A Feature, Not a Bug

A CBO analysis has shown that the Senate Republican tax bill is even worse for the poor than previously thought:

The Senate Republican tax plan gives substantial tax cuts and benefits to Americans earning more than $100,000 a year, while the nation’s poorest would be worse off, according to a report released Sunday by the nonpartisan Congressional Budget Office.

Republicans are aiming to have the full Senate vote on the tax plan as early as this week, but the new CBO analysis showing large, harmful effects on the poor may complicate those plans. The CBO also said the bill would add $1.4 trillion to the deficit over the next decade, a potential problem for Republican lawmakers worried about America’s growing debt.

Democrats have repeatedly slammed the bill as a giveaway to the rich at the expense of the poor. In addition to lowering taxes for businesses and many individuals, the Senate bill also makes a major change to health insurance that the CBO projects would have a harsh impact on lower-income families.

By 2019, Americans earning less than $30,000 a year would be worse off under the Senate bill, CBO found. By 2021, Americans earning $40,000 or less would be net losers, and by 2027, most people earning less than $75,000 a year would be worse off. On the flip side, millionaires and those earning $100,000 to $500,000 would be big beneficiaries, according to the CBO’s calculations. (In the CBO table below, negative signs mean people in those income brackets pay less in taxes).

Silly rabbit.  Republicans think that people are poor because they are evil, and that people are rich because they are virtuous.

Just ask the Kochs.

Stopped Clock: Republican Tax Plan Edition

In an otherwise anodyne New York Times article about various sources of opposition to Republican tax plan, and they reveal a good idea buried in their black hearted evil plans. Needless to say, large multinationals hate the proposed excise tax on payment made to a company's foreign affiliates:

That may be an uphill battle, as key groups begin coming out in opposition to parts of the bill, including a proposed excise tax of 20 percent on payments made by American companies to foreign affiliates. The provision is aimed at preventing American companies from shifting profits abroad through payments, such as royalties, made to subsidiaries or other foreign affiliates.

American multinational corporations are especially concerned about the proposal, which would raise just more than $150 billion over a decade. They say the tax will wind up harming American companies and their consumers.

The American Forest and Paper Association said it was “very troubled” by the provision, which it said “would lead to massive overcollection of tax in the United States.” The provision is also coming under fire from pharmaceutical companies and the small-government advocacy groups spearheaded by the billionaire Republican megadonor brothers Charles G. and David H. Koch, who are trying to generate opposition to the excise tax from other conservative groups.

………

Mr. [Kevin] Brady [House Ways and Means Committee chairman] said lawmakers are working with multinational companies to address their concerns. “But make no mistake,” he said, “we have to have safeguards in place so that companies aren’t encouraged to shift their earnings and their profits offshore and to low-tax havens, and we need strong guardrails to make sure they’re not importing deductions, exclusions and other tax rate issues.”

My heart bleeds borscht for these folks.

They assign their IP to a foreign subsidiary in the Caymans, or the Isle of Mann, or Ireland, and pay "royalties", and voila, no taxes paid.

Of course, this will be dropped in conference committee, because, of course, tax evading job cutting multinationals are the Republican political base, but this is actually good idea.

Pay attention.  It's likely to be a long time before the Republicans get an element tax policy right.

I Have Got to Admire the Ingenuity Here

In response to the Teutonic sado-monetarism Italy has taken to using tax credits to allow the government to pay for some of the services that it needs.

The interesting point here is that they are a very short distance from actually creating money without coming hat in hand to the European Central Bank (ECB)

If the Italians take their program one more step forward, and they are creating money:

Italy is experimenting with giving tax-cuts to its citizens in exchange for public services―such as pulling weeds and cutting grass. Wow. What an amazing idea! The government issues a tax credit, and uses it to pay a citizen in exchange for the citizen’s services to the government. The government could even make this arrangement more formal by printing the tax credits on pieces of paper called “LIRIES” (or something like that) and paying for the weed-whacking services with this “cash.” That way the citizen who’s earned the “LIRIES” has the option of using them as payment to another citizen (who’d also like a tax-cut) for, say, a bag of potatoes. So, the first citizen pulls some weeds, gets paid in “cash” and then uses the “cash” to buy her dinner. If you thought about it, you could possibly run an entire economy in this fashion. The only thing you’d have to worry about, of course, is that the government might run out of the tax-credits it needs to pay the citizens to do the work! If that happened, where could the government possibly get more tax-credits? Could it collect tax-credits as “taxes”? Could it borrow them from all the street-sweepers and weed-whackers who’ve earned them? (In which case it would have to pay “tax-credit interest”―which just seems to exacerbate the problem!) Hmmm. I’m going to have to think about that one. But in the meantime, doesn’t this mean that any Eurozone country has the option to stay IN the Eurozone while at the same time operating its own local economy using its own local “sovereign” currency?

In a followup, it is explained how this can be used to essentially create money:

As I said, Italy, is now experimenting with paying for public services with tax credits. Presumably, this is happening because Italy doesn’t possess enough Euros to pay its citizens to provide all the goods and services needed to maintain and run the public sector of its social economy. And Italy can’t “create” the additional Euros it needs because that prerogative is the exclusive right of the EU Central Bank which Italy, even as a sovereign member of the EU, has no control over. But, as the news article explains, Italy still needs to have the grass mowed and the weeds pulled in its public gardens. So it has decided (out of desperation, the article implies) to pay the gardeners with tax-credits. The gardeners are willing to do the work in exchange for the government’s tax-credits, because it means the Euros they earn (in other ways) can then be used to purchase goods and services rather than for paying their taxes. So, in practical terms, it is “just like” getting paid in Euros.

This, in fact, is way more interesting than it seems. In fact, it might even be mind-expanding! Here’s why:

Presumably, the tax-credit payments described take the form of notations on the gardeners’ tax account. An hour’s worth of weeding is noted as 15 Euros worth of extinguished taxes. If the gardener has a tax liability of, say, €3750, her taxes would be completely paid after providing 250 hours of weeding and pruning. After that, obviously, she’d have no more incentive to provide any services in exchange for the tax-credits. So the amount of services Italy can obtain in this fashion is directly limited by the amount of tax liabilities it can impose on its citizens.

It would be possible, however, to structure the tax-credit payments in another way which would have a very different outcome. Instead of making the payment as a credit notation on a citizen’s tax account, the Italian government could issue paper tax-credits and pay them to the citizens for their gardening services. To be specific, this would be a piece of “official” paper, signed with an important signature, on which was printed something like the following:

The Sovereign Italian Government promises the bearer of this paper ONE EURO of credit on taxes owed to the Sovereign Italian Government.

………

Now we have to ask an important question: Is the amount of services Italy can obtain by issuing and “spending” its paper tax-credits still directly limited by the amount of tax liabilities it can impose on its citizens? In other words, if every Italian citizen theoretically has received enough PTCs to pay their taxes with—either having received them directly from the government for providing public services, or having received them from other citizens in exchange for lasagna dinners—will the citizens’ willingness to exchange real goods and services in exchange for the PTCs come to a halt?

Crucially, the answer is No. This is because the act of “embodying” the tax-credits in exchangeable pieces of paper has given the PTCs a usefulness in addition to their usefulness as tax payments: This additional usefulness, of course, is the ability to use them to buy goods and services from other Italian citizens and businesses. Thus, the number of paper tax-credits in “circulation” could vastly exceed, at any given time, the total actual tax liabilities of the Italian citizenry. The PTCs would continue to be accepted for lasagna dinners, because the Trattoria owners know they can use the PTCs they receive to subsequently buy Italian shoes and motorcycles— in addition to using them to pay their taxes.

It will no doubt have dawned on most every reader that what we’ve just created is “money.” Specifically, we’ve created what is called “fiat money”—which happens to be the kind of money the world has been using now for the past half century (ever since the U.S. formally abandoned the gold-standard in 1971). Having thus conjured a rudimentary image of fiat-money to life we should quickly make some important (and perhaps startling) observations about it.

………

Having made these observations, it appears the Italian government has stumbled on an actual solution to the “austerity” it has been forced to impose on itself by the European Union. Except we must now confront the fact that the rules of the EU do not ALLOW Italy to issue and spend its own sovereign fiat currency! The only “money” Italy is allowed to use is the Euro—and the only way the Italian government can obtain Euros is either by collecting them as taxes from its citizens, or by borrowing them from the European Central Bank, which has the exclusive prerogative of issuing them. And these methods of obtaining Euros to spend are falling short of what Italy needs to pay its citizens to do. So…. Italy has decided to pay its citizens with tax-credits, and then (why not?) with paper tax-credits. And then, presumably, the EU says, “Whoa, hold on here! It looks like you are printing your own money, which is not allowed by our rules!”

While I don't think that the Italians would have the guts to take this to the next level right now, but this would a good way to deal with the current problems with the Euro.  (Not as good as getting the Germans out of the Euro, but a pretty close 2^nd)

If you are paying attention, going the full Magilla on this is actually an application of MMT, and the British city of Bristol has been trying something rather similar with the Bristol Pound, which in accordance with Modern Monetary Theory, can be used to pay local taxes.

It really is fascinating.

H/t Naked Capitalism.

Factoid from a Travelogue

Over at Obasidian Wings, Doctor Science has a review of the new Tappan Zee Bridge, and gives us this little factoid:

As for who *should* pay for the bridge, there's no question in my mind: it should be (mostly) the trucking industry. It won't, of course, but that would be fair.

Most of the vehicles that go over the TZB are cars, of course. But it turns out that the stress a vehicle puts on a road or bridge goes up as the fourth power of its weight per axle.

An example: my 2-axle car weighs about 4000 lbs. Empty, a typical 5-axle tractor-trailer weighs about 33,000 lbs. So the empty truck is about 3.3 times as heavy per axle, and causes almost 120 times the damage.

My toll on the TZB is $4.75. If that truck was paying its way across the TBZ, it should pay a toll of more than $500. But that's only if it's empty! Remember, the burden on the system goes up as the fourth power. If the truck is pretty full, weighing 72,800 lbs, it weighs 6 or 7 times as much per axle as my car -- and does more than 1500 times the damage. A fair toll would be more than $8000.

In actuality, no truck pays more than $50 to go over the TZB, and that's the rush hour price: it drops to under $25 if you cross at night. Other drivers, and the population as a whole, are subsidizing the trucking industry to a truly epic degree. And this occurs while the trucking industry has exploited its workers to the point of indentured servitude -- before they start replacing most of them with robots.

If the problem in our society could be reduced to a single issue, (They can't) it would be the various direct and indirect subsidies that the rich and powerful in our society extract from the rest of us.

Whether it's trucking, pharma, TBTF banks, the military industrial complex, the prison industrial complex, charter schools, big ag, etc., their current business models would be unsustainable but for the money that they extract from the rest of us.

We are riven by parasites.

France is About to Get What it Voted For

I admit that the French voters were caught between the Scylla and Charbdris in the second round of voting for President. 

While Emmanuel Macron was in a number of ways a better choice than Marine Le Pen, but both the self-absorbed banker and the polished bigot were a losing proposition for the French people.

Now they have Macron, and they know that in addition to having the values of a lifelong banker, he has the ego of one as well.

First, is is attempting to make Frances nearly dictatorial Presidency even more overbearing by aggressively issuing and changing regulation by decree.

In particular, he is fixated on gutting worker protections in France, because ……… Capitalism.

Second, Macron, someone for whom distancing France from the EU is unthinkable, is looking to shower tax cuts on bankers and the finance industry, because as a banker, he believes that whatever is good for the bankers is good for the country:

The French Prime Minister on Friday laid out a raft of measures aimed at boosting Paris's attractiveness to high finance in order to cash in on Britain's exit from the European Union, including cutting income tax for high earning bankers and opening international schools.

France continues to make eyes at London's bankers and on Friday the Prime Minister Edouard Philippe laid out a raft of measures to attract financiers who may have to leave London when the UK leaves the EU.

Among them are scrapping a plan to widen a current 0.3 percent tax on financial transactions, eliminating the top income tax bracket for top earning bankers (those picking up over €150,000 a year), and keeping bonuses out of the calculation of severance pay for "risk-takers" such as stockbrokers in order to make redundancies less expensive.

Those measures might have been unthinkable in France under the previous government of former President François Hollande, who famously declared the world of finance was his "enemy", but given the fight for the scraps from the Brexit fallout, France under former banker Emmanuel Macron seems prepared to do whatever it takes to fight off the competition.

This really isn't about competing with Frankfurt or Brussels, they simply lack the living infrastructure to appeal to the banksters, the bankers who would want to move there already live in these (dull) cities or (even duller) Switzerland.

Places like Madrid and Rome are simply too unstable politically and socially to compete, given the secessionist movements (Spain) and a potential Greek style economic collapse (Italy).

I suppose that Amsterdam might be a possibility, but it's rather eclectic nature (see their red light district, defacto legalization of pot, etc.) might require a significant change in the governance and culture of that city.

The real reason that he is making much of a competition for bankers. even though it's pretty clear that they contribute to the overall well-being of society in the same manner that tapeworms contribute to the overall well-being of a dog, is because he wants to make nice with People Like Him.

It's bankster tribalism, and the French people will suffer for it.

Thankfully, his latter effort might be blunted by EU budget rules, as it would open a gaping hole in the French budget, and the Germans won't tolerate that, both because they fetishized balanced budgets, and because want the to draw as as much of the finance industry to Germany as possible.

This is Not an Accident

Does anyone believe that Uber made an honest mistake in tax calculations when it took hundreds of millions of dollars from its drivers?

I certainly don't:

Amid the turmoil at Uber that resulted in Travis Kalanick’s stepping down as chief executive, the company announced a series of changes in late June aimed at improving its drivers’ work experience, including a new tipping option in its passenger app.

But even as Uber makes a concerted effort to win over drivers, it has not acknowledged all the ways it may have squeezed them in New York State.

In May, Uber admitted to taking excessive commissions out of the fares of its New York drivers, who are independent contractors, and promised to make amends. Increasing evidence, however, suggests that the company may have shortchanged the drivers by far greater sums than it acknowledged.

The following are signs that the ride-hailing service improperly deducted what could amount to hundreds of millions of dollars from drivers’ earnings to pay taxes that, under New York State law, are technically due from passengers:

• Uber receipts from other states reflect a tax accounting at odds with the company’s justification for deducting sales tax from the fares received by its New York drivers.
• Language from Uber’s recent contracts indicates that the company should not have taken the taxes from those fares.

Uber has insisted there was nothing improper in its handling of the taxes. Here is a look at the law and the evidence on the question — including the way a major competitor, Lyft, deals with the same issue.

If anyone believes that Uber was acting in good faith, they haven't been following the news lately.

California is F%$#ed Up and Sh%$

We've all heard that the head of the California State Assembly killed the single payer bill.

While you are condemning lobbyists and timid Democrats, it should be noted that the bill had no funding mechanism, and because of California's out of control initiative petition system, which passes bills with all the sophistication of the saying in fortune cookies, every dollar of benefits would require two dollars in taxes:

In the days since California Assembly Speaker Anthony Rendon shelved for the year SB562, which intends to establish a state single-payer health care system, he’s been subject to mass protests and even death threats. The bill’s chief backers, including the California Nurses Association and the Bernie Sanders-affiliated Our Revolution, angrily point to Rendon as the main roadblock to truly universal health care.

They’re completely wrong. What’s more, they know they’re wrong. They’re perfectly aware that SB562 is a shell bill that cannot become law without a ballot measure approved by voters. Rather than committing to raising the millions of dollars that would be needed to overcome special interests and pass that initiative, they would, apparently, rather deceive their supporters, hiding the realities of California’s woeful political structure in favor of a morality play designed to advance careers and aggrandize power.

………

It’s because you can’t do the funding without help from the voters, because of California’s fatal addiction to its perverse form of direct democracy. The blame, in other words, lies with ourselves.

To figure this out, you need only turn to the actual legislative analysis of the Senate bill, which passed in early June. It states very clearly what Rendon alluded to in his announcement shelving SB562: “There are several provisions of the state constitution that would prevent the Legislature from creating the single-payer system envisioned in the bill without voter approval.”

To cut through the clutter, let’s focus on the biggest constitutional hurdle, known as Proposition 98. Passed in 1988, Prop 98 requires that roughly 40 percent of all general fund revenues — money the state receives in taxes — must go to K-12 education. If you include community college spending, it must exceed 50 percent.

Prop 98 was itself a reaction to the notorious Prop 13, which sharply limited state property taxes. It was intended to ensure that education received its fair share of funding. But it also created a budgetary straitjacket that affects virtually anything that costs California money.

………

Substituting a centralized state program for the skyrocketing premiums people pay today would actually be relatively affordable. But if half the money has to be siphoned off to education, that rationale becomes harder to sell.

Self-appointed experts have countered that the state can suspend Prop 98 with a two-thirds vote of the legislature. This has been done twice in the past, during downturns in the economy. But the suspension can last for only a single year; it would have to be renewed annually to keep single payer going. More important, as the California Budget and Policy Center explains, after any suspension, “the state must increase Prop 98 funding over time to the level that it would have reached absent the suspension.”

So legislators would have to vote year after year to suspend Prop 98, but add more money back to cover it in subsequent years. That backfill would grow with every budget, and over time lawmakers would need to vote for ever-increasing giant tax hikes. If this didn’t return Republicans to power in Sacramento within a few years, some enterprising lawyer would sue the legislature for violating the spirit of Prop 98. Suspension is not politically, legally, or financially sustainable.

Until California fixes the network of stupid and dysfunctional initiative petitions that have completely f%$#ed up state government, the best that they can expect is the, "Same Sh%$ Different Day."

I am So Not Sorry About this Computer Hack………

It turns out that thousands of speed camera reports have been invalidated because a technician was updating machines with a tainted memory stick:

A contractor in the Australian State of Victoria has managed to infect an unknown number of speed cameras with a virus, over sneakernet.

Details aren't so much sketchy as they are confused: the virus has been identified as WannaCrypt, but the government's been told it infected both Linux and Windows-based cameras; there was no ransom demand; the main symptom was repeated camera reboots, and; contractors apparently hoped to keep things quiet by patching cameras without telling anyone.

The lid came off on Friday, and Victoria Police decided to cancel 590 fines issued by 55 cameras infected by a contractor visiting the cameras to perform software upgrades with a USB drive that also carried something nasty.

The number of known infections rose to 97 out of the state's total of 280 speed cameras, after one of the state's speed camera contractors, Redflex, told the Department of Justice it had identified and patched a further 42 infections earlier in June.

………

In excess of 7,500 fines issued between June 6 and June 22 are to be “quarantined” during the investigation, but may be reissued once the investigation is completed.

I want to state that I have no direct knowledge of any hacking operations, but if, for example, the good folks at 4Chan decided to hack speed cams and red light cams, I would donate to a GoFundMe of their legal defense.

In the United States, at least, these programs are more about revenue generation and getting money to private contractors who operate the systems.

Bummer of a Birthmark, Sam

I don't know which is more surprising, the fact that the the Kansas State House and Senate have overridden Governor Sam Brownback's veto of their bill raising taxes, or the fact that even the most die-hard of Kansans Republicans are ecstatic over the the fact that taxes are being raised, because they actually want the Government services, and they recognize that the fairy dust of the Laffer curve doesn't work:

The five men, most retirees, had been friends far too long to hold back.

“Brownback? That dumb…,” Larry Craig, 68, exclaimed, laying into Kansas’ Republican governor, Sam Brownback, now in the third year of his second and final term. “He screwed up everything since he became governor.”

Craig, a Republican, was sipping coffee at 7 a.m. Thursday at Mom’s Kitchen in Olathe with his buddies — another Republican, two independents, one Democrat. A lawyer, a business owner, a retired truck driver among them. They’ve been meeting up for 20 years.

“No Brownback fans in here,” declared Larry Hurt, 68, the lone Democrat and a retired Teamster.

The topic on the table: the governor’s 2012 tax plan, the most sweeping tax cut in state history. The governor called the cuts a “real live experiment” of the principle that slashing taxes and cutting government spending would spur economic growth that would power the state.

But over the last five fiscal years, that plan has failed to create enough jobs and businesses, leaving Kansas’ overall revenue — the money it spends on the mass of state services from fixing roads to schools to social services — down by some $3.6 billion.

The Republican-led Legislature, weary of severe budget shortfalls, handed Brownback a new tax plan aimed at reversing the state’s sinking fortunes by raising $1.2 billion more over two years. Income tax rates would go up, and 330,000 owners of “pass-through” businesses such as law firms and family farms would start paying taxes again.

 ………

The governor vetoed the plan. But on Tuesday, in a stunning rebuke, the Legislature overrode the veto, wiping away the centerpiece of Brownback’s conservative agenda.

If the voices of these Kansans are any indication, the mood of many people seems to be one of relief. The overall sentiment: “What took so long?”

It appears that everyone in the state realizes that Sam Brownback's experiment, where he suggested that tax cuts would trigger economic growth to outpace the loss in tax revenues, has been an abject failure.

Only the truly delusional, for example one Samuel Dale Brownback, haven't yet realized this.

I Honest Cannot Tell If This Is Serious or Satire

Someone has proposed an Exchange Traded Fund (ETF) of corporate welfare recipients:

It stands to reason that tax-shy companies outperform, so why not create an ETF for them?

We’ve had funds for sin stocks (the Vice mutual fund which invests in tobacco, booze and gambling) and those for biblical values (The Inspire Global Hope Large Cap ETF recently launched).

Now PassiveBeat presents a new twist on the vice/not vice idea: the Corporate Welfare ETF. This putative fund is chock full of megacaps that pay no tax and have outperformed the S&P 500. What’s not to like?

We’ve taken our cue from a report released earlier this month by the Institute on Taxation and Economic Policy (Itep) highlighting companies that have benefited from what may charitably be termed corporate welfare – tax loopholes, subsidies and so on.

Is this a joke, or is this an investment strategy.  I really cannot tell.

Oh Snap

Doubtless, you have heard various right wingers suggesting that we should replace the income tax with a VAT (Value Added Tax), and they have explained that a VAT is basically a national sales tax.

The truth is that while it is similar in overall effect, a VAT is administered in a very different way:  Rather than levying a tax at the time of retail sale, they levy a tax on each amount of value added at each step of the process, so there is a paument when the ore is mined from the ground, then a payment on the value added by refining, and a payment on (in this case) a steel mill making sheet and plate, and so on, and so on, and so on, until you have (in this case) a car.

It is structured that way because there is a real problem with tax evasion in many European countries, and a VAT is almost impossible to evade.

Well, as a result of the decision of the London Employment Tribunal to classify Uber drivers as employees 8 weeks ago, it appears that the serial criminal of the taxicab industry is going to get completely hosed on unpaid and future VAT:

………

But it also has a further – and rather more fundamental – tax problem.

Let me explain. And for clarity I’ll reduce the argument to its essentials:

1. before the Employment Tribunal, Uber contended that it simply acted as a booking agent for drivers. The Tribunal disagreed. It found, applying a normal contractual analysis, that Uber engaged drivers and supplied transportation services to passengers;
2. what does this mean in terms of VAT? Well, for VAT, you start with the normal contractual analysis. But national tax authorities can also go beyond that analysis to discern the underlying “economic and commercial reality of the transactions” (as the case law puts it). I don’t, for the purposes of my argument, need to take that extra step. If the VAT analysis follows the contractual analysis then the following points apply. But the VAT test is wider than the contractual one – and even if Uber’s appeal against the Employment Tribunal decision succeeded it could still have a VAT problem;
3. as things stand, and applying the reasoning of the Employment Tribunal decision, Uber seems to be making VATable supplies to passengers of transportation services. And those services are standard rated. In practice, this means that, of every £100 charged to an Uber customer, Uber would have a so-called ‘output’ tax liability of £16.67 (being the VAT on such sum net of VAT as, when VAT is added, gives you £100). And it would need to hand that sum over – less any ‘input’ tax – to HMRC;
4. output tax is the VAT you charge your customers. And input tax is the tax you are charged by your suppliers. It’s the difference – the tax on the value that you add – that you hand over to HMRC. But does Uber have any input tax? Your employees don’t charge you input tax. Uber might have some external costs on which VAT has been charged – but not many. On the assumption (see (1) and (2) above) that the VAT reality of Uber’s business is that it is engaging drivers and supplying transport services to passengers, the vast majority of its expenditure will be the money it pays to drivers. But (with perhaps a tiny number of exceptions) drivers don’t charge Uber VAT on their fares. Indeed, they are incentivised to earn less than the VAT registration threshold. If they earned more, they would have to hand over 16.67% of their profits to HMRC in VAT;
5. if you assume that Uber has no material input tax to set against its output tax, that would mean that, of every £100 of fares Uber has collected, it has a liability to pay VAT to HMRC of £16.67. It seems as though Uber racked up about £115m in fares last calendar year. This would mean it had a VAT liability of just under £20m for London for that year. But HMRC can go back four years or, sometimes, more. There is no suggestion in the accounts of the relevant Uber entity – Uber London Limited – that it was aware it had this risk;
………
9. we should watch with care what actions, if any, HMRC take. I should have absolute confidence that HMRC will properly investigate the potential NIC and VAT liabilities of the Uber structure. I don’t.

I'm inclined to agree on item 9.


The psychopaths at Uber seem to have the ability to make regulatory and tax authorities look the other way, which is a pity.

What Bernie Says

Bernie Sanders reviews Donald Trump's infrastructure plans, and finds them lacking, noting that it is a plan to use taxpayer funds to create private gains.

Your mouth to God's ear.

OK, I Approve

The Obama administration has closed a loophole that allowed companies to take a tax credit on foreign taxes paid for income that they have refused to repatriate:

The U.S. Treasury Department took fresh steps on Thursday to curb tax avoidance by multinational corporations, announcing new curbs on a loophole through which companies artificially use credits for foreign taxes they pay to improperly lower their U.S. tax bills.

In a notice that took direct aim at the European Union’s push to have its member states collect more taxes from U.S. companies’ overseas units, Treasury officials said they’re writing new rules that would restrict how corporations can use credits on their foreign tax payments to reduce their U.S. tax bills. The official notice puts corporate tax planners on notice that officials will challenge any strategies that violate their intended rules.

The measure will focus on tax-planning strategies in which companies separate foreign tax payments from the underlying income that they’re based on. That separation -- which Treasury’s notice described as a “splitter” arrangement -- allows companies to artificially inflate credits they use to cut their U.S. tax bills.

Officials with the Treasury and the Internal Revenue Service said it was possible that U.S. companies that find themselves subject to new tax bills as a result of EU investigations could use splitter arrangements to reduce their U.S. taxes. Last month, the European Commission found that Ireland must collect $14.5 billion in back taxes from Apple Inc. after determining that the iPhone maker received a special tax deal that violated so-called “state-aid” rules, which are aimed at fostering competition.

………

In effect, the new rule would disallow corporations from using foreign tax credits unless the companies actually bring home to the U.S. -- or repatriate -- the overseas earnings on which they’ve paid the foreign taxes. Repatriation of overseas income triggers the 35 percent U.S. corporate tax rate, one of the highest in the world -- and companies can use foreign tax credits to reduce or eliminate it. Treasury officials are worried that without the new rule, companies could claim artificially inflated foreign tax credits tied to offshore money they haven’t brought home.

U.S. officials have grown increasingly concerned that more than $2 trillion in offshore earnings that U.S. multinationals haven’t yet repatriated is now fair game for European countries.

Mark J. Mazur, Treasury’s assistant secretary for tax policy, said the new regulation would close “another tax loophole that contributes to the erosion of our tax base.”

“Today’s action protects the U.S. tax base by ensuring that such credits are only available when corporations repatriate their foreign earnings,” Mazur said.

Why the f%$# did this take 7 years to do?

Why did Obama have to wait until the  "I no longer have a f%$# to give" stage of his Presidency?

This should have started on day one.

They Can Find it In Their Couch

Apple was just assessed a €13 billion ($14.4 B) fine tax delinquency for using Ireland as a tax haven. Essentially the European Commission ruled that Apple received tax breaks from Ireland that amounted to an illegal subsidy to the computer and phone maker:

Apple has warned that future investment by multinationals in Europe could be hit after it was ordered to pay a record-breaking €13bn (£11bn) in back taxes to Ireland.

The world’s largest company was presented with the huge bill after the European commission ruled that a sweetheart tax deal between Apple and the Irish tax authorities amounted to illegal state aid.

The commission said the deal allowed Apple to pay a maximum tax rate of just 1%. In 2014, the tech firm paid tax at just 0.005%. The usual rate of corporation tax in Ireland is 12.5%.

“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said the European competition commissioner, Margrethe Vestager, whose investigation of Apple’s complex tax dealings has taken three years.

Here is where it gets weird: Ireland, which stands to benefit to the tune of €2800 for every man, woman, and child in the country is fighting this, as is the US Treasury department, which one would expect to fight this sort of illegal tax scheme:

Vestager’s ruling prompted an angry response from Apple and from Ireland and is likely to spark a political row between the US and the EU. The US Treasury said the ruling threatened to damage “the important spirit of economic partnership between the US and the EU”.

………

The commission said Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a “head office” that only existed on paper and could not have generated such profits.

………

The Irish government, however, wants the ruling reversed because it wants to preserve its status as a low-tax base for overseas companies.

Ireland’s finance minister, Michael Noonan, said Dublin would appeal against the ruling. He said: “The decision leaves me with no choice but to seek cabinet approval to appeal. This is necessary to defend the integrity of our tax system, to provide tax certainty to business and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation.”

This was money laundering, pure and simple.

And this won't really hurt Apple:

Apple, which changed its tax arrangements with Ireland in 2015, should easily be able to pay the huge tax bill because it has a cash mountain of more than $230bn (£176bn) of cash and securities, mostly held outside the US. The tech group keeps the money outside the US because it would be forced to pay US tax charges if it repatriated the money.

It's pocket change for them, but hopefully this will make further Irish tax shenanigans less common.

I would hope that we would see some more movement in this direction, but the Obama administration, in the person of Jacob Lew, seems determined to prove that only little people pay taxes.

Another Myth Busted

It turns out that rich people do not relocate when a state raises taxes:

When it comes to taxes, millionaires have short fuses. Ratchet up their rates and they'll blow you off and move to a low-tax, or no-tax, state.

Or so goes one argument against taxing the rich: States that levy a “millionaires tax” risk chasing those millionaires away to Florida, Texas, and other places with no income tax. Hedge fund manager David Tepper's recent decision to move from New Jersey to Florida, possibly creating a billionaire-size hole in Jersey’s budget, raised alarms. Golf great Phil Mickelson, shortly after his infamous Dean Foods stock trade, complained about his high tax rate in California and threatened to move to Florida.

Now, a study based on 13 years of tax data finds that most millionaires don’t move cross-country just to avoid a tax bill. It turns out that the rich, while perhaps different from us, aren’t all that mobile. When they do move, it’s often for reasons that have nothing to do with taxes. For one thing, they appear to like the beach.

The study, published in the June issue of the American Sociological Review, suggests that states—and countries—may have some leeway to raise taxes on the wealthy without scaring away their tax base. It has obvious political implications, possibly serving as ammunition for those who favor taxing the rich. It could help advance the arguments of presidential candidates Hillary Clinton and Bernie Sanders, for example, who have both proposed higher taxes on upper-income Americans.

And if they did leave, good riddance.

If they leave, they lose political influence where they formerly lived, and the less influence that the self-obsessed pampered assholes have, the better.

Your Panama Papers Update

Bernie Sanders Predicted this in 2011


There appears to be a dearth of US money launderers reported

Rather unsurprisingly, Bernie Sanders is noting his opposition, and Hillary Clinton's support for the trade deal in his campaign:

Responding to the 11.5 million documents leaked this week showing how a Panama law firm helped some of the world's wealthiest people establish offshore tax havens on the Central American country — the so-called Panama Papers — Bernie Sanders on Tuesday vowed to end the Panama Free Trade Agreement, tying Hillary Clinton to the same policies that he claimed fostered the practice.

“The Panama Free Trade Agreement put a stamp of approval on Panama, a world leader when it comes to allowing the wealthy and the powerful to avoid taxes," the Vermont senator said in a statement released through his campaign, adding that he has been opposed to it "from day one."

Vowing to use his authority as president to "terminate the Panama Free Trade Agreement within six months," Sanders said his administration would "conduct an immediate investigation into U.S. banks, corporations and wealthy individuals who have been stashing their cash in Panama to avoid taxes."

"If any of them have violated U.S. law, my administration will prosecute them to the fullest extent of the law," he said.

Sanders also said that he had correctly predicted that the passage of the trade deal "would make it easier, not harder, for the wealthy and large corporations to evade taxes by sheltering billions of dollars offshore."

"I wish I had been proven wrong about this, but it has now come to light that the extent of Panama’s tax avoidance scams is even worse than I had feared," he said, before pivoting to Clinton. “My opponent, on the other hand, opposed this trade agreement when she was running against Barack Obama for president in 2008. But when it really mattered she quickly reversed course and helped push the Panama Free Trade Agreement through Congress as Secretary of State. The results have been a disaster."

It is not an unreasonable indictment of Hillary Clinton's and Barack Obama's record on so called free trade agreements.

In what might be a perfect example of Chutzpah, the state of Wyoming, a shell corporation factory that has one corporation for every 4½ residents, has initiated an investigation of a Wyoming based law firm at the center of the scandal:

The Wyoming arm of the law firm at the heart of the Panama Papers global scandal is under investigation by Wyoming state officials for failing to maintain required statutory information about companies registering there, Secretary of State Ed Murray said Wednesday.

Upon learning of the Panama Papers, a massive leak of secret offshore company data reported on by McClatchy and more than 100 other media partners around the globe, Wyoming initiated an audit of 24 companies registered in the state by the law firm Mossack Fonseca and its partners, he said.

“The audit concluded around noon on Monday, April 4th, and determined that M.F. Corporate Services Wyoming LLC failed to maintain the required statutory information for performing the duties of a registered agent under Wyoming law,” Murray said in a statement.

The state followed immediately with administrative action, demanding that required information be provided.

“Subsequently, M.F. Corporate Services did provide the information,” the secretary of state’s office said, adding that Murray also briefed law enforcement that day. “This investigation of this matter is ongoing.”

This is near toxic levels of hypocrisy.

In an interesting twist of fate, Ken Silverstien, then a reporter at The Intercept was all over the story of Mossack Fonseca 14 months ago, though his employer refused to publish it, so he published on Vice.com.

And then Pierre Omidyar, the publisher of The Intercept, got in his face.

.@MarkAmesExiled FYI @pierre wouldn't pub story but demanded my fee from VICE. Oh well, at least I'm not in Moscow https://t.co/pZT7qr14yt

— Ken Silverstein (@KenSilverstein1) April 4, 2016

I wonder if perhaps the eBay founder (Omidyar) might have some "interesting" corporate structures for his billions.

The reporting this far seems to be what Yves Smith calls, "The Intercept model, not [the] Wikileaks model".  See also Craig Murray's critique of the coverage thus far.

Almost all the reporting thus far, with the exception of Icelands now former PM, has been directed primarily at regimes hostile to the west, with most of the coverage being screaming about Vladimir Putin.

Also note that Suddeutsche Zeitung brought in International Consortium of Investigative Journalists (ICIJ)
Not also the picture in the tweet.

The selective nature of releases to this point also raises the issue that those in the files but not yet exposed may be likely targets for blackmail: (Moon of Alabama)

A real leak of data from a law firm in Panama would be very interesting. Many rich people and/or politicians hide money in shell companies that such firms in Panama provide. But the current heavily promoted "leak" of such data to several NATO supporting news organization and a US government financed "Non Government Organization" is just a lame attempt to smear some people the U.S. empire dislikes. It also creates a huge blackmail opportunity by NOT publishing certain data in return for this or that desired favor.

Both Murray and MoA are implying that the US/NATO state security apparatus are somehow involved in the release of this data.

I have not made up my mind, but if we don't see some prominent western names in the releases in the next few weeks, Sigmundur Gunnlaugsson doesn't count, then I will be much more inclined to take their view.

Would You Like a Nice Cup of Shut the F%$# Up with Your Outrage?

After months of outrage the Obama administration has finally taking action againat the tax dobbed known as "Corporate Inversion", and accoording to FT, this is provoking a, "foreign fury."

Cry me a f%$#ing river:

A White House tax crackdown designed to put a halt to Pfizer’s planned $160bn takeover of Allergan has provoked fury from foreign multinationals with operations in the US.

Barack Obama stepped up the offensive on Tuesday championing new proposals to deter “inversion” deals — such as Pfizer-Allergan — that companies use to move to low-tax jurisdictions, accusing them of exploiting “one of the most insidious tax loopholes out there”.

Multinationals responded by saying they were being unfairly caught in the crossfire of Mr Obama’s campaign as their operations in the US could also be affected by the new rules.

The angry rhetoric came a day after the Treasury department released new proposals which threatened the biggest planned inversion to date — Pfizer’s takeover of Irish-domiciled Allergan — and triggered big losses for some hedge funds, such as Paulson & Co and Third Point.

“It came as a total surprise. Everyone thought the Treasury had used all their firepower,” said one hedge fund manager.

………

The Treasury’s latest moves would make inversions less lucrative by eliminating a tax benefit for “abusive” inverters. But its plan would also deny the benefit to foreign companies with US operations.

“Rather than using a scalpel to deal with this issue they are using a machete,” said Nancy McLernon, president of the Organisation for International Investment, a trade group for foreign companies in the US.

“It’s a misguided approach. They’re trying to go after those companies that are doing something they think is problematic and carelessly hitting a whole class of employers.”

The tax benefit stems from companies’ use of internal loans to cut their tax bills. By loading up US subsidiaries with debt from head office, foreign companies can deduct the interest payments from their US tax bills — a practice called earnings stripping.

Here is my response to the aggrieved tax dodgers:

The fact that you have been able to skate on corporate taxes for the past few decades do not give you the right to continue stealing from the rest of us.

Pass the Popcorn

It appears that someone has hacked into the files of Panamanian law firm Mossack Fonseca, and found a treasure trove of evidence of international corruption:

A massive leak of documents has blown open a window on the vast, murky world of shell companies, providing an extraordinary look at how the wealthy and powerful conceal their money.

Twelve current and former world leaders maintain offshore shell companies. Close friends of Russian leader Vladimir Putin have funneled as much as $2 billion through banks and offshore companies.

Those exposed in the leak include the prime ministers of Iceland and Pakistan, an alleged bagman for Syrian President Bashar Assad, a close pal of Mexican President Enrique Peña Nieto and companies linked to the family of Chinese President Xi Jinping.

Add to those the monarchs of Saudi Arabia and Morocco, enough Middle Eastern royalty to fill a palace, honchos in the troubled body known as FIFA that controls international soccer and 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people.

Also mentioned are 61 relatives and associates of current country leaders, and another 128 current or former politicians and public officials.

The documents within the leak also expose how secretive offshore companies at times subvert U.S. foreign policy and mock U.S. regulators. When drug traffickers, money launderers or other crooks control companies, they undermine national security, and the trail of dark money flowing through them strips national treasuries everywhere of tax revenues.

………


The firm is one of the world’s top five creators of shell companies, which can have legitimate business uses, but can also be used to dodge taxes and launder money.

More than 11.5 million emails, financial spreadsheets, client records, passports and corporate registries were obtained in the leak, which was delivered to the Süddeutsche Zeitung newspaper in Munich, Germany. In turn, the newspaper shared the data with the Washington-based International Consortium of Investigative Journalists (ICIJ).

It would be nice if we actually saw some action by they criminal and tax authorities in response to the leaks, but I doubt it.

A Tory With a Conscience, and Other Myths

Iain Duncan Smith, the British Work and Pensions Secretary,  has resigned over cuts to disability payments to the UK's most vulnerable:

Iain Duncan Smith has resigned as work and pensions secretary, denouncing £4bn of planned cuts to disability benefits as "indefensible".

He complains of pressure to "salami slice" welfare, saying the latest cuts were a "compromise too far" in a Budget that benefits higher earning taxpayers.

David Cameron said he was "puzzled and disappointed" at the resignation.

Earlier, the government had indicated it would look again at some of the proposed disability benefits changes.

'Enormous regret'

BBC political editor Laura Kuenssberg said: "There had been bad blood off and on between Chancellor George Osborne and Iain Duncan Smith over some of the more controversial welfare reforms, but nobody expected this move only 48 hours since the Budget."

She added that she understood Mr Cameron had personally tried to persuade Mr Duncan Smith to stay on and called the resignation "a bombshell at a very sensitive time"
………
Mr Duncan Smith, who was the Conservative Party leader and Leader of the Opposition from 2001 to 2003, wrote in his resignation letter that the changes to disability benefits were "defensible in narrow terms, given the continuing deficit".

But he said they should have formed part of "a wider process" of finding the best way to focus resources on those most in need.

"I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self-imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest," Mr Duncan Smith said.

"Too often my team and I have been pressured in the immediate run up to a Budget or fiscal event to deliver yet more reductions to the working-age benefit bill.

"There has been too much emphasis on money-saving exercises and not enough awareness from the Treasury, in particular, that the government's vision of a new welfare-to-work system could not be repeatedly salami-sliced.

"It is therefore with enormous regret that I have decided to resign."

………

Over the weekend Iain Duncan Smith discovered the Chancellor planned to offer cuts in Capital Gains Tax and was very unhappy that those tax cuts were to be offered to the better off, while he had been forced to make more welfare cuts prematurely, in his view. When Number 10 and the Treasury then backtracked on the reforms to PIP today, he concluded that he could no longer remain in government.

Sources close to him are absolutely adamant that his decision was in no way related to his views on Europe.

Smith supports a Brexit from the EU, so there is some speculation that his exit was influenced by this difference.

Personally, I am inclined to think that there are crass political motivations, but I'm a cynic that way.

This is Brilliant Politics

Rather unsurprisingly, Bobby Jindal has left the finances of the state of Louisiana in a mess.

His successor, Democrat John Bel Edwards realized that the state needs to raise taxes to fix the mess that he inherited.

He has come up with a new way to sell revenue measures, he's holding the LSU Football program hostage:

Louisiana’s new Democratic Governor John Bel Edwards is pushing for new tax increases to help address the severe budget deficit left behind by former Governor Bobby Jindal. The problem: Voters in Louisiana are allergic to the very word tax.

Edwards took his case to the public in a televised address on Thursday night, warning that inaction on his proposed increases could jeopardize the holiest of all institutions: LSU football.

The state’s higher education commissioner warned this week that unless the legislature acts to provide funding for the public university system, it will have to suspend some classes for the spring semester and give students grades of “incomplete.” Because of NCAA rules, no athlete may compete for his or her team with an “incomplete” on their transcript, meaning that LSU’s football players will be ineligible come the fall semester.

 Nice to know someone who understands his electorate, and is willing to use this effectively.