insidious greed – HSBC

If you’ve not been following along today, it’s well worth reading back through the BBC Business Live News feed on the HSBC Tax Avoidance scandal. It is indeed the perfect example of the sort of insidious greed that is destroying society today.

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It’s not just the “me” culture that is all around us, but the industry and culture that is behind it. Rather than pay taxes now, there is a whole industry on tax-avoidance. It’s become an accepted practice, mostly illegal, certainly immoral and to deflect interest in their actions, just like with the bully at school, they deflect criticism and investigation away from their own failings, by making a big deal about those who can least defend themselves.

The amount of tax avoided, mostly illegally, by the HSBC 7,000 will have gone along way to dealing with many of challenges that the UK is currently facing, and the austerity measure they are taking.

Add to that the same offshore tax dodges being employed by large companies, and the industry of sleeze ball consultants, awarded for advising, aiding, and making this possibly, doing everything from advising, writing, and ultimately even joining governments to implement tax policy that facilitates this has got to stop.

It’s easier to blame welfare cheats, immigrants, in fact anyone than themselves. Here in Texas we have both past Governor Perry, and current Governor Abbott continually railing against the Federal Government. Under Governor Perry, we had the HHSC(Ed: no relation) contract scandal, with the State going with a no-bid contract, with little oversight and unclear results to again go after the “little people“. It’s much easier to make them the problem than deal with the problem of insidious greed of the wealthy and their legions of shills.

hsbc taxWatch this extract from the BBC Panorama show to get a quick summary, or read the summary here.

Wonky property taxes

The new Austin 10/1 council is pretty much settled after the run-offs. The new districts will be represented by 9 new Council members, two of whom are Realtors, a new Mayor with zero Council experience, all voted in by an appallingly low voter turnout especially in the runoff elections. In District-3,  Sabino “Pio” Renteria won with just 2,555 votes, a victory by 833 votes… I assume a mere $10,000 could have bought victory for  his opponent by paying locals $10 to go vote. I bet that TV and newspaper advertising looks lame now.

propertytax1One of the flagship, priority subjects will no doubt be property tax. Most candidates had a position on it, almost all want to discount or cut it. Hold on, not so fast. Anyone who actually thinks it through knows, property tax has almost nothing to do with affordability. I can certainly easily pay for my taxes now, but the question is, will I still be able to pay them in 20-years.

That’s certainly the problem most long term residents of the core/downtown neighborhoods face now. They generally live in modest homes, whose lot price and property tax evaluation has gone through the roof. The guy that lived opposite me, 73 when he died in April, couldn’t afford to retire. He was an (arthitic) plumber. He was paying, even with an age discount, more per year than he paid for a mortgage when he bought the property with a small deposit from his mothers estate after she died.

That effect can’t be allowed to continue for many reasons, not least because it is not acceptable. That people who have lived in their home, in what was often a modest property, in a less attractive neighborhood,are now, in their later years, being forced to move. A time when you often are less prepared for change, less able to make new friends, less willing to learn where to go and to get to pretty much everything.

Yes, they can make a ton from selling, and yes, many may chose to do that to move into assisted living, but they shouldn’t be forced to because thy cannot afford property taxes.

The whole issue has become conflated in the usual Tea party, “any tax” is to much rhetoric..  Rather than everyone jump on the bandwagon demanding a property tax cut, and the new 10/1 council lauding it around as having done something important, which the current proposal, clearly isn’t.

Julio Gonzalez has two great posts that show what the current proposal means on his Keep Austin Wonky blog. The Homestead Exemption debate in 2 minutes and 10 bucks or 10,000 homes

Happy 4th to all my US Readers…

My yearly token protest
My yearly token protest
Happy 4th of July. This was my token yearly protest at 6:30am this morning, throwing a tea bag into Lake Austin from the Congress (bat) bridge. No taxation without representation!

The reality is I pay little tax in Texas, not counting what the State takes from the federal government. However, I for one would be willing to pay state income tax if it helped fix the deep inequalities in the property tax, which have arisen from people like me moving to Austin, and driving huge increases in property taxes. The state of Travis county property taxes is in itself deeply unjust for those that have lived through the lat 30-years in their same houses and now find assessments leaping up yearly by the maximum allowed. My property tax appeal will be heard in August.

Not withstanding my complaints and attempts here to understand the massive bias to big business in Texas, and the unjust social impact that regulation has on minorities, and more recently, women. I really like it here. Happy 4th!

The Great American Ripoff: The High Cost of Low Taxes

Americans pay almost four times as much as the citizens of other wealthy countries for things such as retirement security and health care on the private market – 10.6 percent of our economic output versus an average of just 2.7 percent among OECD member states.

via The Great American Ripoff: The High Cost of Low Taxes | Connecting the Dots, What Matters Today | BillMoyers.com.

Bill Moyers website has a great perspective on the whole state vs private industry, tax vs pay debate. It shows that Americans for the most part want what the government provides, well-maintained infrastructure, safe food and clean water, efficient firefighting and policing, Medicare and Social Security and virtually every other government-provided service you can name. Most Americans though think that a lower tax bill – especially for federal taxes — The article shows, with figures, that those low taxes actually work against the economic interests of most Americans.

That’s because we pay ridiculously high out-of-pocket costs for things that are provided by the public sector in other developed countries. The difference is quite dramatic.

How Turbo tax is keeping taxes complicated

As we head towards US Tax season and the whole circus that surrounds it, I am as always bewildered how complex and how much effort has to go into filing your annual personal taxes, so much so, I’m behind and won’t be ready again. Worse still, for Tax Year 2012, I have my personal taxes and 2x businesses taxes to file.

Like so many things, Americans make, and thus assume taxes have to be complex. Businesses make marketing campaigns out of tax refund checks, you can get everything from interest free payments “until you get your refund”, to payday loan advances o n your refund check. And we all know that any kind of payday loan is the scum of the earth no matter how broke you are.

So why am I shocked, disappointed and angry to find out that the bellwether of tax filing, Turbo Tax aka owner Intuit, is not only against this, but actually spent some $12-million lobbying against a totally simpler process. It’s a disgrace. However, the longer I’m in the US, the more I’ve become disappointed with how selfish and backward these businesses are, like all businesses, faced with a challenge rather than adapt, and move on; look for new business, they defend their monopolies, or duopolies in this case, since apparently H&R Block also opposed this change.

So, whats the fuss?

  • Most of us in the employment of someone else have taxes taken from our paycheck
  • Many are outraged by this “interest free loan” to the government, but have you checked interest rates lately, good luck making more than the price of postage from the interest you’d get from most monthly tax deducations.
  • It’s your money if you get it back, if you don’t, it wasn’t yours in the first place
  • It’s obvious, if you regularly get a refund check, you should up your witholdings and have less deducted

In the UK it works just the same; only you don’t have the ridiculous end of tax season circus. Yes, the top 20% of tax payers, which included me when I was there, had to file annual returns. Yes, those with stock, shares etc. benefited from filing these returns as you can claim precisely sold, profit, loss, capital gains etc. Obviously those in self employment and those with complicated tax affairs had to file returns, but for the working person, you got a tax code which reflected

  • Previous income
  • Marriage status
  • Number of tax dependents inc. children and other qualifying dependants

The amount of tax deducted from your pay is based on that code. If you need to adjust your code, because of circumstances, or because its wrong, you can. Each year the government sends you a summary account, based on your earnings, deductions, and a new code for the following year taking into account any legal or tax code changes.

If your circumstances or the tax code change significantly, you can end up owing money, or getting a refund. The refunds in rare cases can be big enough to warrant a refund but are more normally handled by changing your tax code for the following year to balance out. If you end up owing the government money, if it’s a small amount, they can alter your tax code, if it’s a large amount, you have to work it out direct with them. And thats all there is to it.

Like so many things, here in America, eveything is a battle, no one trusts the government, and everyone hates paying taxes, even though they are quick enough to demand benefits, medicare or medicaid when they need it, even though most Americans pay less than 2/3 what the average UK worker does in payroll taxes. Honestly, I don’t understand why the taxes are done the way they are.

So it came as a complete shock to find that the US Government has been trying to setup the same process. There is no conspiracy behind it, just a much simpler way to handle the tax affairs of a couple of hundred million Americans. You would:

  • Still be able to file a separate tax return
  • Still be eligible to a refund for overpayment, or owe for underpayment

Think of the time, effort etc. saved once the system was up and running. Both the current President, and before you howl about the plot, and former President, Republican and tea-party icon, Ronald Regan supported simplified filing, using pre-filled forms.

Really, there is no plot, the government does a calculation on your tax anyway, only now it would share the result with you, instead of holding it in secret and waiting for you to file and then using it to decide to audit you.

In 2005, Norquist testified before the President’s Advisory Panel on Federal Tax Reform arguing against return-free filing. The next year, Norquist and others wrote in a letter to President Bush that getting an official-looking “bill” from the IRS could be “extremely intimidating, particularly for seniors, low-income and non-English speaking citizens.”

Unlike say all those very official, fake government letters they get now from loan sharks, life insurance sales, car warranty companies etc. that show up on a regular basis.

If you are considering using Turbo Tax or H&R Block this year to help with filing taxes, think again. They are like drug dealers, making you dependent on a broken system and keeping you there. Go find a local non-profit to help; pay a local tax attorney if you can’t do it yourself. Sure, they won’t help you model your tax return to get the refund check you want, even if you do owe money, but better that than funding lobbyists to keep you dependent.

When heros were not zeros

So the election is over, I’m still struggling with the reality of what candidate Romney said he’d do and what President Romney would have had to do. A couple of recent things illustrate my confusion. Much of what the republicans were doing was looking back, back to a time when America was a producer, not just a consumer. Sure things are made here now, but so much of what we consume isn’t.

Here in Austin, at yesterdays City Council meeting, a big deal was made out of the package of incentives given to Visa to set-up office in Austin. Visa claim to be brining 800 jobs to Austin with an average salary of over $110,000 and in return they are getting some $10-million in tax breaks and other financial incentives. Texas gives away the highest tax breaks of any State in the nation, this week the NY Times ran a story on this, with the winners and losers.

The other piece of news that peaked my interest this week was the news that Apple would start making its’ Mac computers in the USA again, relying on tax breaks, and likely in “partnership with with FoxConn”. We will probably never know what this actually means since all tech companies try to keep their hardware operations veiled in secerecy, given the plummeting cost of hardware, that makes even the slightest improvement in process or manufacturing, potentially worth a fortune.

And there is my dilemma. Two big deals, both dependent on tax breaks, which ultimately either require some to pay more taxes, or services to be cut. The problem I have with Candidate Romneys proposal, was that it seemed to do both. While it made great political grandstanding, to claim to cut benefits and big government, the only way it made any real sense, was if he wanted or believed he could turn America into a low wage economy at the bottom of the stack, making people work for subsistence salaries, rather than get benefits and do nothing.

You could argue either way on this politically and humanely, but it would require huge tax incentives, which would be paid for by cutting benefits and effectively forcing people to work, which many would argue, isn’t a bad thing. However, the real problem is that there is a big difference between make and assemble. Assembling products in America would be entirely do-able. Making them much less so.

And, there’s the rub. In order to make things, you need the raw materials. For the last 20-years, and especially the last 6-years, the Chinese have cornered the futures markets in almost everything you’d need to make anything useful, their futures markets themselves have become essential in day to day trading.

So, I’m guessing Apple will be doing more assembly than making, FoxConn will be doing the making. In the next 4-years the Republican party is going to have to come up with a forward looking strategy, rather than a backward looking one. If that strategy is dependent on manufacturing, then it’s going to need a big government, even if only to cover the tax breaks needed to kick-start it. We’ll need real heroes to do achieve that, not just people who measure their value by the number of zero’s in their net worth.

to Tax or Not to Tax…. debt is the question

Sat watching the BBC News tonight, my heart rate raced a few beats higher as I watch the Chief Accountants from Apple, Google and Starbucks in the UK defend their accounting process which has meant they’ve largely avoided paying UK Corporation tax, and particularly the hapless public policy wonk from Amazon.com, Andrew Cecil.

I’m glad I’m not working at Google in the UK, who at least as far as their management seemed to be concerned, don’t “innovate” in the UK. oops. Interestingly I used to work with Nelson Mattos at IBM, I wonder what he thinks now?

Starbucks came in for some extra questioning since they were paying dividends to shareholders and telling them, their business in the UK was doing fine, while at the same time declaring a financial loss and using the tax scheme, appropriately to shelter their profits from that loss. The BBC News piece is here.

Margaret Hodge, who chairs the parliamentary committee, told the BBC that she thought it was right for customers to boycott the three companies.

As entertaining as this was, and at first watch/read I was inclined to agree with Margaret Hodge over a boycott. After 15-mins of reading revealed a much more open/shut case that the MP’s need to deal with, that effectively shows Ms. Hodge protestations to be little more than a magicians use of mis-direction.

It was Hodge’s peers in the Labor Government which she joined in 1994, that handed over the water industry to the private sector. Where was the rambunctious questioning, hand waving, pointing and questioning while the water industry was moving all it’s money overseas, and steadily doing a better job at avoiding tax?

Thames Water have paid shareholders handsomely, moved money offshore, and burdened their company with so much artificial debt that according to Moody’s, the credit rating agency, says they can no longer afford the debt aka investment needed to do the infrastructure projects like the new $4.1-billion Thames bypass tunnel, proposed to stop sewage draining into the River Thames.

As Will Hutton’s article in the Guardian sums it up the best, Thames Water – a private equity plaything that takes us for fools. Let’s see the politicians doing something about this, and avoiding asking the taxpayer to either underwrite, or bailout Thames Water before going after the “tech titans”, otherwise these hearings remind me of the barn door, shut after the horse has bolted.