I have to say I am simply confused: this blog certainly argues tax havens do change incidence. Can you explain your argument in more detail?

I admit, what this blog also argues is that incidence is in many cases unproven, and therefore best accepted at face value.

Is that your concern? It would seem strange if it was: it would seem to agree with your contention.

Regards

Richard

Sir, this is backwards; you seem to have misunderstood the argument. It is exactly because there are tax havens that Professor Mankiw’s argument has credence. The existence of tax havens, together with the ease of companies moving offshore or outsourcing labor, is exactly why tax incidence falls on labour. The power does indeed rest with the corporations; that is the point. Attempt to raise corporate taxes and they will threaten to move operations or profits to other countries unless labour accepts the tax burden. Corporations can much more easily threaten to move than workers can threaten to move to another company; while it is possible, it involves more of a disruption to the life of the worker than to the corporation.

You assume that the only reason for taxation is the raising of revenue. That is entirely incorrect. It is a major reason but there are four others as well. These are:

1) redistribution of wealth and income in society. Sales taxes do this,but in a regressive fashion and are therefore wholly in adequate for the task
2) reorganisation of the economy i.e. fiscal policy. Having just one club in the bag is not a good basis for achieving this objective. As such only having a sales tax is extremely unwise
3) repricing goods and services within the economy for social purposes. The market does get very many things very wrong because it failed to take externalities into account. only one sales tax cannot do this.
4) representation of the democratic contract between an electorate and their government. A sales tax is very poor at doing this.

In addition, of course, and you entirely ignore the fact that there are economic returns to capital and land within the economy that you are not recognising.

With respect, your argument is fundamentally flawed because it shows a complete lack of awareness of the reason for taxation, the nature of the political economy, and the necessity for a broader taxation base to mitigate tax avoidance and evasion. Many so-called respected economists share your misconception that this is a simple measure of their own naivete, and nothing else. What works on the blackboard does not work in reality. You have made the fundamental error of thinking that it does.

Richard

I’m sorry: I’m not convinced. You assume an outcome and have created a theory

The truth is the real world is complex, not simple, and the truth is that corporations who suffer the incidence and where.

As a result no one can agree who does suffer the incidence of CT, be it shareholders, labour or consumers.

In the absence of any agreement I continue to deal with the abusive behavior I observe in practice suggests that corporations think shareholders suffer the tax and I’m willing to work with that and its consequences. There is no evidene of ned to work on any other basis

Richard

Please see the following link for the proof of how inevitably all taxes fall on the consumer and income taxes simply mislead voters as to their real income and who really foots bill of government.

http://ecforster.netfirms.com/Tax/Doc1.html

The consumer is always the eventual and ultimate taxpayer, and there are simpler, more transparent, methods of taxation to bring this about.

The immediate implications of your questions are valid but entirely irrelevant to the concept of tax incidence.

Of course incorporation allows people to act in ways more effectively than they otherwise would be able to. That is indeed the reason why people do join together to form companies. But the fact they are a good thing and enrich society is not sufficienct why they should be taxed. Indeed, taxation generally has the effect of discouraging things so perhaps we should be less keen to slap on taxes whenever we see something that is good.

Companies do not exist as real people. Perhaps their allure is overpowering to an accountant, but in the real world companies are only legal entities. They are concepts (like, indeed, onwership) which are legally enforable and have legal basis.

A company does not enjoy the money it creates, nor does it suffer if it makes losses. Companies are equivalent to slaves, except for the fact they lack the basic human rights even slaves may have had.

The fact that profits are good and losses are bad are not so because of their effect on the legal person of the company. They are so because of the effect they have on the shareholders, and also to the customers and employees.

I’m not quite sure how to explain this any more simply. Companies matter only to the extent (and nothing more) that they affect natural persons. Every penny in taxation they pay is a penny that their shareholders, employees, customers or suppliers would (eventually) have been paid otherwise. This is why, when assessing a burden of taxation, it is much more useful to consider who actually loses out from that taxation rather than simply how the money is transferred.

What you say is terribly plausible.

And of course, quite wrong.

Let’s just imagine there is no BP, Vodafone or UBS shall we?

Do you think they’ll go away if we all imagine that?

Do you really think they’re a collective o the minds of the members?

Do you really think they have no greater impact than their members acting in unison could?

If so, why have them?

The answer is simple: because they are agenst with economic impact in their own right. One of those impacts is the right to impose cost on society. The payment of tax is the duty payable in exchange.

Your argument only exists in an economics text book. I live in the real world. It’s very different out here. You should try it.

Richard