Economics Talk

mjt95 · Guest

Article: Pre-packs boosted by High Court decision
Source: AccountancyAge

http://www.accountancyage.com/accountancyage/analysis/2199746/pre-packs-boosted-\court-3501406

The story illustrates the general commercial stupidity of HMRC in its
business of collecting taxes.

A firm of solicitors owed HMRC some £1.7m. HMRC took the firm to
court to wind the company up.

However, the administrators noted that this would not deliver the cash
to HMRC. A better solution for the firm and HMRC was that the
business continues to trade. So, the administrators instead sold the
business (as it turns out, they had a buyer already, giving the sale a
"pre-packaged" title).

Stupidly, HMRC attempted to block the sale of company.

In other words, HMRC chose to i) sacrifice any chance of collecting
tax owed to it; and, more importantly, ii) screw the interests of the
firm's clients.

Fortunately, the court saw the light and blocked HMRC's idiotic
whitterings. Both the taxpayer and the firm's clients gained as a
result of this decision.

But the taxpayer will need to suffer the on-going lunancy of HMRC.
After all, it is highly unlikely that a bureaucracy without any
commercial awareness whatsoever will learn from a single case.
--

mjt

A supporter of http://www.taxpayersalliance.com/, fighting to stop the
government ripping off the taxpayer.

Tax cuts v public services? No! Tax cuts *for* better public services.

Guest

mjt95 · Guest

You are comparing apples with oranges and trying to find a causation
relating to raspberries.

The correct analysis is to measure the effectiveness of the investment
of railways, water boards, post offices, buses, telecoms and others
pre-privatisation (say 1960s/1970s) and post privatisation
(1990s/2000s). The cost of change during the 1980s makes analysis
difficult, especially for British Rail, because it cost a lot to prepare
for privatisation.

For example:

Water boards get a lot of bad press for water leaks. But the leaks
didn't appear on the day of privatisation. They'd been going on years;
the public sector did nothing about them. So when the companies repair
the leaks, morons whinge about it. No dead hand of municipal economic
illiteracy here, save for the price caps that the regulator always wants
to impose, thus undermining the basis for funding capital expenditure.

Railways now offer superb food on trains, the windows are cleaned at
least once every 24 hours, the service frequency is much higher than it
was in the 1970s (especially inter-city routes), the punctuality rates
approach 95% (which is challenging when the main routes are now much
busier), the risk assessments are now much more responsible (but
long-term crash rates are not yet comparable: initial signs are that
they are no worse). And St Pancras International happened. And the
Tunnel. And the links between them. And Liverpool Street got
refurbished. All privately (or jointly) funded. No dead hand of
municipal economic illiteracy here, save for the price caps that the
regulator always wants to impose, thus undermining the basis for funding
capital expenditure.

Social housing stocks have increased significantly over the past 15
years because the capital element is no longer a monopoly of the state.
Most Councils in Hertfordshire still operate a housing service, but
government has wisely stopped them from turning into builders. In those
boroughs which have divested their portfolio to housing assocations, the
cost of management and the cost of capital have dropped like a stone.
No dead hand of municipal economic illiteracy here, but housing
associations need to balance the cost of their investment with the
rental returns given that the state will pay only part of the rents.
That said, the state can offer capital relief (and does), so some
"social housing" stock of housing associations can be a better spec than
pure private stock even on the same development!

So why have taxes risen?

Because the cost of the state has risen.

How?

i) bureaucracy. The government has employed masses of people over the
past 8 years at normal, commercial market wages. As with all government
jobs, none of them contribute to national growth. At best, they
facilitate the private sector to do so, but overall, they are "internal"
services, e.g. HMRC, or the NHS, or the education sector.

ii) pension schemes. Most government staff enjoy a fully-funded defined
benefit pension scheme. Over the past few years, the fall in the
annuity rate has combined with underperformance in most funds.
Consequently, the cost of pension contributions has soared through the roof.

My own analysis of Hertfordshire's district councils infers that the
pension scheme deficit is the largest out-of-control cost that councils
are likely to face in their budgeting. But I have yet to get to the
bottom of this one.

iii) crowding-out. Because the government has consumed so many people
into zero-growth jobs (or non-jobs, as I call them), the profitability
of the private sector has fallen. Thus, there is less investment and
less employment in the private sector. Thus, there are less tax receipts
from corporation tax and personal income tax. Government staff also pay
tax, but it's a zero-sum game. Since 2002, the government has been
trying to widen the tax base on the private sector without pissing off
the tax rates payable by the public sector. Meanwhile, the economy has
bounced on a consumer boom fuelled by cheap credit. Now the credit is
getting expensive, there will be a shortage of cash in private hands.
Prepare for a large drop in living standards over the next two years.

iv) targets. Since 2001, the government has assigned targets to local
authorities and other public bodies to perform the whims of central
government. Of course, local authorities collect their own tax: the
Council Tax. So, by dumping its former duties to local authorities, the
government can promise the earth and bury the cost into many different
boroughs, to hide the audit trail and thus hope to remain undetected.

v) the NHS. The government has devolved significant targets to local
authorites and hospital trusts. Large deficits were the inevitable
result. Rule changes suddenly turned deficits into surpluses. Happy
smiles in Parliament... but that's just spin. What's the real truth?

vi) white elephants. BAA is the best example here. BAA wanted to make
more profit from its existing operations so that it could fund more debt
to re-furbish terminals 1, 2 and 4 at London Heathrow. But, last month,
the CAA said no. The CAA didn't say where the funds for re-furbishment
should come from. Economic illiteracy in motion. Meanwhile, the same
government proposes to spend taxpayers' money on building terminal 6 and
runway 3. Why does the taxpayer need to fund this, when a private
company already had an economically sound plan in place to do so? And
given the shit service that the UK state normally delivers, why should
the consumer-taxpayer spend more than double the cash on a medoicre
service that a private sector provider could provide for less than a
quarter of the investment? It's a monopolistic, municipal rip-off.

In the UK, services have historically improved when people take
ownership of them (i.e. privately funded and privately provided). And
taxes rise because of municipal, process-driven, lazy, uncommercial,
non-entrepreneurial, non-thinking ("disjointed incrementalism", or
"amateurs' night out")

If we simplifed our tax policy, we could offer a negative tax up to
£8,000pa (max 6 months in every 24), with a personal allowance up to
£16,000 and tax at 20% on all income above £16,000. These figures are
my hunch based upon what I've read elsewhere.

We would also scrap capital taxes (capital gains and death taxes). We
would also make the standard rate of VAT 1% (currently 17.5%) and make
all transactions standard rated - no exemptions, no zero-rates, no
differentiations at all. Both scrappings would render contradictory
case law obsolete. In addition, it would remove forever any future,
legal, expensive stupidities like the question about whether a jaffa
cake is a cake or a biscuit.

The whole benefit system - its byzantine complexity of segregating
benefits, costing billions of administration on only relative pennies of
transfer payments - can thus also go: the negative tax would not need to
know the basis of your impoverished income.

At a stroke, this would remove about 80% of HMRC, 60% of the private
sector tax advisers, 60% of staff from all of the government benefit
agencies and just about all poverty traps that low-income people find
themselves in because of complex tax & benefits. The overhead burden on
the economy would suddenly release. After 12 months of high
unemployment, the investment that's been queueing for funds for the past
4 years will find resources to make it happen and re-employment will
happen quickly (over a 2 year period). Technically, the "cost of
capital" will drop like a stone. A short "recession" of 6 months would
precede very rapid, large-scale re-investment in the private sector for
years (some say up to 10) before receding to "normal" levels.

It would also increase government's tax revenues. This is because
shaving smaller amounts off more taxpayers generally yields more revenue
than punishing a small number of taxpayers. And because government
would be spending less, it would need to tax less.

Thus, for those services that the government continues to provide, the
financial foundations would be much more stable. There would be much
more private sector than public sector. And as the private sector funds
both public sector and national growth, society ends up better off.

There is also a strong probability that the remaining government might
realise that politics is the main reason for waste. So the smaller
goverment is more likely to want to private the remaining public
services - like the NHS - and revert to being a specialist buyer on
behalf of taxpayers. This would dramatically reduce the government's
nede for cash relating to the NHS, so further tax cuts are possible.
And because the government is acting only as a buyer (hopefully via
private-sector insurers), the poor get their medical assistance as they
need it, rather than being thrown onto a trolley in A&E for a few days.

With more money in private hands, there is also a far greater
probability of investment in green technologies. At present, there is
no incentive to do so. All government needs to do is to create a
market; but most governments simply want to monopolise (as all mafia do).

And this is why tax cuts lead to better public services.

orangatang1@googlemail.com wrote: