[examples/openspending] - openspending v0.2 (#907)

* [examples/openspending] - openspending v0.2

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examples/openspending/content/resources/journo/resources/reading-accounts.md

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+---
+title: Reading accounts
+---
+
+*Reading accounts, both public and corporate is all too often seen as something best left to specialists and accountants. But with a few key ideas and some terms explained you will find that accounts are really quite readable and a great source of news.*
+
+This guide aims to show you how to read accounts. This advice should be taken with an exploratory attitude because there are no universal standards for presenting accounts - although you would think there should be given the number of accounting standards and regulators.
+
+Ultimately accounts are a statement for a company’s or public body’s shareholders (yes, public bodies have shareholders - they are the taxpayers) and so putting accounts together is a mixture of sticking to accounting guidance and trying to be clear for the particular investors.
+
+We will outline common patterns that you will see in accounts over and over, no matter what type of organisation you are interested in or where in the world they are based. It’s these features that form the headings of this resource.
+
+## 3 Statements
+To fully describe the financial health of an organisation there are usually three financial statements and a document full of description and footnotes to contextualise them.
+
+The three statements are:
+
+### cash flow statement
+For the year it shows money the organisation received and spent through particular activities. Usually it starts with money coming into the organisation followed by money leaving the organisation and ends with a total where spending is deducted from income to give a figure that represents the balance of money gained or needed. Often there are cash flow statements for different aspects or activities in the organisation. For example there may be a cash flow for profit making activities and another for costs of keeping the organisation ticking over.
+<div class="well" 'markdown="1"'>
+Important note: An organisation’s overall profit is not calculated from cash flows so it’s incorrect to refer to the final total of the cash flow statement as profit. It’s also incorrect to take the positive figures from the cash flow and sum them to form a profit figure. The reason that this is incorrect is because the cash flow statements don’t take into account subtleties of the organisation’s delivery of goods and services in the timeframe of the financial year.  For example say you have a company that buys sofas from a manufacturer to sell on to customers. The profit making cash flow statement will show the sales figures and the cost of buying the sofas from the manufacturer. But there are some customers who buy on credit and don’t pay for two or three years and even though a customer may have agreed to buy a sofa it may not have been delivered to them. So the profit in this situation is calculated as the costs for the sofas actually delivered to customers and the amount customers actually paid in that financial year.
+</div>
+
+### the profit and loss
+
+*This is where subtlety of costs and timing is considered...*
+
+Gives the overall money earned or loss suffered by an organisation over the year.
+
+### the balance sheet
+
+Shows the investors the assets and debts held by the organisation at the end of the year. The question is: *is the organisation (or your local council) solvent?* This means that at this point in time if the whole operation was closed down could the stuff owned be used to pay off debts and how much would be left over for the shareholders, or how much would the shareholders owe, if this was to happen. Assets include everything of any value such as cash owed, cash currently held within the organisation and an estimate of the worth of items owned.
+
+**Now a really neat part about accounts is that these three statements are related.**
+
+## Relationships between statements
+The three statements all show something different about the financial health of the organisation, but in themselves they are limited in what they can tell us. However, in combination the financial statements can start to answer questions like:
+
+* **How long are products held, on average, before they are sold?** This is found by taking the cost of goods purchased from the income statement and the inventory assets from the balance sheet. The cost of goods purchased is the cost of all products sold to customers in the financial year. The inventory assets is the cost of the stock of products at hand, ready to be sold, at the end of the year. The average time products are stored is given by dividing the cost of goods purchased into the inventory of assets at year end then multiply the whole thing by 52 (the number of weeks in a year). The result is the number of weeks a product is stored on average. When reporting this figure it's good to take into account the accounting problems for the cost of goods sold expense and the cost of inventory. For example finding out how has depreciation of goods been taken into account can help explain the figures so check the footnotes of the financial statements for details.
+* **How long, on average, does it take for a customer to pay for their purchase?** Take the inventory asset account again and the accounts payable liability, both in the balance sheet. The accounts payable liability is a short term non-interest-bearing liability arising from customers buying on credit. It is significant because the period where the goods have been purchased but no money is exchanged is financed from debt and stockholders equity. The time is calculated by dividing the accounts payable into the inventory and multiplying that by the length of time products are held (calculated above). The result is the time in weeks that it takes, on average, for a customer to pay after they have bought the product.
+
+*This is just a quick introduction to some of the questions it is possible to answer using financial statements. Now see which ones of these you can find for your region.Recommended further reading is [How to read a financial report](http://books.google.co.uk/books/about/How_to_Read_a_Financial_Report.html?id=Xzd3-NojmkgC) by John A. Tracy.*

examples/openspending/content/resources/journo/resources/tax-avoidance-evasion.md

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+---
+title: Follow the money - An exercise in tax evasion and avoidance
+---
+
+Tax evasion and tax avoidance are constantly in the news - but what are the difference between the two and how do you start investigating them as a journalist?
+
+This resource was originally designed as an exercise in journalistic judgement run at the first [data expedition at Mozilla Festival](http://blog.okfn.org/2012/11/14/data-expeditions-at-mozfest/) and we'll continue to build on it as we do more and more investigations into the topics.
+
+Read the explanations of the various options below and then try out the **challenges** at the bottom of the page to find them for yourself.
+
+## Tax evasion or tax avoidance?
+
+The first choice you, as a journalist, face in this tax investigation is to pursue **tax avoidance** (currently legal but this legality could be challenged) or **tax evasion** (illegal non payment of tax through non disclosure or non payment).
+
+There is no correct answer to this exercise - it simply offers a number of routes to investigating tax - all routes have a dataset so the resulting story is really a reflection of the morality and motivations of the journalist rather than available resources.
+
+* Go down the tax avoidance route if you are looking for people breaking the law. You now choose between corporate and personal income tax avoidance.
+* Go down the evasion route if you are looking for people exploiting loopholes.
+
+Here's the flow chart of options:
+
+[![Data expedition](http://farm9.staticflickr.com/8184/8368409648_92d093db30.jpg)](http://www.flickr.com/photos/object-group/8368409648/sizes/n/in/photostream/)
+
+## Route 1 - Tax Avoidance
+
+### Income Tax: The K2 and EBT tax avoidance schemes
+
+<em>The K2 and EBT schemes are relevant for those investigating income tax.</em>
+
+These are aggressive tax avoidance strategies that relies on there being no taxation on loans, and creating a separate organisation based in a tax haven that can receive all the profits and then give an interest free loan that is designed so that it never has to be repaid to the tax avoider.
+
+For example an individual avoids paying tax by becoming a contractor to a company in a tax haven, the individual earns a large salary but this is paid to their agency and the individual is only paid the minimum wage on which they pay tax at the rate for the country they live in, they are then given the rest of their earnings as an interest free loan from the agency which they don't pay tax on.
+
+In this route there are two options, to look at a) a tax avoidance scheme that some celebrities have used or b) to look at a scheme that is used for highly paid employees in well known organisations.
+
+a) The celebrity scheme is the **K2**. The [guidance](http://www.hmrc.gov.uk/manuals/eimanual/eim45000.htm") covering this is on the revenue and customs (HMRC) website.
+b) The scheme that is used for highly paid employees in well known organisations is the **<a href="http://www.hmrc.gov.uk/news/ebt-news0812.htm">Employee Benefit Trust schemes</a>** in the UK until their use was strongly discouraged.
+
+### Other investigations: Name and Shame
+
+If these two investigations do not satisfy your desire for a scoop there is a third option where you aim to name the people using these schemes.
+
+This involves putting together pieces of the tax avoidance picture.
+
+We can get some sense of how frequently these schemes are used, or how much money is saved as some countries' tax collection forms require the tax avoided by individuals (or lost from the system) as some countries require taxpayers to describe their scheme - in the UK DOTAS does this and there are stats <a href="http://www.hmrc.gov.uk/avoidance/avoidance-disclosure-statistics.htm">here</a>.
+
+An explantation of DOTAS is <a href="http://www.rossmartin.co.uk/index.php/penalties-a-compliance/403-disclosure-of-tax-avoidance-schemes-dotas">here</a>.
+
+This narrows down which schemes are most used. Then we can figure out which tax havens are most likely to be used as the [OECD monitors havens](http://www.oecd.org/ctp/harmfultaxpractices/listofunco-operativetaxhavens.htm) and attempts to establish transparency in tax havens.
+
+Once you get down to a country and a tax avoidance scheme we can start looking for agencies that are set up there.
+
+There are groups who set up schemes and there are their customers and there are the people or companies who benefit.
+
+### Corporations: Transfer pricing
+
+If you select the tax avoidance for corporations option you will most likely be looking at transfer pricing. This is the strategy of having smaller companies within the same corporate empire. The smaller companies can be based in tax havens and each operate in a way that is maximally tax efficient to the empire overall. This is particularly common in online retail.
+
+An online book retailer might have a company specifically for its book sales based in Luxembourg and so pays a Luxembourg VAT rate (only 3%), but the books are bought all over the world. Look for places with low local tax rates and then see which branches of firms are located there.
+
+Alternatively if you are interested in ways that tax avoidance may be managed they are recommended to investigate the General Anti-Abuse Rule (GAAR) that is being developed at the moment [here](http://www.hm-treasury.gov.uk/tax_avoidance_gaar.htm). The rule aims to deter abusive tax avoidance by reducing legal uncertainty around what constitutes aggressive tax evasion and what constitutes legitimate tax planning.
+
+## Route 2: Tax evasion
+
+If your selection was tax evasion rather than tax avoidance then you can choose the severity of the evasion; ranging from shadow market to individuals evading tax and wanted by the tax authorities.
+
+#### Shadow market
+
+#### Naming tax evaders
+
+The individuals considered to be evading tax and with a warrant issued by a UK court and that are being investigated by the UK tax authority are fully described on the [official HMRC account](http://www.flickr.com/photos/hmrcgovuk/sets/72157631087785530).
+
+[![Tax Evaders](http://farm9.staticflickr.com/8545/8652943180_7dcb6a8c84_z.jpg
+)](http://www.flickr.com/photos/hmrcgovuk/sets/72157631087785530)
+
+## What now?
+
+So, we've described the main routes for this little exercise in tax reporting. Below, we've suggested some possible challenges for you to investigate yourselves - please let us know via the [OpenSpending mailing list](http://lists.okfn.org/mailman/listinfo/openspending) if you have any success in uncovering avoidance or evasion via these routes!
+
+### Challenges
+
+1. Write a piece on how the K2 scheme works, who has been shown to use it and which organisations facilitate it.
+2. Show the history of the EBT scheme, who used it and how did HMRC attempt to stop the use of EBT schemes.
+3. Pick one of Starbucks, Amazon or Google who were recently accused of tax avoidance and take a look at the [written evidence](http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/716/contents.htm) for their taxable involvement in the UK. Use this a basis for an explanation of the company's specific tax avoidance mechanism.
+4. Collate and compare different estimates of the size of the shadow market in a wide range of countries. The reports with estimates we suggest are from [the European Commission](http://ec.europa.eu/europe2020/pdf/themes/06_shadow_economy.pdf) and the [IMF](http://www.imf.org/external/pubs/ft/wp/2012/wp1247.pdf) but other sources should be added. You can explore the significants of the shadow market and measures to reduce its size.
+5. Classify tax evaders published on the [official HMRC account](http://www.flickr.com/photos/hmrcgovuk/sets/72157631087785530)  for example as importing goods without paying UK tax and fraudulently claiming state benefits etc. Then to put these individual costs in the context of cost estimates for these crimes in the country as a whole. For example we can get overall cost of benefit fraud [here](http://research.dwp.gov.uk/asd/asd2/index.php?page=fraud_error) and the loss of funds through importing goods without paying tax from this [HMRC report on tax gaps](http://www.hmrc.gov.uk/research/direct-tax-gaps.pdf).