All posts by John B

Trebles all round

Congratulations to BAA and BA for the successful opening of Terminal 5 – it’s taken less than a week of live passenger testing to get the whole thing working pretty much as it’s supposed to.

If you think that achieving that kind of switchover in that kind of timeframe with the kind of really-rather-minor chaos that’s taken place is anything other than reasonably creditable, then you’re a churlish muppetteer with no knowledge of how things work in the real world. Which means you should probably seek a career in journalism…

I’ve no sympathy for anyone who was delayed, either. If you book to fly out of a new airport terminal the day after it opens, what on earth do you expect will happen…? I flew into T5 on Sunday, and was entirely unsurprised by the 35 minute wait at the gate to sort out some steps because the airbridge wasn’t working. Had I been particularly worried about 100% on-time arrival rather than interested to see the new terminal, I’d’ve flown a different airline.

(side note: anyway, who the hell takes hold luggage onto aeroplanes? You can easily get a fortnight’s clothes, a computer and plenty of stuff to read into a pair of hand-luggage-able bags, thereby shortening your arrivals time by at least 45 minutes and diminishing your chances of lost luggage to near-zero…)

Point of order

In the UK, all debt for which the government is ultimately liable appears as government debt on the national accounts.

If the debt of a PFI company is guaranteed by the taxpayer (as for Metronet, for example, unwisely) then it appears as government debt on the national accounts.

If it does not appear as government debt on the national accounts, that means that the taxpayer isn’t liable for it.

While there are many arguments possible about the benefits or disbenefits of PFI (and, irrespective of whether PFI is a good thing or a bad thing in aggregate, it is certain that the disbenefits are exaggerated and the benefits understated in nearly all discussions of the topic), this isn’t one of them.

Two bald men in ‘fight over comb’ shock

Tax Research has an article criticising the TaxPayers’ Alliance for being a bunch of rentaquote extreme-right-wingers who distort the facts to bash Labour, socialism and anyone who thinks taxes should be higher than 1%, and also criticising the media for taking the TaxPayers’ Alliance seriously.

This is entirely true: the TPA is a lobby group for well-off people. If it – or indeed, anyone whose concern with cutting taxes is motivated by ideology rather than personal venality – were truly interested in tax cuts for moral or efficiency reasons, it would focus on addressing the 80%+ marginal tax rates faced by very poor workers, rather than the frankly immaterial amounts of tax paid by those of us lucky enough to earn or inherit a lot of money.

However, I’m sceptical that Tax Research is in much of a position to comment. As I’ve pointed out several times on this blog (and on another temporarily disappeared blog, which I will mend when I get a free weekend in the UK…), its leader Richard Murphy is equally keen to offer dubious opinions on complicated issues, and is frequently quoted in the press doing so…

You draconian what draconian?

Sorry for radio silence, I’ve been in Istanbul (not Constantinople) doing Exciting but Hardworking things.

Quick comment on the budget: many people, mostly on the “we believe in free markets except when, err, I’ll get back to you on that one” right, seem to think that the government’s rise in beer excise duty spells the death knell for struggling pubs.

The rise in beer tax is 4p. A pint of beer costs £2.50-£3.50. If you can find anyone, anywhere, who’s willing to drink a £2.50 pint but not a £2.54 pint, then I’ll eat a hat salad, a hat casserole and a hat meringue pie…

On tax and Tesco

I don’t know the detailed substance of the Tesco/British Land sale and leasebank transaction that the Guardian is exposing with glee as a sign of Great Evilness. But I do know some basic things about UK company and tax law, which suggest that the claim that Tesco will be able to avoid paying non-trivial amounts of tax on the profit from the deals is simply nonsense.

If you are a company domiciled in the UK, you have to pay tax at corporation tax rate on all repatriated profits (i.e. all dividends paid to the parent company by foreign subsidiaries). The only way in which you can get the profits from transactions made abroad into the hands of your shareholders is by repatriating the money to the parent company. At which point, the repatriated money is considered to be taxable profit by the Inland Revenue, and hence you have to pay corporation tax on it.

So if Tesco, or anyone else, were to set up a subsidiary in the Cayman Islands and make a stupendous amount of money tax-free, then while Richard Murphy would doubtless be sent into a state of apoplexy, it wouldn’t make a blind bit of difference to the money received by the UK government – Tesco’s shareholders can’t see any of the money (and the payment of dividends to shareholders is the whole point of a plc) until HMRC has taken its cut.

Don’t get me wrong – there are plenty of ways of using different international tax regimes to avoid paying various sorts of tax. If you’re a company based somewhere with lower corporation tax than the UK, you’ve got an incentive to keep your profits here lower than they really are – crudely, by ensuring your UK subsidiary pays higher prices than it should for goods it buys from other group companies [*]. Some once-British plcs have avoided paying UK tax on profits earned abroad by moving their domiciles from the UK to tax havens. And if you own a private company, you can easily pay random amounts of money from the company to blind trusts in the Caymans that you happen to control, to keep your UK profit and hence tax liability at zero [*].

But with very few exceptions, any action abroad which makes a UK-domiciled plc more profitable will, in the long term, generate tax revenues for the UK government at the standard corporation tax rate. And amusingly, that includes avoiding tax that would otherwise be incurred in higher-taxed foreign countries… [**]

[*] literally doing the starred activities in the way that they’re expressed above is illegal, but there are plenty of ways of achieving a similar result.

[**] in most cases profit isn’t double-taxed, so profit remitted from a country where 10% corporation tax has been paid to a country where the corporation tax rate is 30% will be taxed at 20% by the home country. But you don’t get a refund on profit remitted from a country where 40% corporation tax has been paid, so it’s in the UK taxpayer’s interest for British firms to minimise the tax they pay in such places…

Plastic bags are great – don’t ban them

It’s generally a good rule of thumb to oppose anything that’s favoured by the Daily Mail, assuming you have the slightest interest in economics or liberty, even if it doesn’t obviously sound like a bad idea. Sunny at Liberal Conspiracy would’ve done well to follow the rule:

In one stroke the Daily Mail has put [banning plastic supermarket bags] back on the political agenda and for that it must be applauded. The question is, will politicians heed?

Why is Sunny wrong? Well, plastic supermarket bags, while they make for oh-so-sad photostories of suffering seagulls, cause next to no net environmental damage. The government-funded Waste Resources Action Programme has said that because they are generally re-used as rubbish/storage bags, and because they are less environmentally costly to make than paper bags, they are the greenest current alternative.

It gets worse. Plastic bags are of the most use to people who’re shopping on foot or by public transport; if you’re going by car you can keep your shopping in boxes, or keep a selection of Bags For Life in your boot.

But if your shopping is done as part of a public transport commute [work -> shop -> home], which is the least environmentally damaging way to do it, then you’ve got a problem if plastic bags are banned: paper bags aren’t much use for holding things for more than the distance from checkout to car, which is why they’re popular in America, and carrying a Bag For Life wherever you go on the off-chance you might want to do some shopping at some point is hardly practical.

If you want to impose a tax on shopping that helps the environment, then tax supermarkets £5 for every car that parks in their car parks – giving them the choice of whether or not to pass it on to the consumer, of course. If you want to drive people off public transport and into their cars, while also increasing emissions associated with bag production (but saving a couple of cute animals – so that makes it all worthwhile), then support the plastic bag tax…

Me fail English? That’s unpossible

Apparently, 40% of 14-year-old boys perform below the level expected for their age group in national tests, and this is a Terrible Thing.

In other equally shocking news, which also comes as a devastating indictment of the government’s failed education policies [etc etc ad nauseam], nearly 50% of people are of below-average intelligence.