Tax havens / secrecy jurisdictions* deliberately, knowingly and successfully redistribute wealth from the poorest in society to the richest. They do this in many ways.
The facility they offer to those who want to avoid and evade their tax liabilities is only available to those who can afford the services of the offshore financial community who work within them — and they do not come cheap. This ensures that it is only the wealthiest people and the largest companies, in turn owned by those wealthiest people, who can have access to them — especially if they wish to use these places with any degree of legitimacy. The consequence is simple: the richest people and largest companies often pay a lower proportion of their income in tax than the poorest in society.
The evidence is clear. In the TUC’s the Missing Billions published in 2008 based on 2008 data it was reported that the largest companies in the UK paid tax in the UK at an average rate of about 22% — with the rate having fallen by 0.5% a year over the previous seven years. That means by now the average rate would be about 21% except for the fact that the headline rate of tax has fallen by 2% as well. Large companies now probably pay tax at an average rate of 19%.
Small companies now pay tax at 21%. They will soon be taxed at 22% in the UK. Their effective rates are higher in almost all cases. The use of tax havens has unambiguously shifted the burden of corporate tax onto small companies.
The same is true of individuals where in the UK the lowest decile have a much higher effective tax rate than the top decile — and many in the top 1% of ‘income’ earners pay little or no tax.
But that is just the domestic effect. Internationally it is worse. Tax havens facilitate the flow of $800 billion of illicit funds a a year from developing countries to the developed world.
Transfer mispricing that they facilitate costs developing countries $160 billion a year.
Tax evasion they facilitate denies governments at least $250 billion a year in tax revenues from high net worth individuals.
You can argue about the numbers. They are always massively bigger than the total aid budget of $100 billion — and of course they massively undermine the effectiveness of that by providing the services that ensures that corruption can occur.
Systemically tax havens / secrecy jurisdictions are designed to achieve this goal. And they do achieve it.
No wonder more than a billion people — a sixth of the world’s population live in poverty.
And directly as a result of what tax havens do 1,000 children die every day.
That’s what tax havens do.
* There is no agreed definition of a tax haven. Secrecy jurisdictions are ion the other hand precisely defined. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“And directly as a result of what tax havens do 1,000 children die every day.” Another sweeping general statement to support your extremist views…to be expected I guess.
I too can apply your methods. My headline would be something along the lines of “Firm connected to Richard Murphy aids systematic offshore tax evasion”. I’d then go on to say you used to work for KPMG and that they advised Aspen Insurance in Bermuda.
John
As I have said before, your powers of argument are really rather limited.
Christian Aid based their analysis of children dying on high-level econometrics supervised by an ex-Oxford academic. The link was statistically demonstrated
Your logic is based on the fact that I once worked for KPMG. I left in 1983, partly because I could not stand the philosophy of the place. Now what is the connection?
I reiterate a point I made earlier: if you cannot provide reasoned argument I will not waste readers time your comment.
Richard
[…] What tax havens do — 2 — they redistribute wealth from the poor to the rich […]
Hey John! You don’t really have anything to say do you?
Why don’t you state the following facts about yourself:
1. Level of education, including the business school you went to.
2. Your salary, including any bonuses you take from your employer.
3. How much money you have invested in offshore instruments.
You do that, we’ll listen. Until then, we’ll treat you like the idiot you clearly are.
Richard – this guy is one of the free market cheerleaders who have been tasked with trawling through blogs and making ingenuous and often downright incorrect statements. He’s the smokescreen. A fresh wind blows smoke away.
How do you feel about the Guardian Media Group using a Cayman Islands vehicle to avoid capital gains tax on its disposals? I seem to recall you writing something giving them a clean bill of health.
Secondly, the thing about the children dying is of course a highly emotive argument. The problem is that its nonsense. Christian aid say the money is available is there if only the people who owe it would pay up. But if you structure a transaction legally to reduce tax then you don’t owe that tax. So it’s specious to say that the money is there or is owed. If I had ham I could make ham and eggs. If I had eggs.
The thing about tax is that governments don’t spend tax on helping dying children. They spend it on allowances for MPs, nuclear missiles, they waste it on foolish and hubristic projects like the DNA database, ID cards, the olympics etc.
Sean
The Guardian’s low tax rate had nothing to do with Cayman – but to do with a relief they could not avoid having
Their use of Cayman was a mistake on their part. I do not condone it.
Third – Christian Aid are specific – they allege evasion
Your last point is beneath comment
Richard
The waste and incompetence of governments has to be seen to be believed. Add in all the pointless and vanity projects and it would be in the 100s of millions in the UK alone , and trillions worldwide. Imagine all the poor babies that could be saved with that!
Thus governments are killing 10,000 children every day; not to mention the millions they kill in deliberate wars.
I’m afraid that waste and incompetence along with all the 7 deadly sins are simply part of the world as it is. These things exist in the private sector as well as the state sector. There are things that can be changed in the world. There are other things that can only be chiselled away at slowly. If you have some real proposals fror doing anything to improve the condition of the poorest in the world, Mukesh, let’s hear them, please. If your comment is just an excuse for doing nothing then go away!
[…] 2. Redistribute income from the poorest to the richest in the world […]
[…] 2. Redistribute income from the poorest to the richest in the world […]