Negative interest rates have been on the cards for sometime and seem to be one of the solutions of Central Banks - who are themselves fundamentally flawed by insisting on interfering with the markets

Why is it that the banking system seems to constantly get away with ridiculous practices that would not be permitted in any other industry - whilst at the same time lining their own pockets with disproportionate salaries?

If zero/negative interest rates are the order of the day then they should apply to everything across the board and not selective areas. Should the banks choose to impose negative rates on credit balances the they also ought be subject themselves to the same interest rates when they lend out money - resulting in the fact that they should pay borrowers interest rather than charge them interest.

This would apply in paying interest to those who hold mortgages or overdrafts and the biggest disgrace of all are the interest rates charged by credit card companies which is bordering on usury at 25% plus, when the Bank of England rate is so low

Yet nothing seems to be done about credit card interest rates by the Government - why not?

However, at the same time nobody seems interested in putting a stop to the banking systems use of 'fractional reserve banking' - unless digital currency puts an end to this practice

All this would seem to be a push to do away with cash and replace it with a digital currency such as bitcoin and if this came to pass the current banking system as we know it would become superfluous. After all why would anyone hold money in the current system with the potential of a run on the banks or RBS scenario when it would be held in a new (revamped) style central bank

Unfortunately once this 'demise of cash' occurs, consumers could be 'forced' to spend a certain amount or otherwise incur penalties and far too much control then passes over to the Central Banks - to abuse their position at will

In the meantime, how do the Central Banks propose to deal with any future recessions under their current policies? After all, the present problem is too much global debt in one form or another and the Central Banks will have used up one of the tools in their armament by forcing down interest rates from sensible levels to levels that bear no relation to risk and will eventually become the new norm for a whole generation 

Making the 'fallout' from even a modest interest rate rise very considerable

Furthermore, what do Governments do when their entire ageing population comes knocking on their door because they cannot afford to live with 0% interest on their savings, which have become worthless?

And as for the farcical 'stress testing' for residual capital on the banks balance sheets after an 'adverse scenario' - whose money is it anyway on their balance sheets and if it were not for the bankers slight of hand, claiming clients money as their own would they even be in this situation in the first place? What about ring fencing client money in the first place rather than claiming it as their own?

Tags: , | Categories: Bank of England | UK Government | US Government

Multi-nationals Transfer Pricing or 'profit shifting', call it what you wish, is a by-product of globalisation that enables companies to avoid taxes and facilitates the flight of capital from one jurisdiction to another

Whether it is 'Costa Del Crime' or 'Costa Del Tax Avoidance' the effect is basically the same - countries setting themselves up to potentially shelter companies or individuals from the penalties of avoiding the law in other states

This is nothing short of 'cooking the books' by affording corporations the discretion to allocate costs & overheads to favourable geographical locations; thereby minimising taxes and maximising profits

Essentially state sponsored encouragement for corruption and there are a number of countries making a very comfortable return from this approach.

Anyway, perhaps someone could explain how the likes of Ireland manages to get away with this as well as being a member of the EU. Yes it does help them remain solvent but at what cost to other member states with the likes of Apple, Microsoft, Google etc. avoiding tax in other EU countries

Is this a harsh assessment?

Well consider this:

  • These practices affect the state both in setting tax rates and also in allocating tax revenues
  • Capital is exported from the country of origin to favourable locations. This inhibits the flow of money in the country of origin which is an essential component for healthy growing economies
  • This capital flight could seriously impact on citizens in the county of origin. This affects hospitals, pensions, state benefits, country wide infrastructure etc. So anyone in the country of origin is being deprived of the resources (taxes) which would enhance their quality of life
  • Some of this infrastructure is used by the multi-nationals to facilitate their sales and yet they are trying to avoid paying for its upkeep - i.e. roads etc.
  • Don't forget that the major beneficiaries of suggesting these schemes are the accountancy profession

Solution

A good start would be for HMRC to be given powers similar to US section 482 Internal Revenue Code

'.. to allocate income, deductions, credits or other allowances between or among controlled entities if that allocation is considered necessary to prevent evasion of taxes ..'

This should place all these multi-nationals on notice - then take matters forward from there

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