Tag Archives: Stemcor

Taxation Lost, John Milestone

High on a Throne of Royal State, which far outshone the wealth of Ormus and of Ind,
Or where the gorgeous East with richest hand showers on her Kings Barbaric Pearl and Gold,

This is pretty much the beginning of book 2 by John Milton where Satan debates whether another battle should be waged on the recovery of heaven. I would state, that if I was back in his employ at his right side (and no longer medicated), then heaven would no longer exist, such is the folly of man!

In that same light we could see the article that sky News showed today at http://news.sky.com/story/1181132/govt-losing-a-staggering-55bn-a-year-in-taxes. It’s title “Govt Losing A ‘Staggering’ £55bn A Year In Taxes“. It seems nice that someone is waking up, but let us not forget that this is something that had been going on for some time. It is nice to bring up Stemcor at times like these. Especially as this company is in hands of the family of labour MP Margaret Hodge who is chairman of the Public Accounts Committee.

Let’s not forget, before we nail her to some cross, that WE (actually you Britons) enabled all this. She and her family broke no laws. Has there been an abundance of letters to the MP’s of local voters demanding a stop to tax evasion? No there were not!

So it is nice to read in that article the following “PAC chairman Margaret Hodge said: ‘It is staggering that, in one year, the public sector was defrauded of over £20bn and the tax gap rose to £35bn.’” Is it truly so staggering? Her own company paid less than 0.1% in taxation. It boiled down to 14 million pounds over 2.1 billion generated business (as suggested by the Telegraph, which is not the best of sources). The Stemcor website had this to say (http://www.stemcor.com/Response%20to%20further%20allegations%20of%20tax%20avoidance%20in%20the%20UK%20press.aspx).
I can go with that! I accept that turnover is not a sign of profit, the numbers in my mind do not seem to add up, but I lack the data to confirm or deny this, so for now, let’s move on.

This is because the reasoning I hold is in play as we read the next quote “However, the committee said its credibility had been undermined by the ‘poor quality’ of some of the data and the Treasury needed to do more to explain the discrepancies between some of the figures in the WGA and those produced by the Office for National Statistics.

I reckon that the quality of data from some of these sources have been in question for some time. That is a side I do have knowledge on. You see, these views always involve several parties talking (discussing and disagreeing) and in retrospect, when we take a look at the numbers and the data that was needed, we all end up wondering why certain data was never collected. When you play the game in only submitting what was ‘exactly’ asked, we end up looking at three iterations of ‘miscommunication’ and we end up with results that do not help to the degree it should; there is little doubt that certain numbers are not available. So, when we consider the Stemcor answer in regards to their 1% of profit in consideration of turnover versus profit, then we should take a look at a random example.

Let us take a software company. They have a program for sale at $1000. The customer wants it, they need training and they need some assistance (read: consultancy). So a package deal is made. The training and consultancy add to almost $750, so the salesperson makes that $1500 package deal as he gave a 25% discount on the program. Yet, their HQ abroad states that $1000 goes to their HQ and the rest is for the local office (which is $500 at this point). Now, $500 does not pay for all the costs, but for the local office it does not matter, they get paid and they never notice it, the CFO makes it all match and that office has close to 0% profit as the turnover and the costs cancel each other out. So, yes! We understand that some places have little turnover, but how are the costs and the deals managed and registered? At no point any laws were broken, yet when we consider this, tax is still evaded.

This is part of the game that the corporate icons play. It is all legal and no laws are broken. Yet, who benefits from all those millions? I remain on the fence in many cases. I believe that the hard worker should make more, that the innovator deserves to get rich, however we all do have to pay our taxes (even though it hurts in many cases). It is that part that is so lacking. Weirdly enough, the tax office seem to hunt down the little people, whilst chunks of corporate city London (and New York and LA and…) seem to push it all across borders and attend sales conferences in 5 star luxury resorts. Google, Amazon and Apple are the visible players, but that list is long and very distinguished. How about those dozens of software vendors (and companies with such a setup) with offices all over the place? How much gets pushed to other places?

That part needs to be dealt with and it is nice that Margaret Hodge is fighting this battle, yet is she getting it done? This is not about her, but I am questioning the data collectors who should have been on top of this LONG BEFORE Miss Hodge got the visibility. Who is guiding them to collect and sift through the data that is collected? Who decides on the questions that need to be asked? To me, that seems to be the gravy train that many wants to board and no one wants to rock, because those corporate supporters get a taste of the real sweet life. They are not in the limelight, but they get access to the real VIP events, get access to the best schools for their kids and life in the places many only dream of. They are the people behind the curtains. Perhaps MP Hodge needs to take a second look and rip away certain curtains, it might be quite a revealing view and a show the press would love to behold.

 

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What lies beneath!

Today is the day we get to take a look at those who get and those who did not receive an Emmy. This is a remarkable year for it. Not because of the winners and non-winners, but from my personal view on the quality of TV shows. There was little way for me to predict the winners in this year. This is not a year where there is a clear winner. They were so many amazing shows and some of them blew away their own fans. So whether we cheer for 30 Rock, Louis, Nurse Jackie or Glee, or even all of them. 2013 shows that the audience won in a very big way. If the bad economy brings out creativity then no one can afford to miss the 2014 Emmy’s as true creativity is just around the corner.

Talking about the economy, is there any news? Well, today, not unlike the Emmy’s the UK is facing issues like vetting the spending by labour, Ed Milliband does not tolerate backstabbing and George Osborne is facing Scepticism over the multi-billion pound sale of Lloyds Banking Group.

So as we are in the sphere of the Emmy, considering that soon there will be the Tony for theatre and the BAFTA and Academy awards for the cinema, here is the Churchill Award. This golden statue shows us Churchill in a thick winter coat and a cigar. Like the image we had of this great man during WW2. We should not confuse the statue with a Hitchcock or any other drama figure. Here we ‘award’ the politician.

So in good standing, the Churchill award for political events goes to (wait for it)……

Nigel Farage of UKIP!

Surprised? Angry?

Let me elaborate. I am not on his side. I remain for now a conservative. Yet, when we watch the news in triviality, where not unlike the issues in Australia Labour seems to be in power struggle after power struggle we wonder why we should support a party where the bickering of being in control takes so much energy and time of a party. Now I am all in favour of a Milliband labour with the bedroom tax gone. Yet, how will certain measures be made with a trillion plus in deficits? Similar warning in regards to the squabbling was reported by BBC’s Justin Parkinson as he recouped the words by Dave Prentis.

The second player, ‘my’ preferred side David Cameron was accused of bringing back more of the ‘nasty’. That is not a bad thing (still highly uncomfortable). I agree that costs have to be cut, yet for now he has not gotten a hold on their spending. In addition his peer in parliament George Gideon Oliver Osborne, Chancellor of the Exchequer did not help much. Yes, on his watch the economy is slightly better. However, if we give weight to the Guardian (http://www.theguardian.com/business/2013/sep/22/first-signs-recovery-despite-austerity-george-osborne) it was not his victory. William Keegan has his ducks more than just in a row and as such this article has weight. Still, the UK could have done a lot worse. Heavily against the conservatives is the Welfare Reform Act 2012 (aka bedroom tax). I always thought of this as a bad move. Especially, in a time and age, where the UK housing shortage is massive and no one can afford to move or change apartment. Nailing these people to their empty bedroom (or cupboard with bed) is just not the way cricket should be played.

So we see the winner Nigel Farage. I consider this man to be dangerous. His ideas are out there and the consequences of moving away from Europe will hurt the UK economy in ways we still cannot foresee. Still the idea of a flat tax approach has merit. When we consider the Stemcor’s of the world (or in this case, just the UK) the umbrella options and other small little twinkles that give the wealth more deductibility’s then the average welfare person many wonder. The fact that he gets stigmatised on matters seem to work positive for him as well.

Still, the plays he plans should he ever get to number 10 will hurt the UK in ways many of his voter will not realise until it is too late. He speaks to those losing much, to those in economic hardship, ever willing to blame anyone else, even if no one (bankers excluded) is to blame.

The man has the charisma and he has the drive, people react to that and in the end, all sheep plenty and few will follow the herder that gives them the best music (even if he is sitting next to a blowing volcano). If the others do not change their ways then my initial prediction from my previous blog (at https://lawlordtobe.com/2013/05/04/ukip-or-u-k-i-p-ur-kiddin-i-presume) will come to be true. Labour and Conservatives on the same opposition side of the isle. That would be one hell of a show to get tickets to.

 

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Tax evasion, copyrighted by Vodafone?

If we look at copyright in the UK, then according to the UK copyright service, which states that “In the case of business ideas, it is again the recorded work rather than an intangible idea that is protected. Copyright would apply to items such as written documents, artwork, etc. – i.e. a Business plan, promotional literature, website, logo, and such items could certainly be registered.”

From that point of view, the creative tax efforts by Vodafone could be seen as an original work of ‘art’ (by lack of a better word), yet are they alone and are they really the first?

Yes, there is so much frustration in voices of people all around me as I hear them complain about the too fast rising cost of living. The fact that I saw an article last week in a newspaper stating that the minimum income for getting a mortgage in London now exceeds a million pounds, which I reckon is some new record to fight. So as many, who dream of a place around Swiss Cottage or Bond street (to keep the Lord’s Cricket grounds within walking distance), we see that this new price tag makes London an affordable place, mainly for Bankers and dealers in amphetamine based chemicals and that is pretty much it. So when these realities hit us and we see that a deal is struck with Vodafone for hundreds of millions of revenue (for the goal of non-taxability) made by what was described as an empty office in Ireland, waves of anger hit many people. This could be seen as a sign that the rich will get richer, at the expense of everyone else.

But is that the actual truth? It seems more a sign of the time than anything else. Vodafone is in pretty good company. They are actually one of the smaller players when we consider grocery shop sized companies like Google and Amazon. It gets to be a lot more hilarious listening to MP Margaret Hodge complaining about it to Google (in May 2013), whilst she is directly connected through family to Stemcor who is having the very same artistic approach to the payment of taxation (or lack thereof). The Telegraph in November 2012 reported that Stemcor, which reported revenue around 2.1 billion with a reported profit of 65 million paid a mere 163,000 pounds in taxation.

Whoever came up with that idea was worth his weight in gold and gemstones in the eye of these corporations.

It does not end there and it goes far beyond the borders of the UK. Consider the following. A software company has an item prices at ‘X’ and then adds consultancy valued at ‘Y’ and the total being ‘Z’ is charged.

So let us take a basic approach. The customer wants the package which requires software and a consultant and is willing to pay 100, consultancy is set at the basic price of 80, which means if the disc could be valued at 20, the price is met, and as such the customer is a new and happy customer. Yet, the books would reveal that even though 100 is truly placed in the books (as a package deal), the disc value is now set at 70 and the consultants at 30, 100 remains the fixed set price. It is interesting that the 70 is set towards the foreign owner of the program and a value of 30 remains behind. Of course the consultant was more (a lot more) expensive, and as this is all within one corporation the consultant will get his monthly income. Yet, was there a case of tax evasion?

It becomes an interesting debate, more important, it becomes the environment of global corporations and even more interesting is where the revenue and taxable revenue should be placed. I would share the view that this is more than a sign of the times; it is now fast becoming THE sign of the future.

In the age of technology today, many government types (PM, MP’s and exchequers alike) might look at certain developments of ‘new technology’ moves, as corporations go to the cloud and digital distribution, yet there seems an apparent lack of ‘comprehension’ is not the right word, perhaps it is ‘realisation’ that all these revenues would no longer be taxable and Microsoft is not even close to being a frontrunner. At present Adobe is far in the lead there. Consider all these advertising and publications houses, they are in abundance in the UK and those houses have moved to some extent, or are largely moving to the Adobe creative cloud, software, that is no longer sold in the UK, costs that are paid for in the UK and are therefore tax deductable revenue, which is shrinking the UK government revenue pie chart by a lot, especially as revenue from the other side of that equation is no longer in the UK for any level of taxation.

Whether we realise it or not, the old tax deduction scheme was designed on some level of equilibrium. We had tax deductions on one side, because we bought certain items like hardware and software. Hardware is now no longer the expensive post it used to be and the software part that is still steep in some cases is no longer bought, it is leased. As such the equilibrium is gone and a nation cannot continue on one side to hand out deductions as the other side of the scale no longer exists. This gives us two dangers. The first is that certain parts would lose deductibility as the other side stops existing; this should be seen in the light that the cost of business is going up, whilst revenues will not get better. This approach is set by the bulk of cloud providing ‘solutions’ and that group is growing really fast. If the UK government (not just them) loses out on taxable revenues exceeding 15 billion pounds on software alone, where will they get the money from? When we consider the trillion pound debt, then we should worry about such changes and it is not just the UK who is facing them. These companies as mentioned before are doing this on a global scale, which means that Europe is getting hit hard all over the place and it is not unlikely that as cloud servers are placed all over the planet these companies will move into new group that could be labelled as ‘the global non-taxable core of corporations’.

In the past I proclaimed strongly that when we saw the information about Microsoft with their Xbox One approach and the cloud was not about gamers. Gamers do not warrant the implementations of over 300,000 servers. Yet, add the earlier mentioned events to the equation and we end up with a global customer base of software and as Microsoft stated it themselves, an entertainment provider of TV, Movies and Software, all in the cloud! As we see the situation now, likely less than one tenth of a percent might end up being taxable. In that same light should you wonder why NTT DoCoMo was so happy to get into the Indian market, then here is the evidence. Out of a very rough estimation (by me) of a total value of entertainment products that is cloud distributable which exceeds 350 billion (business and entertainment products), consider that these products would in future yield less than 0.5 billion in tax revenue on a global scale. This means that national infrastructures on a global scale are about to get hit really hard (unlikely before 2014). So as NTT DoCoMo starts streaming 4G based entertainment solutions, a massive amount of taxable revenue would no longer end up being taxable at all. So long Tax department of India!

It was exactly for these reasons that I advocated an approach where taxability of services are charged on the consumers side, to avoid the pitfall many governments are about to get faced with. That approach would end the dangers of Google, Amazon, Vodafone et al to walk away with a ‘non-taxability’ based commission solution.

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Values of a debatable side

OK, it is 23:30 at the moment and I am finding out the hard way that life in a hospital as a patient can be different from your daily life in the corporate world with fluent internet and then some, go figure!
So when I initially listened last weekend to a few newscasts in regards to a team of devoted UK MP’s I was not completely on the ball. Yes, they were having a go at the dude from Google, but alas, it was not the price fight we might have seen when some have a go at Lawrence Ellison, and the MP’s go home crying like Charlie Brown after an encounter with Lucy.

So there they are, Amazon, Google and their margins of non-taxation. Those MP’s dressed like bankers and charging like Don Quixote.
It is almost like a new disney ‘fairy-tail’. The pot calling the kettle brokered. Is it not a little on the hypocritical side, that AFTER they bail out RBS, when RBS reports a 2 billion loss, that personal ‘acquaintances’ still go home with a bonus total of almost 400 million? That was not stopped was it?
But Amazon and Google, after they did everything legal (not unlike the bankers of a fat-cat persuasion), and used exactly those correct steps in their order processing that now certain MP’s cry Havoc and slip-up the dog of stores.

This situation does bring back memories of my previous blog where I accuse members of the EU thinking too local in certain cases, this tax front reads the same way. Now, if you think that I will advocate one version of taxation for the EU, then think again. That is just not realistic! That is like putting 22 toddlers in one room, asking them to all select the same piece of chocolate, good luck with that one!
Yet, the idea to streamline certain forms of taxation to ease businesses in an optional situation where web stores will have equal rules, rights and burdens is not that bad. Of course not all EU nations have the same powerful internet, so more issues will arise.

In the end, is it about web stores and taxations? Let’s face it, a political grilling that was senseless and pointless to begin with? And let us not forget, no legal transgressions seem to have been made (if I am incorrect, then this blog WILL be updated). It is also interesting that the chair person of the committee Margaret Hodge, and her family connection to Stemcor seems to be in the same class of fishing pond. How revealing! What was that about a pot and kettle I mentioned earlier? By the way a special thanks to Helia Ibrahimi of the Telegraph who had several of these facts before I did (4G in a hospital is not that realistic, hence my delays).

Yes, it seems that a elevated level of lesser taxation does exist, like an additional income support class for billionaires. Hoo-de-la-lay, as Prince John would say (Copyright: Disney).

So looking at these issues, and these facts, then what is this really about? Will this be the kick-off for a ‘simpler’ tax system? (like billionaires do not get enough deductibles as is). Is this about uniting into one tax system? The latter part would be a nice idea, however with many EU nations in desperate shape to get revenue, not realistic. There is also the slight humorous thought of PM Cameron calling Dublin asking them to do him a favour and not process Google’s non taxable issues there. What are the odds that Irish laughter will reach the shores of Sydney? #JustSaying

Make no mistake, there is more going on here. Do not be fooled to think that this is just visibility. The honourable Margaret Hodge for Barking is one clever cookie. She has been around for a long time and when it comes to the disciples of Machiavelli, she is up there with the league players, which beckons the thought what is this the start of?
The only part that comes to mind is that this is a two edged sword. On one side this is only partially about the tax lessening that Google, Amazon, a few others and the family firm (Stemcor) are enjoying. This might be in one part, a nice little jab to raise the topic of raised taxation during the G8. Consider the issues that the EU needs revenue, now consider that 1% of something remains better then nothing, and that plays nice to the Stemcor business family too, All these EU items play in her/labours favour. If David Cameron does nothing, he will look weak, any act by the PM will economically hit back and gives chance for an overwhelming victory for labour next election. The UKIP issues do not help much either, but at least in that part they are not on the side of labour.

Still, whatever pressure is applied to increase the billionaires tax bill, Westminster must be careful not to be too harsh with their ‘scare’ tactics. Scotland is only 725 km to the North and Stemcor already has an office there.

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