We should not expect the government to stand guarantor to every company in Britain – whether manufacturer or investment vehicle. Yet that is effectively what the financial ombudsman is expecting in demanding compensation for the policyholders of Equitable Life.
French president Nicolas Sarkozy and Britain’s lorry drivers are unlikely bedfellows but they have something in common: they have both got it wrong in demanding cuts in fuel tax to compensate for rising oil prices.
The problem is that demand for fuel exceeds supply. The rising oil price is the mechanism that will bring those two into equilibrium - encouraging more production and discouraging consumption. Cutting the tax on oil and thus reducing the price to the user will merely stimulate demand and push the untaxed price higher still.
Alistair Darling flips his 10p coin and instead of tails, 5m people lose, it is heads, 22m win. Yet Darling emerges as a loser either way. He has dug a large hole to get himself out of a small one and he now needs to dig an even bigger one to extricate himself from the latest tax changes. And despite his largesse, he has received no glory.
The UK Treasury may not be able to match Ireland’s 12.5 per cent corporate tax rate, but sooner or later it is going to have to make concessions on company taxation to ensure there are companies to tax.
The drip of British businesses re-registering abroad, especially to Dublin, is turning into a steady stream and the more that go, the more acceptable and the easier it is for others to follow. United Business Media and Shire are showing that the brass plaque can be moved offshore while leaving the business and management exactly where it always has been.
Remember the old woman who ate a spider because she had swallowed a fly? Next she swallowed a bird to deal with the spider – then a cat. The government would do well to study the nursery rhyme as it tries to extricate itself from the mess of the 10p tax band.
Ministers started by wanting to cut the 22p income tax rate. Abolishing the 10p band was the spider to deal with that. Now it is considering invoking a bird in the form of the minimum wage. At some point it must realise that each solution is worse than the problem it is designed to overcome.
Two questions for Royal Bank of Scotland about its much-leaked record share issue: why pay the final dividend, and why underwrite the rights? They are questions that should concern any finance director planning to raise capital this way.
First the dividend. Normally the argument is that the dividend must be maintained to encourage investors to buy the new shares. But why pay cash to shareholders so that they can pay tax on it and then ask them to pay the money back to the company?
There have been constant threats to take companies overseas to save tax – from BAT to GlaxoSmithKline – but it has taken a company based in Basingstoke to make the decision to go. And the irony is that Shire will still be based in Basingstoke even though the pharmaceutical company’s brass plaque will be on Jersey and its tax-base in Dublin.
Is a slow recovery better than an imminent crash? Governments are trying their best to ensure stability even if it means a long haul: business might be better off seeing the economy allowed to sink to its natural level now so that the recovery can start sooner.
The housing market offers an easy analogy of the choice. If property values are 20 per cent too high, then six years of flat prices while inflation creeps up at 3 per cent would bring values back to their equilibrium level. Alternatively, prices would be allowed to crash by 20 per cent now and then start rising again as soon as the market has bottomed. That analogy can be applied to stock markets, consumer confidence, business profits or the whole economy.
The corporate world is gearing itself up for a high-profile libel action in which the winner might well also turn out to be the loser. Tesco is suing The Guardian over stories in the newspaper saying the supermarket group was avoiding £1bn tax by using offshore vehicles.
It looks set to be messy. The Guardian chairman, City bigwig Sir Paul Myners, has been dragged in because Tesco’s chairman allegedly warned him the story was incorrect. The newspaper’s chief executive is in an invidious position too because she is a non-executive director of the retailer. It turns out the Guardian Media group uses similar offshore structures for its own acquisitions.
Can two wrongs make a right? Is it acceptable for HM Revenue and Customs to pay money for stolen data if that information reveals details of UK tax evaders?
Britain’s tax collectors have followed their German colleagues in buying a list of UK customers with Liechtenstein bank accounts. The Germans paid more than £3m to an employee of the bank for its list and justifies the bribe by the information it has yielded. It has already produced high-profile resignations of German officials, though so far, no charges.
Treasury Matters by Joergen Jensen
Insider by Michael Pawley
Eco-Finance by Peter Wognum
