Monday 11 May 2009

Different Planets

It seems that one of the hedge fund managers who made a fortune last year by short-selling British banks, and thereby helping to wreck the economy, is now planning to emigrate. He gives two reasons - the new higher rate of tax, and the proposed new regulations on hedge funds. Other hedge fund managers are apparently thinking along similar lines.

Now, many might feel that a person who managed to pay himself £28 million last year might feel able to afford to contribute a little more to the tax revenues of the government to put the economy right. But I find myself wondering how much tax he's actually paying in the first place.

His company, like many other similar companies, is a Limited Liability Partnership rather than a plc. LLPs are effectively exempt from Corporation Tax, so the company probably paid no tax at all on its profits. And generally speaking, profits from this sort of activity are treated by the Inland Revenue as capital gains rather than earned income, and therefore attract a lower level of tax anyway. So, all in all, the new rate of tax probably won't affect him very much.

As for the other reason, he apparently feels that his 'industry' has been abandoned by the Government, who are allowing the wicked French and Germans to drive through new regulations which will prevent his company and others like it from doing some of the things that they were doing previously.

Presumably these people feel that once we as taxpayers have finished bailing out the banks which the short sellers helped to wreck, they should be allowed to start all over again. I think not.

It's also interesting that some of these companies describe their activity as 'wealth generation'. It is not - it creates no new wealth at all, it merely redistributes existing wealth. Mostly redistributing our wealth to themselves.

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