Tag Archives: Tax

The EU: investing in failure

So Brussels has demanded that ‘Britain’ pay an extra £1.7 billion towards the EU budget. By ‘Britain’ they don’t mean the British Government, but the British Taxpayer. You and me.

Why must we pay this money? To support rebates being given to France and Germany. I don’t object to the Germans getting a rebate. They have paid enough over the years. But France! Their economic failure is all down to the socialist insanity of Hollande and his crew.

Recent British economic success … yes we have been successful, which is why we must pay … is all down to our willingness to suffer the recent austerity measures. Meanwhile the wasteful government in France, spending money it doesn’t have on ideological nonsense, simply holds out its hand and slips it into British pockets. Nigel Farage will be counting his extra votes by the sackload.

The EU strategy is known as ‘Investing in Failure’. And when you invest in failure, that is exactly what you get.

Abandoning the ship sinking under taxes

According to Pulse, the magazine for General Practitioners, in 2013 4,741 UK trained doctors applied to the GMC for Certificates of Good Standing (CGSs), so they can register with an overseas regulatory body or employer. In 2012 the figure was 4726, and 2,485 for the first six months of 2014.

The training costs for these wannabe emigres was in the main covered by the UK taxpayer. Many are escaping to Australia with shorter working hours, higher salaries and where the politics of envy doesn’t pervade the parliament. The USA and the UAE are also popular destinations.

No one seems to have commented on the irony that two of the UK’s political parties are intent on raising taxes on the wealthy (and yes this includes GPs) to pay for the National Health Service, just as NHS doctors are intent on fleeing those taxes.

Gdansk talk

I’m jumping the gun in Gdansk on October 15th by one month. I’ll be giving my very first public talk on my new book with co-author David Lesperance, Flight of the Golden Geese. The book will be published on November 15th.

I’m giving four talks (on 4 different topics) over two and a half days, plus some press interviews. If any of my blog readers are in the area and would like to come along, then just let me know so I can arrange it.

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New Barbarians in the Home Office

It seems that mandarins in the UK Home Office have been reading my New Barbarian Manifesto.

At present non-EU nationals who invest £1 million, £5 million and £10 million in government bonds can apply for permanent residency in the UK after five, three and two years respectively.

Now someone in the Migration Advisory Committee (MAC) has proposed a sealed bid auction of around 100 visas annually, minimum bid £2.5 million, £2 million of which goes straight into government coffers.

Critics say the British Public won’t like this. I beg to differ. The British public don’t want dole queue immigrants. They’d be delighted to welcome the rich who spend money and thus employ people, and pay taxes. In the New Barbarian Manifesto I said that the UK “should drag them of the planes if necessary”. It looks like someone in MAC is thinking along the same lines.

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A three-letter word ending in X

My friends say I have a one-track mind. I’m always thinking about a three-letter word ending in X. … TAX.

It seems I’m not the only one. For yesterday in the House of Commons MP Ben Gummer stated a fact that has always irritated me. His bone of contention was National Insurance. For non-Brits I should explain that British subjects who earn more that £149 per week has to pay 12 per cent or more of their earnings on a so-called contributions based scheme that supposedly pays for various sickness and unemployment benefits and pensions. Gummer says it is a stealth tax masquerading as a social good.

National Insurance is a sanctimonious euphemism, it is a tax mechanism for redistributing wealth. The state should come clean and admit that it is nothing less than an ‘Additional Income Tax’.

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Learning the lessons of the Laffer Curve

During the late 1970s the U.K.’s top income tax rates were over 80%, and yet the top 5% of income taxpayers contributed just 24% of the total, whereas nowadays at much lower tax rates this group pays around 43% of the total; the top 10% paid 57.6% in 2011/12. The top 1% paid 11% of the total in the 70s; and 27.7% in 2011/12 (up from 21.3% in 1999/2000) – raising £44 billion, more than raised from companies. Apart from showing that the wealthy pay a disproportionate amount of taxes, the figures clearly imply that lower tax rates actually increase tax revenues. This counter-intuitive observation seems to support the Laffer Curve theory, which sees two counteracting effects at play in the raising of tax revenue: that of ‘arithmetic’ accumulation and the ‘economic’ consequences. The arithmetic effect is straightforward: revenue collected is the tax rate multiplied by tax-base (the taxable amount available) accumulated across the various bands. The economic effect is the recognition that the tax rates imposed will have a dampening effect on the tax-base – a higher tax rate will trigger tax evasion, more effort in avoidance, less incentive to earn, more time spent at leisure, and some tax-payers permanently leaving the jurisdiction.

At the extreme a 100% tax would mean no incentive at all; no one would bother to work since all the fruits of their labour would all be taken off them. Hence the economic effect of a total tax would mean an empty tax-base, and a consequential tax take of zero. Charging tax at 0% would also bring in nothing. Hence there must be an optimum tax level that maximizes the tax take balancing these two effects. But what level? This is an impossibly complicated calculation that would also have to take into account special circumstances (like paying for a war, or subsiding the unearned bonuses of the banking sector), or the availability of offshore tax havens, or changes in the overall economic climate etc. Nevertheless it seems clear that punitive tax levels actually drive down revenue.

Why is it that the taxman focuses on the arithmetic consequences, but has no conception of economic ones? Does he believe in a kind of Newton’s Law of Taxation: where to every action (that is tax) there is an equal and opposite reaction (namely everybody pays up in full)? According to their simplistic arithmetic logic, tax creates a revenue stream, and a higher tax makes for a larger stream. Not in Laffer’s non-linear world of consequences. The only law the Revenue should consider is that of Diminishing Returns. Taxing is disturbing. There is an uncertainty principle at play here. The act of taxing disturbs and changes the attitude of both the persons being taxed, and those doing the taxing. Those profiting from taxes get an appetite for it, and like Oliver Twist will ask for more. However, keep increasing tax levels, and the tax-base collapses. And when the tax-base collapses, so does the economy, and ultimately so does the country. Death by taxes – a lesson that every socialist state eventually learns. One that President Hollande’s France will learn very soon. The rate of tax needn’t even be that high – the mere introduction of a new tax is interpreted as a statement of intent, a signal of more to come.

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“Hell hath no fury like a woman scorned”

Before starting this article, we should first use the correct quotation:
“Heaven has no rage like love to hatred turned, Nor hell a fury like a woman scorned”.

When William Congreve wrote those words in 1697 in his play “The Mourning Bride” little did he realize he was giving tax advice to errant husbands of the twenty-first century, like Scot Young. Young, a tycoon now fallen on hard times, is at the centre of a bitter £400 million divorce battle with his wife Michelle. The highly acrimonious case has got the whole of Britain in thrall.

Scot Young declared himself bankrupt, owing £2m to the taxman. Claiming to be broke, Scot is unable to give Michelle and their two children any financial help. That having been said, apparently she has received more than £1m from her husband’s friends. Michelle, having lost her privileged lifestyle, was not satisfied. “We are just living one day at a time. He is eating in the finest restaurants with beautiful young models while my girls don’t know their futures”.

She asserts that her husband has salted away large sums, and wants her share. But how can Michelle prove her claim? She can’t. She doesn’t have the resources to track down the money through a maze of concealed deals. However, she knows someone who does. The British tax man!

Scot should have listened to Congreve before giving his old laptop computer to his children Scarlet, 17, and Sasha, 15, to help them study for their exams. Of course he first ‘sensibly’ deleted all his personal files. Mistake! In her fury Michelle got experts to scour the hard disk, and they managed to recover five-years’ worth of encrypted files, containing hundreds of e-mails and other sensitive data on Scot’s financial and property dealings. We can now expect HMRC to unleash its hounds of hell to sniff out any hidden assets, particularly if they can grab a share – and Michelle will grab the rest.

Watch this space!

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The Pomperipossa Effect

Once upon a time, long, long ago (well actually in 1975) in a land far, far away (Sweden) there lived a kindly fairy godmother named Astrid Lindgren. Astrid brought smiles to the faces of children from all over the world with her stories of Pippi Longstocking and other charming characters. Indeed, her stories were so popular that her books became very successful and sold in vast numbers. Her royalty income just grew and grew. And she lived happily ever after?

Well, not quite! A big bad wolf in the form of the Swedish Social Democrat Government had other ideas. It introduced a new tax regime that meant self-employed individuals had to pay both regular income tax and employer’s fees. In Lindgren’s case this meant a marginal tax rate of 102%. Unbelievable. She had to pay more in tax than she actually earned.

This idiocy has subsequently been dubbed the ‘Pomperipossa Effect’ after a allegorical story ‘Pomperipossa in Monismania’ (in English ‘Pomperipossa in the World of Money’), which she published in Stockholm’s evening tabloid newspaper, Expressen, on 3 March 1976. Even the Swedes, who are normally fairly passive over high levels of tax, were incensed. It was no accident that later that year the Social Democrats were thrown out of government after being in power for 44 years.

So there was a happy ending. Astrid Lindgren did live happily ever after paying a mere 80% of her income – she died in 2002. However, this isn’t a fairy story – more a horror story. The big bad wolves haven’t gone away. They have spread out from Sweden to join governments all around the globe. Don’t be surprised when the nightmare of the Pomperipossa Effect suddenly reappears in your country.

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All taxation is theft

This is a presentation given by Professor Ian Angell at the London Stock Exchange, Tuesday March 7, 2006 in a debate with Sir Nicholas Montague, former head of H.M. Inland Revenue.

“… Thus began the fierce endeavour of the State to squeeze the population to the last drop. Since economic resources fell short of what was needed, … [t]he full rigour of the law was let loose on the population. Soldiers acted as bailiffs, or wandered as secret police through the land. Those who suffered most were, of course, the propertied class. It was relatively easy to lay hands on their property, and in an emergency, they were the class from whom something could be extorted, most frequently and quickly…”

Sounds familiar? No, this isn’t today’s Britain, with its middle classes ravaged by stealth taxes, speed cameras, national insurance, income tax, death duties, VAT, petrol, alcohol, tobacco duty, community charges etc. This is a quotation from The Cambridge Ancient History, on the decline and fall of the Roman Empire. There’s nothing new under the sun. Once again the State is predator. Look closely at today’s Britain, and the same signs are there: such is the end of Empire.

“…If the propertied class buried their money, or sacrificed up to two-thirds of their estates to escape … ; or went so far as to give up their whole property in order to get free of the domains rent, and while the non-propertied class just ran away, the State replied by increasing the pressure…” This is why such large hoards of Roman gold and silver are still being unearthed. The owners were hiding their wealth, not from barbarians, but from the swarms of state registered looters.

Don’t think that this couldn’t happen in a democracy. According to Alexander Tytler, an 18th century philosopher: “a democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largesse out of the public treasury”  – out of taxation.

In the new globalized socio-economic conditions, governments chosen by the majority are governments chosen by losers. They are losers because labour has become a commodity, and must compete on price. The International Labour Organization calculates that nearly a billion workers have entered the global job market. Why should the world’s sub-employed all live in developing countries? Automation and exportation of jobs is sending shock waves through western workforces previously protected by national interests, but which are now incapable of fending off foreign incursions. Because of the minimum wage, companies are lowering staffing levels. It is no accident that most are instigating downsizing, delayering and outsourcing programmes.

Because of computerised production, the structured world of semi‑skilled labour, that arose out of the industrial revolution, is now disintegrating.  Professor Richard Scase tells us that in the UK today, more people are working in Indian restaurants than in the iron & steel, shipbuilding and coal industries combined.

Meanwhile, the politicians still pretend to be in control. Trust me, “I’m from the government and I’m here to help” (which according to President Reagan are the nine most terrifying words in the English language). Politicians, both the knaves and the naive, pander to the masses. They say they can conjure up hundreds of thousands of new jobs for the huge number of soon-to-be-unemployed. What a nerve! Businesses create jobs, governments create non-jobs and pensions-in-waiting, all paid for by taxes, and in doing so tax real jobs out of existence.

Today, productivity is delivered by a technology needing only a few machine minders. A typical factory employs one man and a dog. The man is there to feed the dog, and the dog insures that the man doesn’t touch anything. Growth is created from talent, not from low-grade labour. It has been decoupled from employment. National economies can no longer grow themselves out of unemployment. A large population, particularly an uneducated and ageing population, is a now liability: a major problem facing all Western governments. The twentieth century, the century of the masses, is over. A degenerate political system based on manipulating those masses is over too, but it won’t go quietly.

Just as in Ancient Rome, they hang on by soaking the rich. Hence, the wealthy look to escape, taking with them as much of their wealth as possible, and a vicious circle of decline begins. A series of tiny tax hikes, each seeming so obvious, harmless, beneficial even, are the first steps on the road to perdition. There are no alarm bells; life goes on, only with each infringement, ethical standards drip away. Drip, drip, drip, until the floodgates open. Then instead of setting standards and punishing wrongdoers, the government is ‘at it’ themselves. Croneyism is rampant; government has become corrupt and corrupting.

Strapped for cash, they will steal (tax) anything in solid form. Taxes will inevitably rise on fuel, food, clothes and property. ‘Who guards the guardians?’ when morality collapses into vice. The ‘will of the people’, voting for full employment, a minimum wage, and fair taxation, is merely the turkeys voting for Christmas. To stay in power, the government needs to subsidise preferred voters, and so it will stuff the turkeys.

Don’t think the other lot will make any difference. That’s the trouble with elections, the government always wins. And if voting made a difference, they would have made it illegal. Whatever the government, they all face the same problem: income collapsing, and expenditure going through the roof. How dare Chancellors call it a budget, when they just steal even more from the public to pay for their mistakes.

To justify their tax take, the state professes a superior morality. However, the legitimacy of the state does not stem from any unassailable moral position, but from raw power: the domination of the individual by the tribe. This is the same immoral morality that deludes ‘incorruptible’ tax collectors and policemen as to the rightness of their legitimate brutality. Indeed, the enforcers of state power, preening themselves in this sanctimonious morality, are given the right to, nay the obligation to, invade the privacy of its citizens.

Consequently, the wealthy are losing their faith in the nation-state, which supports the profligate and penalises the thrifty. The state no longer delivers its side of the Faustian pact, where the individual submits to the legitimate violence of the state in return for protection and security. Globalization has shown the James Bond myth, that the state is good and global corporations (Spectre) are bad, to be blatant propaganda on behalf of the nation-state: a morality tale told by tax-collectors. James Bond, the patron saint of civil servants, the thug of state, is now just another dirty old man.

The nation-state does not stand on some moral high ground, rather on a squalid collectivist doctrine: we are all equal in that we are all property of the state, or rather of the leaders of the state; and those leaders can dispose of its property as they see fit. All taxation is theft. It is the state obtaining money with menaces. Government is merely legitimate organized crime; and even the mafia doesn’t charge 60%. Taxation without representation may be tyranny, but it’s a lot cheaper than the alternative!

Ralph Waldo Emerson once visited David Thoreau in jail, where he had been imprisoned for non-payment of taxes. Emerson asked “why are you here?” to which Thoreau replied “why are you not here?” Thoreau saw himself as a prisoner of conscience, a political prisoner, and was asking why all free men were not acting in the same way, defending the right of the individual against coercion by government. The morality of the common good should not intimidate the wealthy. The ‘Common Good’ isn’t good, it is merely common!

However the politicos are addicted to, and dependent on their tax take. They won’t give up that easily, and they have found a newweapon: radio-frequency identification (RFID) tags. A tag, costing less than five cents, fitted in each banknote, will uniquely identify that note to every sensor it passes. The authorities will claim its purpose is to combat counterfeiting. Science fiction, you may think. The new 10,000 Yen bills (~$100) are to be implanted with Hitachi’s ‘mu-chip’. Each chip costs around a mere 50 Yen (soon to be 5Yen)! The EU is considering implanting tags in its notes. By insisting that only notes with operational tags are legal tender, governments may cancel the cash of any targeted individual – what a fantastic method for instantly taxing citizens, or destroying political opponents!

The state’s database won’t stop with money. In the name of homeland security, U.S. passports will soon contain an embedded tag. Holland already has tags in its ID cards. This will save the Dutch citizen any inconvenience of having to show the card on request – how thoughtful of the Dutch government.

Officials can validate a person’s identity anywhere they have secreted a reader, and all without the permission or even awareness of that person. The world’s national borders will soon be so equipped, thereby controlling the transnational flow of people. There’ll be no more slipping through customs without paying duty, or carrying suitcases of money to Switzerland. The state will know who you are, everything you are carrying and wearing, and where you’ve been.

But why stop with ID cards. The tagging of pets has been very successful, so why not implant tags in everyone? Just like it says in the Book of Revelations, Chapter 13, verses 16 to 18:

16. And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:

17. And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

18. Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.

The state is the beast, and its number is 666, the symbol of everything evil. Society will be turned into a Panopticon prison, where the Revenue can, not only calculate every tax bill, but also seize payment. In the words of Friedrich von Hayek: “The complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape not merely for the rich, but for everybody”?

Then we can expect ‘differential rights’ for ‘differentiated citizens’, identified in a data-base and policed by smart ID cards. Party members, will use the card to gorge on benefits – euphemistically called entitlements, while opponents, trapped by their Ahnenpass, are harassed, suppressed, and worse. How long before ‘Human Rights’ becomes as outdated as the “Divine Right of Kings’?

Rome used the threat of the Visigoths to extort penal taxes from its citizens. Today terrorism and organized crime are the equivalent justification. If parliament defines terrorism as ‘a threat to the financial viability of the state’, then tax collectors will have the right to sweat a suspected tax evader for 28 days without charge. You have been warned.

The US government may claim it is chasing narco-dollars, but it is using money-laundering laws to track down tax-flight dollars in Switzerland and Grand Cayman. Every global corporation is now at the regulatory sharp end of US extraterritorial muscle. Failure to comply will lead to the seizure of their dollar assets. Compliance with the demands of government: both in US and UK! That’s the next big issue for business; Sarbanes Oxley was just the start. Forget about computer hackers; government regulations are the ultimate denial of service attack on the corporate sector. It’s going to find itself knee-deep in compliance officers.

Don’t expect the EU to protect you. European politicians think that all businesses are run for their benefit, to pay for schemes that will buy them votes. Their tax freedom day is the end of June, a month later than ours, and we come six weeks after the US – they are in mid-April.

The European Union is just another collectivist disaster waiting to happen: the USSR with a forty-year time lag – the EU-SSR.

What do you get when you mix the British Pound (B£) with the EURO? The anagrammatic ROUB£E.

I have one piece of advice for you. In the words of W.C. Fields: “Start the day with a smile and get it over with”, because you’ve got nothing to smile about, when all taxation is theft.


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Progressive Taxation Explained

The term ‘progressive taxation’ sounds so decent, so right, so positive, so fair, so progressive(!). How could anyone object? Socialist politicians love to talk about progressive values – because it sounds like they are talking about progress. In fact, more often than not so-called progressive values are highly regressive. To the Golden geese, progressive taxation means the rich pay more: not just proportionally more, but exponentially more – the ultimate conclusion being the Pomperipossa Effect (see below).

In the hands of greedy politicians, particularly when under fiscal pressure, progressive taxation inevitably leads to a drop in tax revenue. We justify this rather bald statement by using a metaphor of ten friends from various socio-economic groupings who regularly meet up in a bar. We have lifted this description of progressive taxation from the Net. Supposedly posted by 
Dr. David R. Kamerschen, Professor of Economics at the University of Georgia, the good professor actually denies authorship. To quote his website: “Contrary to Internet folklore, Dr. Kamerschen is NOT the author of Tax Cuts: A Simple Lesson in Economics or Bar Stool Economics or anything similar to that. Additionally, he does NOT know who wrote it and he has no opinion on its merits”. Since we too have failed to track down the original author, therefore he/she must remain anonymous, and we feel free to quote the story with impunity.

Every day ten men go out for beer, and the total bill comes to $100. If they paid their bill progressively, that is the same way we pay our taxes, the tally would go something like this:
       The first four men (the poorest) would pay nothing.
       The fifth would pay $1.
       The sixth would pay $3.
       The seventh would pay $7.
       The eighth would pay $12.
       The ninth would pay $18.
       The tenth man (the richest) would pay $59.

So, that’s what they decided to do. The ten men drank in the bar every day, and all seemed happy with the arrangement, until one fateful day when the bar owner complicated matters. ‘Since you are all such good customers’, he said, ‘I’m going to reduce the cost of your daily beer by $20. Your drinks will now cost just $80’.

The group decided they would still wanted to pay their bill progressively. Hence, the first four men would still drink for free. But what about the other six paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share’? Dividing the $20 equally between the six who paid would mean they would each save $3.33. However, that would mean the fifth man and the sixth man would each end up actually being paid to drink his beer.

So, the bar owner suggested that it would be fair to pay the new bill progressively, which meant reducing each man’s bill roughly in proportion to the amounts he paid. So he suggested that:
       The fifth man, like the first four, now paid nothing (a saving of 100%).
       The sixth now paid $2 instead of $3 (a saving of 33%).
       The seventh now paid $5 instead of $7 (a saving of 28%).
       The eighth now paid $9 instead of $12 (a saving of 25%).
       The ninth now paid $14 instead of $18 (a saving of 22%).
       The tenth now paid $49 instead of $59 (a saving of 16%).

Each of the latter six was better off than before, and the first four continued to drink for free. However, once outside the bar the men began to compare their savings.

‘I only got one dollar out of the $20’, declared the sixth man. He pointed to the tenth man, ‘but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I also only saved a dollar. It’s unfair that he got ten times more than I!’ He ignored the fact that originally number ten was paying 59 times as much.

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute’, yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth, and beat him up.

The next night the tenth man, who incidentally had made the smallest percentage saving, naturally didn’t show up for drinks. So the nine sat down and had beers without him – good riddance! But when it came time to pay the bill, they were in for a shock. All together they didn’t have enough money for even half of the bill!

And that, boys and girls, is how the progressive tax system works. The people who pay the highest taxes get the most benefit from a tax reduction – although they also pay the most of any increase. However, tax them too much, attack them for being wealthy, and they may just choose not to show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.

Surely the population at large, or at the very least their representative politicians understand the moral of this story? Raising taxes beyond a certain level will precipitate a backlash amongst the rich, which consequently will lead to a drop in tax revenue. Do they understand? No they don’t. Hence politicians are stuck between a rock (the markets) and a hard place (the voters). The good times are now over, and the financial trouble facing all western economies mean that austerity is staring them all in the face. Be sure they won’t share out the pain equitably – they will be ‘progressive’ about it, and you can expect to see that word liberally scattered throughout political speeches as the moral justification for robbing the rich – who luckily for democratic politicians form only a small minority of voters, although it is a minority who unluckily for those politicians can fly away.

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