2010 January » Tax Research UK

Time for the OECD to deliver on the G20 promise

Country-by-country Comments Off

Jan 272010

Crackdown on tax evasion in attempt to help poorer countries | Business | The Guardian .

Large companies should reveal how much of their profits they pay in tax to developing nations to show they comply with local corporation tax regimes, Stephen Timms, the Treasury minister, will say tomorrow as part of a three-pronged effort to boost tax revenues in poor countries.

Developing nations must also be given access to secret tax agreements between western governments and other poor nations together with expensive technical support to help them rein in tax-dodging companies, he will tell the first meeting of a high-level tax committee at the Organisation for Economic Co-operation and Development, the Paris-based club for the world’s 16 richest nations.

Timms wants the OECD to adopt the measures as part of a wider crackdown on tax avoidance by corporations. “The agenda reflects the concern that developing countries also need to benefit from the new co-operative tax environment the OECD is working towards,” he said.

Unsurprisingly I support this. As the same article acknowledges, my paper on country-by-country reporting (a concept I created) for the Task Force on Financial Integrity and Economic Development has influenced the Treasury’s thinking. For that reason I’ll be at the OECD meeting tomorrow.

As we now know – and as Lord Turner made very clear last week – the International Accounting Standards Board’s claim that accounts are just for providers of capital is a nonsense, and always has been. Regulators need data too. And so do civil society.

Country-by-country reporting provides information for investors, regulators, and civil society. The time for it is now. The OECD could demand it. I sincerely hope they will.

Unequal Britain is unsustainable Britain

Economics 12 Responses »

Jan 272010

Unequal Britain: richest 10% are now 100 times better off than the poorest | Society | guardian.co.uk .

A detailed and startling analysis of how unequal Britain has become offers a snapshot of an increasingly divided nation where the richest 10% of the population are more than 100 times as wealthy as the poorest 10% of society.

Let’s be blunt: that’s unsustainable. This is a recipe for social breakdown.

I don’t want that.

It’s why I demand change.

Part of that change will reduce the monetary wealth of the richest. It has to.

Wolf on Volcker

Banking Comments Off

Jan 272010

FT.com / Columnists / Martin Wolf – Volcker’s axe is not enough to cut banks to size.

Martin Wolf thinks Obama and Volcker have taken a step in the right direction. He says:

I admire Mr Volcker and strongly support his desire to develop a financial sector that supports the wider economy, rather than makes vast profits out of activities so likely to destabilise it. Equally, I agree that part of the solution is indeed structural.

So things are going in the right direction. But he adds

It is, alas, not the case that the US government can credibly promise to make banks safer, while leaving this vast forest of shadow institutions to the market. That would only be possible if it could separate banks from the shadow system and did not care what happened to the latter. So if governments are indeed to pursue structural reform, they would need to be substantially more radical.

Odd how, from whatever direction things are viewed our politicians need more courage, more conviction to beat bankers, more willingness to stand up for people against the machinations of the right in all its form – especially in the form of bank management.

Obama needs to perform a U-turn

USA Comments Off

Jan 272010

FT.com / Comment / Opinion – Obama needs to perform a U-turn.

Good commentary in the FT. I agree with its three core arguments:

1) Obama has to be true to the convictions of those on the left who drove him to power

2) He has to treat the Republicans like the small minded people they are

3) He has to rid his administration of Clinton re-treads.

People wanted a different sort of president. Not another one too frightened to act or unwilling to act.

He has to deliver that.

Drop Haiti’s debt

Development 8 Responses »

Jan 262010

Aid agencies worldwide are responding to the crisis in Haiti. It’s typical of Christian Aid that it is looking beyond the immediate crisis and addressing the underlying issues that have helped create the crisis that country faces.

As a result it is calling for full cancellation of Haiti’s debt of $890m, and for all emergency and development funds to be given not loaned. Please sign Christian Aid’s petition now.

Haiti currently owes $890m, owed mostly to the International Monetary Fund (IMF) and the Inter-America Development Bank. Christina Aid argues that this is unacceptable. And while the World Bank’s announcement on Friday that it will waive repayments for five years marks welcome progress on this issue, what Haiti needs from the Bank and the IMF is concrete commitment that all its debts will be cancelled in full.

Investors flock to Greek bond issue

Economics 13 Responses »

Jan 262010

FT.com / Capital Markets – Investors flock to Greek bond issue.

OK, the return is higher than that due on German bonds. But Greece has sold a third of its annual funding requirement with the issue four times over-bid.

Greece is in much worse state than the UK.

Shall we stop all the nonsense that the UK may face a funding crisis as a consequence?

Where is the Chinese Beveridge?

Economics 1 Response »

Jan 252010

Banking reforms only half the solution: global economic imbalance needs to be addressed | Business | guardian.co.uk .

Larry Elliott’s pessimistic today:

In theory, the solution [to global trade imbalances] is simple. China should accept a significant upward revaluation of the renminbi, making its exports significantly dearer. It should put in place a more generous social security system so that consumers have to save less for health care and education. Perhaps the new forum for global economic management – the G20 – can find a solution to the problem that stumped Keynes in 1944. If it can’t, the debtor nations will be forced with a stark choice – semi-permanent financial upheaval or protectionism, as many far-sighted City analysts now accept.

He may be right.

But isn’t it strange that well being is now dependent on the supply of social welfare for the largest nation on earth – which is something they can afford, but which they are reluctant to deliver.

Where is the Chinese Beveridge?

Lord Myners calls time on ‘greed is good’

Economics 6 Responses »

Jan 252010

Lord Myners calls time on ‘greed is good’ bank culture | Business | The Guardian .

The Guardian reports:

Lord Myners, the City minister, has called for an independent review of the investment banking industry and the “greed is good” culture that he says has permeated many areas of society.

Which is great. But I presume he knows this means abandoning just about everything that is taught in undergraduate economics as a result, which underpins the flawed logic of Anglo-Saxon capitalism as a whole – not just banking?

Let’s start with what goes:

Profit maximisation. This is a complete nonsense. Economists think it discounted future cash flow, accountants a measure of the past, and no one can measure either.
The idea of markets being efficient. This requires profit maximisation to be true. But we don’t profit maximise and those who seek to do so just abuse others by extracting monopoly rents, which is inefficient. It also requires us all to be clairvoyant, and there is some evidence we are not.
Ignoring externalities – the fact the market assumes we can abuse the planet as a ‘free gift of nature’.
The idea that wealth is created by markets. Wring, wealth is created by people – the means of ownership of the structure in which they work has little to do with the value of what they do – but efficient management has. there’s no evidence that efficient management is the exclusive preserve of the private sector – although there’s ample evidence of bad management in all sectors.

So Lord Myners, I agree – but let’s sweep away the whole destructive nature of neo-conservative economics and move on. Let’s not tinker at the edges. And let’s be clear about what we’re doing. Nothing else will do.

As I said last week:

Obama has set out an agenda for changes on Wall Street that will be the making or breaking of his Presidency, and maybe the rest of us as well.

I stand by that. This is a battle we have to win. But don’t underestimate what it means.

The Impossible Hamster

Economics, Environment 8 Responses »

Jan 252010

A young hamster doubles its weight each week between birth and puberty. But if it grew at the same rate until its first birthday, we’d be looking at a nine billion tonne hamster, which ate more than a year’s worth of world maize production every day. There are good reasons why things don’t grow indefinitely. And yet politicians are convinced that the economy needs to keep growing, no matter what the costs.

New research published by nef (the new economics foundation) argues that unless economic growth in rich countries levels off at a steady-state, we will have absolutely no chance of avoiding dangerous climate change. It’s time to realise that rich countries have matured enough and now, like a healthy hamster, we need to stop growing.

The report, Growth isn’t Possible: Why rich countries need a new economic direction, concludes that, in an economy designed to respect environmental thresholds, it may actually be easier to achieve human well-being, social equality, full employment and strong public services.

Go read. This is the reality of life.