Sorry to bang on about the big firms of accountants this week - but their PR departments seem to be in tax overdrive mode at the moment. I advisedly say that it is the PR departments at work because the reports they are producing appear to bear no relationship to methodical research, facts, or objective analysis. To put it another way, they're pure politics.
The latest one I've read is the PWC / World Bank report that came out a week or so ago, but which I've only just read. This report is based on the PWC Total Tax Contribution methodology, which I've already discussed here and which is (if I'm being polite) fundamentally flawed. I won't be rude. Bob McIntyre has already done that for me.
Just one example of the trite methodology used might suffice. The burden of administration of tax is measured by the number of pages of tax legislation a country has, as if this is some objective measure. So they note with all seriousness that:
A first important finding to note is that the volume of primary federal tax legislation is not directly proportional to economic size. For example, the US, ranked number one in GDP terms, being almost three times the size of the next nearest economy (Japan) has just 5,100 pages of primary federal tax legislation compared with Japan's 7,200 pages. Or India, with a lower GDP ranking of 10 but which has the most pages of primary federal tax legislation at 9,000.
I should add that someone once proved that the number of storks in Denmark in spring is positively correlated with the number of births, and the two are of course entirely unrelated. So are the above statistics. This is work of the quality I would hope a poor university would reject from a weak undergraduate. To be polite, it's simple mumbo-jumbo. Such things as page size, type face, the language used, the legal system adopted, and many other elements might all be independent variables in this equation. PWC appears to let them all wash over it. One despairs of their intellectual capacity.
I'm not saying everything the report says is rubbish. It's obvious that very high tax rates force small businesses in developing countries into the informal economy. It's obvious that an efficient tax administration is advantageous to an economy. It's clear that there is a trade off between tax take and admin burden imposed on business. In other words, in all cases an efficient system design, a broad base and the elimination of both inefficiency and corruption help the tax system work. We hardly needed PWC to tell us that.
But what is more worrying is that in a report that depends on such poor methodology and which, through association with the World Bank pretends to be objective, the political rhetoric is so strong. Take this:
It is also important to note what the extra taxes are used to fund: if, for example, they are used for transfer payments, then the net impact on long-term economic growth may be negative.
No evidence is presented to support this claim that supporting the poor, the elderly, the sick or the disabled is harmful. It's just taken as a fact that it is.
Take this as well:
tax regimes with relatively high marginal rates and large numbers of exemptions and allowances tend to be less economically efficient in relation to encouraging work, saving and investment
This is presented as a statement. No evidence is offered to support the claim.
Most worryingly though PWC first offer this observation as one of fact:
Attempts to impose internationally uncompetitive tax rates on these forms of mobile capital may be particularly damaging to an economy in the long term.
They then offer this panacea for tax administration:
VAT/GST: The win:win taxation systems of the future?
When they reach their conclusion they remove the question mark. They do something else as well. Whilst noting the regressive nature of the tax in their discussion and that this problem may be eased to exempting a wide range of items from the charge to ease the burden on the poor they conclude that any successful VAT/GST (as they define it) must have the least number of exemptions possible.
The conclusion is clear. PWC want to tax the poor, and remove the burden from capital. There's no surprise there, but what is clear is just how profoundly political these reports are and just what a threat PWC and firms of their ilk pose to the poor of the world.
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“PWC appears to let them all wash over it. One despairs of their intellectual capacity.”
I think that this is perhaps a little too strong Richard.
PWC (or at least its constituent parts) did employ one roger rabbit for a substantial period of time. They can’t be too stupid.
I to have read the PwC/World Bank report.
Unfortunatly, small Island ecomonies like Jersey, Guernsey and the Isle of man have let the big 4 write and dominate economic policy over the last 15 or so years.
These islands have, or will have zero percent corporate tax, 20% or less PIT, and in the case of Jersey GST without any exemptions.
The socio-economic divide is getting bigger, the poor are getting poorer, and the anomic and dystopian consequences are already taking hold.
Isnt the answer in the hands of politicans?
How many people have been made poor by the actions of their government diverting taxes and aid to line their own pockets or pursue wars.
Surely globalisation and tax is no different? Taxes will only work if there is a common will amongst governments and politicans to impose tax “equally”. Otherwise we are always left with the governments (not just Jersey) that will always look to compete in tax rates and incentives? The OECD looked at harmful tax measure and what happened? The usual suspects were warned but the big players were not affected.
Roger Rabbit has a point, Richard. Was that you telling Dennis Howlett on Monday that “making it too personal is the bit we’d best avoid. It actually spoils the debate”?
Andrew
Is this personal? The authors can take it that way if they wish. But what I am saying is that this a poor piece of political diatribe designed to promote the neo-liberal cause of enhancing the well being of the rich at the expense of the poor, not published by some metaphysical entity but by a large firm of accountants who portray themselves as being the purveyors of objective truth when they are in fact the agents of those who seek to oppress the majority of the world’s population.
That’s not a personal atack. That’s a statement of my objective opinion. Which is quite different.
Richard
PS Most of the Big 6 have read this article – I note none have chosen to comment
Politicians in the developed liberal democratic world are nothing more than the lackies of corporate business, who have the power, knowledge and money to promote and influance policy to their advantage.
I have motto that says that “most people do not do anything for nothing”
What people do not understand about Attac and the Tax Justice Network is that we work for nothing, and are prepared to put our futures on the line for the benefit of those who are less fortunate than ourselves.
We do this because we understand how the dominant discursive of neo-liberal nation-states work.
I have been a political rebel all my life (50 years).
I met Richard Murphy, John Christensen, Prem Sikka and Jacques Harel three years ago, and can say that they are four of the most honest, un-selfish, hard-working people I have ever met in my life, who have given up opportunities of high salaries to fight for the poor of this unjust world.
Richard
Just to be clear, I was merely following up Roger’s response to your comment that “PwC appears to let them all wash over it. One despairs of their intellectual capacity.” If I had pointed out (as Peter Cussons did) that the world’s largest economies do not necessarily have the most voluminous tax law, and you responded by suggesting that I was a few slices short of a loaf, I would think you were being rude. Peter Cussons actually makes some important points about the impact of voluminous and complex legislation (whether his conclusions are wholly correct is another matter).
I am not defending the World Bank / PwC report and I do have some concerns about it. Your view that it makes PwC “a threat to the world’s poor” seems far-fetched, but the report’s assertion — not mentioned in the executive summary — that a “perfect” VAT can be a “win-win taxation model” is controversial. I see, incidentally, that there is only a passing reference to tax havens and nothing at all about their impact.
The foreword indicates that the report’s purpose is to share “… the results of a survey which has been conducted as part of the World Bank Doing Business report … to look at and compare tax regimes around the world.” It adds: “The results focus on the need for governments to ensure the effectiveness of the tax systems they implement, and for companies to appreciate the benefits of making tax reporting more transparent.”
However, it is the report’s impact, and in particular what law makers do with it, that matters. That is worthy of investigation.
Andrew
Chris:
I think a lot of people agree with your views on politicans. The contradiction I find with this network is that it advocates a moral path of paying as much tax as possible for these same people to waste on our behalves.
No one minds paying taxes if they something valuable to society is being created.
David,
Had you thought that if EVERYONE paid their codified tax liabilities we may actually be paying less direct and indirect taxes?
I also believe that central and local government should be transparant and accountable to the public for their income and expenditure.
We also need to remember that the original concept of modern taxation (since the age of enlightenment) was for the benefit of the rich not the poor.
Please see a lengthy comment on this at http://www.taxresearch.org.uk/Blog/2006/11/16/developing-the-theme-pwc-and-the-wrolds-poor/
[…] I have had the chance to discuss Andrew Goodall’s recent comments on my blog on PWC’s World Bank report with him. I see the point he makes about the personal nature of the suggestions I made in the original blog, but do not recant. The reason is simple. PWC actually use the phrase ‘connected thinking’ as a trade mark. When you fail to evidence that claim I think I can fairly point it out. The claim is based on pride. We all know what follows from that. […]
[…] As readers of this blog will be aware, PricewaterhouseCoopers have recently produced what is claimed to be a report for the World Bank. It is, of course, nothing of the sort. It’s actually PWC promoting their political agenda on behalf of themselves and their clients. […]