Mortgage rates / interest etc
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johna.clements
Established Member
Yes "Multi-nationals can locate wherever suits them in terms of tax, regulation, labour cost etc". You could headquarters Terry Wood Working Tools in the Caymans but if you wanted to sell your tools in the UK you would have to do it mail order and pay duties or set up a store in the UK. Terry Wood Working Tools UK could pay a fee to Terry Wood Working Tools Cayman so that it does not turn a profitand pay tax. To stop this the UK could tax the fee paid to the Caymans.
Marcusthehat
Established Member
I am not in the least religious, but the Bible does contain some pithy distilled wisdom,
"the poor will always be with us"
Which, despite our generous welfare/benefits society of the past 60 years, has unfortunately proved to be all too true.
No matter how much money you provide.
There are those who simply cannot cope.
They will always be poor.
But others with less will still make good. Stalin called them Kulacks.
I imagine we all see evidence of this sad fact every day. But some deny the evidence.
Good night,
Marcus
"the poor will always be with us"
Which, despite our generous welfare/benefits society of the past 60 years, has unfortunately proved to be all too true.
No matter how much money you provide.
There are those who simply cannot cope.
They will always be poor.
But others with less will still make good. Stalin called them Kulacks.
I imagine we all see evidence of this sad fact every day. But some deny the evidence.
Good night,
Marcus
bryan267
Established Member
Always makes me laugh when Keir Starmer asks a conservative MP what they are going to do about the £500 increase in the average mortgage cost. It's not conservative policy, its the global policy of quantities easing that's been in place since the banking crisis.
I run investment portfolios for clients and I have been betting on rising interest rates for over 5 years. Sold the last of our fixed interest and index linked holdings in February. None of us know why it's taken this long to start. But look at interest rates in other countries, we are comparatively low and will end up with a bank run if we don't keep pace. Which could devalue the pound. Why the defending conservative politicians don't call Starmer out on his accusations I don't know.
I'm qualified to do mortgages but don't, lot of mortgage guys will be short of work soon. In short, last years 1.1% fixed for 5 years were great offers. If I was deciding again today, I would go for 5 years again, even at 6%. To expect interest rates of 1% again on borrowing is extremely risky. But I and no one here can make any promises they're sure about if they know how complicated the markets are. There will be more interest rate rises, but the mortgage market has already factored in a lot more than those we can currently see on the horizon. There is a chance if BOE stop increasing rates that mortgage fixed rates might drop below where they are now. But it's a slim chance.
People have lost their houses in a similar environment before. I recall the politicians of the day promising it will happen again. Lenders will offer fixed and discount rate deals you can afford, then refuse your application on affordability leaving you the variable rate you can't afford. Good luck, hope you make the right call.
I run investment portfolios for clients and I have been betting on rising interest rates for over 5 years. Sold the last of our fixed interest and index linked holdings in February. None of us know why it's taken this long to start. But look at interest rates in other countries, we are comparatively low and will end up with a bank run if we don't keep pace. Which could devalue the pound. Why the defending conservative politicians don't call Starmer out on his accusations I don't know.
I'm qualified to do mortgages but don't, lot of mortgage guys will be short of work soon. In short, last years 1.1% fixed for 5 years were great offers. If I was deciding again today, I would go for 5 years again, even at 6%. To expect interest rates of 1% again on borrowing is extremely risky. But I and no one here can make any promises they're sure about if they know how complicated the markets are. There will be more interest rate rises, but the mortgage market has already factored in a lot more than those we can currently see on the horizon. There is a chance if BOE stop increasing rates that mortgage fixed rates might drop below where they are now. But it's a slim chance.
People have lost their houses in a similar environment before. I recall the politicians of the day promising it will happen again. Lenders will offer fixed and discount rate deals you can afford, then refuse your application on affordability leaving you the variable rate you can't afford. Good luck, hope you make the right call.
We’ve been talking about moving profit to a tax efficient locality, what we’ve not touched in is how it’s done. It’s not just moving ‘profit’, wha5 needs to happen is that the tax efficient place provides a legitimate service or goods that are charged for. The amount of this charge is managed to be roughly the expected profit for the company 8n the tax inefficient location. There is a lot of legislation to tip toe around, but whilst trade is allowed between different locations, a solution can be found. So, for instance simple examples could be. These are real simple things and nit moving to more complex methods.
License to be paid for the use of the company brand.
Centralising accountancy functions to the tax efficient country and charge for the service
Centralising legal or HR functions
Distributing the cost of running head office through a management charge.
All cash is lent from the head office at an inter company interest rate.
What I’m trying to highlight that it’s relatively easy to move profits, it’s almost impossible for governments to prevent it. The focus therefore should be creating an environment where company’s don’t try to need to deploy these strategies. For instance, Ireland doesn’t worry about these problems, it has a tax efficient environment for business.
License to be paid for the use of the company brand.
Centralising accountancy functions to the tax efficient country and charge for the service
Centralising legal or HR functions
Distributing the cost of running head office through a management charge.
All cash is lent from the head office at an inter company interest rate.
What I’m trying to highlight that it’s relatively easy to move profits, it’s almost impossible for governments to prevent it. The focus therefore should be creating an environment where company’s don’t try to need to deploy these strategies. For instance, Ireland doesn’t worry about these problems, it has a tax efficient environment for business.
Locking up on the bible quote. In the UK there is a definition of being poor. This is taken from Poverty definitions and thresholds | Trust for London that’s just a reference, it’s a generally accepted threshold.
‘Households are considered to be below the UK poverty line if their income is 60% below the median household income after housing costs for that year.’
The definition means that no matter what happens there will always be those who are considered poor.
‘Households are considered to be below the UK poverty line if their income is 60% below the median household income after housing costs for that year.’
The definition means that no matter what happens there will always be those who are considered poor.
Jacob
What goes around comes around.
Only if we stick to that definition. It's not an excuse for asserting that poverty is unavoidable, it's just a rule of thumb.
J-G
Established Member
But that 'Rule of Thumb' is used by many to assert that 'poverty' is rife - which it is not (in this country)
Jacob
What goes around comes around.
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There are two aspects to your comment @Jacob. Firstly, I’m sure everyone would agree that it’s a good thing to always increase the living standards of everyone in society, to raise the bar so to speak. In the UK that has, and is happening, perhaps not as quickly as people would like, but it is happening. Secondly, it’s a definition, we talk of Rich and Poor. We say the super wealthy are the top 1% of the population, well, we will always have the top 1% irrespective, so they there will always be the ‘super rich’. In the same way we have a definition of poor, that’s also a percentage of the population. The trouble is that people get mixed up with a label and actual living standards. Now, poor is relative to a society / country. The poor in the UK would be considered rich in other societies, where people are struggling to earn $2.14 / day / person.
Jacob
What goes around comes around.
Always be a top 1% but they won't necessarily always own more than 50% the wealth, or even be "super" rich for that matter, in an ideal world.
You've confused yourself with the figures, easily done!
https://equalitytrust.org.uk/scale-economic-inequality-uk
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There is just so much about those reports that needs to be critically considered. Firstly, there will always be people who find it difficult to manage money, or for what ever reason find themselves financially compromised. However, as an example, let’s take the report on State of Hunger, one of their big headlines is that people using food banks have £50 / week to live on AFTER housing costs. Well, the UK full state pension is presently £195 a week. I’m suggesting that after typical housing and no other sources of income they will have around £50 to live off if not less. Their needs are totally different to say a family with a couple of kids, or a single working age person. That’s why, almost all studies classify the minimum monetary requirements of people based on age, how many dependants they have and exactly where they live. Central London has a different cost of living than say the North of the UK.
Jacob
What goes around comes around.
Yes undoubtedly. They certainly shouldn't be dismissed out of hand.
The focus again is what the top 1% have. What I’d like you to consider is, what difference does it make? Let’s instead focus on what the bottom have, and is it sufficient to have a decent life? If the answer is they do, then the super rich can have as much wealth as they want. This keeps changing, and the definition keeps getting broader. I’m in my fifties, but as a boy, not everyone had an inside toilet, a fridge, a freezer, a car, a television, a telephone in the house, a washing machine, or a computer. A lot never had a holiday or even ventured outside the local area. That was ‘normal’, now if you don’t have access to these you are considered deprived, and I would agree.
Jacob
What goes around comes around.
Good question. It is an indication of what the bottom 50% could have, if things were different.
PS and the good news of course is that it takes relatively little to radically improve the quality of life of those at the bottom
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thetyreman
Established Member
the north of the UK is actually very expensive as well, especially manchester city centre, it's getting worse in terms of prices, not like it used to be.
I think you started this thread talking about real problems and looking for a solution, and then everyone got idealistic and political. Which doesn't solve problems. You might have to start a thread about interest ratesDont mind me, im just hanging out
johna.clements
Established Member
You keep saying it is relatively easy to move profits but when I state that new laws and taxes could be introduced you ignore it and just state again that it is relatively easy to move profits with no justification of the statement.
"License to be paid for the use of the company brand."
Tax licence fees at 10% of turnover.
"Centralising accountancy functions to the tax efficient country and charge for the service
Centralising legal or HR functions"
There are legal duties on directors of companies to try to turn a profit. If the directors are trying to loose money by using a service that is more expensive then they could be criminally prosecuted for misuse of the companies funds. They would have to demonstrate that they could have not purchased that service somewhere else for a lower fee.
"Distributing the cost of running head office through a management charge."
Tax turnover depending on the size of the management charge and size of the company.
"All cash is lent from the head office at an inter company interest rate."
Tax the interest paid on intre company lending when the interest rate is substantially higher than that from banks. The directors would also have to demonstrate why they had to borrow from the offshore company and not another source or possibly face penalties for misuse of company funds.
And sadly a flawed question...
It is not as simple as saying that £600B spent is somehow distributed as £600B extra sitting in bank accounts... it wasn't barrow loads of cash handed around...
You only have to consider the high number of people who worked before covid but were then furloughed to realise where a lot of money went - those people won't be seeing extra money in the bank because in effect they have already traded it for not working, so they have had their extra in the form of paid holiday - that was an estimated £60-70B handed out as free cash to allow people to not work - very nice for those who got it... and let's be clear, that was mainly to those who are at lower ends of income.
Not sure where you get your headline £600B figure from - the National Audit Office lists it as £376B:
£147B support for businesses - difficult to quantify who benefited, there are certainly a number of fraud cases in there, but most of this will have been to keep businesses running - and much of that money ends up with employees being paid (e.g. the hospitality businesses)
£89B for health care
£75B for public services and emergency responses
£60B for individuals (e.g. furlough)
£5B for other support etc.
Costs vary from supply of more medical equipment to propping up businesses -> investing to then reduce backlog as we come out of covid (e.g. backed up court cases etc.)
it would be wrong to see it as simplistically as x was spent where is my share - I have no idea of your personal circumstances, e.g. whether you were furloughed etc. - if you were, then that is where your share went, if not, then in the balance of how government works you helped others so that we could have the best possible exit from Covid with businesses and services still running - and to keep that going when basically normal money has stopped circulating is very expensive...
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regarding your other points on taxation - I think that @deema is very perceptive in the comments being made... I understand your belief that everything comes back to something tangible, but...
a) it really doesn't - there are plenty of examples of bubbles (from the Tulip bubble of the 1600s to the South Sea Bubble to modern crypto bubbles) to realise that you can see wealth being created and destroyed with nothing tangible behind it.
b) the biggest issue is that the taxation powers of authorities doesn't match the patterns their 'subjects' can deploy - the simplest being geography - If I set up a business abroad, and use that as a shell to transact - who gets to tax it? I could be 'poor' in this country - but wealthy on an international basis - e.g. Philip Green who famously owned very little in the UK - his wife, domiciled abroad owned it. I can still enjoy the lifestyle - my 'abroad' company can buy a jet and I can use it to fly me around the world - it can buy me clothes / jewellery / stays in nice hotels / great holidays / expensive boats and cars - yet none of it taxable in the UK. I can fly my car into the UK and drive it here, with zero taxes (other than petrol) - if the car is in the UK for less than 6 months a year I can run it on foreign number plates and it needs no taxing or registration.
So, for the wealthy (who do own a disproportionate amount of the world's wealth) they get to choose where their money will be taxed and where it will be used, and the two do not need to be the same. There will always be a country happy to give the uber wealthy residence - the rules for the wealthy are different.
So, ideally you want our country to be the place where that wealth resides - as then more is spent there and you are taxing (albeit at a lower rate) from a vastly larger pot, which is still more than otherwise. That means being a country of low taxation. And yes that might arguably help the richer people, but they are the ones with alternatives who will help themselves anyway, so it is about setting up an approach which ultimately helps the poorer and high taxation does not help the poor.
Low taxation can make it tricky to balance the books - but a big part of that is to do with spending, not taxation. The media and commentators get it wrong when they keep commenting (e.g. about the Truss budget) that it is unfunded cuts - actually, you can't have an unfunded cut in taxes as you are simply not taking money off people, so it is totally funded as they already have the money and simply keep it - the issue in balancing the books when lowering tax is that you end up with unfunded spending - therefore the big issue is actually government spending, not taxes and that is something the government needs to tackle - we live in an era of ridiculous costs of spending - numbers of civil servants / HS2 / etc.
Ultimately the ideal is low tax - encourage the wealthy in - and then compassion towards those at the poorer end - with a more rigorous understanding of whether they should or should not be getting support (ie try to tackle the abuse of the benefits system)...
We also need to re-visit what actually is essential and what is not - as is noted above, our minimum standards of living are vastly different now to what they used to be - but we can perhaps challenge some of them - it is not necessary if you are struggling to feed your children to have a car, or an expensive computer / phone as priorities - we need to resource public transport and local access to the internet so that there are free or cheap options. We need to re-visit the housing market and the balance of types of properties from shared ownership to council, private to rented etc.
Isn't the problem with it all, that you are taxing in the wrong location...
Company A has outlets making £10m in the UK
Company B is parent company in Ireland where taxes are lower
Company B licences brand to Company A - who are you taxing in the UK?
You don't get to tax Company B who are in Ireland, and you don't get to tax the transaction which takes place in Ireland (or somewhere else in the world depending on the legislative framework of the agreement), so as the UK government, exactly what are you taxing?
The issue with all of these ways of moving the money out of your domain - i.e. in this example, out of the UK is that they are transactions held outside the UK - they are costs on Company A - and you don't get to tax costs!
So, Company A has £9m of costs elsewhere in the world, so now instead of making £10m it is making £1m, and its overheads in the UK are a further £950,000 - so it has only made £50,000 profit in the UK - it won't even be taxed at the higher rate of corporation tax!
Meanwhile £9m has moved to Ireland as valid expenses where it is taxed at 12.5% instead of the soon to be relevant 25% in the UK and the company saves over £1m. The UK has received tax on £50k at 19% which is £9,500.
If the UK instead encouraged those monies to stay in the UK - e.g. they reduced the corporation tax to match Ireland's 12.5%, they would receive tax of £1,131,250 or 120x as much tax
The fundamental flaw is that governments are geographically limited and therefore can not control what happens outside their boundaries.
Companies are not, and so can play games across those boundaries - and it is not possible to stop them without all governments agreeing to do the same - and where is the incentive there for smaller countries like Ireland who can simply choose to opt out and lower rates and make lots of money!
