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Richard Teather

Articles by Richard Teather

Postponing tax rises doesn’t help

March 3, 2021

There is a scene in Yes Minister where Sir Humphrey, goaded by Hacker into giving a straight answer for once, blurts out:“If you’re going to do this damn silly thing, don’t do it this damn silly way.”The Chancellor could have done with that sort of straight talking before today’s Budget speech – it might have stopped the announcement that corporation tax will be increased from 19% to 25%, but only from April 2023.  It fits perfectly – not only the wrong thing to do, but done in the wrong way, making it even worseI wrote just before the Budget about what a bad idea tax rises would be and that applies especially to business taxes.  Taxing companies sounds like a free ride for the government – more money for the Treasury without taking it from voters. But it is voters – especially people

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Budget tax hikes would bring disaster

March 2, 2021

Just when we can finally see the end of lockdown and life possibly returning to some sort of normal, we have a flurry of rumours that the Chancellor is about to shoot the recovering economy in the foot with all sorts of tax rises.This would be a disaster, and the people it would hit worst would not be ‘the wealthy’ or ‘big corporations’, but young people looking for their first jobs.Before coronavirus, the government was taking over 37% of the economy in tax, and even if the Chancellor does nothing in the Budget, that is expected to rise to around 39% (because although tax revenues are dropping, the economy is dropping faster).That is dangerously close to the top level that an economy can bear without suffering badly. Yes, other European countries have higher levels of tax (although

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Rawlsian ignorance

March 1, 2021

The centenary of the birth of philosopher John Rawls has prompted the usual claims that his best known philosophical tool, the veil of ignorance, is an argument in favour of redistributive taxation aiming at a much more equal income society.In his thought experiment, Rawls imagined people meeting to design the society they would then live in, but without knowing anything about themselves that might help determine their position in that society (intelligence, skills, gender, age, etc.).  Rawls and his disciples argue that, if we do not know where we are going to end up on the income spectrum, we will want to create a much more equal society so that our position does not matter.My friend Hannes Gissurarson rightly points out that, if the sages made this decision, they would make themselves

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Sharing the spoils, and sharing the loss

February 12, 2021

“Amsterdam ousts London as Europe’s top share trading hub”, claims the FT, seeing further proof that Brexit was a huge damaging mistake.Of course Amsterdam hasn’t become “Europe’s top share trading hub”. It has only overtaken London in trading shares in EU-based companies; London’s dominance in trading shares from the rest of the world has continued. Also the data only measures trades that go through the stock market; the off-market private trading between the big market participants isn’t included.But is this a sign that other EU centres are giving London a run for its money? Are the smaller continental bourses getting better than London and so luring trading away? Of course not. “The shift”, the FT notes, well away from the headline, “was prompted by a ban on EU-based financial

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Which is more important: cat videos or investment?

May 9, 2018

The House of Commons is in the middle of one of its fits of inconsistent moralising.They are creating a panic about data protection; worried that our private information is being sold and must be protected. Facebook can somehow tell what we might be persuaded to buy based on which cat videos we like; more amazingly, people believe that Cambridge Analytica used the same information to change how we voted (Cambridge boffins joining with Russia to subvert Western democracy?! It’s like being back in the ‘70s).The House of Commons is in full “something must be done” mode, trying to force Mark Zuckerberg to appear before its committee to answer questions. More strongly, later this month the GDPR (General Data Protection Regulation) comes into force; a new expensive, bureaucratic and complex

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Racing around in circles on tax

November 8, 2017

Lewis Hamilton has been in the headlines for his tax planning rather than his driving, named in the BBC’s “Paradise Papers” reports as having imported his private jet through the Isle of Man to save £3 million in VAT.If you want an unintentionally funny tax story, do read the BBC’s piece on this. “It was still dark when the private jet began its descent. Inside, its decor was sumptuous…the island that the plane was heading towards hadn’t yet woken up.” Melodramatic prose, private jets, fast cars, exotic islands, shadowy international finance – I think the writer must be angling for a job on the next James Bond script.But once you cut through the purple prose and outrage, what this shows is the stupidity of governments trying to fiddle with the tax system.Hamilton bought his jet, according

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The effect of Labour’s corporation tax

May 12, 2017

The Labour party has proposed increasing corporation tax to 26%, from its current rate of 19%, and in contrast to the government’s proposed reduction to 17%.That would leave the UK with a tax rate one and a half times the level the government is proposing, putting us around the middle of European corporate tax rates rather than near the bottom (although still the lowest in the G7).Labour claims that this will raise around £20 billion to fund various spending commitments.On a simple mathematical basis, that looks about right.  The Treasury estimates that a 1% increase in the corporation tax rate would raise about £2.3 billion.  Multiply that by Labour’s proposed 9% increase and allow for inflation until 2021 when they propose to implement it, and £20

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It’s all been said before

November 14, 2016

Working in free market economics can sometimes feel as if one is merely writing footnotes to an 18th century Scot.  Pretty much anything worth saying has already been written by Adam Smith, and often all that we can do is collect some more evidence, quantify the effects that he predicted, or apply his wisdom to the modern world.Maybe that explains some of the wilder economic theories of recent decades; some people will write anything, no matter how daft, just to try to be original.But in my field of tax, it turns out this feeling that it’s all been said before is even older.  Never mind the 18th century; the basic economics of business tax was summed up in the 1500s:“Taxes and imposts upon merchants do seldom good to the King’s revenue … the particular rates being increased, but the total bulk of trading rather decreased.”That was Sir Francis Bacon, lawyer, politician and scholar under Elizabeth I and James I, credited with being one of the founders of the enlightenment, scientific method, the modern approach to the common law, and America.As with Smith on economics, what more is there to say on business taxation that does not merely expand on what Bacon wrote over four hundred years ago?  If you tax something, you have less of it.

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Brussels’s treatment of Apple justifies Brexit

August 31, 2016

The European Commission’s ruling on Apple, and its €13 billion bill for back-taxes, raises some complex issues of tax law.But the political issue is quite simple; it shows that those of us who argued for Brexit on constitutional grounds, that the EU had become an all-powerful super-state, were quite right.First, the claim that tax is a national issue, for national governments and parliaments to decide on, is now entirely exploded.  A question of how Ireland operates its own tax system has been over-turned by the EU’s Commission, making it clear that no EU member country has control over its taxation.We who work in tax have known for years that claims of national sovereignty over tax were nonsense; I was writing about the EU’s control over its members’ tax policy nearly fifteen years ago; but it is now clear to everyone.Second, this wasn’t a question of allocating taxing rights between different EU countries, which possibly could have been argued to be a reasonable consequence of being within the “European Club”.  This was purely an internal Irish matter, but despite there being no EU dimension the EU Commission still intervened.

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Tax clampdowns make the rest of us poorer too

August 30, 2016

I’ve been warning of it for years, and we now have fresh evidence; the wealthy industrialised countries’ desperate search for more tax revenues is causing actual problems that risk seriously damaging the global economy.Many European and American governments’ spending makes drunken sailors look restrained, but rather than looking at their own behaviour they are blaming their deficits on their citizens’ unwillingness to pay even more tax.Offshore tax evasion is one culprit often blamed for deficits, even though real tax evasion, hiding income that really is taxable, is very rare.  HMRC estimates that it loses only a tiny 0.8% of tax revenues through tax evasion, and only a small part of that is from offshore evasion (most tax evasion is local, such as small businesses not reporting cash-in-hand income).But a ‘clampdown on tax havens’ is seen by politicians as a convenient way of distracting attention from their failure to balance their budgets, promising that the latest schemes will bring in the lost billions and solve their financial problems.

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