26 February 2008

Non-doms: Gordo's got it wrong

I have been wrestling with the issue of the much trailed non-dom levy. On the one hand I am all in favour of people paying their fair share of tax, but on the other I am dismayed that it is being done in such a cack handed manner which is likely to damage the economy. Whilst I have little sympathy with US businessmen who are to be taxed on their worldwide income or pay £30k since a UK citizen working in the US would not even get the benefit of that option, I can see that the arbitrary change is a bit tough on people who have managed their affairs in the expectation that the tax system would remain stable.

However, rather than imposing the flat, reggressive £30k levy, there are a couple of sensible reforms that the Chancellor could make in a few weeks which would not be such an obvious cause celebre amongst the ex pat business community.

  1. Change the rules so that any income derived from employment based in or mainly undertaken in the UK is subject to UK taxation, regardless of where the payment for that employment is made. Currently, non-dom workers can be paid through off-shore companies for work done in the UK. This would be similar to the crackdown on consultancy companies, which were used as tax efficient vehicles.
  2. Levy a small percentage of the value of any real property held by an offshore company. Lots of properties (including the entire HMRC estate, via Mapeley STEPS) are held in offshore properties to be tax "efficient" and where properties are held in an SPV, this SPV can be sold avoiding the need to bring income into the UK or pay UK stamp duty as the only transaction is the sale of the SPV, in the BVI or whereever it is located.

There is no reason why foreigners working and living in the UK should be getting a free ride on the work done in the UK or property owned here. But the compromise (to keep a competitive advantage) is that we do not seek to tax money earnt and kept offshore.

Banking 2.0

I have recently become intrigued by the newish phenomenon of P2P lending over the internet. Irritatingly, I recall reading an article all about it but now cannot locate it - I am convinced it was in the Spectator, but it appears not.

The principle is simple - you agree to lend money at a particular rate, and then the website lends it out to borrowers who want the money at that rate. The trick is that the website cleverly splits your money into parcels as small as £10, so if one lender defaults, the loss is not major. The downside is that whilst the returns are greater than traditional bank interest, your money is tied up for the lifetime of the loan (up to 5 years), although for some people, this might be a good thing.

I have signed up on Zopa.com and have experimented by lending a measley £100. You can either lend in the general market (where Zopa does all the work once you have set the criteria) or you can take part in the Dutch auction and bid to lend money to people who are on the listings section. In the US, a rival site, Prosper.com, has a vibrant listings section, but on Zopa it is quite small and many of the people on there seem to be having a laugh. For instance, people borrowing a couple of thousand pounds but claiming that their income exceeds their expenditure by £500 or more each month, which in my mind does not really stack up. I have offered £20 to a lister, but I think I will steer clear as the borrowers are obviously hoping the "personal touch" seep through and the lenders will allow their heart to rule instead of their head, and I have no intention of becoming a one man Northern Rock (although I have just got 8.5% on my £20 for 3 years, which is not bad, let's see how it goes)

If you are interested in Zopa, please click on the link in the side bar and sign up so that we both earn £30 or you can sign up here.

Of course, micro lending is also used as a development tool, and if you are not worried about getting a return and just want to do good - I recommend you check out www.kiva.org.

14 February 2008

Ken's cant

This week Ken Livingstone has been busy justifying the new increased congestion charge for drivers of cars in emission band G or above - which will be up at £25 per day with no rebates for residents.

Ken says that if people want to drive polluting vehicles, they should have to pay for the privilege.

This is a fine sentiment, but bears little scrutiny, when you examine his scheme.

  • All cars pollute to some extent. The scheme is favourable to small cars, and neutral for cars just within band F.
  • There is no charge for driving outside of the operation hours of the scheme - but what difference to London's air quality and climate change is there if big cars are driven at night or at the weekends?
  • The zone covers a completely arbitrary part of London - why are band G car drivers in South, North and East London all exempt?
  • The scheme makes no allowance for the number of people in a car. Two band F cars each emitting CO2 at the rate of 224 g/km and each carrying one person is far more polluting than one band G car emmitting 230g/km, but carrying two or more people.
  • There is no allowance for the amount of CO2 actually emitted by a car on a particular day: a smaller car might be driven around all day - free of charge - whereas the large car may just take one short journey but be subject to a £25 charge. This is mad, when the smaller car has pumped out more CO2 over the course of the day.

And finally, not all the cars in the scheme are 4x4 giants of the road. Try getting more than three children and two adults in anything smaller than a people carrier (with compliant child car seats). Sure, there are people carriers which are not in band G, but many of them are.

The sad truth is that Ken Livingstone is a bitter little man who wants to do what he can to make the lives of people he hates as difficult as possible. He has no genuine interest in the environment - if he had he would be thinking hard about some of the points above.

Yes, I do drive a car in band G - it is an estate car. Just about the only time I drive it on my own is to move it onto residents' parking in the morning and usually when I am in it, it is full. If the scheme goes ahead, I will have to get a new car as we live 15 feet within the zone and I could not even move my car a few yards into a resident's bay without being caught on camera - although this means I will change my car sooner than I would otherwise and thereby cause even more carbon to be emitted.

So our only hope is Boris.

05 February 2008

MP's expenses and pay - a simple solution

Two problems: (1) Members of Parliament are paid a salary which is too low to attract talented people; (2) Members of Parliament have expense allowances which are not transparent/are misused.

Solution: Roll up the the total salary paid to an MP together with the total amount which could be claimed via allowances (adjusted for London MPs smaller housing allowance) and place the entire amount for each MP into an account to be operated by that MP. The MP should then be free to use this budget as he or she sees fit (in connection with his/her activities as an MP), including to boost his or her own pay. Clearly, the bigger the salary, the smaller the budget for other things.

This solution would mean that there would be no incentive for MPs to employ family members in jobs to boost the family finances artificially. It would also make it much easier for MPs to pool resources - share staff and subscribe to centralised services. Not having set amounts to be claimed for certain activities would make MPs more businesslike and encourage them to shop around for the most efficient service and thus stretch their budget the furthest. This amount could then be increased each year in line with inflation, but then it would be up to each MP to set his/her own pay. Might make for some interesting decision making....