CinnabarRed's tax thread

Share the profits, yes. But apparently not sharing the risk....

Woah niceguy2! Please play nicely on this thread. Everyone's entitled to his or her opinion.

Best guess? Perhaps £5bn per annum. In the same ball park as HSBC anyway.

Here's my post on the HSBC thread for the calculations:

Last year, total tax revenue collected by HMRC was just a shade under £409 billion. That's income tax, VAT, NIC, Corporation Tax and all the other odds and sods.

My best guess estimate for how much tax HSBC pays across to HMRC is around £10 billion. That's made up of CT, PAYE withheld from employees, employer and employee NIC and irrecoverable VAT.

So around 2.5% of all tax take comes directly from HSBC or from its employees.

If HSBC were to shift to Hong Kong then its UK retail banking operations would stay here, of course, and those would still be tax paying. So you could argue that the £10 billion figure is an overestimate. That said, there would be a knock-on effect for all the other businesses that're reliant on HSBC, so I reckon that around £5bn to £8bn in lost tax is about the right figure.

£8 billion in lost tax is roughly equivalent to increasing the basic rate of income tax by 5p, or 2.5% increase in VAT.

I very much doubt that it would be possible to collect £8 billion per annum from the rich. Have you ever heard of the Laffer Curve? It's the idea that when you raise taxes you collect less that 1p of tax for every 1% rate rise, because the increased tax disincentivises people from making the effort to earn more. That's the reason why the [correction: it was the Adam Smith Institute, not the IFS as per my previous posting] - has calculated that the 50% income tax rate will actually cost the country, rather than raise revenue.

So, in my view, if HSBC leaves the UK we would be screwed.

The problem is that the UK is used to thinking of itself as the only place worth doing business, and hasn't really woken up to the fact that the various pluses of being here (time zone, language, educated workforce, benign income tax regime, etc) are starting to be outweighed by the minuses (poor transport links, high house prices, red tape, somewhat unbusiness friendly corporation tax regime when compared to many other places, etc).

The press reports today that Barclays is considering moving its corporate HQ from the UK to NY.

In the interests of fairness I should point out that any such move would not be tax motivated - it's about avoiding compliance with the new EU and UK rules that increase the amount of "safe harbour" capital banks should be obliged to hold.

I know about the taxation of the banking sector, but only have a layman's knowledge of the regulation of it. It seems to me that the banks screwed up royally, and that they should be obliged to hold more capital in the future. So I'm not feeling overly sympathetic towards Barclays this morning.

But if there's anyone out there who knows more, I'd like to hear from you.

Here's an extract from the Telegraph with a bit more detail:

New York mayor hopes Barclays will exit London

The Daily Telegraph, March 31, 2011

New York's mayor has said he would like Barclays to move its headquarters to the city a day after the release of an analyst note suggesting the bank should consider redomiciling. Michael Bloomberg, the city's billionaire mayor, said Barclays moving its main office to New York would be "great for us". "I hope they move here," he told reporters. "Every day, every city in this country and in this world is trying to get those businesses." His comments follow the publication of a report by UBS that said Barclays should consider relocating its main operations out of the UK because of the likelihood of strict new regulations on the banking sector. Mr Bloomberg's comments came as Bob Diamond, chief executive of Barclays, warned that forcing banks to hold more capital would mean nothing unless the lenders have a plan in place to allow an orderly wind?down. So?called "living wills" are crucial to making the banking system safer and must be put in place ahead of meeting new capital requirements, Mr Diamond said yesterday. "For banks that are resolvable, judgment will need to be applied about the level of capital required, so discussing ideal capital levels absent of these plans misses the point," he said. Speaking at a Morgan Stanley?organised event, Mr Diamond told the audience that Barclays was at an "advanced planning stage" of finalising with the UK authorities its own living will should the bank ever need to be wound down.

I've just read my last post back. I'm sorry if it sounds trite, patronising or approving of unethical behaviour. I entirely understand your desire to buy British and Ethical, and in fact I do the same when I can. I just wanted to emphasis how few businesses there are which haven't moved at least one aspect of their business from the developed (high tax high costs) world to the developing (lower tax low cost) world.

What I would also say, though, is that if multinationals move say their manufacturing to a developing country then that isn't necessarily a bad thing overall. It can bring investment, jobs, education and money to placed that really need them - often, if I'm being honest, more than the UK does. Dyson, for example, makes a point of paying its factory workers well above the average wage in the jurisdictions in which it operates (having regard for the fact that paying too far above the odds starts to distort the local economy in damaging ways), provides all kinds of benefits like healthcare that the workers would otherwise struggle to access, and builds its factories to UK standards in terms of safety and pollution (way above local standards). And it can do that at a lower price than in the UK so British consumers also benefit from lower prices.

So I guess where we do disagree is over the fact that I'm comfortable with my decision to buy a Dyson.

Newwave - I'm racking my brains, but I can't think of a single large company off the top of my head that would fulfil those criteria for every single part of their supply chain. Small UK high tech and biotech companies that have just left the R&D phase and started selling products commercially would probably qualify, or the kind of UK start ups you see on Dragons Den. Of the large mainstream companies the high street retailers and supermarkets come closest, but are not exactly paragons of virtue when it comes to their treatment of suppliers. Some of the pub chains will be OK too, thinking about it. But even they will almost certainly have bank debt provided by lenders which may not fit the bill.

If you want to buy ethically, look for small companies which make a point of local sourcing (sudden thought - funeral directors will meet the brief!).

Every single one sited tax as the motivating factor. And remember that there are around 500 listed companies in the UK who have to reveal details of their HQ moves, out of 2.7million companies registered in the UK at Companies House. Those 14 are the tip of the iceberg.

nottirednow - pension payments make up just under half of the welfare bill. So they are roughly equal to payments made to the working age population. I'm happy to agree to disagree on whether pensions are untouchable!

slhilly

I'm not aware that ONS, or anyone else for that matter, prepared figures relating to net inflow/outflow of companies into/out of the UK.

There are figures that show inflows/outflows of trade, but they don't distinguish between outflows arising from migration [which is what we're talking about here], UK held companies being sold into foreign ownership [like Cadbury] and UK companies buying overseas companies [which result in net cash outflow from the UK]

What I can give you is a list of all the publicly traded companies which have migrated out of the UK since 2006:

• Freeport
• Experian
• Colt Telecom
• Hiscox
• Shell
• Waterford Wedgwood
• Omega Insurance
• Invesco
• Shire Pharmaceuticals
• Kiln
• Hardy plc
• XP Power
• WPP

There are no examples of companies in the same period which have moved their HQs into the UK.

In addition, I'm aware of many privately held UK companies which have migrated themselves of the UK, and foreign parented companies which have moved their European HQs from the UK to other European countries. Unfortunately I can't give you names or numbers because I only know about them through my professional career and I'm not permitted to breach client confidentiality.

The other thing we'll never know is how many foreign parented companies might have come to the UK if the tax regime were more benign, but instead chose to base themselves somewhere else.