Guy News Special: Inside the Guardian's Tax Dodges

Something tells Guido that the campaign against Guardianista hypocrisy is getting to Polly:

Judge not, that ye be not judged.
For with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again.
And why beholdest thou the mote that is in thy brother’s eye, but considerest not the beam that is in thine own eye?
Or how wilt thou say to thy brother, Let me pull out the mote out of thine eye; and, behold, a beam is in thine own eye?
Thou hypocrite, first cast out the beam out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother’s eye.

Motes and beams Polly, motes and beams…

Budget Day Winners and Losers

Winners:

  • Job providing corporations.
  • Internet Service Providers.
  • Business start-ups in northern cities.
  • Sheffield and the “Nick Clegg Memorial Enterprise Zone”.
  • Motorists.
  • Scientists.
  • Local councillors and their £100m to spend on potholes.
  • Charities – 10% death tax cut if money is given away.

Losers:

  • Smokers.
  • Private jet users.
  • Tax avoiders.
  • Councils and their frozen tax.
  • Nondoms.
  • Tree huggers – green belt planning permission up for auction.
  • Sleepy Ken Clarke.
  • George Osborne’s throat.
  • Whoever came up with last year’s growth figures.
  • Ed Miliband’s press team who sent the speech out before Red Ed had floundered through it with whole sections changed.

Tax Transparency

Guido was at a private dinner last week held by an influential think-tank; around the table sat a senior Tory tax policy expert, right-of-centre wonks and an investment banker turned MP newly promoted to the government payroll. The talk was of consolidating national insurance and income tax into one headline figure. The Mail and the Sunday Times have been given the same steer that it is on the budget agenda.

The myth that national insurance is some kind of insurance to fund the welfare state no longer fools anyone. NI is just another income tax, even if it is called “employer’s NI” it is still a tax on the employee’s income. Consolidating the taxes will make income tax more transparent, the headline starting rate  is really 32% not 20%, higher rate taxpayers pay 52% not 40% of their income in taxes. The marginal rate for those on £100,000 is 60%. Making this clearly transparent will make it easier in the long run to win the political argument that we are taxed enough already. It is politically difficult to justify taking more than half a worker’s income in taxes, Guido would further argue it is immoral for the state to take the majority of the fruit of our labour. Feudal serfs kept more of their income. Transparency on taxes will inform the argument more clearly to the public.

The bad news is Osborne is expected to bring the 40% higher rate threshold down to pay for a rise in the lower rate threshold, putting 750,000 more taxpayers on the higher 40% rate. That’ll be the squeezing of the middle…

UPDATE: From the comments:

Employer’s NI is paid on all income and Employee’s continues at 1% after they reach the upper threshold The resulting tax rates are therefore 43.8%, for basic rate taxpayers, 53.8% for middle rate taxpayers, and 63.8% for those paying top rate tax. NI is going up in April so you can add 2% to all these rates.

Helping "Squeezed Middle" Families French-Style

We think of France as far more socialist than Britain yet French middle class families are far better off than their British equivalents in after-tax terms, despite higher basic rates. French taxpayers get an allowance of up to €2,300 per child under 7 years of age called les frais de garde d’enfants towards the costs of child care outside of the home, a small tax rebate called les frais de scolarité for each child in education and up to €6,000 rebated for l’emploi d’un salarie a domicile covering a house-keeper or nanny. In addition there is the quotient familial to minimise the impact of higher rates of taxation on families with children, it actually increases your tax allowance as you have more children. All these fiscal incentives encourage the French tax-paying middle classes to have kids.

The think-tank research out this morning showing that Britain is the worst country in Europe for taxpayers to have kids is only the half of it. In Britain we incentivise those who can’t afford to have children to have kids by paying them more welfare benefits and upgrading their state housing. This has created a multi-generational underclass who vote Labour to keep their benefits. Anyone would think it was Gordon’s deliberate plan…

Shouldn't the Guardian Come Clean?

This email has just been sent out to subscribers to the Guidogram:

Dear Co-conspirator,

We need your help fighting left-wing hypocrisy. For months The Guardian has been attacking the City, bankers, hedge funds and companies like Barclays and Vodafone for using legal and prudent tax strategies. Over the past two days Guido’s blog has revealed that the Guardian Media Group has itself hundreds of millions of pounds of assets held offshore in the Caymans and invests tens of millions in hedge funds.  They have been caught hypocritically doing exactly what they condemm others for doing.

On Monday we revealed that the Guardian is guilty of exactly the same business practises it deplored Barclays doing The Guardian: Uncut and Full of Cant

Yesterday Guido wrote an open letter to Alan Rusbridger asking him to come clean after we revealed tens of millions invested in hedge funds by the Guardian Media Group: Guardian Invested Millions in Hedge Funds During Banking Crisis – Editor Rusbridger on Board Which Approved Strategy

Today we’re asking you to call out the Guardian editor on his paper’s hypocrisy, if you have a Twitter account we’re asking you to tweet directly to the Guardian’s editor, Alan Rusbridger, a clear message to #ComeCleanAlan by just clicking on this birdie image:

Help fight hypocrisy by just clicking.

Guido

An Open Letter To Alan Rusbridger

Guardian Invested Millions in Hedge Funds During Banking Crisis Editor Rusbridger on Board Which Approved Strategy

Earlier this month the Guardian front paged a story revealing that the City of London accounted for £11.4 million of the Conservative Party’s funding in 2009 – 10, in lurid terms we learned of the millions passed to Tory coffers by rich hedge fund managers. Guido can reveal that during that same period the Guardian Media Group’s coffers gained £39.3 million from investments in hedge funds. More than three times as much as they castigated the Tories for taking from hedgies…

GMG owns the Guardian and Observer newspapers, where journalists and columnists rail against the City, hedge funds and the short-termism of pin-striped financial traders. Documents obtained by Guido reveal that the GMG board approved investments now totalling £223.8 million in speculative funds in a range of assets. Alan Rusbridger, editor of the Guardian, sat on the board which approved the hedge fund investment plan, the board was at the time chaired by Paul Myners who also sat on the board of GLG partners, a hedge fund which is widely reported to have made big profits shorting UK banks.

The funds are traded by a number of specialist fund managers, overseen by the giant U.S. based asset manager Cambridge Associates. Cambridge Associates is a secretive, privately held firm with a client list which includes billionaires and government sovereign wealth funds. Guido has discovered that the £223.8 million is invested in emerging markets, bonds and hedge funds. The investments are principally in US Dollars and offshore from the UK.

In the small print of GMG’s 2009 Accounts

These short-term funds are in addition to the GMG assets held in Cayman Islands domiciled corporations where the rate of corporation tax is zero. Sources suggest that GMG has between £300 million and £500 million held offshore in these opaque special purpose vehicles. Such tax haven domiciled corporate vehicles are used to shield assets from tax. Guido has discovered that one GMG controlled Caymans corporation was incorporated as recently as March 2008, a mere 5 months before the banking crisis wreaked havoc on the global economy.

So far GMG has ignored embarrassing questions posed since the winding up of the old Scott Trust. What Guido and many confused Guardian readers would like to know is how the use of these opaque investment vehicles is compatible with the public positions taken by the newspapers and even members of the board. Will Hutton for example is a former editor of the Observer who sits alongside Alan Rusbridger on the board of the Scott Trust Foundation. Is Hutton, a noted campaigner against hedge funds, comfortable with GMG having hundreds of millions in assets both offshore and invested in hedge funds? Are the perennially loss making Guardian newspaper’s columnists like Polly Toynbee happy to have their six-figure salaries paid out of the profits of hedge fund raids on the currencies of emerging market countries? Isn’t it about time the Guardian’s senior executives explained openly and honestly to its readers how it really survives despite losing money every year?

The Guardian: Uncut and Full of Cant

On Saturday morning The Guardian decided to give UK Uncut a front page boost.  The protestors managed to shut down three dozen of the 1,720 branches of Barclays bank. Surprised they found any branches to occupy given Saturday opening hours.

The gist of the shabby story was Barclays bankers are evil tax dodgers. The evidence was a hatchet job with the paper making the spurious claim that Barclay’s only paid 1% tax on their £11.6 billion profits. In arriving at a profit before tax figure of £11.6 billion, The Guardian has added the profit from the ongoing business (£4.5 billion) to profits from a disposed business (£726 million) and the gain made on disposal of that business (£6.3 billion) to reach a total of £11.6 billion.

What they chose to ignore however was the total tax take Barclay’s had to pay; payroll taxes, bank levy, non-recoverable VAT, employers NI, SDRT and so on. Over the weekend Tim Worstall and the FCA Blog tore chunks out of the piece:

The article compares the cash paid to HMRC in respect of UK corporation tax in 2009 (£113 million) to the profits generated by the consolidated Barclays group worldwide in 2009. In the UK, tax is paid in arrears, so 2009 taxes would relate to widespread 2008 losses, not 2009 profits.

Multinational companies such as Barclays pay tax in a number of jurisdictions. Generally speaking Barclays only pays UK corporation tax on profits it generated in the UK.  Anything earned outside the UK doesn’t get taxed here. So it’s a howler to compare the UK corporation tax payment to the global consolidated profit. Most of those profits were taxed where they were made.

In 2002 (under Gordon Brown, Chuka), the UK government introduced the substantial shareholdings exemption, a corporation tax exemption for UK businesses disposing of a substantial shareholding in a part of their business. The idea was that businesses should be able to restructure their businesses without having to worry about chargeable gains implications. Barclays are heavily criticised by The Guardian for using it.  The last time that Guido saw this being used was by the, err, Guardian Media Group to save themselves some £60 million of taxes in 2008:

“In 2008 GMG sold half of Auto Trader publisher Trader Media Group and made an exceptional (one-off) profit of more than £300 million. No tax was payable on the return from that sale because under UK law GMG qualified for SSE”

In 2008 The Guardian made £302 million in profits and paid no corporation taxes. The CEO, Carolyn McCall, was paid an £827,000 package. Yet we don’t see the UK Uncut crowd kicking up a stink about The Guardian’s tax structures or their fat cat pay and bonuses.

Over the weekend the Guardian editor Alan Rusbridger (half-a-million a year since you asked) tweeted about Barclay’s offshore holding corporations. Guardian Media Group holds hundreds of millions in assets in a Caymans Island domiciled offshore corporation.

Guido put it to the GMG press office that GMG has £223.8 million invested in an overseas/offshore hedge fund managed by Cambridge Associates which trades currency derivatives. They don’t deny it and have declined to confirm the fund’s structure for tax purposes.

Guardian readers seem to be under the illusion that it is owned by a not-for-profit charity. The Scott Trust was wound up in October 2008 and the Guardian is a for-profit-privately-owned media business, the well paid directors of which confirm in their annual accounts that they operate tax strategies in line with their fiduciary duty to the shareholders – just like any other business.

The old Scott Trust was set up in 1936 to avoid inheritance taxes and wound up in 2008 so that GMG could cynically exploit the SSE capital gains tax shelter to pay 0% in corporation taxes on their £302 million in profits that year. GMG claim that it was about modernising the holding structure, in fact it was a disingenuous cover for corporate venality.

For three quarters of a century the The Guardian has been shirking taxes, Guido has no problem with them acting in their shareholders’ best interests. The hypocritical cant from them however about others doing the same is beyond contemptible…

Don't Mention the War

The news that more than half of the council chief execs are paid more than the PM has caused a fair flurry of chatter today. It made it out on to the wires and was picked up by almost all of the news outlets. Except the BBC. A quick look over at the website and it seems large publicly funded salaries are not something they wish to talk about.

Funny that.

Balls 1, Osborne Nil

No hangover from the Black and White Ball for George Osborne, he was up bashing bankers at the break of dawn. And what a coincidence he’s up against Balls in the House today in what will no doubt be the first of many ugly brawls. However before they even face each other, Balls has won the day.

Last night Balls claimed Osborne was “all talk and no action” and as if by magic Osborne gave ground. While the extra £800 million levied on those driving growth in the City will blunt Balls’ sword today, what about next week and the week after that? Will Osborne raise a tax a week to avoid standing by his principles?

Double Dip Fears Grow

The half-point fall in GDP has serious political ramifications. If we get a second quarter of what Gordon Brown would call “negative growth” we will be in recession. Ed Balls will have been proved right and George Osborne’s credibility will be shattered. One policy change could prevent that happening. Suspend the VAT hike.

The short-term political hit of executing a u-turn versus the wrecking of the long-term mission to cut the deficit is a calculation that George Osborne won’t like to make. He is touring the studios saying that he “won’t be blown off course by bad weather”. The trouble is he is making the bad weather with this VAT hike.

The VAT hike depresses GDP growth, adds to already rampant inflation and hits the poorest hardest. If GDP in this forthcoming quarter is slightly negative, he’ll have only himself to blame. Why maintain a tax hike that suppresses the very consumer spending necessary for growth?

Publicans Call Out Booze Bull

Guido didn’t weigh in on the minimum pricing story yesterday because if he jumped on every broken promise from Dave he would be typing till the cows came home. Instead of living up to his promise of being on the “cider” pubs (gettit?) Dave is continuing the crippling of the industry. Proponents of the hike Alcohol Concern say “duty is so low in the UK, that it will still be possible to sell very cheap alcohol and be within the law.” Something that is frankly nonsense given booze duty is up 26% in the last two years. The British Beer and Pub Association are quick to hit back. Just look at the how much tax Brits pay on their drink compared to their neighbours:

It’s not much better here in Ireland, guess Guido will have to stay in France more often…

More Left-Wing Tax Hypocrisy from Richard Murphy

In what is a bid to soothe ruffled LibDem feathers, rather than in response to the looter’s protest, the government has just announced a new clamp down on tax avoidance. Guido mentioned at the weekend how quiet the left were about the Guardian’s tax avoidance in contrast to their attitude to Philip Green. There hasn’t been a squeak from the likes of left-wing millionaire Richard Murphy, a Rowntree and TUC funded, self-styled “fair tax” expert. But then he did give the Guardian Media Group accounts his seal of approval, after GMG made a £302 million profit in 2008 and paid not a penny in corporation tax.

Murphy, of the Toynbee school of hypocrisy, seemingly wears his principles on his sleeve and argues for anti-avoidance measures and crucially that the philosophy behind tax collection should be judged by the spirit not the letter of the law. However has Murphy  always practised what he preached?

Before he discovered the cause of “Tax Justice” between 2001 and 2003 he wrote technical articles for The Guardian advising how to minimise tax on employing a nanny, how to minimise tax for the self employedmaximise your tax allowance through taking out a stakeholder pension and attacking legislation which requires accountants to report tax evasion. On second reading Murphy’s recent line that he was just highlighting the holes doesn’t really wash, especially when his own tax practises are examined.  Although Murphy puts his home address on all his business literature – it is the registered address for all his companies – he does not pay business rates on the property. Not quite within the spirit of the law now is it…

Polly Missed Guardian Tax Justice Demo

In February 2009 Guido’s co-conspirators held a tax justice demo outside the Guardian’s spanking new HQ. Shouting “Scott Was a Tax Evader” and “GMG Fat Cats Pay No Tax”. We didn’t manage to get any support from multi-millionaire, three home-owning, anti-poverty campaigner Polly Toynbee. We would have dragged her out if we could…

The Guardian Media Group is one of the shrewdest corporate avoiders of tax in Britain, in 2008 it made a £300 million profit and yet managed to pay no corporation tax, the following year in 2009 it still paid no corporation tax, it uses the offshore Caymans tax haven to own assets, it uses tax efficient trusts and deploys all manner of perfectly legal tax shelter strategies to avoid paying tax. Polly seems silent about this tax dodging…

See also: Guardian’s Tax Hypocrisy is RidiculousTax Justice Protest Against Guardian Tax Dodging

Defending Philip Green Against the Looters

Philip Green is a sharp businessman who turned round the Arcadia chain when they were closing shops and made them profitable. He turned Top Shop from a fading also ran into an international brand with cheap chic credibility. In doing all that he secured thousands of high street jobs, boosted profitability and made a billion.

He bought Arcadia via an offshore company, perfectly legally and paid that famous billion pound dividend perfectly legally. He did it the way he did it because this country punishes entrepreneurs and risk takers with capital gains taxes on top of income taxes. Double taxing those who create and produce.

Arcadia pays hundreds of millions in taxes every year, VAT, carbon taxes, stamp duty, business rates, National Insurance, employee’s income taxes and the myriad of other taxes that penalise enterprise and entrepreneurs. That isn’t enough for the type of parasites and political activists the great novelist Ayn Rand correctly identified as “looters”.

The looters are killing this country because, in their humanitarian noble-minded, public-spirited contempt for entrepreneurs, they forget how much they rely on entrepreneurs. With each new restrictive regulation designed to enhance equality and “justice” they make it harder for the remaining entrepreneurs to create the Vodafone-supplied iPhones from which they tweet their bleatings about “fighting the cuts”. Self-styled Anarchists” calling for higher taxes to fund a bigger state are no anarchists.

Philip Green deserves his billions, he is a self made man who left school at fifteen, worked hard, took risks, clearly enjoys himself and defends his just rewards from the rapacious grasp of the tax man.  If only we had one hundred more Philip Greens…

Iceland Shows the Way Forward for Ireland:Decouple, Default, Devalue and Develop

Iceland’s President, Olafur R. Grimsson, told Bloomberg TV on Friday that his country is better off than Ireland because they allowed the banks to fail two years ago and devalued the krona:

“The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

The Irish bank bail-out is being foisted on them by the EU and the IMF whereas sovereign Iceland let the banks go bust and restructured the financial sector to keep the commercial sector serviced. As a consequence, “Iceland is faring much better than anybody expected” says Grimsson:

“How far can we ask ordinary people – farmers and fishermen and teachers and doctors and nurses – to shoulder the responsibility of failed private banks… That question, which has been at the core of the Icesave issue, will now be the burning issue in many European countries.”

Under this plan 20 cents of every euro of Irish taxes will go to pay the interest on the bank bail-out debts. The Irish bail-out plan will cost €54,800 per Irish household. Ireland’s future thus looks a lot more bleak than Iceland’s path of debt default and a devaluation of 60% two years ago which has the country rebounding: exports and manufacturing are growing by 20%, tourism is back near all-time highs, real wages are rising, unemployment is declining sharply, interest rates fell from 18% to 5.5% and the stock market has rebounded 50% from its lows. In contrast this euro-banker’s bail-out will only burden the next generation of Irish who don’t flee with crushing debts not of their making…

Britain and europe should keep their bail-out billions rather than foist them on Irish taxpayers to cover the responsibility for bad investments made by their own private banks. They can use the billions to bail-out their own banks directly if they want, without involving the Irish taxpayers…

How Liam Byrne Could Help the "Squeezed Middle"

Liam Byrne says that the “squeezed middle” are those on between £16,000 to £50,000 and Labour’s task in reviewing policy is to help them. Guido is glad to hear it. Presumably he would therefore support those struggling on middle incomes being taken out of the higher-rate tax bracket, which kicks in at a ridiculously low £37,401? That is smack bang in the middle of the range he defines, surely it should kick in at £50,001, above the income levels of those hard squeezed middle classes. C’mon Liam, review that policy…

Poll: 76% Say Scrap the Beeb

Guido’s poll yesterday sampled more people than most polling companies manage for their political polls splashed across national newspapers. He likes to think his readers give a fair and balanced view too. The results are in and show an overwhelming desire for the BBC to be scrapped:

These one IP address, one vote polls might be a regular thing…

Guido's Advice to Alan Johnson

Alan Johnson has been very self deprecating about his economic knowledge, promising to get a text-book to brush up. He faces George Osborne at the Dispatch box for the first time today.

In truth to be Shadow Chancellor does not require a knowledge of neo-classical endogenous growth theory. He needs to just pick a few issues with which to harry the government. Guido checked Alan Johnson’s website to discover a flavour of his approach to economics. Unfortunately he doesn’t appear to have one. All Guido could find under the “business and economy” heading was a press release about the PBR dating back to December 2009.

Since Alan seems devoid of his own ideas, perhaps he could borrow some ideas from his fellow progressive Barack Obama? Obama is giving individuals a progressive tax break this year of 6.2% of earned income up to $400 for individuals and up to $800 for couples, phased out at an income of $75,000. Obama is also giving parents a $1,000 tax break per child (in France it is €5,000) that would please the squeezed middle-classes.

Barack Obama says that the the one thing you don’t do in a recession is raise personal taxes, taking money out of the economy. Alan Johnson should stand foursquare against Osborne’s VAT hike. The Coalition has no mandate for it, in fact half of them campaigned against it. If the economy double dips next year as a result of consumer spending being crushed, Johnson needs to position himself to be able to pin the blame on Osborne’s VAT hike…

Maggie's Children

A Comres poll for Newsround has shown just how sound the latest generation of 18-24 year olds are. They overwhelmingly accept the need for spending cuts and would much rather slash the state than have their already burdened wallets hit by more taxation.[…] Read the rest

+ READ MORE +



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Quote of the Day

Tory MP Nick Boles says what everyone thinks…

“There is a timidity and lack of ambition about Mrs May’s Government which means it constantly disappoints. Time to raise your game, Prime Minister.”

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