did shower in the traditional manner, rather than licking myself clean).  At this rate, I may even be able to pass for an adult by the time I draw my pension – assuming I make it that far (the date does seem to have been receding faster than I’m approaching it of late).

What about death, you may ask?  Well, as part of my pre-cornet stroll around the Common, I took a small diversion and had a stroll around Southampton Old Cemetery.  I have to say that it provides all you could want in a graveyard by daylight (it is positively archetypal), and can only hope that at dusk a mysterious mist (and nothing else) rises from the ground.  A salutary reminder, perhaps, of where all this financial responsibility will lead and a useful counterbalance to my current elevated levels of smug.  But, more importantly, it provided a second unavoidable element of life with which to grace the title.

Free Oor Wullie?

When I was in Edinburgh, today’s referendum was definitely a popular topic of conversation and angst – then again, I was staying in quite a political household.  Upon my return to the deep South, you would barely have known anything was happening – or you wouldn’t until just over a week ago when it suddenly started to saturate the media (in a manner normally only possible if it involves Nigel Farage).

That’s the amazing power of one poll result.  As always, last week’s More or Less was fascinating, showing just how worried the pollsters were about the accuracy of their numbers.  They are not hoping for either YES or NO, but just that they won’t look too stupid when the results are announced.  Nevertheless, this one – decidedly uncertain – number was enough to move markets and PMQ.

As a neutral – or if not an actual neutral, then at least one of the un-consulted (a group which seems to include Scots living abroad, so Mr Connery will not be able to vote Yesh), there has been much else of interest in this whole process.

For a start, the degree of public engagement in the democratic process has been extraordinary – well, on the basis of registrations at least, the actual turnout still lies in the future.  It would seem that the public can be interested in something other than a mediocre singer with a mildly tragic past: who’d have guessed?  I suppose that unlike the vast majority of opportunities to exercise our franchise, the result is not a foregone conclusion and your vote might actually make a difference (a situation normally reserved for a lucky – or unlucky – few who happen to live in the right marginal constituency and which focus groups suggest could be swayed with the application of appropriate spin).  Could there be lessons for the future here?

It is also interesting that, at best, a tiny proportion of the electorate can possibly understand the implications of their vote.  I have tried to an extent (as you will see below) but would have no rational basis on which to decide, so I am in many ways grateful for my disenfranchisement.  Would I go with my deep-seated risk aversion or be tempted by devilment and the desire to see if something new and better could come?  So, I assume most voters are making a largely emotional (or party political) choice.

It has been fascinating to see how bad at politics all the main political parties are.  The SNP seems to rely on a combination of nationalism, the idea that change is good and we should ditch the Westminster elite (who are certainly well worth ditching, but do seem awfully similar to their brethren at Holyrood) and vague promises about the future being better (but also the same) backed up by some dodgy numbers.  The combined might of the remaining political elite seems to have worked on the basis that “we can change” whilst strongly demonstrating that we haven’t (and probably won’t) and attempting to terrify the Scots with the prospect of life without us, backed up by some dodgy numbers.  The UK does seem to have chosen to act as though they were the abusive spouse in a violent relationship (which I’m not convinced we are) – perhaps, Jerry Springer should have chaired the televised debates?

More recently, the Yes campaign has moved up a gear – with senior politicos molesting the Scots in the flesh, presumably to leave the bitter taste of the Westminster elite fresh in their mouths as they go to the polls today.  They have even tried to tempt the Scots to stay by offering Holyrood increased tax raising powers!  Now, I’m no political strategist – but promising the potential for higher taxes for all doesn’t strike me as an obvious vote winner.

One of the main bones of contention had been the admin that will have to take place as you turn one country, with one set of institutions et al, into two.  Mr Salmond would have us believe this will be a cinch, whilst his opponents suggest it will be virtually impossible and Scotland will be left as a smoking wasteland if you so much as try.  I’ve tried to think of any recent example of countries decomposing voluntarily, and the only one which came to mind was Czechoslovakia – however, in this case both sides voted to leave.  I don’t recall any major issues in this case, but then again it is hard to remember the last time the Czech Republic (let alone Slovakia) had any coverage at all in the main UK media – so it may have been a mess for years for all I know.  Czechoslovakia had also only been a country for a rather shorter period of time – only since 1945, rather than 1707  – and was probably only part way through moving from Communism to Democracy, so the process may have been a little easier.

My best guess is that there will be an awful lot of admin to do if we bifurcate, and bureaucrats and politicians will be very busy and lawyers will be buying third or fourth homes in the sun.  There will also be an extended period of uncertainty while all this back-room work goes on.  This is supposed to be complete by 2016, but re-organising the UK electricity market has already taken rather more than two years – and that is only one element of the work needed to set up a new, independent state (as but one example, it is not just relations with the UK that will need redefining, but those with the rest of the world which currently arise by dint of being a part of the UK) – so I suspect the timetable is a tad optimistic.  While the admin is underway, there will be a fair bit of uncertainty in the air – with people unsure just what the new Scottish State will be like – and this is likely to put the brakes on investment. Investors are strange folk, willing to gamble huge sums in some areas as we’ve all seen, but oddly shy of a little uncertainty in others.  So my best guess is that a newly independent Scotland will have a few tricky years to endure before the sunlit uplands of independence yield their potential benefits.

This brings me on to another pet theory of mine.  I suspect that independence (if achieved) will do for the SNP what being part of the coalition has done for the Liberals – basically finish them politically.  First they will have the difficult “admin years” as I am calling them, followed by full responsibility for everything that happens thereafter – but with no-one else to share the blame – and with even less control over monetary policy (if they keep the pound).  In particular, they will be responsible for raising taxes for Scotland, rather than just spending those raised by the perfidious English.  As a result, the SNP’s support for independence does seem oddly selfless – if they win, they just become another centre-left party in the new State, but one without its USP.  I also wonder if independence will create a larger space for a centre-right party north of the border?

So, I must admit a part of me does hope for a YES vote – largely to see what happens and whether I’m right about the future (forecasting is, after all, my day job).  However, any Scots reading this in time to have an impact, please don’t feel any obligation to vote just to provide me with interest and/or amusement in the years ahead: I do have Netflix and access to cinemas, theatres and bookshops so I’ll probably be alright even without your (indirect) support.

CP Snow violation

The chemist and novelist C P (later Lord) Snow is nowadays mostly known for his lecture entitled “Two Cultures” – highlighting the breakdown of communication between the sciences and the humanities.  I am nominally a scientist – though as a lapsed mathematician, also view myself as a bit of an artist – but I do try and bridge the gap.  As but a single illustration, my recent trip to Edinburgh was divided between the science festival on the one hand and JS Bach and some art galleries on the other.

However, it is to another division between two cultures that I shall address myself today – that rather artificial and fluid border between high and low culture.  Some posts on GofaDM (including the last one) might give the impression that I am some refined, high-minded aesthete – aloof from the low culture enjoyed by the unwashed masses.  This impression might be reinforced were I to reveal that over the long weekend I have been to three plays and two chamber music concerts.  Some might imagine I do this to impress (though I’m not sure who) or to climb a little further up the social ladder (unlikely given my fear of social heights) – but in fact I do it for fun (which would amaze or horrify the youth I once was – though not as much as my current, uncoerced consumption of vegetables).  I suppose I may be trying to impress myself: if so, it really isn’t working – I still think I’m an idiot.  Anyway, to redress the balance, it’s time to admit to an entirely different, recent cultural pleasure about which I feel no guilt whatsoever.

I have recently replaced Lovefilm (or Amazon Instant as they seem to have renamed it) with Netflix – always good to keep tax-dodging US corporations on their toes.  Talking of which, I could try and determine how much tax such companies (who have no obvious tax-paying competitors) should pay and then give that amount of money to an appropriate charity to try and redress the cosmic balance.  This change of service gives me access to a slightly different set of films and television shows I can watch – and cuts out the mail altogether.  As a new Netflix subscriber from the middle-classes, I should have been bingeing on the critically-acclaimed Breaking Bad – but that is all a bit obvious and, I fear, not a bundle of laughs and so I have gone in a very different direction. A long time ago, for reasons long since forgotten, I added a TV series called White Collar to the list of desired future rentals Lovefilm insisted I keep well-stocked (Netflix seems less demanding, so far).  They were never able to supply this, but before I departed I made a note of my undelivered list and checked which (if any) were available from Netflix.  And, so my addiction began…

The basic premise of the show is fairly simple: con-man and master criminal (Neal) escapes from jail and is soon re-captured by the FBI agent (Peter) who put him there.  He (mostly) avoids going back to jail by using his knowledge and skills to help Peter (and by extension the Feds) solve crimes.  Given that the crimes are white-collar in nature, there are very few corpses for a detective show and not much violence – Neal does get punched from time-to-time, but frankly he usually had it coming.  Like the Doctor, Neal dislikes using guns and prefers to rely on his wits to get himself out of trouble (and often into it first).  There is a strong buddy element, complicated by some trust issues, and a lot of laughs and wise-cracks.  It has just enough story arc to keep you interested, but not too much to get in the way of the fun.  Neal is unfeasibly pretty, though unusually this is actually important to the plot, but despite this is rarely seen even party undressed: indeed, he is usually seen in a tie and an expensive suit – and often a hat.  There is a vague hint of Lovejoy about the series, albeit in a much slicker, better dressed New York form.

So, why have I become so fond of this show – so much so that I have managed to watch 18 episodes in only 10 days?  I think a lot can be explained by the fact that it is just so much fun – and as a result, like so much of the culture I consume, it helps to keep afloat the rather unseaworthy hulk that is my sanity.  There is something about Neal’s expressions of innocence, mock or outraged, that crack me up every time.  He also spends a significant amount of time researching stuff in actual books – not something you see very often on the television which presumably fears the competition.  I fear that I also secretly want to be Neal (and always have), despite my almost total lack of aptitude for such a role in the real world.  There is something about the life of the gentleman, master-criminal that has always appealed – living the high life, trading quips and living off one’s wits has always been an aspiration.  Sadly, despite the huge range of course offered by today’s universities and the alleged keenness of the government to encourage the entrepreneur, there really is nowhere to train for such a career.  This unfulfilled want may explain my tendency to intellectual dilettante-ism and, indeed, my poorly sublimated need to show off.  I also like to imagine that my current gymnastic training could help with the need to make a hurried escape if things gang aglay (to paraphrase Mr Burns) – I’m just worried that my hereditary clumsiness will be a major issue if I do make a career switch.  Still there are five series of White Collar to enjoy – though only three are currently available in the UK – so there is an opportunity to obtain some training via that route.  I can also take up drawing which could act as a useful precursor to my new vocation – and could well be fun in its own right.  I suppose I could also source a cool hat and a decent suit (something rather too good for my current life of indentured servitude to the “man”) – that way I might look the part, even if I remain somewhat deficient in the area of actual performance.  I’m fairly sure there is a saying that one should dress for the job you want, rather than the one you have – though I suspect there may be more to a successful career shift.

Still, while I remain in training I shall continue to enjoy culture both high and low – caring not a jot for who is impressed (or horrified) by my choices.  It’s my fun and it doesn’t seem to be obviously harming others – well unless you count the readers of this blog, and they really only have themselves to blame!

Gideon’s bible

This week has seen the return of that annual ritual, the Budget.  I find the budget rather uninteresting, but also deeply annoying.  It strikes me that if something needs adjusting in the economy it should be done, and if it doesn’t then it shouldn’t – but instead we seem to save up a whole series of unrelated tweaks and announce them all in one go once a year.

The Budget ends up being a strange admixture of changes driven by tradition and ideology.  So, it seems to be vitally important to fiddle with excise duties on an annual basis – and also usually a good plan to move tax thresholds and interfere with pensions.  Each Budget also offers an important opportunity for chancellors to make the tax system even more complicated – just in case there was a risk that someone actually understood it.

The Budget is also the chance to announce changes to income tax – usually to either raise or lower the rate for the very rich.  Lowering taxes for the very rich is unlikely to attract many votes (the über-rich are not terribly numerous, though very influential) so I assume is driven by ideology or with an eye to future party funding.  Raising taxes on the rich may be more of a vote winner, but perhaps is less conducive to future party funding (or lucrative consulting jobs for ministers when the political gravy train hits the buffers).  In either case, changes need a strong dose of ideology as no-one knows what tax rate would maximise tax revenues from the seriously rich – I believe there is some certainty (maybe a sigma or two) that the value lies between 30% and 75%, but nothing better than that.

The other platform provided by the Budget is to announce a combination of increased spending and/or cuts – though usually these have already been announced and are nowhere near as new as the Chancellor would have us believe.  I have a rather serious problem with announcements of either type, as they all seem to suffer from a common failure of understanding.  Chancellors of all political stripes seem to believe any problem can be solved either by throwing more money at it, or throwing less money at it.

If you throw more money at a problem, the money will certainly be used but usually with minimal impact on desired outcomes.  There is a form of financial Parkinson’s Law in action whereby costs expand to consume the money available.  The most powerful segments of any organisations being funded will take the lion’s share of the money and grow bigger and more powerful.  Sadly, power rarely lies where you want the money to be spent.

If you throw less money at a problem, despite what many think, organisations do not tackle waste and become more efficient.  Instead, the most powerful segments of the funded body will devote all their energies to protecting themselves and their empires and will instead ditch activities they consider to be peripheral.  Sadly, these peripheral activities are probably the very ones for which the bodies exist and which represent their most important outcomes for UK plc.

These last two paragraphs are true for organisations whether funded by public or private means – though, on the plus side, privately funded organisations may eventually go bust (unless prevented from doing so by the State, yes I am talking about the Banks).  I always feel that when my employers start eliminating biscuits from meetings (a meaningless cost-saving activity) it is time to seek employment elsewhere – and I assume that other savvy employees think similarly.  Cost cutting is, thus, an excellent way to weed-out the competent, go-getting portion of your employee-base while retaining the dead-weight.  I do wonder if something similar applies to nation states – and austerity is an excellent way to “fix” net migration by selectively disposing of the more economically-valuable portion of your economy whilst simultaneously encouraging the more sensible potential immigrant to seek another destination.  Are we deliberately turning the UK into the B Arc of Golgafrincham?  Well, we do seem to be turning into a service economy – though my phone does remain staunchly unsanitary.

Anyway, time to turn from Budgets in general to the most recent offering.  This is dear old George (née Gideon) Osborne’s fifth attempt at a budget, and despite all the evidence he does continue to believe that he has the common touch and knows what matters to we members of the lumpen proletariat.  After singeing his fingers with the pasty tax and static caravans, he has now turned his attention to beer and bingo.

As a sometime beer drinker, I did wonder what his headline measure would mean for me.  As a man, I am given a suggested weekly allowance of 28 units of alcohol – and if I choose to take all of this in the form of beer at a relatively modest 3 units per pint, I would find myself £4.85 richer every year.  I’m afraid, were I a woman, this boost would be a mere £3.64 and given my modest drinking habits (and foolish consumption of wine and spirits) I will be luck to clear an extra 50p.  Not quite the giveaway the newspaper headlines (both good and bad) suggested.

I must admit I have no interest in Bingo – I think that I blame it (quite incorrectly) for the destruction of so many cinemas (well, it tended to use old cinema buildings in my formative years, creating the unfortunate association).  I must admit I wasn’t even aware there was a bingo tax – but I suspect reducing it is not going to have a large financial effect on very many people.

Nevertheless, some in Mr Osborne’s own party seemed to think these two changes were the most important things to be announced in the budget.  Sadly, their crowing about this seems to have back-fired rather spectacularly.  I had always assumed that such measures were designed to provide a fig-leaf of good news behind which to hide the entire forest of bad news contained in the rest of the Budget.  If this was the good news, which seems to have gone down like a lead balloon, how bad must the rest of the Budget been?  I have seen some suggestions that new pensioners are to be encouraged to spend their pension pot on fast cars – rather than frittering it away on an income for their declining years.  I presume this is an attempt to defuse the pensions time-bomb via the medium of road traffic accidents – which is certainly a bold initiative and bound to be more fun than spending one’s lifetime savings on the cost of a nursing home or one way trip to Switzerland.  So, unless pensionable age continues to recede from me, I could be the proud possessor of a shiny red Ferrari in a mere 20 years time!  Not really a dream of mine, but I suppose someone has to prop up the Italian economy – and it would be churlish of me to try and live forever bleeding dry anything that remains of the State in 2038.

Be careful what you write…

In my recent outing as an (unqualified) economist, I came to the conclusion that Amazon was not a good corporate citizen and that to drag this country kicking and screaming out of its n-dip (where n=2 at the time of writing) recession we should be spending our money elsewhere.  This conclusion was by no means a foregone one – when I started writing I had no idea what the conclusion would turn out to be.

It struck me that if I was going to “talk the talk” then I had better “walk the walk”, as our American friends would say (well, the more clichéd among them).  Some readers of this blog have ditched Amazon, so I could scarcely do less.  This has meant Amazon and its ilk have not been a part of this year’s Christmas shopping.  So I have sought out UK tax paying alternatives – looking for smaller companies and those without major operations abroad.

For many of my online needs, it was reasonably straightforward to find more exchequer-friendly alternatives to Amazon, and even ones that use the Post Office for deliveries (though this latter may not entirely have pleased my postman!).  (Oh yes, for me shopping involves both economic and social policy considerations).  However, in a few key areas I was forced to bite a rather unpalatable bullet and actually visit a real shop.  Not just a shop, but a shop during the month of December – which I’m sure must be somewhere in Dante Alighieri’s masterwork (though, I’ll admit I haven’t actually checked the Inferno).

So, last Sunday I girded my loins and headed into Cambridge on my bike. Having cleared the gauntlet of cars waiting to enter the Grand Arcade car park (a queue which I think runs continuously from late November until Christmas day and fills several nearby streets) it was surprisingly easy to find a space to park my bike.  John Lewis was busy, but still readily navigable and the staff were astonishingly cheery.  Buying stuff was a breeze and queues were relatively short and moved quickly.  I may have to do this whole “shopping” thing again.  As an added bonus, shopping in the real (as opposed to the virtual) world also provides an excellent excuse to partake of a little fortifying cake (these loins don’t just gird themselves you know!).

Whilst in John Lewis, I noticed that they were stocking formal shirts made in England – rather in the land of our soon-to-be economic masters – and felt I might partake.  I need some new work shirts as my current stock are rather too voluminous for my svelte frame so that I tend to feel like I’m wearing a kaftan or small marquee beneath my suit.  I’m also finding myself making rather more use of shirts at work given my sudden rash of both client contact and international travel, and so the lack of fit is more often brought to my attention.  At this stage, I would like to make clear that even when working from home, I do dress fully – if informally.  No working in either the buff or PJs for me!

With a little help from a sales assistant, one reason why I was drowning in my shirts became apparent – my current shirts are all 17.5″ in the neck, whereas my actual neck is only 15.5″.  It would seem that my neck was much fatter the last time I bought shirts or very poorly measured (or both).  Is this (the shrinking neck) one of the infamous seven signs of ageing?  Still, whatever the cause, I can now dress formally in a little more style (once – but more may follow), rather than giving the impression of waiting for a friend to join me in my chemise.  Again, a benefit of the real over the virtual.

Another side-effect of my blog post is that I now feel the need to support real bookshops (as well as Greenmetropolis).  My favourite London restaurant is only a stone’s throw from Foyles (and we are talking my stone throwing ability here, so that means pretty close).  Despite some modernisation over the years, Foyles remains delightfully quirky and it is still quite possible to get lost when trying to find the exit (I can tell you this from recent personal experience).  I’ve been to 10 Greek Street twice since that fateful post and so have bought two books.  At this rate, I’m going to need a new bookcase worryingly soon.

So, the moral of this post is to be careful of what you write:  the need to maintain a modicum of internal consistency can have unintended consequence for one’s life.

100% wrong

We have reached that time of the year when even I, a lover of black and white striped mint sweets for sheep (baa humbugs), must admit that Christmas may not only be coming (which is always the case) but is sufficiently close that I may have to do something about it.

Yesterday, whilst wandering the aisles of a local supermarket,I noticed a packet of tasty Xmas treats labelled “100% butter mince pies”.  Surely the only thing which is 100% butter is butter – and unsalted butter at that.  Now, I like butter as much as the next man – but expect my mince pies to have some other ingredients: mincemeat, flour, sugar and perhaps an egg and a dash of milk.  I know footballers and other mathematically challenged individuals have been giving 110% for many years, but these mince pies would have to be giving well over 200% to be even remotely satisfying.

Talking of the mathematically-challenged, I notice that the Chancellor justified his plans to reduce the highest tax rate using reasoning thoroughly debunked as complete nonsense on More or Less more than a week earlier (by those well-known left-wing subversives: Tim Harford and a senior tax planner to the wealthy).  I have no idea whether the change is a good idea or not – but judging by his explanation, it is an even worse thought out change than the rest of government policy (and that can’t have been easy given the amazingly “high” standard of the competition).  Perhaps it’s time that More or Less became required listening for all government ministers – it is less than 30 minutes per week and at least while listening they should be unable to implement innumerate new policies.

Definitely not The Economist

Not even an economist – I could never really handle all the hand-waving.  (Mathematicians will recognise this as a deadly insult, the rest of you will have to take my word for it).

There has been a lot of ill-informed discussion about large corporations (mostly hailing from one of our less successful ex-colonies) not contributing their fair share of tax to the UK exchequer in the media of late.  Never one to avoid a band-wagon – even well after it has passed – I figured it was time to jump on.

Much of the previous discussion has focused on the disparity between turnover in the UK and tax paid.  As I’m fairly sure I’ve mentioned before, turnover is no guarantee of profit – just look at Comet or all the banks we’ve been required to bail out: plenty of turnover, but not much sign of an elusive profit.

If we assume a profit has really been made – something of which these tax-shy corporations have presumably managed to convince their shareholders – then there are quite sensible reasons for a foreign domiciled company to try and avoid tax in the UK.  Tax treaties between countries are generally fairly poor (as both tax authorities want the money) and so unless they are careful, companies can end up being taxed on the same profit twice (something they are understandably keen to avoid).  Unfortunately, a company based in country (US)A and operating in country (G)B having discovered how to avoid corporation tax in B can use much the same bunch of tricks to avoid paying tax in A.  Rather a classic prisoners’ dilemma – by both tax authorities trying to keep all the money, both in fact receive almost none.

Still, all is not lost – these companies do buy stuff (some of it might even be sourced in the UK) and will have to pay VAT on some of this, they also pay business rates and employ staff.  These staff will have to pay income tax and NI (well, those well enough paid to owe tax and too poorly paid to avoid it) and, should they be foolish enough to spend any of their salary, will also pay VAT and a range of other duties enriching UK plc.

So, how does this balance out I wondered?  Sadly, numbers are hard to come by without a large team of spies and statisticians – so I shall resort to a qualitative look at a couple of the case studies.

Starbucks saw the early brunt of outrage.  They entered the UK by buying an existing and rapidly-expanding chain of coffee shops: the Seattle Coffee Company.  I will assume that SCC paid normal UK corporation tax as it operated in the UK alone – so UK plc has lost all of this revenue.  SCC also provided all the other revenue advantages of Starbucks to UK plc, albiet in a rather smaller scale,  Such has been the growth of Starbucks that you are now (on average) closer to a purveyor of mediocre, over-priced coffee than you are to a rat.  The big question is: if Starbucks had not come to these shores, would all these coffee shops be empty and their staff unemployed or would other coffee vendors or better still, for the non-coffee drinker (such as myself), something more useful have taken their place?  This is a hard question to answer, but on balance I suspect Starbucks presence on these shores has not been a net benefit to the UK exchequer – so I shall continue my quest to buy hot chocolate and cake from independent coffee shops (the Indigo Cafe is my preferred venue in Cambridge) and leave Starbucks to wither on the vine.  Admittedly, whilst I have had some great chocolate and cake, Starbucks is withering quite slowly despite my endeavours.  I must redouble my efforts – it won’t be easy forcing myself to eat more cake, but George Osborne is depending on me!

Amazon is another whipping boy.  To the best of my knowledge, they did not enter the UK by taking over another business – so no corporation tax lost there.  On the negative side of the ledger, they have been one of the primary reason for the loss of bookshops, record shops and the like from our high streets.  That seems like quite a major loss of corporation tax and I have a nasty feeling that Amazon employ an awful lot fewer people than the businesses they have displaced.  They may well shift a lot more product, but until very recently a lot of this avoided VAT by using a tax loophole relating the the Channel Islands.  I rather fear Amazon has had a very negative effect on revenues for UK plc – and so my use of a Kindle and Lovefilm is looking ethically rather dodgy (I don’t buy anything physical from them, I stopped when they ceased using the Post Office for deliveries).  Sadly, ethical alternatives are hard to find, but at least Lovefilm does give the Post Office some business.

When I was in Edinburgh, I had a few minutes to kill and wandered round Blackwells: I’d forgotten the joy of wandering round a bookshop and the serendipitous finding of interesting new books; whilst Amazon recommends stuff, it is utterly useless in this regard.  I have resolved to spend more time in bookshops and to buy books there.  Yes, I know, I’m almost too selfless…

This has not been a terrifically scientific survey of the tax issue, but I think I shall try and use smaller, UK-based business for my spending needs (or, more honestly, wants) in future wherever I can.  It also leads to a more interesting life away from the corporate uniformity that seems to dominate in so many places.  Feel free to join me!