Wednesday 25 February 2015

It's a rich man's world @ No.10

"What's all this about fat cats? I ain't nor are you a fat cat." Arturo was quite beside himself, as he pointed to a screen.

Fatcat fund managers dodge £700MILLION in tax every year because of loophole

I too was incensed 'fatcat' indeed! But I decided to read on to discover the justification for that headline in The Mirror online. The article was by Jack Blanchard:
Fatcat fund managers are using a £700million-a-year loophole to pay a lower income tax rate than teachers and nurses, a report warns today.

Ah Ha, I thought, so that's what its all about - not fat cats eating pieces of tuna - but really gross fat cats gobbling up the dosh! I read on:
(38 Degrees Group Director) Mr Babbs urged Chancellor George Osborne to side with “hardworking families on average incomes” by closing the loophole in his March 18 Budget.

But many private equity bosses bankroll the Conservative Party.
http://www.mirror.co.uk/news/uk-news/fatcat-fund-managers-dodge-700million-5187932

It gets real murky! People with taxable income up to £31,865 are basic-rate taxpayers and pay tax at 20% - yet it seems that some of these private equity bosses 'cut tax bills to just 10% by treating their multi-million pound wages as capital gains instead'! Talk about something smelling rotten in the State of Denmark!

A story on the same topic, written by Chris Green appeared in The Independent under the headline:
Private equity bosses using £700m tax ‘loophole’ – and donating to the Tories
Can't get clearer than that, can you? Even I can hear the fat cats guzzling! Further on Green quoted David Babbs:
“Money which should be funding the NHS is going to millionaire fund managers instead,” said David Babbs, executive director at 38 Degrees. The group added that the current draft of the Government’s forthcoming Finance Bill, published in December, explicitly exempted the private-equity executives from new anti-tax avoidance legislation.

Green explained how the loophole operates:
The so-called Mayfair tax loophole allows private equity executives to pay relatively low tax on the profits their investment funds make from buying and selling companies.

This is achieved by classifying this profit (known as “carried interest”) as capital gains – as if it had been produced by investing their own personal capital – rather than salaried income.

While their salaries and bonuses are subject to normal income tax rules, the carried interest – which in some cases makes up the majority of the executives’ pay packets – is subject only to capital gains tax at 28 per cent, instead of income tax at 40 per cent or 45 per cent.

The special arrangement is guaranteed by a memorandum of understanding negotiated outside Parliament between HMRC and the private equity industry’s umbrella group, the British Venture Capital Association.

Critics say the loophole is unfair, as the money wagered on private equity deals largely comes from outside investors, not the executives themselves. They argue that it would make more sense for the profits to be taxed like salaries at the higher income tax rate.
http://www.independent.co.uk/news/uk/politics/private-equity-bosses-using-700m-tax-loophole--and-donating-to-the-tories-10054911.html

Now that is a pretty clear explanation - even for skinny cats, like me and Arturo, to grasp! But in this 'rich man's world' there are other areas where even stinking fish would smell sweet! Just take a look at a story in The Guardian by Owen Bowcott which had the headline:
HSBC should face UK criminal charges, says former public prosecutor: Lord Ken Macdonald QC says HMRC’s decision not to prosecute bank over Swiss revelations was ‘seriously legally flawed’
The article continued:
In a legal opinion prepared for the consumer watchdog, SumOfUs, Lord Ken Macdonald QC argues that there is sufficient evidence for the bank to be investigated for conspiracy to defraud the UK tax authorities. Decisions taken by Her Majesty’s Revenue and Customs (HMRC) not to prosecute the bank were “seriously legally flawed”, he said.

...Macdonald also said he believed that evidence already publicly available suggested HSBC should be prosecuted under the 1977 Criminal Law Act for its part in a “systemic” operation to deprive HMRC of revenue.

“It seems clear, from the evidence we have seen, that there exists credible evidence that HSBC Swiss and/or its employees have engaged over many years in systematic and profitable collusion in serious criminal activity against the exchequers of a number of countries.

Wow! That's telling 'em! But that was not the end of the article, no siree. It continued:
Martin Caldwell of SumOfUs said: “No company can be above the law. If HSBC or its employees have defrauded British taxpayers they need to be brought to justice. By allowing wealthy clients to evade tax HSBC has cheated the public out of millions of pounds that could have funded schools, hospitals and libraries across the country.

“UK tax authorities have serious questions to answer. At best HMRC suffered a serious lapse of judgement, at worst they allowed HSBC and its wealthy customers to play by different rules to the rest of us.
http://www.theguardian.com/politics/2015/feb/22/hsbc-uk-criminal-charges-former-public-prosecutor-hmrc

So it seems that these fat cats have been having more than just a few 'meal deals'! They've had a veritable banquet.

By now, I felt quite exhausted by all this chicanery! But I read one more article. This was by Jill Treanor and Sean Farrell which had the headline:
HSBC boss says bank shamed by Swiss tax avoidance

Treanor and Farrell wrote:
The bosses of HSBC have admitted they were shamed and humbled by the tax avoidance activities of the group’s Swiss banking arm as the bank revealed its chief executive, Stuart Gulliver, received £7.6m in pay and bonuses last year.

Gulliver, speaking for the first time since the Guardian and other news outlets published a series of revelations about HSBC’s Swiss operations, offered his “sincerest apologies” but was defiant about the account he had with the bank in Geneva which sheltered millions of pounds in a Swiss account through a Panamanian company. The 55-year-old who became chief executive in 2011, was born in Britain but is tax domiciled in Hong Kong, where the bank has major operations.

Oh, dearie me! So how does he get out of this 'fine mess'? Well, read on:
“I would say that a number of us, myself included, think that the practices at the Swiss private bank in the past are a source of shame and reputational damage to HSBC. Yes, I think shame is an appropriate noun,” said Gulliver.

“One of the largest impacts has been on morale inside HSBC. All of us are subject to scrutiny from our families, our friends and people we meet generally in our everyday lives. It makes people embarrassed at HSBC and concerned,” he added.
http://www.theguardian.com/business/2015/feb/23/hsbc-chief-paid-7m-pounds-last-year-profits-slide-tax-avoidance-apology

Arturo reminded me about Jonathan Swift's satirical novel 'Gulliver's Travels' in which a man called Lemuel Gulliver travels to various fictitious lands where bizarre events occur. Wonder whether that's been the problem for Mr Stuart Gulliver of HSBC residing too long in strange lands with people who have even stranger customs!

Arturo and I were drooling at the prospects of fat cats gobbling up cash - it's not cash we were after - it was the smell of steamed cod wafting downstairs from the flat upstairs!

Bye

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