Op-Ed Columnist – Till Debt Does Its Part – NYTimes.com.
Krugman says:
The only real reason for concern [about debt] is political. The United States can deal with its debts if politicians of both parties are, in the end, willing to show at least a bit of maturity. Need I say more?
He’s right.
The right are wrong.
Steve Rodan, the Speaker of the Tynwald, the Isle of Man’s parliament has reacted angrily to Lord Wallace’s suggestion that the Isle of Man be brought under UK control. In a letter he said:
‘The Isle of Man does not cost the UK a penny. We pay our own way in the world – every pound spent here is raised here; no block grants, subventions, special funding from the UK, the EU or any one else.
‘By statute our Finance Minister is obliged to balance for a budget surplus – this is done consistently; with no external borrowing, and rates of taxation which actually encourage private enterprise and wealth creation, yet this little nation can still point to first-class publicly financed services in health, education and social security.
There’s just one problem with that.
The UK massively subsidises the Isle of Man to the tune of at least £230 million a year and it in total costs the UK not less than £1.5 billion a year.
I have shown this to be the case.
In other words, Steve Rodan is simply not telling the truth.
It’s not an endearing trait, but it puts him in the company of people like Tescos when it comes to inability to use statistics with any degree of accuracy.
The OECD has issued an updated grey and white list of compliant and non-compliant states:
The ‚Äòinternational standard’ is, of course, just twelve of the almost meaningless Tax Information Exchange Agreements, but even so many places are a long way from achieving that.
I’d also love to know why there are just 82 jurisdictions on this list when there are 223 in the world. Don’t the others count? Shouldn’t international mean ‚Äòall’?
I wrote yesterday about an Op-ed in the Wall Street Journal that supported Swiss bank secrecy and encouraged tax competition.
In my critique I said:
Blatantly this is the Wall Street Journal promoting the merits of tax evasion and the role of tax havens in undermining the democratic rule of law.
A Channel Islands critic has persisted in arguing I am wrong. He has said:
Where does he say people should break the law?
Of course, it is typical of those in the financial services industry in such places to be unable to identify tax evasion, but let me offer an explanation from a strong supporter of tax competition, Richard Teather, a UK chartered accountant and lecturer at Bournemouth University, who when speaking of the OECD anti-tax haven initiative says (page 81):
This is attacking a classic use of a tax haven, as explained in the previous chapter, in which a person resident in (or otherwise subject to the taxation system of) a highly taxed country places his capital in a tax haven where it can earn untaxed income. While there are many cases where the home country does not tax foreign source income (such as the UK’s non-domicile exemption discussed above), most Western countries have a worldwide taxation system that seeks to tax the worldwide income of its residents (or all of its citizens in the case of the USA). This tax haven income therefore does not cease (legally) to become liable to tax merely by being earned offshore: it is still liable to tax and the investor has a duty to report it to his home tax authority. In practice, however, if the investor does not report his income, then the home country can have great difficulties in discovering and taxing it, particularly if the haven country has strong banking secrecy laws.
While I am not seeking to condone dishonesty or criminal activity, from an economic perspective this is merely another
example of tax competition: indeed, it is often necessary behaviour in order to take advantage of tax havens. Without the willingness of some to engage in this sort of activity, tax competition would be much less effective and therefore reduce the benefits that flow from it for the rest of us.
Note: criminality is often necessary behaviour in order to take advantage of tax havens. and he then argues the benefits flow to all of us.
He is referring to exactly what the WSJ op-ed was applauding, people hiding their money in tax havens /secrecy jurisdictions out of sight of the US IRS, and he recognises that for the benefits that the WSJ says flows from this criminal behaviour is required.
What more evidence do you need?
These people are seeking to undermine the rule of law and all that goes with it. To put it bluntly, they are attacking the very fabric of our society because they don’t believe there is such a thing. The criminal legacy of Thatcher lives on.
Tory controlled borough of Barnet adopts budget airline model | Politics | The Guardian .
A leading Conservative council is using the business model of budget airlines, Ryanair and easyJet, to inspire a radical reform of public service provision which is being seen as a blueprint for Tory government.
Actually, it’s no such thing. It’s about cuts:
In his day job [council leader Mike] Freer, 49, is a consultant to the banking sector and he has worked with PricewaterhouseCoopers, the accountants, to draft plans to save up to £16m a year from the council’s costs.
How? As the Guardian notes:
One of Freer’s most controversial reforms so far has been to cut live-in wardens from sheltered housing.
The council says this level of support is too costly and it is planning to replace live-in wardens with “floating” wardens across the borough, possibly run by the private sector.
But as one resident noted:
“It is essential to see somebody and know somebody cares about you,” he said. “I have suffered a lot of depression over the last few years and Janet knows if I am down or not. She comes and chats, sits in your flat and speaks to you like a mother or a sister. When she is away, the place is like a graveyard.”
This does not go down well with local Tories apparently: it is the state replacing the family and that will never do.
Well maybe theire rleatives can afford to pay for this service, but I think it appropriate for all elderly people – including those with limited or no family.
As the Guardian editorial notes:
Whether or not the Tory devolutionist rhetoric goes the forgotten way of Gordon Brown’s one-time “new localism”, services administered locally are in line for a battering. Competing national politicians have extended protection to centralised aspects of expenditure, such as health and international aid, which only leaves town halls more exposed. Council tax has risen steeply over a dozen years, making it hard to increase it much further. As in the 1980s, there will be new “local discretion” in interpreting social obligations. As in the 1980s, there will also be much talk of choice and of charity. And as in the 1980s, it will soon ring hollow if the upshot is that there is no one around to help an old lady in need.
My prediction is simple: expect a great many old ladies in need who will face massive hardship as a result of the policies of ex-PWC bank consultants.
ABC Radio Australia News:Stories:Pacific tax havens at risk: report.
The international campaign against tax havens has driven three Pacific Island nations’ off-shore finance centres out of business, according to a new report.
The report, by the Pacific Legal Network, warns of serious implications for the remaining centres in Samoa, Vanuatu and the Cook Islands.
Six Pacific nations are on the “Tax Haven Grey List” run by the Organisation for Economic Co-operation and Development (OECD).
The Pacific Legal Network says conditions imposed by the OECD have forced Niue, Nauru and the Marshall Islands to close down their off-shore finance centres.
Kim Ralston, the Pacific Legal Network’s tax haven expert, says Pacific countries must get off the OECD Grey List if they want to keep their finance centres.
“Pacific Island countries really need to undertake a cost-benefit analysis and to determine whether it is worth retaining their offshore financial centres in light of the increased regulation costs,” she said.
She says the countries must also consider whether they are worth keeping “in light of the stigma attached to them and how that might actually affect their economy.”
Isn’t the answer obvious?
Just in case it isn’t Tax Justice Network will shortly be pubishing its comprehensive review of sixty secrecy jurisdictions, including those mentioned.
Nevada’s senseless war on California — latimes.com.
In case you haven’t heard, California and Nevada are at war. Not an old-fashioned war with bullets and tanks, but a newfangled media battle over which one is the last best hope for entrepreneurs and businesses in these troubled times.
Nevada started it. The Nevada Development Authority launched a campaign that will spend a million dollars over a year to air a series of ads enticing California businesses to move to Las Vegas. The spots boast about Nevada’s low taxes and workers’ comp fees and feature a chimpanzee and a really bad actress portraying a television newswoman who turns into a pig wearing bright red lipstick.
So what?
But the real significance of the spat is that it furthers a dangerous and phony economic myth — that hordes of nomadic businesses are roaming the country, plopping down for a year or two in a tax haven and then packing up and moving on the minute a neighboring state bats an alluring low-tax eye.
The fact is the come-hither look is useless: Relatively few businesses, once they’re formed, pick up and move across state lines. Over the last several years, the nonpartisan Public Policy Institute of California has done exhaustive research trying to measure precisely how many jobs California has lost because of such moves, while also measuring the offsetting number we have gained from businesses moving into the state. The conclusion? The impact is tiny. The researchers found that the average annual job loss was only .06% of California’s total employment. Just to be clear, that’s not 6%; it’s six one-hundredths of 1%.
Why?
In other words, most businesses live and die where they are born, thriving or failing on the merit of their product, the wisdom or imprudence of their managers’ decisions and the luck of the marketplace.
When that truth is ignored, often because of the kind of one-upmanship foolishness embodied in both the Nevada and California ads, states can participate in a tax-cutting competition that does them more harm than good. Taxes, after all, fund things that businesses need.
Want to improve the business climate? Invest in good schools to produce better-educated workers. Build infrastructure projects on which all businesses depend, like transportation and water systems. Put more cops on the streets and pay for proven social programs so that workers have attractive neighborhoods in which to raise their families. Low taxes are good, but they’re not a panacea.
Precisely.
And those who think tax competition is a) effective or b) beneficial had better read and absorb the rest of the article becasue it really puts the nail in their coffin.
Lord Turner made appropriate comments about the City on Wednesday, blogged here.
And of course the City reacted:
But Lord Turner’s backers were drowned out by the City reaction. The British Bankers’ Association was among the most trenchant in its criticism. “If we introduce the wrong kind of regulation or the wrong kind of taxes we could so easily lose that position by driving business abroad … On so many occasions in the past the country has lost chunks of industry through making the wrong decisions. Let’s not do that again.”
The Investment Management Association and the Association of British Insurers were critical of the likely impact on investors. “It is just illogical to want to shrink one of your most important industries,” said one London banker. “If you want to turn London into a Marxist society, then great.”
How amazingly predictable: no argument, no analysis, just ‚Äòwe’ll all go’ and ‚Äòit’s all a left wing plot’ (from Alastair Turner???)
Except as Nils Pratley argues in the Guardian notes this is not the whole story:
It would be wrong to assume that everybody in the City of London thinks Lord Turner has lost his marbles. Many, undoubtedly, agree with the mayor of London, Boris Johnson, that introducing taxes on certain financial transactions is "crackers". But, dig a little deeper and you will find people who think the chairman of the Financial Services Authority is on to something.
Turner did not say that modern investment banking is a racket, but others in the City do. The idea is not heresy. You will find the view expressed frequently (although usually in private) by senior fund managers, folk who used to be considered the core of the City club.
Many of these people are tired of seeing companies in which they invest pay exorbitant advisory and underwriting fees to investment banks. They think many derivative products have been invented solely as means to extract fees from unsuspecting clients. They conclude that the primary purpose of investment banks has become the advancement of the financial interests of the people who work in them.
And as Pratley argues:
These waters aren’t as dangerous as the government seems to think. Of course it is true that the City doesn’t want to lose its competitiveness, but there is acceptance in many quarters that change is necessary. Maybe the Treasury listened too hard to all those investment bankers it hired during the banking crisis. The truth is there is more to the City than one tribe – and there’s a broader range of views out there.
Too true.
As I have argued for some time.
The pension plunderers | Prem Sikka | Comment is free | guardian.co.uk .
Prem Sikka writes:
Governments can and should provide decent state pension through progressive taxation policies, but many major companies resent paying taxes. Almost every day, companies hold elected governments to ransom by threatening to relocate elsewhere unless their demands are met. Despite mantras of corporate social responsibility companies appease stockmarkets and prioritise return to shareholders by squeezing employees and condemning millions to a life of retirement hardship. Governments simply twiddle their thumbs.
Even in the so-called golden age of pensions, the UK pensioners’ lot is not a happy one. The erosion of final salary pension schemes is set to create a new era of hardship. The pensions crisis cannot be addressed without improvements to the workers’ share of the GDP and shackling of the finance industry and the tax avoidance industry.
As ever, he’s hit the nail on the head.
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