A bridge too far?

I learned to play Bridge while at school – which may tell you something about my age and social background (or may not).  I did not live anywhere terribly posh during my school days and my schooling was provided by the State.  Perhaps curiously, I was taught by my chemistry teacher – which I suspect he did in his own time (Bridge certainly wasn’t on the curriculum) – or this may be entirely normal (a web search suggest this link between chemistry and contract bridge may not be entirely uncommon).  I have no idea whether today’s young people are exposed to the delights of Acol and Blackwood whilst in their teens – I fear they may have superficially more exciting things to do than we had in the early 80s.

Bridge is a very cheap hobby (unless you bet on the outcome): all you need is a deck of cards, three friends (or you could use complete strangers, but this may be harder to arrange without an inappropriate degree of coercion) and a pen and paper to keep score.  I played at school, at my grandfather’s and most recently on a holiday in Iceland.  I do find it is becoming harder to find people who are both able and willing to play Bridge, which is a pity – or perhaps I just move in the wrong social circles.

But why is the old fool banging on about Bridge?  Well, you should blame HMRC for I learned in the news today that the Courts have agreed with HMRC that Bridge is a game rather than a sport.  I think I’d always known this: it is clearly a card game (like cribbage, whist or Newmarket), I am not aware of any card sports (though this may be a result of my sheltered upbringing).  Confusingly, when I was forced to play sports at schools, the lessons were described in the timetable as “Games”.

One might wonder why the judiciary and excise should be bothered by this difference – well apparently sports are not subject to VAT while games are.  Yes, it is the whole Jaffa Cake debacle again whereby cakes and biscuits have different VAT treatment and the courts had to decide into which camp the orangey treat should be placed.  I suppose I shouldn’t blame HMRC, they merely enforce the laws of taxation – it is government that creates these laws.  I find it hard to explain why successive UK governments have decided that sport and biscuits are good, but games and cakes are bad.

I suppose sport has supposed health benefits – though does also seem to generate an awful lot of injuries (everyone I know who played football in their twenties had totally wrecked their knees by their early thirties) which is not something which I would expect from playing Bridge.  I suppose sport might also have benefitted from the Victorian vogue for muscular Christianity.  However, I fear it does give the impression that the State is rather keener on brawn than brain and I’m not sure this is going to help us in the “Global Race” (which is apparently so important to the current government), unless this race is a rather more literal one than I had previously understood.  It also seems to reinforce the school stereotype that “jocks” are more lauded than “geeks”.

The preference for biscuits over cake is unfathomable – does the state have some issue with raising agents?  Was this an attempt to support British biscuits against an onslaught of imported cakes (a flood of gateaux and torte)?  I suppose baking powder et al work their magic through the production of carbon dioxide, so perhaps this is an early attempt at green taxation to tackle global warming?  Still, I can’t imagine that the baking of cakes is a major contributor to atmospheric CO2: even given my own consumption.

What other weird incentives is our VAT system giving to the good folk of the UK?  I seem to recall there is some strange difference in treatment between hot and cold food – with cold food favoured (very much not the position taken by generations of mothers – but I suppose for much of history they were not given the vote and even now are rare in government).

Many in this country (and probably others) whinge about the European Union and its supposed legislation on the curvature of bananas and the definition of carrots as fruit (so that the Portuguese can make jam out of them).  I really don’t think we need to look to Europe for such irrationality, perhaps we should focus our efforts on our own taxation system.  That way we could reduce the scope of confusion and expensive court cases and rationalise the incentives we provide to our citizens.   Let’s have a level playing field: whether it be of grass or green baize.  Let’s have fair competition between the cake and the biscuit!

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!