These are my links for August 31st:
Some of us are up to the task.
So Barack Obama can promise tax cuts by “the closure of corporate tax loopholes and tax havens.”
He’s right: he can.
So why can’t anyone politician in the UK promise the same thing?
I expect we’ve all heard those news reports of people who have been stranded far from home with flights booked for their return only to find that their airline went bust, and thought “How does that feel?”
Well now I know. I picked up my newspaper early on Friday morning in Montreal to find it headline news that Zoom, the airline on which I was booked to return home that night had ceased operation. A quick check of the web site confirmed the truth.
Everything has a silver lining. My hosts at the University of Montreal had in fact booked me three flights to get me the best return deal: a return out with Air Canada on which I had not planned to use the return portion next Wednesday, and a single back with Zoom. This was, absurdly, far cheaper than an Air Canada return on Friday.
But having the ticket made it an easy job to switch to a return flight via Halifax, Nova Scotia for a cost of $300, and by the time the credit card refunds the Zoom ticket a net refund for the University of more than $300.
So right now I’m sitting in Halifax, a rare airport that offers free wi-fi. And I’ll get home an hour earlier than originally planned. It is a perverse outcome, if gained at losing attendance at a couple of presentations at what was a superb seminar.
So three more companies are planning to leave the UK.
Let’s as usual set this in context: Charter has not paid UK tax and has no intention of doing so. They are a typical ‘free rifer’ – wanting to get all the benefits of the UK but wishing to pay nothing for them.
And Henderson and Regus are making clear this is going to make nmo difference to their UK operations.
I have little time to comment – I am lecturing in Canad today – but the issues here are very clear:
a) This will almost certainly have little impact on UK tax revenue
b) This will have little impact if any on UK jobs
c) This has little impact on UK markets
So what is the impact? Simply this: capital is seeking to float free from responsibility. And the big question is the hardest and yet the simplest to answer. Do we want that? Can we afford a global world where a small elite command resources and yet feel no obligation to support others?
The answer has to be an unambiguous no. This is a definition of unethical conduct. It is a clear indicator of a breakdown in society.
International effort needs to be taken to stop this abuse, and to stop the abuse of countries that promote it.
That action will happen.
And we will also get a new tax system as well: unitary taxation with formula apportionment is inevitable if this keeps happening.
Every now and then we think a secrecy jurisdiction (tax haven) has gone out of business. Nauru was one we believed had fallen into its own black hole of secrecy.
But sometimes they re-emerge, as this web site proves.
The benefit for a place like Nauru of pursuing activity like his is marginal – they might make only a few tens of thousand of dollars a year and yet suffer massive potential regulatory costs for doing so, but still the abuse goes on, imposing a cost on everyone else in society.
It makes no sense to allow this. Buying off these smaller jurisdictions is an entirely realistic possibility, and needs to be done as a matter of priority.
The arguments for a windfall tax on energy companies are complex. I am in favour of such a tax at this time. In forming that opinion I have, I admit, ignored much of the complexity and have fallen back on instinct. I see no harm in that: the reality is that almost all management decisions are based on pure gut instinct, data is only used to support that feeling. The instinct is, however, supported by logic.
First, let’s not suppose for a moment that the increased energy costs are not paid to someone, somewhere. We often hear about the incidence argument of corporation tax, which says that all tax burdens are eventually suffered by people. In extremis, I do of course agree (although I also argue that as the tax is used to change the people who pay the burden it remains important that it is charged). The incidence argument also applies completely and utterly to the cost of energy. None of the payment we make is used to fill the holes in the ground from which oil is extracted. All of it is used to pay someone. This means that right now someone, somewhere is obtaining a massive benefit which they had not anticipated from the increased price of energy. It is in that circumstance completely untrue to argue that business is completely dependent upon there being a predictable and certain tax system or it will not invest in additional energy facilities. That industry did not anticipate the price increases they are enjoying. For that reason I entirely reject their argument that an additional tax will impose a disincentive or destroy their capacity to plan for the future by creating conditions of uncertainty. They have not refused the upside of the price increase because it was not predicted; they cannot refuse the additional tax for that reason either. And let’s stress this point: even after the windfall tax they and their owners will be better off than they were before the unexpected price increase. Energy companies will remain the big net winners of what is happening: they just won’t win by as much as they would like.
Second, to claim as downstream operators that their costs have increased upstream is a perfectly acceptable argument, if it is true. But it is wholly inappropriate that profits generated from end consumers on sales of energy in the UK are transferred upstream and outside the UK tax net simply to avoid liability in this country. I suspect that this is happening.
Third, I would buy the argument that companies needed to retain profit and not be taxed upon it if there was no evidence that the excess profit was being paid as a dividend to shareholders. Centrica has however entirely disproved that theory. It increased its profit and substantially increased its dividend, at a rate well above inflation whilst raising prices, and therefore, to follow the theory of incidence, this increased energy price is being used to be reallocate income from those least able to bear the additional energy cost in our society to those most able to bear that energy cost, being the wealthiest segment in society.
Lastly, and noting the argument that the cash needs to be retained by the energy companies for investment purposes, I would accept this point if I believed they were going to invest in alternatives to carbon energy. Carbon energy is, as we all know, threatening the very existence of life on Earth. I have not however seen that evidence. All I hear about is the need for additional carbon energy based extraction, and for the sake of my children that scares me rigid. Long before they are old they will come to curse the generation who used the increase in energy prices to increase the rate of global warming. In other words, and to be unsubtle about it, I do not think energy companies can be trusted with all this money.
For all these reasons I think the windfall tax now is essential for the ordinary people of this country, is essential to correct market imperfection, is essential to rebalance the government’s books, is essential to send an important lesson to the energy companies that it is not within their right to use the resources which they had been allowed to use without consideration of their social consequences, and that they have a duty to minimise carbon emissions both now and in the future, which must be reflected in their investment policies.
These are my links for August 27th:
But at least the IMF are noticing it is time to change that. Read the whole thing. It's important.
As some people are aware, one of my major activities at present is co-directing a research project for the Tax Justice Network which is being funded by the Ford Foundation. This project is called Mapping the Faultlines and the aim is to identify where and how illicit fund flows take place.
One of the initial significant problems that we have faced is in defining the language that is used to describe what is colloquially called the offshore world, even though no one knows what ‘offshore’ means.
As a result of that effort I tried to offer precise definitions of what I thought the terms tax haven and offshore financial centre might mean in the Tax Justice Network publication, Creating Turmoil, sent to the Treasury Select Committee in July this year. In that report I said:
Tax havens are places that create legislation designed to assist persons – real or legal – to avoid the regulatory obligations imposed upon them in the place where they undertake the substance of their economic transactions.
Offshore financial centres are not the same as tax havens. OFCs are the commercial communities hosted by tax havens which exploit the structures that can be created using the tax haven’s legislation for the benefit of those resident elsewhere.
Given that no one seems able to offer more precise definitions than this, and given that these definitions are distinct and have value in use I remain of the opinion that they are a benefit, but it is apparent from subsequent discussion that almost no one is willing to give up their own view of what a tax haven or OFC is. In addition, the IMF has also, since I wrote Creating Turmoil, decided to drop the term offshore because of the ambiguity inherent in the term.
That does not mean the problem that these terms seek to describe has gone away. Far from it: we know that if anything it is becoming more significant, not least because the efforts to close it down are becoming more proactive.
In that case I have begun to develop a new language for the ‘offshore’ world. And I’m off to Montr?©al today to lecture on the subject, and will be repeating the performance at a conference in London in two weeks time. The paper I am presenting is here, and the slides here.
The point is not just about language though. It’s about appreciating that the existing language that has been used has severely restricted the way in which regulation has taken place. That regulation has focused upon the activities that take place within a secrecy jurisdiction (our new preferred term for taxation, and which is also used by the likes of Carl Levin in the USA). The important point about it is that secrecy jurisdictions deliberately create law for use outside their domain and the secrecy providers (that is, the accountants, lawyers and bankers who work within secrecy jurisdictions) use that law to provide secret structures for the use of people resident elsewhere which become wholly unaccountable as a result, and for which they deny any responsibility. These structures do, therefore, operate in what we call the secrecy space, which some might in the past have called offshore, although inappropriately.
This secrecy space is not in the secrecy jurisdiction. In fact, that is the last place to look for it because it is very definitely, and deliberately not intended to be there. But the secrecy jurisdiction also, and deliberately, does not ask where the structures that it creates actually are. As far as they’re concerned they are simply “elsewhere”. The secrecy space is the ” elsewhere” they ignore.
This means that the focus of regulation with in the secrecy world (the combined term for secrecy jurisdictions, secrecy providers and the secrecy space) has to change. It is entirely true that the secrecy jurisdictions are now reasonably well regulated. This however is completely irrelevant if we are seeking to tackle money-laundering, terrorist financing, tax evasion and financial instability. Those activities are all undertaken ‘elsewhere’ but no one knows where, except the secrecy providers, and as such it is the secrecy providers and not secrecy jurisdiction who now have to be the focus of attention (without in any way reducing the pressure on the jurisdictions themselves).
Read the paper I think you’ll get the argument. It is one I will be returning to the time and again. I will also put up a glossary of this language is since I have time available.
The Jersey Evening Post has reported that Guernsey’s Housing Minister, Dave Jones has condemned Jersey’s fledgling executive government system as a failure, saying:
Jersey went for a form of executive government that clearly is not working. Nor does it have a general election in the true sense of the word. It has a series of elections for officials, Deputies and Senators.
Guernsey has a system which gives the people government from the bottom up, not the top down, and the real control over policy remains firmly on the floor of the assembly – not, as in Jersey, behind closed doors by a handful of ministers.
To be blunt, the Jersey system is little more than an elected dictatorship.
It is very hard to argue with that.
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