1. The rule against perpetuities

The rule against perpetuities is a legal doctrine that was formulated in the 17th century following the judgment in the Duke of Norfolk’s Case of 1682. Its intention was to prevent the concentration of inherited wealth, particularly landed property, in the hands of the few by limiting the length of time in which property could be left in trust. The principle of public policy was that land should be enjoyed by the living and not subject to the will and wishes of the dead.


2. The rule against excessive accumulations

In 1797, Peter Thellusson, a wealthy merchant and financier died and in his will directed that his property, which produced an income of approximately £5,000 per annum and other assets amounting to over £600,000 in value, be accumulated during lives of his children, grandchildren and great grandchildren living at the time of his death and the survivor of them. The property thus accumulated would have amounted to over £14 million. To put this in pespective, barely a decade before Thellusson’s death, the whole of Britain's National Debt had stood at just £250,000. In the resultant case of Thellusson v. Woodford [1798, 4 Vesey, 237] the will was held to be valid and there was then a protracted lawsuit as to who were the actual heirs which was not decided until 1859, some 60 years later. The terms of the will scandalised British society and resulted in the Accumulations Act 1800 which was further amended in 1892.


3. The ‘dead hand’ of managerial capitalism

Corporations as permitted by current legislation have perpetual life and are therefore an anomalous circumvention of the very sensible public policy rules against perpetuities and excessive accumulations. The pernicious effects of the corporate ownership and control of wealth are now all too apparent. Managerial capitalism is an essentially collectivist concept and the antitehsis of enterpreneurship, innovation and individualism.

The phenomenom of global free trade has put modern corporations and the self-perpetuating managerial elites who control them beyond public accountability. This paper proposes various prescriptions for the redistribution of wealth on a massive scale, not from rich to poor individuals (which was the erroneous premise of socialism) but from corporate to individual ownership.


4. Tax reform

Firstly, any radical reform of company law and taxation needs to be accompanied by a corresponding reduction and simplification of individual taxation. The existing tax system is far too complex with its nominally high rates hedged with exemptions and shelters. What is suggested is a uniform rate of Income Tax, Capital Gains Tax, Inheritance Tax, Value Added Tax and Corporation Tax of say, 25% with all Personal Allowances and exemptions scrapped. Something like it has already been done in Slovakia, with an astoundingly beneficial impact on the economy.


5. Corporations should have a limited life – "death duties" for corporations

Firstly, the life of a corporation needs to be limited. The suggestion is that this should be 50 years in the case of a private company and 25 years in the case of a public company.

If BP plc, which was originally incorporated in 1909 as the Anglo-Persian Oil Company Limited, were a natural person, it would in all probability now be dead. If its £92 billion of net assets were taxed at 40% Inheritance Tax rates this would yield £36.8 billion. This is slightly more than the total of £36.144 billion in Inheritance Taxes collected by the Inland Revenue on the estates of every deceased person, over the past 20 years and exemplifies the manifest injustice of a system which allows corporations to continue accumulating its profits in perpetuity.

Legislation that limited the life of our corporations, would not necessarily mean that it would have to cease operations and dimiss all its employees. Shareholders would be allowed to form a new, successor corporation to take over the business of the "old" company but subject to its paying a Companies Liquidation Tax at Inheritance Tax rates (which could, in view of the fact that corporations would be contributing to a fairer share of the tax burden, could then be reduced from 40% to say, 25%).

The necessary legislation would apply to all private and public companies of the respective age limits with immediate effect following enactment. Using the Exchange Control Act 1947 (which has never been repealed) it would be possible to prevent corporations from moving assets out of the jurisdiction whilst the required legislation was in the process of being debated by parliament.


6. Corporations should be of limited size

There needs to be a limit on the size of a corporation since it is clearly contrary to public policy that so much wealth should be concentrated in the hands of so few people. For example, in the case of BP, a board of just 9 executive directors control assets of more than £200 billion. The activities of companies like BP are wholly lacking in transparency and accountability. They have the power to lobby and corrupt entire governments and their very existence is a threat to democracy and individual liberty. It is wholly contrary to public policy that so much economic power should be concentrated in so few hands. No individual corporation should control assets of more than say, €100 million in value.


7. Corporations must be socialised through mutualisation

Nationalisation would be wholly unnecessary. As a preliminary step, all companies, whether public or private, large or small, would be required to issue shares to their employees. The shares would be of nil par value and would be issued in proportion to the salaries they earned. For example, an employee earning £25,000 p.a. would receive 25,000 shares. Another employee earning, say, £35,000 p.a. would receive 35,000 shares, and so on. However, there would be a maximum ratio of 3:1 in the differential between the highest and lowest paid in the company. In other words, the highest paid employee could not lawfully receive more than 3 times the salary of the lowest paid. Multi-million dollar salaries to executives are profoundly dishonest since they unjustly appropriate to salaried employees, the rewards for entrepreneurship and risk taking, where no risks have been taken. The notion that in order to do their jobs properly, executives must be paid very highly, but to make poor people work harder they should be paid less, is utterly hypocritical. There would be nothing to prohibit the continued payment of high salaries but that for example, in order for an employee to receive a salary of say, £1,500,000 p.a., the lowest paid employee would need to be paid at least £500,000 p.a..

All shareholders, whether employees or investors would be permitted to vote but solely on the basis of one vote per person, rather than one vote per share. Entitlement to dividends would of course be in proportion to the number of shares owned. However, 50% of all of the company’s profits and 50% of its voting rights, would accrue to the employee-shareholders and 50% of a company’s directors would be elected by the employees. Additionally, all corporate and institutional shareholders (shares owned by persons other than natural persons) would be disenfranchised.

This would result in a complete mutualisation of the corporate sector without having to pay compensation as would be the case in a conventional nationalisation programme. It could not be said to amount to an expropriation of capital owners but merely the taking of a more just and equitable share of corporate profits, that is to say, 50%, by working people. These requirements would not apply to sole traders or unincorporated firms provided that each of the partners in such a firm were natural persons. Corporations would moreover be required to distribute at least 65% of their profits to shareholders and would pay Corporation Tax solely on their undistributed profits.

There would be no constitutional barrier whatsoever to introducing such legislation.


8. Corporations must not be allowed to own land

Corporations need to be required to divest themselves of ownership of land and buildings under the "dead hand" principle. Real estate should only be owned by natural persons, partnerships comprising natural persons, pension funds and other trusts in which only natural persons are beneficial owners. Cooperative societies and other mutually owned corporations should be permitted to own real estate but only for their own occupational needs.


9. Cutting the corporation down to size

Mutualisation is not sufficient. Concentration of wealth in the hands of small elites is unacceptable per se. The unbundling of all our corporate behemoths will need to be carried out over time and in an orderly manner. However, there is an inherent risk that managers will seek to frustrate the proposed legislation by delaying its implementation whilst other measures are sought to subvert it. Punitive and confiscatory taxes need to be introduced to encourage corporations to divest their wealth as quickly as possible.

The problem with such an approach is that corporations have become adept at avoiding taxation of their profits. KPMG, the international accountancy group recently reported that the average level of Corporation Tax in the world's 30 richest countries has fallen from 37.5% to 30% between 1996 and 2003. In the case of larger companies, this must surely be an understatement. Rupert Murdoch's UK holding company paid no net Corporation Tax in the UK whatever, throughout the 1990s. Sir Richard Branson's Virgin Group is nominally controlled from the Caribbean, yet in 2003, Virgin Rail received some £500m in public subsidies. In 2003, the estimated loss of revenue to the UK Treasury from corporate tax avoidance, was between £25 billion and £80 billion per annum.

Clearly, a tax on profits such as Corporation Tax is therefore insufficient since corporations with overseas operations can ensure, through transfer-pricing, inter-company financial transactions and other tax avoidance schemes, that the profits of their subsidiaries in low-tax jurisdictions can be maximised whereas those in higher tax jurisdictions (such as the UK) are minimised. In addition to 25% Corporation Tax, it is therefore suggested that companies would pay additional taxes. Here are some suggestions:

(1) Corporate Wealth Tax

This would be a tax of say, 0.5% (a mere ½p in the £) of the total assets controlled by a corporation. The impact of such a tax on banks would be especially significant and such a tax would therefore be particularly just. For example, on such a basis, Barclays Bank plc, with assets of £1,949 billion under its control would pay an additional £9.745 billion per annum. It is especially important that the tax should be on gross rather than net assets since it is the control of wealth by financial institutions per se that is pernicious and undesirable and not merely its ownership. Better still, a 0.5% tax on gross assets, a 1% tax on net assets and a further tax on the ratio of gross to net assets, would be especially punitive towards highly leveraged corporate structures such as Private Equity Funds.

(2) Market Capital Value Tax

A 0.1% per month (1.2% p.a.) tax of the stock market value of listed companies would reduce stock market values to realistic and affordable levels. For example, based on its present stock market value of £94.79 billion, such a tax would cost Barclays Bank £95 million per month.

(3) Annual Turnover Tax

A 1% Annual Turnover Tax would mean that a company such as Tesco plc, the grocery chain, for example, which has annual turnover of £33.6 billion, would be making an additional contribution in taxes of £336 million.

(4) Monopoly Profits Tax

If set at a rate of 1.5% p.a. for every 1% of market share, such a tax would encourage those companies which are most affected, to quickly downsize. Again, by way of a 30% share of the UK retail food market, Tesco plc would, pay an additional 45% of its profits in such a tax.

The primary intention of such a tax would of course, be to penalise and discourage corporate monopolies rather to raise revenue.

For example, British Telecom are understood to have a 94% market share of local telephone calls, a 70% market share of international calls and an overall market share of 50%. Under such a tax BT would therefore pay 141% of its profits from local calls and 105% of its profits on its international calls but it could avoid the tax by for example, selling or de-merging its international calls business and making local calls free. Better still, the Post Office could set up its own telephone company and offer unlimited telephony and Broadband access for a single monthly payment which would put the UK's private sector telecoms industry, which has overcharged and gouged its customers for decades, out of business altogether.

(5) Retail Market-Share Tax

A tax of 1% per annum for each 1% of market share of total national retail spending would be especially punitive for multiple retailers. For example, Tesco plc, which accounts for 14.3% of all UK retail sales, would thereby pay an additional 14.3% of its profits in tax.

The crass and meretricious tastes imposed upon local communities by multiple retail chains are self-evident. These enterprises are inimical to small, independent traders. Britain’s "cloned" High Streets with the attendant loss of individuality and diversity represents a kind of aesthetic as well as economic fascism. These stores drain the wealth of a community to remote corporate headquarters. The impact on the environment is also adverse, since multiple retailers require considerable investment in centralised warehousing and distribution. Supermarket chains are also indirectly responsible for the deterioration in food quality standards, since their demands can only be satisfied by food production on a large, industrialised scale, heavily dependent on synthetic flavourings and colourings or genetically mutilated crops or livestock. Food, clothing, footwear and most other goods supplied to the major retail chains are invariably produced under conditions where workers’ rights have been systematically violated, in countries that wholly ignore the human rights, social charter, health, safety and environmental standards with which EEA producers are required to comply. To restore competition, higher quality and greater choice in the retail sector, the multiple-ownership of retail outlets should be prohibited.

(6) Branch Tax

In addition to Business Rates, multiple retail chains (including banks and building societies) should pay a supplementary tax of say, £10,000 and £10 per sq. ft. on each of their branches. By way of an example, such a tax would cost Tesco plc with its 1,998 stores and 27.785 million sq. ft. of retail space an additional £297.73 million in taxes.

(7) Intellectual Property Tax

Brand names, trade marks, logos and similar forms of "intellectual property" are one of the chief instruments by which corporations create monopolies. They constitute formidable barriers to entry in almost every industry.

In 2005, it was estimated that for example, Coca-Cola's brand was in itself worth £39 billion and that of Britain’s HSBC Bank was worth at least £5 billion. Yet such assets are intrinsically worthless, having been created over a long period of time through advertising propaganda.

It is a bizarre anomaly that the intellectual property of the world’s greatest writers, composers, scientists and thinkers, should die with them; whereas the trade mark of an unhealthy, carbonated beverage should be accorded such a vast monetary value to be enjoyed in perpetuity by its incorporated owner.

It is therefore proposed that there should be an Intellectual Property Tax on such assets. If this was set as a mere 1.5% p.a., HSBC would face an additional tax charge of £150 million per annum.

Copyright in such brands should automatically expire at the end of 25 years and vest bona vacantia in the Crown which would enable them to be licensed to the highest bidder, through not to the original owner.

(8) Corporate Advertising Tax

Major corporations propagate the crass and meretricious values for which they are notorious, partly through lobbying and public relations, but chiefly through advertising.

A 25% ad valorem Corporate Advertising Tax based on the UK advertising expenditure for 2006 of £19 billion would produce £4.75 billion for the Treasury, which would amply fund the BBC and enable the television licence fee, which particularly impacts upon the poor and unemployed, to be scrapped.

Additionally, a 5% Sales Tax on all advertised goods and services would have the greatest impact on major corporates and would give small, unincorporated business, especially if they were exempt from such a tax, the ability to more easily compete.

(9) Credit Tax

One of the chief factors contributing to the excessive concentration of wealth in corporate hands is the prevalence of usury. £10 million lent at 10% p.a. compound interest becomes £73.28 million after 20 years and a colossal £452.59 million after 40 years. By this process, our major corporate lending institutions could not fail to have enriched themselves.

In the UK, house buyers are particularly attracted by the potential for tax free capital gains based on the anomalous exemption from Capital Gains Tax allowed on home ownership. As prices have risen, the greater the attraction for borrowers and lenders alike but with every price rise, the greater the sum that the buyer needs to borrow.

In 1957, only 38% of householders owned their own homes and now the ratio is nearer 70%. But in 1957, average house prices were barely more than 3 times average wages whereas in 2007 average house prices are now equivalent to 8 times average wages.

In 1984, 50% of house buyers were first time buyers and by 1994 this had increased to 55% . But by 2004, the number of first time buyers had fallen to 29%.

Since 1984, the average age of buyers able to afford their own home for the first time, has increased from 31 to 34.

Average residential property prices in Britain have risen by over 469% since 1986 and residential land prices by more than 764%.

In the year to March 2006, there was a 16% increase over the previous year in house purchases yet there was a 33% increase in loan approvals suggesting that there were more than twice as many people who wished to buy a house, than there were houses to buy. In short, there was too much money chasing after too few houses, an inevitable catalyst for inflation in any market. Moreover, whilst there was just a 16% increase in house purchases over the period, the total value of residential property lending increased by 41% indicating that lending institutions now own a much higher percentage of the value of people’s homes than ever before.

The profit margins of credit institutions are excessive and unconscionable. For example Barclays Bank currently pays only 4.2% interest to its savers (and no interest at all on its checking accounts) but charges 14.9% interest to its Barclaycard customers. If any other type of retailer was known to be selling an item for £14.90 for which it had only paid £4.20, the tabloid press would be rife with accusations of profiteering.

The banker’s argument is that people are not bound to borrow and are free to shop around for the best deal. Yet with residential property prices as they are, home buyers have little choice but to borrow and it is the abundance of easy credit that has brought about present price levels. Usury is a contemptible practice which Moslems and indeed as recently as the 18th century, the Catholic Church, rightly condemn.

Gross lending margins should therefore be restricted by law to say a maximum of 50% over their own borrowing costs. For example, if the lowest rate that a bank pays to its savers is 4% the maximum that it would be permitted to charge its borrowers on such a basis, would be 6% depending on whether a loan was secured or unsecured and the purpose of the loan.

Charges for issuing cheques, wire transfers or for the use of ATMs are particularly fraudulent and unjustified because they are essentially a penalty imposed by banks upon their customers merely for withdrawing from the bank their own money. Such charges need to be prohibited.

As far as possible, banks should be mutually owned by their own depositors and run by locally appointed directors. The savings of the poor are mobilised by today’s gigantic financial institutions and used for speculation in international capital markets or investment in foreign enterprises which are actually taking their jobs, instead of serving local communities which is their only legitimate function.

Britain has approximately 10,500 bank and building society branches. If these were de-merged from their present owners, it would create 10,500 new credit institutions and destroy the economic power of the existing banking cartels. Alternatively, the government could set up its own housing finance company and offer interest free loans in return for a share in any increase in the value of the property upon its eventual sale. If it advanced say, 90% of the purchase price, whilst no interest would be charged, it would receive 90% of the profits (as well as taking 25% of the balance in Capital Gains Tax). The effect would be to stabilise house prices. Such an institution could however, still pay interest to depositors, but which would be repayble in tax credits only.

The availability of residential property loans should be restricted, to 90% of value in the case of first time buyers and 65% in the case of other owner-occupiers. In the case of second home buyers and buy-to-let investors, a 50% deposit should be required, with a maximum lending term of say, 8 years.

Mortgage interest relief for properties bought for investment, whether commercial or residential should not be an allowable expense for tax purposes.

In addition to a 25% Capital Gains Tax, there should be a requirement that any part of the proceeds of sale of a house that is not used to purchase another residence for the buyer’s own occupation, should be required to be invested in government bonds paying say, 2.75% p.a. interest, which would be used to finance social housing construction.

A further objection to credit is that property or goods purchased out of a person’s savings, have been paid for out of income on which tax has been deducted. But a borrower has the same purchasing power as the saver. This is fundamentally unjust, particularly, as we can see in the case of property lending, the abundance of credit causes prices to rise higher than would otherwise have been the case. After paying taxes and saved the money to buy a house or car, inflation will have invariably placed these items out of reach for the saver whereas a borrower does not have this concern.

In 1965, when credit restrictions were in force, a provincial terraced house typically cost less than £1,000, which was also roughly the price of a new Jaguar. During the same era, a steel worker could earn £3,000 p.a.. Today, the same property would typically cost over £150,000, a new Jaguar of similar quality would cost £30,000 or more, but the steel worker would probably be lucky to be earning £30,000 per annum.

It is therefore suggested that 25% Income Tax would be deducted at source from the proceeds of all loans which would be rebated to the borrower as the loan was repaid. In other words, on a loan of £100,000, the lender would have to deduct £25,000 in Income Tax at source and hand this over to the government. The borrower would only receive £75,000 but would be able to reclaim the tax once the loan was repaid. This principle would in effect penalise borrowers and sharply reduce the demand for credit.

Conversely, to encourage saving, all interest on deposit accounts would be tax free until actually drawn out of the bank by the account holder.

Credit cards are especially pernicious and have been justly condemned as a tax on consumers for the benefit of a private cartel. It has been estimated that in Europe, they have added approximately 2.5% to retail prices.

Credit card lending is quite literally usurious and unconscionable. Not only are the lending margins over the borrowing costs of card issuers grossly excessive, consumers invariably have to rely on credit cards to buy food, pay utility bills and mortgage instalments. Late payment penalty charges ensure that most credit card customers, end up paying interest on money they have never actually borrowed. There is therefore the strongest possible case for prohibition.

Credit card interest margins need therefore to be capped. Interest payable upon earlier interest charges, which is one of the chief characteristics of usury, should be prohibited.

All other fees and charges payable by credit card users should be prohibited. Late payment penalties should be allowed but taxed by the government at 90%.

There should firstly be a complete moritorium on all credit card debt. All future credit card purchases should then be required to be settled at the end of every month out of funds deposited with the card issuer. These funds would be required to be redeposited with the Bank of England, interest free.

Card holders would have a credit limit equal to the funds placed on deposit with the card issuer. In other words, all credit cards should become debit cards.

Any balances owed to the credit card companies would be repayable solely out of future commissions they received from merchants.

Where card holders owed nothing, card issuers would be entitled to receive at least 65% of card issuer's commissions from merchants.

In 2004, Mastercard’s transactions in the UK had a value of £42.7 billion on which it is reputed to have received commissions varying between 1% and 4% in addition to income from interest and other charges. Assuming the estimated average commission from merchants is 2.5%, by compelling Mastercard to pass 65% of its commission income on to its customers, this would transfer over £671 million per annum from Mastercard to their customers.

It is a well established instrument of fiscal policy to increase or lower interest rates. A variable, ad valorem Credit Tax on the interest payable to banks would ensure that banks would no longer receive windfall profits from interest-rate increases. For example, if the cost of borrowing was 7.5% and Credit Tax was 20% of interest charges, the borrower would have to pay the equivalent of an additional 1.5% per annum interest in tax. If the Credit Tax was levied at 30% of interest charges, the additional borrowing cost would be a 2.25% per annum. The lender would receive no benefit from interest rate fluctuations at all.

Additionally, by compelling banks to maintain "special deposits" with the Bank of England, this would control inflation. Under this mechanism, the banks would each have to redeposit say, 10% of their total deposits, with the Bank of England, interest-free and this could be varied according to the fiscal policy requirements of the day.

10. Conclusion

The chief purpose of the foregoing measures would be to compel a massive transfer of wealth from corporations and institutions to natural persons. This is by no means an expropriation of corporate wealth but rather a redistribution of wealth from the dead to the living.

A corporation's owners are of course its shareholders. It is also true that their ultimate beneficial owners must necessarily be natural persons. However, voting control of our major corporations is in practice in the hands of other corporations or collective investment funds controlled by such corporations. It would therefore be perfectly feasible for the boards of a dozen major corporations to buy 5% of each other's stock and in this way they and their appointees and succesors would control those companies in perpetuity and to all intents and purposes this is what managerial capitalism is all about.

Wealth should be the servant of humanity, not its master. It has no value except in its distribution. Etymologically, the word corporation derives from the Latin, corpus, which according to Wikipedia refers to a group of people acting as one. The problem is that unlike a natural person, as an artificial entity, a corporation is amoral with no conscience to be examined and no soul to be damned. It is therefore of itself incapable of morality yet we have endowed such entities with all the rights of thinking, living human beings, moreover, with the ability to exist in perpetuity. In so doing, we have created monsters of arrogance, pride, venality, greed, covetousness, mendacity and corruption.

These proposals will transfer economic power from corporations to individuals. Political power will then follow.