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Capitalism and The Wine Society

Martin Vander Weyer has just written “The Good, the bad, and the greedy” about capitalism. The book review in today’s Sunday Telegraph says:
“Its proposed alternatives, meanwhile, don’t add up. The Wine Society and John Lewis are inspirational, cooperative firms that deliver high quality and low prices. Vander Weyer, however, shows why they are not practical substitutes for more hardnosed business models.“
Has anyone read the book and can provide some further details about the quote?

Haven’t read it - and would be interested in the quote and his reasoning. I imagine one could add Nationwide to the TWS & JL pack.

Because it’s written for the readership of The Telegraph? (Ergo, no discussion or nuance beyond unfettered-free-market-capitalism-is-perfect will be tolerated). :smiley:

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I’ve just found this, written by Martin in 2012. Maybe he will comment?
‘Never mind the John Lewis economy, the model must be the Wine Society,’ says an email from my distinguished predecessor, Christopher Fildes. Last week I lamented the paucity of employee-owned firms that fit Nick Clegg’s new-found ideal of fairer capitalism — so I’m delighted to raise a glass to this flourishing mutual enterprise, whose list has been keeping its customer-owners happy since 1874, when it was founded to market wines left in the cellars of the Albert Hall after that year’s Great Exhibition. The Society trades only with its members, who own one share each. In its last financial year, turnover showed a healthy increase despite falling booze sales nationally and steep rises in wine excise duty; ‘establishment costs’ were down by a fifth partly thanks to energy efficiency; and a 6 per cent dividend was paid. Meanwhile, 12,000 new members brought the total to 106,000. As Christopher adds, ‘Can this be what David Cameron meant by the Big Society?’

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Setting aside politics, I guess one practical consideration if, hypothetically, every company converted to a Wine Society model is that little or no corporation tax would be paid. The Society uses dividends, which aren’t actually paid out, to reduce or eliminate corporation tax liability. All entirely legal but obviously that leaves a big hole in the government’s budget if undertaken on a mass scale, so I guess all of us would have to pick the slack somewhere else, for example in higher income tax. Unless the government spends less to compensate, but it tends not to be all that good at doing this.

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Or a sound-bite copy of Lyndon B Johnson’s ‘Great Society’ - but without the policy behind the words.

If taxation means paying ziltch like Shell and BP amongst others than the co-operative model looses nothing for the government. Truth is the taxation system in the UK is completely at sea and needs a top to bottom recasting so there is a fair distribution of responsibility across the whole population with those that have , and I am specially thinking about these huge corporate bodies, paying their way. It is appalling that Shell et al got government support whilst paying 0 corporation tax. Sickening that as a retiree I pay more than them, just sickening.

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BP in 2019 paid 3.1bn $ to the UK. There is a bigger picture however, being a global company - unravelling that would be futile.

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0 corporate tax on North Sea oil for three years. 2018-2022 whilst claiming 400m tax relief.

Dividends are not deductible against corporation tax?

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This discussion was covered off earlier this year in another thread

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I possibly used the wrong word. There are zero dividends… instead TWS marked down the price of 224 wines and ‘returned’ the surplus cash to the members that way. I guess they technically made a loss on those wines - which balanced things out?

If they had returned the surplus to the member’s as a dividend - I guess every member would have to pay personal tax on that amount AND it would declassify TWS from being a mutual?

Not strictly true, there is a dividend appropriation in last year’s financial statements, though it isn’t distributed in cash in the conventional way.

I would doubt that they made a loss on them, that would be value destroying for all of us. Instead, they’ve got a better deal from suppliers, passed on the favourable exchange rate movement, and probably taken some hit on margin to assist cash flow and space constraints.

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Not the same then ?

Absolutely not. Reducing profit margin from 20% gross to 10% gross is not making a loss. If there is no increase in sales resulting, then net profit will reduce a little, but if there is an increase in sales then net profit might well go up if the extra turnover covers more fixed cost overhead.
The price reductions varied quite a bit, but on the whole suggest that the gross margin is reducing by about half…on these wines only of course. It frees up more space in warehouse and balance sheet for restocking ahead of Christmas with higher margins too.

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Not entirely true, Shell pay a 78% rate in Norway, also for operating within the North Sea. Understanding “why” they didn’t pay to the exchequer within those years is also hugely important.
The North Sea is an ageing basin with literally hundreds of platforms and as each field comes to the end of its life these rigs and platforms need to decommissioned correctly in order not to cause damage or cause leaks into the ocean and to comply with the UKs mission of being carbon zero . This costs money amd these companies are using funds ordinarily sent to the exchequer to fund decommissioning .
They also have tax loses due to new investments in fields there that were not productive.
It’s far more complicated that “they didn’t pay tax”.
For example Exxon mobile made a 5.2bn contribution in direct and indirect tax in 2020 due to downstream and chemical operations in the U.K. but nothing in taxes for extraction .
The bigger picture needs to be looked at .
Do I think Britain should be charging rates like
Norway? Absolutely, but I also think throwing about figures without acknowledging taxes are paid indirectly and there is reasoning behind such decisions is paramount .

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My point is that what ever has or is paid, be it direct or otherwise, should be the legal and socially responsible amount. The fact that a big number may be referenced should not obscure the fact that a bigger number should have actually been paid. This is particularly the case IMHO where government support for the organisation has been drawn down. Just seems wrong.

Two very different things, particularly when it comes to the British taxation system. You won’t find many shareholders crying out for the latter and it won’t ever happen without a total revision.

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Yes, you raise an interesting point on the disclocation of ethics from legality/self betterment. Biden’s 15% is I suppose a smalll step to rejoining the two facets of what I would call a fairer tax system, not so open to gaming. The example I started with , no payment of corporate tax or production levies on NS oil between 2018-2020, with 400m claimed in tax reliefs also saw 44 bn paid out in dividends to shareholders. Finding justification for that sort of gaming is well beyond what I would consider ethical, if ‘ethics’ are the embodiment of ‘how things ought to be’.
But returning to TWS’s co-operative model. Mutuality is certainly an ethical , as well as an economic,feature I would say.

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A global accord on minimum levels of corporate tax is a start.

I’m not sure that selecting a relatively short time period to look at a deeply cyclical industry with specific issues around decommissioning as outlined by @leah is a proportionate way to look at it. Dividend policy tends to be formulated with a longer time horizon than that. Presumably you would be happy to see your pension cut if companies paid no dividends to shareholders?

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