31st August 2016
There's a row brewing between the EU and corporate America, with the US government having to look after its own, whatever the merits either way. In fact the opening salvoes of the row have already started with the EU Commission declaring that Apple is required to pay back-taxes to the EU, via Eire, of £11 billions. While everyone waits for the UK Prime Minister, Theresa May, to trigger Article 50 and begin the formal negotiations to leave the EU, the UK is more in a position to observe from afar. The UK remains a member of the EU for the next two years, but at the same time it will be detaching itself from EU laws and declarations.
What the Apple row with the EU illustrates is how wealthy global corporations will use clever accounting to position themselves to pay as little, or even no tax. One method is to place their headquarters far from their home base in their country of origin. Thus by establishing their headquarters in countries who fall over themselves to offer very favourable tax arrangements. This works both for the corporation and the country it chooses to record it's profits from.
This may not be breaking any laws, but it's a way of interpreting them in a way that benefits the corporation. Like a software program, all the rules work normally, but then someone tries a different approach and gets more than was intended. The UK is now bringing in a law that makes the corporation's accounting firm equally liable for tax evasion. Thus not only is the tax recovered from the corporation, but the accounting firm has to pay the same amount again. It's intended to be a double blow.
The EU says that Apple has broken EU laws by obtaining a special arrangement with the Irish government, when it first placed its headquarters there. Ireland gained inward investment and job creation, while Apple received a softer view on its overall profits. It was able to divert a significant amount of profit out of the tax system by creating a virtual headquarters, that had no physical presence. As a consequence its tax went as low as 0.005%, equivalent to £50 tax paid on every £1 million of profit made. This wasn't clever accounting, this was using the tax arrangement that the Irish government had agreed to.
Ireland operated as if it was not a member of the EU when agreeing to Apple's tax arrangements. Luxembourg has done the same with Amazon and Starbucks didn't point out that it too did not have its tax arrangements closely examined – until recently, when it paid some back-tax. Ireland doesn't want the missing tax, but it has to abide by the EU Commission's dictate. If it cannot extricate itself and Apple from this latest ruling, it could suffer financially.
This doesn't cut any ice with the EU Commission. After all it's practically made Greece bankrupt by forcing it to comply with Euro laws that do not work the same in each country. So how was it possible for Ireland to ignore EU rules until now? This is just one of the examples that caused the referendum in Britain to vote to leave the EU. The vote would not have gone fro Brexit, if the EU Commission was not so biased towards certain EU countries and intransigent to any change.
Since Brexit, the pound sterling has dropped in value by 10%. This means that imports are dearer, but exports are cheaper and inward investments are cheaper too. The steel industry for example, which was about to close altogether before Brexit, is now cheaper to run. So its sale has been put on hold and re-investment is no longer considered unrealistic. So far the consequences of Brexit have been more talked about than have actually happened.
2nd September 2016
So the Irish government is going to appeal against the imposition of an £11billions back-tax credit on Apple. It was a foregone conclusion that Apple would appeal, but now Ireland is embarrassed at having to receive an enormous tax rebate. Perhaps it should take the money and give it to Greece, who have been made virtually bankrupt by the EU Commission. There's no doubt that Apple has been paying an incredibly low tax on what has to be very large global profits. Apple say that they have been paying tax in accordance with the normal arrangements in the EU country where it is based – outside of the USA.
I think that under analysis, they're probably correct and it is also probably correct to say that Google, Amazon, Starbucks, etc. are not breaking any tax laws in the way in which their favourable arrangements may suggest. If Ireland has offered an arrangement that offers low taxes which favours companies like Apple, but against EU rules which interprets it as State Aid, then it has effectively made a bilateral trade agreement with Apple. But as a member of the EU it is not permitted to do that. Okay there is not yet a harmonising of taxes across the EU, but offering sweetheart deals to dissuade companies from investing in other EU members, is not playing the letter of the game.
Interestingly, when the UK finally breaks with the EU, it will be in a position to make bilateral trade agreements, without any higher authority deciding that only they can decide whether or not it breaks any rules. There will be no back-tracking and really the EU should accept that it had its eye off the ball, when allowing member states to make their own tax arrangements. Thus it should write off the tax as an accounting error which cannot be charged retrospectively. That may be the sensible approach, but it's not how tax departments operate throughout the world. After all Al Capone was found guilty of tax evasion and not for the obvious murders and crimes he committed.
After the imposition of the tax demand on Apple, threats are flying in all directions, exactly in the way that they have done from the EU against the UK's Brexit decision. Even President Abama produced his own threat to the UK after Brexit by stating that any discussion on bilateral agreements, would move to the back of the queue. But agreement with the EU on the TITIP trade set-up has been under negotiation for some time now without any sign of agreement.
The tax demand by the EU is seen as political by Apple and the US government, but if it is the only way to make companies pay their way in the world and not rely upon a tax-free arrangement, then governments need to work together. Countries have become rich historically because of trade and not politics. Family dynasties – Royal and non-Royal – have been formed for financial benefit, which in turn is reflected in trade. The British Empire started out on trade only, without political interference. Politics took over when the trading companies became more powerful than the governments of the countries from which they originated.
9th September 2016
Brexit continues to cast a long shadow over all aspects of British society currently. Theresa May, the New Prime Minister, has said that 'Brexit means Brexit' and apparently this is a statement which is full of uncertainty. But the referendum question was very clear, 'Do you wish to remain part of the EU?'. The answer from the British public was equally clear – No!. It's true that just four million voters tipped the balance to leave the UK, but it was still an absolute decision. When an athlete loses a race by a margin of hundredths of a second, he may well feel aggrieved; but a 'win is a win'. He can go and sit in a corner and wallow in deep depression or review his strategy and exert even more effort to win.
In the campaigns for and against remaining n the EU, that lead up to the referendum, there was negativity on both sides. But these were speculative observations based on perceptions only. On the leave side, there was an optimism for the future prosperity of individuals and the country as whole, but backed up unsubstantiated arguments. On the leave side, upsetting the status quo was was considered to be catastrophic and result in the UK collapsing through the economic floor of the world.
Well the UK cannot officially leave the EU until two years have passed – after triggering Article 50 of the EU rules. So the future can only be speculative, but the intermediate dire consequences forecast after the Brexit vote have not materialised. Economic output has not collapsed, people have not left the country in droves, spending by the public has not diminished. The pound dropped by 10% in value straight after the vote, but while imports are dearer, exports are cheaper. This has resulted in increased orders and stay of execution for businesses previously under pressure.
Commentators on all sides of the decision appear unable to express any view without dragging it down to a level of unsupported fear. Yet as President Roosevelt said in his speech in 1933, 'the only thing you to have to fear is fear itself' – a lesson still not appreciated.
12th September 2016
Brexit may be likened to a book that is still being written, much to the dismay of the remainers and the rest of the EU – and in fact far parts of the world. Well today you could say that the first chapter has now closed. David Cameron is continuing his own exit from politics by resigning as an MP. This will take place in the next few months, once they find a Conservative candidate to stand instead.
So not only was David Cameron defeated by the referendum, but instead of staying on in politics as he said, he first resigned as Prime Minister and is now leaving politics altogether. Other EU leaders and probably leaders in countries around the world will view David Cameron's actions with a high degree of caution. It shows how granting too much decision making in the power of the electorate, that you can really come unstuck.
Democracy may be a fine thing, but it's limits have to be carefully defined. The whole point of electing politicians to serve on your behalf is that they then have the time to establish laws and policies which are intended to work for all. Referendums by their very nature are divisive. Even the Scottish First Minister, who still believes in the separation of Scotland from the UK, will not offer another referendum without strong evidence that it will be successful – for her.
David Cameron states that his reason for leaving politics is so as not to be a distraction for the new Prime Minister – Theresa May. It's certainly true that past Prime Ministers who remain MPs, often act as a thorn in the side of their replacement. But it's also a fact that Theresa May has ditched most of David Cameron's previous cabinet, and is also dismantling his policies that she never fully agreed with.
Although the official Opposition Labour Party is in its own state of awry, it's leader is defiant on his hold of power. So David Cameron lost out to the public, the Opposition and the person who he intended the referendum to defeat. These people all remain in their positions of influence while he now disappears into the mist.
23rd November 2016
I would concede that the Brexit situation is a bit of a mess and has suffered from a lack of forward planning during the pre-referendum campaign. It's possible that if sixteen year-olds had been allowed to vote, the result might have been different. I think it is also conceivable that if the EU Commission had been more flexible in its outlook, not as many people would have voted to leave. So the refusal of the twenty-seven EU leaders to give ground but simply harden themselves against any form of compromise, forced the UK out of the EU.
It was not helped by the lack-lustre approach to initial negotiations by David Cameron in securing any satisfactory deal and the fact that a referendum was not even necessary. Upon the defeat of his belief, he immediately washed his hands of the whole affair and has left politics altogether. He had one term as Prime Minister of a coalition government and then could have continued with a greater mandate, but only lasted for one year at his own volition. He destroyed his own career – and that of his political friends – and has shown himself to be arrogant, inept and stupid.
The vitriol displayed in the recent US Presidential campaign was just as strong in the UK referendum campaign. Even now both sides are still at each others' throats accusing each other of pure ignorance. But David Cameron's refusal to deal with what he had caused meant that things had to move quickly in stabilising the political system and the financial markets. So a new Prime Minister was voted in – outside of a General Election – within two weeks. A new team and a new approach has been taken and today the new Chancellor of the Exchequer will present his first budget for the future direction of the UK.
After the terror stories spouted about the Hell of leaving the EU, a lot of this has not yet materialised and in some quarters a more rational view is beginning to emerge. It's true that the value of the pound collapsed, but this brings equal opportunities for trade and society. Even if higher tariffs are established because of long term trade negotiations with the EU, it could well be cheaper to buy something in the UK and then take it home to whichever country you live in. The block on bilateral trade with significant trading groups and individual countries around the world, will now be lifted in 2020. The EU will then no longer be the deciding controller.
People talk about 'uncharted territory' and 'uncertainties', but at a personal level this is true of being made redundant. I was made redundant in my mid-thirties and it was the best thing for me. I used my past experience and was forced to adapt to an unknown employer and it worked. Really if you consider the beginning of Hollywood in the USA and all the foreign immigrants – mainly from Tsarist Russian – who created all the big studios, the blossoming of such creativity occurred when people went into the unknown. So I don't see the future with any pessimism.
19th March 2017
Yesterday was the sixtieth anniversary of the Treaty of Rome, when the EEC was formed by France, Germany (West), Italy, Belgium, Luxembourg and the Netherlands. It was not the anniversary of the EU and that is the point – the EEC was the European Economic Community and not a political union. Britain had declined to join under the direction of Winston Churchill, which rather confirms why he was voted out immediately after the Second World War. Despite being a great war leader and essential to the survival of the UK under the Nazi threat, he had his roots in the British Empire. He was the man of daring do risked capture and injury during the South African Boer War, at the end of the nineteenth century. He entered parliament and rose through the great offices of State to become the war-time coalition leader. He could see what was happening in Europe with the rise of Hitler in the 1930s. He also witnessed the rise of communism as it spread across eastern Europe. He coined the phrase 'the Iron Curtain'.
Later on in 1957 when Churchill was now in retirement, it was Harold MacMillan who changed the view and applied to join the EEC. But France's General de Gaulle saw the special relationship between the UK and the USA, as a threat to the EEC and refused. It may also have been a fit of pique as well. So it wasn't until 1972 when a further change in Prime Minister in the person of Ted Heath, that the UK applied again to join the European Common Market, and this time succeeded. Over the years the EEC has been transformed into the EU and any time the UK has raised an issue, it has been shouted down and accused of being recalcitrant. In other words, you can have a democratic vote provided you agree with everyone else.
That attitude is even more in force now with Brexit. As article 50 is now about to be triggered which formally states that the UK will be leaving the EU, the words coming out of continental Europe are 'punishment' and 'poor deal'. How is this a getting together of common ideals when any objection is turned into a fight? The UK government, whichever party one supports, has simply said that a poor deal is a bad deal and not worth considering. The EU leaders have said that any deal must be sub-standard and not have any trade advantage. All leaders have dismissed all economic arguments raised by business.
It is continually suggested by many politicians and sections of the public in the UK that a 52% per vote in favour of leaving is not fare and requires a second vote, but that's not how democracy works, that's more of a dictatorship process. If an MP wins their seat by one vote, he's still won. If an athlete wins his/her race by a tenth of a second, they have still won. You can't keep rerunning the result until it matches what you personally think, you always have to go with the winning number. The UK would more than likely not have voted to leave the EU if there was room for discussion. But the EU leaders said do what we say or leave, I just don't think they expected the UK to leave. So now there are going to be fractious negotiations on how to continue trade with the continental European countries and yet not appear to give any preference either way.
23rd March 2017
In 1570, four hundred and forty-seven years ago, almost exactly to the day, Pope Pius V issued a Papal Bull excommunicating Elizabeth 1 of England. As a consequence trade in Europe was denied to Britain as a declaration in this Papal Bull. Although it was Elizabeth's father who split from the Church of Rome and created the Church of England, his eldest daughter Mary (daughter of Catherine of Aragon) restored the Catholic religion with fervour. There had been a short continuation of the Protestant faith under Edward VI, but he was a sickly child and died after just six years as King, aged sixteen years old. However after Mary, Elizabeth re-established the Church of England as the religion of the land.
With trade closed off from Europe – a kind of Brexit in reverse – England had to look further afield for trading partners. So the Turkey Company was formed to trade with the Middle East (Levant), the Barbary Company was formed to trade with North Africa. The Muscovy Company had previously been formed to trade with Russia and the East India Company later began trading in India. World trade drove exploration and ultimately formed the British Empire as the trading posts became bigger and were brought under control of the British government. At home, business drove invention and ultimately lead to the Industrial Revolution of the mid-1700s. This created a factory culture away from cottage industries and brought into practice financial services.
All of these events continued to develop in the Age of Enlightenment of the eighteenth century and covered science, industry and culture. In Britain, the steam engine was invented which lead to the establishment of railways and steamships. Mass production was introduced in the cotton mills, shipbuilding and big engineering projects. The electric motor was developed by Michael Faraday. The postal service was created in the early 1840s and Sir Robert Peel started the police force that has developed to this day. Much later, penicillin was discovered and the atom was split in the twentieth century by two English scientists. The development of the computer was started with the difference machine created by Charles Babbage in the nineteenth century and further developed by Alan Turing in the twentieth century.
So the UK has a history of invention, innovation and adaptation, and it seems to me that anti-Brexiteers are blind to the intrinsic intelligence that provided UK independence while associating with others countries. Since the referendum there has been a fight between those who voted to leave the EU and those who voted to stay. The EU leaders of the other twenty-seven countries have looked on with bemusement as the UK gets shaken by violent discussion in both camps. Now they are having their say and acting like spoilt children. Hopefully they will come to their senses. If politicians were separated from trade deals, then the practicalities of doing business would have an easier ride. Brexit may be a walk in the dark, but it isn't a catastrophe.
1st April 2017
Well the troops have gathered and the battle lines are about to be drawn, for the expectations and aspirations in the negotiations of the UK to formally leave the EU. There are two points that I do not understand and which I don't think have been satisfactorily explained. One is, why is there so much anger expressed by the leaders of the EU? They are constantly verbally attacking the UK in the form of the Prime Minister. But if it had just been the MPs in parliament who had voted whether or not to leave the EU, the vote would have been to remain a member. It was the British Public who voted to leave and whatever arguments there are that a 4% vote in favour is insufficient to be valid, this is rubbish and I wish people would come to their senses. It isn't the way of the world in sport, politics, competitions, etc. Everything works on a simple calculation of when the figure is greater than 50%, then that will be the winning state. So I do not understand why the word “punishment” is being bandied around by the EU. If you're a member of a club and decide to leave and thus resign, it is your prerogative. To my knowledge no club has rules that treat any resignation as a personal attack. There may be reasons that are due to personalities, but the other members do not instigate a campaign of hatred as a result.
The other other point I do not understand is the EU setting a bill that the UK must pay before any negotiations are completed. This is speculated to be around £50 billions. Exactly what is this money for? In insurance, an early closure of a policy incurs a penalty of realising less funds; so you may effectively lose the final bonus. But you are not expected to pay all future premiums in a lump sum, that would have been payable had you remained with the policy. If you pay for a lifetime membership of a club or organisation, then the full payment is made upfront. If you buy something on credit then a final payment will be demanded, but that means you then own the product. There are likely to be parts of the EU operations that the UK would be willing to pay for, even though this is constantly denied by the UK government. The rules intended to be set by the EU for such openings have already been made impossible to accommodate. So I don't understand what this bill is and it's shrugged off as being a kind of divorce bill.
Okay, Scotland has decided that things are not going their way and want to go it alone. Ironically it was the Scottish King in 1603 who inherited the throne of England. So the power had been brought into their sphere of influence, but political unions as opposed to nationalism has been relatively peaceful and successful ever since. The Civil War of 1642-1651 was between English divisions and Scotland did not take part. Also ironically, there's already a wall across the border between England that the Romans built by Hadrian and an earlier one, the Antonine Wall. Hadrian's Wall is in England now and the Antonine Wall is in central Scotland. The only land border that will definitely come about is between Northern Ireland and Eire. There are no border posts at present, and both the UK and the EU wish it to remain so – no hard border.
The British public voted to leave the EU and they must now step up to the challenges. Productivity must increase, all jobs must be considered important and none socially inferior. Costs will have to be rationalised, as they would anyway, with higher trade tariffs a possibility. Supplies where possible must be obtained from within the home market and not brought in from abroad. The UK is currently the fifth largest economy in the world with a densely populated country of 64millions, so should not be dismissed as irrelevant to world trade. It has a highly intelligent and technologically history of innovation which still continues to this day. Maybe the word sovereignty has been used so often over the past eight months, that it's beginning to lose its meaning. But pessimism is a poisonous state and whatever one's opinions it must not be allowed to suppress optimism.