Sunday, October 19, 2008
Mr Cameron's Conservatives are calling on the government to allow small and medium-sized enterprises to defer their VAT bills for up to six months. Thus does Mr Cameron tell us, viaThe Observer:That means a typical small business with 50 employees, revenues of £5m and an annual net VAT bill of £350,000, doesn't have to find £90,000 to pay the taxman when the bank has just taken away its overdraft.
There are, however, just one or two tiny little problems with this idea. VAT is, of course, an EU tax, implemented via the VAT 6th Directive. A payment holiday on VAT would amount to a de facto reduction in the rate of tax, which is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.
That, though, might be the least of Mr Cameron's tiny little problems. Member states are required under EU law to collect VAT, a proportion of which goes to the EU coffers – known as the "own resource". Collection procedures are also defined by EU law, requiring the imposition of penalties on late payment – typically one percent per month. Changing these procedures unilaterally, guess what, is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.
Under certain circumstances, member states are entitled to adopt a simplified procedure for charging VAT, under Directive 2006/69/EC, but that does not include any provision for delaying tax payments. To the contrary, the Directive allows special provisions to enable member states to "prevent distortion of competition," which rather shows where EU priorities lie.
If these hurdles were somehow to be overcome, however, unilateral action by the UK in offering a tax holiday would certainly be considered a "distortion of competition" under Single Market rules. At the very least, Commission permission would have to be given, which will not necessarily be forthcoming.
And, since Mr Cameron's proposals affect only small and medium-sized businesses, larger firms might be moved to complain. A company like McDonalds, for instance, would have a just complaint. It regards itself as a "group of small businesses" under one banner. Fighting as it does for market share in competition with other high street outlets, it could argue that different rules on payment would most certainly distort competition.
There is also the matter of state aid. Broad-brush aid – which includes tax-breaks of any form, directed at one sector rather than applied uniformly – would most likely be considered illegal. At the very least, Commission approval would be required, which might not be forthcoming.
Then there is one other tiny little detail. Numerous studies – not least this one - have drawn attention to the danger of deferred VAT payments, making the system even more vulnerable to fraud. This is already a massive problem. Would Mr Cameron want to add to that problem?
Nevertheless, armed with his brilliant idea, that brave Mr Cameron has told Gordon Brown that he, "cannot hide from the truth." Thus adds the leader of the opposition, "In the short term, we've got to help families up and down the country with proposals to get them through the downturn."
This is stirring stuff, but with the "elephant" rampaging through the undergrowth, one wonders just who is hiding from the truth. Is he for real, or trying to sell us a pup?
COMMENT THREADA random event
So, according to The Telegraph, the government plans to impose random breath testing on drivers, regardless of how they are driving, in order to "reduce the number of deaths and serious injuries caused by drink driving".
This, of course, has been dreamed up by the government, completely spontaneously, a sovereign nation deciding to act in order to safeguard its citizens.
Yet, in May 2004, the then Home Office was robustly insisting that random tests were not an efficient way of catching drink-drivers. It did not see the need for them to be introduced. So what changed?
Well … It might just have something to do with this. Leave it long enough and allow the furore to die down and then you can pretend it was your idea all along. The media – with no memory at all – will never cotton on.
Unfortunately, some of us have long memories. Not that that makes any difference, of course. This will go through, on the nod, and no one will be any the wiser.
COMMENT THREADWhen justice is not done
The Booker column today has a heart-warming tale. It describes how a couple, Graham and Sara Blackmore (pictured), who ran a small skip hire company in Cardiff, had been turned over by officials from the Environment Agency and, finally, having had their "day in court", had come away found innocent of all charges.
The story speaks for itself and is well worth reading on the link provided. But, what does not come over from this tale on its own – but will be apparent to regular Booker readers – is one essential feature that makes it news. That "news" is the very fact that, despite being "framed" by the Environment Agency, with a series of malicious, trumped-up charges, the couple were actually found "not guilty" in a court of law.
This is not always the case and, in a distressing number of instances, innocents are found guilty of "administrative" offences by courts which too often support "their officers" – the officials – right or wrong.
That was exactly the case with Janet Devers, featured heavily in The Sunday Telegraph today. She is, of course, the "metric martyr" who the week before last was found guilty by Hackney magistrates for offences under the Trades Description Act.
Apart from the issues involved – the sale of goods measured using the Imperial system – a review of the evidence demonstrates that the trading standards officer did not prove his case. There were major technical flaws in his evidence, in key areas he was shown to be lying and evidence was given from a number of witnesses that events the TSO claimed to have happened – which were essential to secure a conviction – simply did not take place.
On those grounds alone - without considering the general merits of the issue - the case should have been dismissed. But the Magistrates chose to believe the version of events offered by the officer – even though, under cross-examination, he had admitted they were not true – and convicted Janet. She is now to appeal.
Over time, however, we have seen many such travesties of justice, some much worse than this. One, I recall, also involved the Environment Agency, when an officer – who kept a display of the photographs of the people he had previously "nicked" in the boot of his car – decided to prosecute a poultry farmer. The charge was polluting a "controlled watercourse" with effluent from the farm.
As it happened, this "controlled watercourse" was a near-dry ditch running alongside the farm, static pools of water lying along the bottom. But, because the ditch connected, a mile or so away, to a small stream and the stream ran into a river, it was a "controlled watercourse" and came within the jurisdiction of the EA.
The official's evidence was interesting. He had taken a sample of the brackish water in the bottom of the ditch. On chemical analysis, he had found traces of residues indicating "faecal contamination", which he attributed to the overflow from the farm muck heap. This was the only enterprise, in his view, which could have been the source – in a sparsely populated rural area.
There was actually no evidence of run-off from the farm and, when I had a look at it, I formed the view that it was unlikely. The muck-heap was actually some distance from the ditch and had its own barrier containment system. However, there was an emergency overflow from that system – a dry pipe which led to the ditch and could discharge into it, in the vicinity of the area where the official had sampled. It was on this basis, that the official's case rested.
Forgive the detail, but it is only from this that the full horror of the injustice that was to follow becomes apparent.
On investigating the officers evidence, it transpired that he had sampled the ditch not downstream from the emergency overflow, but a short wayupstream. Rummaging around the thick undergrowth working up from the sampling point, I found another pipe discharging into the ditch. This turned out to be the overflow from a septic tank serving a residence nearby.
Now it gets really interesting. We had the technical results from the officer's sampling, demonstrating high (and quantified) levels of nitrites and phosphates, indicative of and compatible with faecal contamination. However, the ratios were wrong – say, for example, they were 10:1. When I sampled the muck-heap run-off, it had the reverse ratio – 1:10. And when we tested the septic tank overflow, it produced a ratio exactly matching the official's sample.
Thus, for the official to succeed in his case, any effluent from the muck heap – not actually demonstrated - had to have flowed upstream from the claimed discharge point and, in so doing, had to have changed completely in chemical composition.
With that we went to court, entirely confident that justice would prevail. But, as with Janet Devers, the judge – in this case – preferred to believe the evidence of the official and found the farmer guilty. He was fined a goodly sum, about £12,000 from memory, plus costs. And the official added another "scalp" to his photographic display.
I have many more such examples, but to recount them here would make this post too long. Suffice to say – a point we will reinforce when we return to this subject – that in all too many cases, justice is not done. Graham and Sara Blackmore were the "lucky" ones in that they were found not guilty on the day, even though they have suffered grievously from the officials' actions. But that is another story, no doubt one to which I will return.
We thus conclude with an observation that there are far too many cases where justice is not done for this to be a random problem. As elsewhere, there are systemic failings which need addressing.
COMMENT THREAD
Sunday, 19 October 2008
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