Labour still lost - Lisa Nandy and her incredibly clever tax ideas

I don't quite have the quality of post for today that Mr. Drew was able to produce over the weekend. But this snippet from the Labour leadership contest got me thinking a little about both how stupid these people are but also what tax policy could mean in 2020. 

In the Mirror article, Ms Nandy says she wants all companies to pay minimum wages after benefits are calculated so that big companies have to support workers at this level and moreover to add a special tax which is in effect a top up tax for paying such low wages. . Whilst to Ms Nandy this sounds good and suitably comradely, it would create some rather odd outcomes. Tesco would likely get a very large new bill, as would any big employer. Smaller employers with higher wages, I don;t know such as say a large global investment bank or Facebook or Apple, would not get hit at all. So in effect it would be a tax on employment - just what the economy ordered. 

Of course, in a wider context a policy like this is even worse. It would further drive companies towards automation and reducing work numbers.

So how do we tax these pesky companies. I think a lot of progress has been made with BEPS (Base Erosion and Profit Shifting) which is an international agreement that has been spread worldwide. This has really pushed hard on the easy use of international tax structures and and upgrade is on the way. 

Then of course the reality becomes that you have to tax what is done in Country to have a hope. for me this means a greater lean towards consumption taxes and complex transfer pricing contracts....as well as perhaps higher import and export taxes, especially on digital goods. In return, there needs to be a reduction in employment taxes and also business property tax where the alignment is well out of kilter with value.

All of this is worthy of a longer post which I will get too - certainly more quickly than the vacuous Nandy will come to any real conclusions on tax policies!.  

Film Industry: Ripe for Culling

Visiting a stately pile that is often used for film shoots, I happened upon a remarkable document.  It reveals the number of film crew required for the following scenes:

• Driveway of house:  carriage drives by - 90 crew
• Back lawn: Lizzie watches Mr Darcy gallop up to house - 90 crew
• Main stairs:  Lizzie agrees to dance - 30 crew 
• Ballroom - 50 crew, 150 extras 
• The Bennetts leave the house - 90 crew

The word "required " is of course used loosely.   I think we can confidently analyse the situation as follows: it would not be plausible to claim that 90 people fit on a staircase, therefore a random number of 30 is chosen.  A ballroom, being bigger, can plausibly accommodate a few more - on top of the generously-stocked company of extras.  However, any number of people can fit into an outdoor location, so the full complement is allotted whenever the open skies beckon.
 
You can bet the budget reflected this generous allocation of manpower, even if rather fewer than 90 people were actually, errr, working.  A striking reminder of the days before the Times moved to Wapping and put paid to print unions stuffing Fleet Street payrolls with individuals such as D.Duck and M.Mouse, all of whom were said to put in full shifts every night - and certainly drew full wages.

This is what happens when tax-breaks are awarded to a favoured sector of the economy. The filming schedule cited above was from 10 years ago, but did the financial crisis change things fundamentally ?   Still some modest scope for cost reductions in this particular 'industry', I should think.

ND

Coffee still too expensive?

This is not going to be a rant about Starbucks legitmately using the UK tax system to keep its corporate tax bills as low as possible.

 (Ok, it will be a little bit now, but this is just to say the MP's in Parliament so keen on grandstanding should be asking the Chancellor and HMRC how it is possible for companies to legally do this? Why is out corporate tax code so Byzantine in nature?)

No, what really strikes me is the lack of coffee price effects on the price of coffee in the high street. This year the wholesale price of coffee has droped by up to 40%. Next year there is predicted to be a global coffee glut for the first time in over 5 years.

Yet prices on the UK high street continue to be  as high as ever, in fact they have been increasing this year. As usual, UK property rents are the key driver and staff costs. Only 3% of the price of a coffee is the actual coffee - 3%! I found that quite surprising, Labour, VAT and Rents are each over 25% each of the costs - even the packaging costs more than the coffee.

With that in mind, perhaps it is not surprising that Starbucks struggles in the UK, after all upwards only rent reviews, increassing minimum wages and increases VAT have been a big part of the last 5 years in the UK.

Maybe they really cant't make any money after all then...