Thursday, April 09, 2009

BREAKING NEWS - Britain writes to its tax havens

Update 1: The Guardian and FT now cover this story. Read it here and here.
Update 2: Richard Murphy has now added his analysis here.

We have just received copies of letters to the British tax havens from No. 10, Downing Street (for non-British readers, that's the British Prime Minster's office.)

We now have access to two examples of letters sent by Gordon Brown today to the heads of governments of Britain's Crown Dependencies and Overseas Territories. The two letters are to the chief minister of Jersey, and to the Premier of the British Virgin Islands. The letters are here (BVI) and here (Jersey.) TJN is extremely encouraged by the content of these letters, notwithstanding the diplomatic language in which the points are made. We single out these points:
  • (from the Jersey letter) "As international efforts on harmful tax practices start to refocus on the issue of tax avoidance, it will be vital to the interests of the Crown Dependencies that they can readily meet any new international standards which emerge." (our emphasis)
    TJN comment: this is by far the bigger issue over and above tax evasion, because tax avoidance has been the veil behind which a vast industry has developed with tax havens as their focus. This is a strong signal to the tax havens that avoidance will no longer be treated as a legitimate activity. Prepare your Plan Bs.
  • (from the Jersey letter) I welcome the progress which has already been made by the Crown Dependencies in meeting the OECD target of 12 TIEAs. This standard should be seen as an indicator of commitment to the principle of tax transparency. I think it is particularly important that the Crown Dependencies continue to set the pace in this process and put clear water between themselves and those jurisdictions which only just meet the international standard. If genuine progress in agreeing, implementing and abiding by these agreements does not continue to be made I will encourage the G20 to look at this issue again until all abide by the highest standards.
    TJN comment: that last sentence is rather strong medicine, in diplomatic terms. We say to the tax havens: don't just sign agreements with minor jurisdictions like Greenland or the Faroe Islands, in order to fluff up the numbers. Start serious negotiations with serious major developing nations, and make it clear that you are commitment to implementing the agreements without putting up artificially high judicial barriers.
    TJN will continue to pursue the line that a real commmitment to tax transparency will entail signing up hook, line and sinker to a reformed version of the EU Savings Tax Directive. No witholding taxes, no secrecy exemptions for trusts, and so on.
  • (From the BVI letter,) "Given the developments at G20 and, in particular, the identification of a tool box of sanctions which will be applied against those who do not meet the international standard, I urge you to achieve the standard of 12 TIEAs or equivalent before the UN General Assembly meeting in September. "
    TJN comment: and that is just the starting point. We note that in the final paragraph, Brown reiterates the point about tax avoidance. Note, also, that the time reference point is the UN meeting, not the next G20. This is good - the United Nations is the body with the right global legitimacy to take this on - it is not a narrow club like the OECD or the G20. Read more here.
  • (From the BVI letter.) I agreed with the other G20 leaders that international co-operation is necessary in a number of areas. One of these areas was on improved co-operation in the exchange of tax information, and ensuring that all jurisdictions meet internationally recognised standards on tax transparency.
    TJN comment: this reinforces the case for TJN's position that this is a high, if not the highest, priority. The British Prime Minister confirms that here.
  • (from the BVI letter.) It is particularly important that all Territories build on the current momentum and work towards meeting the international standard swiftly on the basis of agreements with the major nations represented in the G20, the EU and the OECD.
    TJN comment: note that the British Premier is not choosing between the EU and the OECD model here in terms of international standards. We insist that the required standard is a full multilateral, automatic, all-encompassing exchange of information arrangement. See more here.
Feedback we are receiving, and the above points, give us grounds for believing that Gordon Brown has accepted TJN's position that tax havens have a negative impact on poor countries, and on the need for multilateral, not bilateral solutions, as well as on the broad notion of tax transparency. Reading between the lines, we think they should be interested in focusing not just on bank accounts and bank secrecy, but also the tax arrangements of trusts, accounting standards and so on, and in seeking new ways to tax corporations effectively, without the beggar-thy-neighbour framework of tax havens getting in the way. Paraphrasing what we recently noted, tax avoidance is to democracy what pollution is to the environment.

The letters also mention the Foot Review, which is supposed to be reporting on Britain's Crown Dependencies and Overseas Territories by the end of this year. This review needs to be very ambitious in scope, looking at how this issue not only affects Britain directly, but also looks at how it affects the global economy, which is in Britain’s long-term interest. Foot must also focus on regulatory issues, of course, and look specifically at how individual havens can make a transition to a post-tax haven economy. See more on this here.

A last point. The above letters are words, and we cannot take anything for granted. We hope Brown will follow up forcefully. We will be watching.

35 Comments:

Blogger Henry said...

Just a load of words. Brown & Co. could choke off the flow of funds to tax havens at source if he was really serious.

If Iceland hadn't blotted its copybook so badly, Smokey Bay could have had a good future as a tax haven. It's a good name for one. Given that its plans to join the EU could yet go belly-up and it is well placed in the middle of the Atlantic, it still might. If I was Amazon or some other internet trade company, I would be checking it out with the aim of doing a deal for a tax free zone for a distribution centre.

5:33 am  
Anonymous Anonymous said...

Hey John,

Gordon will be out of a job in a year. The clock's ticking! Tick tock, tick tock, tick tock...

Will you tell him or should I?

1:44 pm  
Blogger Fred Fry said...

"tax avoidance is to democracy what pollution is to the environment."

- The US Supreme Court says otherwise. Tax avoidance is legal and the international drive to grab more tax money will fail if they decide to take on tax avoidance simply because it makes everyone a criminal.

- your position makes everyone who purchased anything abroad or in a 'tax-free' shop a criminal since those acts results in 'Tax Avoidance'. Not for anything, but that probably includes most vacations made to 'low-tax' countries.

- Buying foreign-made goods probably makes you guilty of tax avoidance as well since the foreign manufacturers don't pay home tax. You keep claiming that it is the big corporations looting the third-world but in reality it is the final consumer who chooses the cheapest item on the shelf without any regard to the 'made in' label. Sure, tax groups advocate more openness to prevent taking advantage of the third world, but all the action called for simple results in more taxes being paid to the first-world....

This Blog is hosted on a foreign website, essentially it has been outsourced out of the UK. Since you did not pay for hosting it in the UK, you paid no tax where otherwise tax would have been paid. VAT by the organization running the blog. Income (and surely other) tax by the company hosting the Blog. So, this organization attacking 'Tax Avoidance' is guilty of it. (Not to mention the jobs not created in the UK because the business is being done in the US)

5:51 am  
Anonymous TJN said...

Fred Fry,

You twist yourself into real contortions trying to counter our arguments. Suggest you check the definitions of avoidance and evasion before commenting on them.

7:59 am  
Blogger Fred Fry said...

TJN:
Per Wikipedia:
Tax avoidance is the legal utilization of the tax regime to one's own advantage, in order to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by illegal means. The term tax mitigation is a synonym for tax avoidance. Its original use was by tax advisors as an alternative to the pejorative term tax avoidance. Latterly the term has also been used in the tax regulations of some jurisdictions to distinguish tax avoidance foreseen by the legislators from tax avoidance which exploits loopholes in the law.
Seems that the UK is trying to define a line in legal.illegal tax avoidance. That ight be fine for any one country, but you are trying to do this internationally. that will run into trouble in the US as well as elsewhere.:

"In the United States "tax evasion" is evading the assessment or payment of a tax that is already legally owed at the time of the criminal conduct.[18] Tax evasion is criminal, and has no effect on the amount of tax actually owed, although it may give rise to substantial monetary penalties.

By contrast, the term "tax avoidance" describes lawful conduct, the purpose of which is to avoid the creation of a tax liability in the first place. Whereas an evaded tax remains a tax legally owed, an avoided tax is a tax liability that has never existed."


My examples might be considered trivial, but undeniably, they are valid examples of tax not being paid...

8:41 am  
Blogger Henry said...

Everyone with an ISA is a tax avoider. The weekend papers are full of advice about how their readers can avoid tax, including the left wing ones whose journalists say how dreadful it all is. And who, hands on heart, can claim they have never, ever, paid cash to their builder or plumber, or bartered their goods or services? Or over-egged the pudding when claiming expenses against earnings?

It's called cognitive dissonance. Or rank hypocrisy.

10:06 am  
Anonymous Mick said...

TJN,

In that case why don't you give a short working definition of evasion, avoidance and legitimate tax plannning (if you accept any), for those of us who are relatively new to the discussion?

4:13 pm  
Anonymous TJN said...

Regarding the difference between evasion and avoidance -

Evasion is, by definition, illegal, while avoidance, is not illegal but, also by definition, contrary to the spirit of democratic legislation (otherwise why would it be called avoidance?) Avoidance is generally about loopholes, and is generally harmful. There is a huge grey area in between the legal and illegal, which is the terrain of lawyers, accountants and tax authorities. Dennis Healey summed up (from memory): the difference between evasion and
avoidance is the thickness of a prison wall.

As one commenter says, mitigation is a euphemism for avoidance, but that makes it no less harmful. Perhaps it makes it more harmful, for the euphemism serves to disguise the harm it causes.

An ISA is a very different beast from a Barclays or Enron tax dodge - an ISA is not only within the letter of the law, but within the spirit of the law too, as the government designed the law specifically to make these tax concessions open to all - with the hope that this would make the tax system more progressive overall (this blogger hasn't analysed this particular question but Richard Murphy probably has.)

We do intend to put together a proper "FAQ" page when we get time (which isn't going to be soon) to address questions like this distinction between evasion and avoidance.

12:10 am  
Anonymous MIck said...

Why is avoidance harmful? Surely a fundamental aspect of the rule of law is that obligations of people in society, including tax should be set out clearly according to the law prescribed by government. There if something is not illegal, it should not be condemned for being against the “spirit” of the law –for that is a nebulous concept that there will be endless disagreement on (to clarify, I am only making a general point. I know there are some extremely contrived tax avoidance schemes which I do not intend to defend).

I agree tax is a moral obligation – we owe the government for the many services it provides for us which we enjoy. But the government must decide how much it demands back from its citizens by setting the laws accordingly. It cannot enact one set of laws and still want to collect tax outside of the scope which itself has defined.

8:11 am  
Anonymous TJN said...

Mick
Governments (unless they are wholly subverted by narrow interests, which does happen) do not intend to leave loopholes - these gaps usually result from the actions of narrow lobbyists or poor design, and happen because tax is a complex business, especially in its international dimension. Avoidance involves narrow interests pursuing an agenda at the expense of the common good. Just because it's legal doesn't make it right, and doesn't mean it isn't harmful. It is harmful, all the way. If News Corp. pays a 6% tax rate (as was the case when The Economist investigated in 1999) when its competitors pay 30%, competitive markets are being distorted and democracy is being undermined. Nobody except News Corp wants News Corp to have a low tax rate - it is the result of wholesale abuse of the deficiencies in the international tax system. We all have to pay the tax that News Corp. won't. It is wholly harmful, even if it may not be strictly illegal.

1:07 am  
Blogger Henry said...

The problem with the tax system is that it is essentially a structure of perverse incentives. Successful, honest and legal, above the board activity, and thrift, are punished, whilst idleness, fecklessness, and dishonest and illegal activity, are rewarded. That is the nature of the tax system.

The effect is that the GNP is about 12% less than it would otherwise be due to the deadweight effect of taxes - that is wealth which would have been created were it not for the tax system.

Governments know this and mitigate with ad hoc concessions. These make the system ever more complex and incomprehensible, but they also create loopholes. The fat cats are best placed to pay for the professional advice to search out the loopholes and exploit them.

There is not and cannot be such a thing as an international tax system. To prevent tax avoidance at that level would require collaboration in the implementation of draconian and authoritarian measures.

It is up to national tax jurisdictions to safeguard their own revenue through proper design of their tax systems, bearing in mind the fundamental point that people and capital are mobile, whilst companies can exist in many locations simultaneously and can shift their cash flows around internally to exploit differences in tax in different jurisdictions.

1:48 am  
Anonymous TJN said...

Henry. Nonsense. Read more here
http://www.taxjustice.net/cms/front_content.php?idcat=130
or here
http://www.taxjustice.net/cms/front_content.php?idcat=107
or here
http://www.taxjustice.net/cms/front_content.php?idcat=102

12:00 pm  
Blogger Henry said...

Those texts do not answer the fundamental critique that tax as we have it today is a structure of perverse incentives - that if you work honestly and successfully, the fruits of your labour are confiscated. Nor do they address the deadweight cost of the system, the arms race generated by introducing loopholes or the fact that is would take draconian measures of control to plug the leaks.

Taking the points from the first of the links, you mention the four "Rs".

The first “R” is Revenue. Taxes raise money to pay for health, roads and education, or for more indirect things like good regulation and administration.The tax system is incapable of raising anywhere near the amount of revenue needed for these purposes. It also ties up vast sums of money in welfare payments to alleviate the problems of poverty caused by the system itself.

The second “R” is Redistribution: taxation can help reduce poverty and inequality, and spread the benefits of development more widely. Different taxes have different effects.Too true. Under our so-called progressive tax system based on the taxation of gross pay, for someone on the minimum wage, gross labour costs to the employer are 75% over and above the net purchasing power of the wage. This puts employers under inordinate pressure to reduce their total labour bill, and so they employ as few people as possible and often less than they need and would do if gross labour costs were more closely aligned to net wages. This is especially so in the care and public services sectors.

Who suffers? Young and low-skill workers, leading ultimately to the three-generation unemployed family. The tax system as we know it really is an engine for keeping the poor down. It creates, sustains and reinforces inequality.

The third “R” is Repricing. Taxes (and subsidies) can be used to change people’s behaviour: taxing tobacco, pollution or carbon-based energy, for example, is accepted by many people as a way to curb potentially harmful activities, particularly “externalities” that represent failures in free markets or other forms of social organisation.Yes! This gets to the core of the issue. All taxes affect behaviour. Taxes on windows led to bricked-up windows. And it is precisely why taxes on labour lead to idleness. Taxes should not be tolerated without regard to their effects on people's actions. And people should pay the cost of externalities, both costs incurred and benefits received. Thus, it would be reasonable to levy taxes on packaging both to cover the cost of disposal and to signal to the customer that there is such a cost.

The biggest externality relates to the costs and benefits enjoyed by landowners, as reflected in the rental value of land, which ought to be collected as public revenue but in practice are ignored.

The fourth “R” is Representation. Historians are familiar with this function, but many of us have forgotten it. American colonists who were being taxed under British colonial rule famously demanded “no taxation without representation.” This is not just an oddity of history, however, but a much more general rule: citizens who are taxed tend to demand accountability and representation in exchange from their rulers. People want to influence how their hard-earned money is spent; as a result, taxation helps keep governments on their toes. As a result of this bargaining between rulers and their subjects, taxation strengthens and protects channels of political representation.Where is the evidence for this? Sixty years of PAYE income tax does not seem to have done much for British democracy. We are still stuck with being run by an incompetent and mildly corrupt political class who offer substantially the same flawed policies - cyclic boom-busts, persistent high unemployment and an intractable housing problem - with the odd war to divert attention and spice things up. We haven'ẗ even managed to get rid of the evil "first past the post" electoral system.

The economic burden of income taxes falls on employers and the idea that individuals pay this tax is a consequence of the "gross pay" delusion. How can there be a healthy connection between taxation and representation when the whole thing is based on a deception?

Tax competition is generally harmful, for several reasons. It short-circuits democratic (or other) domestic or local processes by which governments set their tax policies. It results in the tax burden within countries being shifted away from corporate taxation in particular and towards other forms of tax whose burden falls disproportionately on the poor and the middle classes.Tax competition is only harmful if those who lose in the competition fail to get the message. People want, quite reasonably, to keep as much as possible of what they legitimately earn. If taxes on labour and production are low, this will be attractive.

But competition between countries is not just about keeping taxes on earnings as low as possible. Economic activity demands good infrastructure in the broadest possible sense. The quality of this infrastructure will also be reflected in land values, which will either be pocketed by landowers or can be used as the public revenue base to pay for the supporting infrastructure.

In a situation of tax competition, rotten and dysfunctional tax systems like Britain's will be weeded out and, if the government is smart enough to get the message, replaced by better ones.

Bring it on.

3:20 am  
Anonymous TJN said...

Henry
Do you actually believe this stuff that you are writing?
Land value taxes - OK, there's a place for them as we've remarked, ad nauseam, but simply to deny the "no taxation without representation" argument and to say that taxes are all about raising revenue and nothing else - forget all taxes except land value taxes - well you you won't find many sympathisers. If you're going to respond further, could we perhaps have some more interesting arguments this time?

6:10 am  
Blogger Paul Lockett said...

I very much sympathise with Henry. I think his points are spot on.

As for the "no taxation without representation" point; that isn't what your comment is suggesting. Your point is more akin to "no representation without taxation," as you appear to be saying that, ideally, every member of electorate should be directly taxed to ensure that they have an incentive to hold the government to account.

Of course we had such a system at one point in the UK; it was called the Poll Tax and to be honest, it wasn't what I'd call a great success.

10:24 am  
Anonymous TJN said...

Henry and Paul

You asked "where's the evidence?" Here's something you might want to read - a book on this subject.

http://taxjustice.blogspot.com/2008/01/how-to-build-state.html

11:45 am  
Blogger Henry said...

Yes, thanks, I looked at the review of that book too. I entirely agree. Taxation is the fiscal expression of the relationship between the individual or perhaps the householder, and the state.

It explains a great deal. Since the incidence of employment-related taxes falls on employers, it is only to be expected that governments are more and more in the pockets of the bankers and the big corporations.

No wonder democracy is failing. We ought to refrain from advocating that our harmful tax system is something that third-world countries should adopt.

Where is the evidence that income taxes promote democracy?

3:46 am  
Anonymous TJN said...

Henry
You haven't fallen for old that tax incidence canard as well, have you? Really. Take a look here, and the associated links.
http://taxjustice.blogspot.com/2008/06/incidence-brigade.html

10:08 am  
Blogger Paul Lockett said...

I'm finding some of the TJN comments quite contradictory. On one hand you use the "no taxation without representation" argument, yet on the other hand, you say Newscorp should pay more tax. How do you square that? Do you want Newscorp or Rupert Murdoch to be given a vote so that there is representation to accompany the taxation?

On a similar note, you say that universal taxation is good as it gives everybody an incentive to hold governments to account, yet when people respond to the incentive and hold governments to account by moving to a state which has done a better job, you cry foul.

10:55 am  
Blogger Henry said...

I am running the argument in precisely the opposite direction. The incidence of labour-related tax falls on employers. That people imagine otherwise is a consequence of the "gross pay" delusion.

Where the public sector is involved, the effect is that the cost of public services is about 40% higher than than the net cost, since all the NICS and PAYE so-called deductions are promptly remitted to the government in a massive churning operation. But the effect is to destroy employment at the bottom end of the labour market and to leave the streets unswept and the hospitals under-staffed on the non-medical side, so MRSA can get a good hold in the dust under the beds.

Whose side are you on, anyway? You appear to be against the sharks exploiting weaknesses in the system, but when arguments are put for changes which would most help those at the bottom of the economic pile, you resist and ridicule.

11:33 am  
Blogger Robin Smith said...

TJN. Please can you tell me where the evidence is reasoned out here:

http://taxjustice.blogspot.com/2008/06/incidence-brigade.html

I cannot see it. You seem to have sent Henry on a wild goose chase. Why?

Would it not be more honourable of you to treat his reasoning with respect and point out exactly what is incorrect? Is it not right you have 2 choices:

1) Reason with the comments made with courtesy like a gentleman (or lady) as above and take the debate forward for the benefit of all

2) Accept the reasoning as valid and say so. Move on.

Which is it?

2:38 pm  
Anonymous TJN said...

Paul, you seem to be suggesting that if we enrich giant corporations by shelling out huge hidden subsidies to them, that will weaken their bargaining power. No, corporations exert their influence through lobbying - rapier engagement with governments. The essence of democracy is made up of mass participation - this is how the public good gets asserted in national politics, along with voting.

Henry. You were indeed running the argument in the other direction. But that's not to say that the argument is right. As Martin Wolf puts it: tax dollars don't just go up in smoke. They pay for useful things. That's the essence of tax. That's why, if you think about it, it makes no sense to treat tax as a "cost." Read more here. http://www.guardian.co.uk/commentisfree/2007/nov/07/comment.ethicalbusiness

12:30 am  
Blogger Henry said...

I notice you have declined to publish my comment, but I was running the argument about incidence of tax the other way because the current shift towards the Total Control state run for the benefit of bankers, big business, politicians and the Mandarinate reflects the fact that the true incidence of labour related taxes falls on business. Political influence does indeed follow the realities of taxation, which would help to explain the sad state of British democracy. There isn't much public participation. People have just got angry and depressed about their feelings of powerlessness.

Martin Wolf leaves much unsaid. Of course money collected in taxation does not go into a black hole, though there are huge inefficiencies, since so many of the best brains in the country are the accountants and lawyers who are paid to help their clients minimise their liabilities, and the cost of administration is substantial - about 6% of the take, if I recall correctly.

Further waste arises because of the disincentive effect of the tax system, a deadweight cost as a result of which the GNP is reduced by about 12%.

From the point of view of an employer, taxation is a cost, a charge on the balance sheet. The bulk of this cost never appears on the balance sheet as such because it is concealed under the headings of "Gross Pay" and NI contributions, but they are costs which serve as a deterrent to employment.

The result is that the government is having to provide for people that which they might reasonably be able to provide for themselves. They can't, because under the present system of taxation, they are priced out of work or have no alternative but to work for a pittance.

Corporation tax is a separate issue. There are genuine difficulties in assigning revenue where companies operate in various tax jurisdictions.

An easy short-term fix for the problem would be to phase out company taxation and collect the same amount through existing property taxes eg the UBR. That way the tax liability cannot be shifted out of the country at all. Such a change would need to be accompanied by a legislative clause which nullified the effect of upwards-only rent revision clauses and gave business tenants an entitlement to request rent reviews.

Incidentally, whilst on the subject of business rate, you might like to follow up the tax avoidance currently going on through "constructive demolition".

3:13 am  
Blogger Henry said...

Sorry I didn't spot that you had published the one about running the argument in the opposite direction.

It is getting a bit difficult to navigate this discussion.

3:22 am  
Blogger Robin Smith said...

Dear TJN

You still seem to be avoiding Henry's question with ad hominem and straw man reasoning and references. Is this the way to conduct a public forum that is seeking credibility I wonder? Will that approach deliver more truth or less?

Are you going to provide evidence supporting your case. I'm sure Henry would be just as delighted for you to prove him wrong but you have yet to do it. Why is this when all stand to gain from it?

The question seems to be why does TJN support taxing the production of wealth?

It seems he is saying taxing production is very stupid because it means people will make less wealth as a result. And they will then justly try to avoid paying it too. And he gives plenty of well reasoned evidence. The evidence you provide is just "telling" people it is so, without reason.

Why dont you have another think about what he's said and respond with your usual humility.

3:42 am  
Anonymous TJN said...

Robin
Please remind us which of Henry's many points you are referring to that need answering. This discussion, as Henry notes, is getting hard to navigate. If it's "why does TJN support taxing the production of wealth?" then take a look at the TJN comment on whether or not tax should be treated a cost. Perhaps you'd like to point to the ad hominem attack too. We will continue to use references in answer.

Henry - this blogger hasn't heard of your 6% and 12% figures- not saying I doubt them - but am interested to get any hard references on that from you. Perhaps John knows, but he's away.

5:12 am  
Blogger Henry said...

I dealt with the issues one by one but they were answered with fresh ones each time.

The key issues to be dealt with but have still not been answered except with shaky references are

1) The economic damage and poverty resulting from our existing tax system.

2) The amount of government expenditure consumed in putting it right.

3) That the system is inherently vulnerable to abuse legal or otherwise.

4) That incidence of the taxes does not fall on those from whom it is formally collected.

5) That there is indeed a connection between taxation and representation and due to (4) above, it is killing off democracy.

The deadweight cost of taxation was estimated in this UK study but the phenomenon is well know world-wide.
http://www.iea.org.uk/record.jsp?ID=320&type=news

As to compliance and administrative costs, the figure I was given was £25 billion about five years ago.

This extract from the obituary of Professor Cedric Sandford, public-finance economist specialising in taxation, and founding pillar of Bath University mentions the issue in The Indpendent of Thursday, 18 March 2004
"Cedric Sandford was a public-finance economist. His chosen field was taxation. He applied economic principles to analyse issues of tax incidence, fairness and efficiency and took pains to find out how these principles actually operated in practice, thus linking tax theory to tax administration. Clarity of exposition and relevance of content made his work widely accessible. His extensive published work illuminated issues of tax policy and tax reform, and provided guidance for a generation of politicians, students, thinkers and reformers.

"Sandford was the leading UK researcher in the field of tax-compliance costs (the costs in time and money which taxpayers incur when dealing with their tax affairs) and probably the leading researcher in this field worldwide. Using extensive taxpayer surveys, he found that UK tax-compliance costs were larger than the Government's own tax-administration costs. Moreover they were regressive (proportionately more onerous for those on lower incomes) and a disincentive for small businesses, in the sense of diverting their scarce resources to unproductive uses."

Remember that most of the accountancy profession and a sizeable chunk of the legal profession is taken up with tax matters. It is a huge drain on the economy.

6:12 am  
Blogger Robin Smith said...

TJN: I'd love to take a look at "tax treated as a cost" but am struggling to find it on your blog. Please can I have a link. I'll repay your effort by responding once digested.

You are right, this is off topic. But I would like to explore tax incidence further if the link provides no joy? (this is the ad hominem you used earlier to be frank)

And if you want to offline I'd like to understand how you define wealth as I get the feeling this might be causing you some confusion. Apologies if this is an incorrect assumption.

9:09 am  
Blogger Paul Lockett said...

TJN: Paul, you seem to be suggesting that if we enrich giant corporations by shelling out huge hidden subsidies to them, that will weaken their bargaining powerNot at all. I'm trying to establish how the desire for increased corporation tax fits in with:

citizens who are taxed tend to demand accountability and representation in exchange from their rulers. People want to influence how their hard-earned money is spent; as a result, taxation helps keep governments on their toes. As a result of this bargaining between rulers and their subjects, taxation strengthens and protects channels of political representation.The two are at odds. Corporations don't get to vote, so taxes on them violate the second principle. It is taxation without representation. On one hand, the idea that those who are taxed will demand accountability and representation in return is presented as a good thing, but when it is corporations making those demands in return for the tax they pay, it's presented as a bad thing.

11:09 am  
Anonymous TJN said...

This thread has been going on a long time. At a max of one minute per answer:
Robin. On corporations and no taxation without representation - see a few comments further up. on the meaning of wealth - take a look at this book. it's not a TJN book but it's interesting.
http://www.google.com/books?id=eUoolrxSFy0C&dq=the+origin+of+wealth&printsec=frontcover&source=bn
Whether tax is or is not a cost - that's been answered above already with the link. here it is again
http://www.guardian.co.uk/commentisfree/2007/nov/07/comment.ethicalbusiness

1) The economic damage and poverty resulting from our existing tax system. Looks like we share the same concerns then Henry

2) The amount of government expenditure consumed in putting it right. Ditto.

3) That the system is inherently vulnerable to abuse legal or otherwise. Ditto.

4) That incidence of the taxes does not fall on those from whom it is formally collected.That's been answered already - take a look at the incidence bit, already noted above.

5) That there is indeed a connection between taxation and representation and due to (4) above, it is killing off democracy. That's also been answered above. The incidence argument, as should be obvious to anyone who thinks about it - is entirely bogus. And even more bogus by virtue of being a mix of false logic with elements the truth.

7:33 am  
Blogger Henry said...

TJN - we both want the same things and that is why LVT supporters want you on-side with us and vocal on the subject. The taxation of labour is fundamentally unjust.LVT has a long history - the present movement can be traced back to the French physiocrats. It was the latter who worked out that all taxation was ultimately at the expense of land rent and there was no point attempting to collect public revenue except through a tax on land rent. This was the basis of Quesnay's proposal for the impôt unique, which was then supported by Turgot later in the 18th century. Sadly vested interests got in the way, the French economy deteriorated and the result was the disaster of the French Revolution and the trail of events from which Europe is only just beginning to recover.

The land value taxation campaign has some figures on the incidence of labour related taxes here and hereAs for a definition of wealth, this is the best one I have come across

"natural products that have been secured, moved, combined, separated, or in other ways modified by human exertion, so as to fit them for the satisfaction of human desires"

8:07 am  
Blogger Paul Lockett said...

TJN:

The incidence argument, as should be obvious to anyone who thinks about it - is entirely bogus.If that were true, it would add even more weight to the idea that taxing corporations destroys the principle of "no taxation without representation." The principles that are being promoted here are a circle that can't be squared. The ideas that:

(a) Taxation makes the government accountable to the taxed, which is good for democracy.
(b) Tax levied on the corporation falls on the corporation.
and
(c) Corporations should shoulder more of the tax burden.

when added together imply that you want the government to be more accountable to corporations. Why?

8:12 am  
Blogger Robin Smith said...

TJN. Would it not be fair to say that your approach points to references and Henry's is to attempt explicit reason on the blog?

On the representation point I believe the theory entirely. But cui bono? You seem to be saying tax on production benefits the voter through representation. (we keep asking for the evidence, still waiting) Yet you dont need to read a book to see this is clearly not the case. The beneficiaries of taxes on production are corporations. How so? Do they not control our democracy now to a larger degree than the voter? The voter has withdrawn. The corporate lobby is ever powerful is it not? If what Henry says on tax incidence(with evidence) is true, both points are reinforcing are they not?

So you are dead right. Taxes on production deliver representation. But for the corporation. Hallelujah! Perhaps if we stopped taxing production, folks would start to vote once again?

See here for more detail and reason on this if you have the time

http://gco2e.blogspot.com/2009/04/tax-on-production-does-deliver.html

9:07 am  
Anonymous TJN said...

Both Paul and Robin - on taxing corporations - please do read the TJN comments - they've been answered already, and a reminder has been posted already too.

henry "we both want the same things and that is why LVT supporters want you on-side with us and vocal on the subject."
We do indeed seem to share a lot of goals. The key difference is that we believe in a range of kinds of taxes - enabling democratic leaders to mould and shape a tax system to their will - while you seem to favour only one tax. Which leads you into a fatal mistake - the logic of your argument leads you into what looks like an unholy alliance with the anti=tax brigade - those who think that if we cut government down to the size where it is small enough to drown in a bathtub. embrace a range of taxes, Henry, including LVT, and it seems to me we are then on the same side again.
what is more, we do pay attention to LVT - here's our last piece
http://taxjustice.blogspot.com/2009/03/parliament-seminar-on-land-value-tax.html

1:27 am  
Anonymous 2020 tax resolution said...

Surely, this issue shows its sensitivity by the way people react and express their insight regarding on this matter.

12:06 am  

Post a Comment

Links to this post:

Create a Link

<< Home