2010 August » Tax Research UK

It’s demand, stupid

Aug 312010

From this morning’s Guardian on market reactions to the latest round of stimulus in Japan:

Central banks typically buy bonds and other assets in financial markets to generate growth and demand, but that would not be enough to ignite the global economy, investors warned. "Asset purchases will just increase liquidity, but there’s already plenty of liquidity in the banking system. The problem is demand," the fund manager said. "It is not good enough to say we’ll do everything we can, people are sceptical."

Too true they are.

And rightly so.

Without demand – and I mean deliberately managed demand aimed at specific goals such as greening the economy – another round of QE (quantitative easing) will not deliver the benefits the first rounds did.

But spend it into the economy on a Green New Deal and then see the benefits flow!

Even those in the markets are saying this now.

But Osborne sticks resolutely to the mantra that no one wants to lend to the state and state borrowing is squeezing the private sector out. He’s about as far removed from reality as it is possible to be.

And that’s why this is dogma driven – nothing else can explain it.It certainly is not rational. And yes – I do link this to right wing libertarian thinking that maintains the state must always be the wrong solution. Why else can he persist in a view that is so blatantly wrong?

This is the reality of the right wing blogosphere and think tanks

Politics 24 Responses »

Aug 312010

There’s been a powerful article on the New Yorker web site this weekend.

It documents the hundreds of millions of dollars David and Charles Koch have given in the USA to fund those who promote so many of the issues this blog opposes.

These are the people behind the Cato Institute that does so much to promote tax havens.

These are the people behind the Heritage Foundation.

These people are paying for the Tea Party movement,

What do these people think. Take this:

Many of the ideas propounded in the 1980 (Libertarian Party] campaign [they funded] presaged the Tea Party movement. Ed Clark told The Nation that libertarians were getting ready to stage “a very big tea party,” because people were “sick to death” of taxes. The Libertarian Party platform called for the abolition of the F.B.I. and the C.I.A., as well as of federal regulatory agencies, such as the Securities and Exchange Commission and the Department of Energy. The Party wanted to end Social Security, minimum-wage laws, gun control, and all personal and corporate income taxes; it proposed the legalization of prostitution, recreational drugs, and suicide. Government should be reduced to only one function: the protection of individual rights. William F. Buckley, Jr., a more traditional conservative, called the movement “Anarcho-Totalitarianism.”

And why do they fund these think tanks:

That November [in 1980], the Libertarian ticket received only one per cent of the vote. The brothers realized that their brand of politics didn’t sell at the ballot box. Charles Koch became openly scornful of conventional politics. “It tends to be a nasty, corrupting business,” he told a reporter at the time. “I’m interested in advancing libertarian ideas.” According to Doherty’s book, the Kochs came to regard elected politicians as merely “actors playing out a script.” A longtime confidant of the Kochs told Doherty that the brothers wanted to “supply the themes and words for the scripts.” In order to alter the direction of America, they had to “influence the areas where policy ideas percolate from: academia and think tanks.”

These people want to destroy democratic politics as we know it.

They want to change society forever so that it becomes a brutal place for all but the elite winners – like them.

They deny our right to think for ourselves.

They deny climate change.

They deny the need to compensate for the abuse of the market.

They want to destroy our rights to choose.

And these are the ideas that the anarcho-capitalists who comment here, often endorse.

These are the ideas that creep into the Taxpayer’s Alliance.

And from there into the Mail and Express.

And into the Tories.

This is what we face: corrupting capitalisms that wants to destroy our society.

Cameron and Clegg are just starting that process.

But they pave the way for much worse.

And big money funds this. Daily. And I am sure it funds those who promote this vicious creed.

And that’s what we have to oppose.

Because such groups set out to destroy all we value.

They do so with a low profile. From tax havens. Behind fronts. And they do so with a mixture of respectable activity. But the aim is to destroy our democracies none the less.

This is the challenge we face.

Wake up and smell the coffee. This is what’s out there. And it’s spreading, like a cancer.

It’s what the left has to kill for good.

Without money to match only ideas can win the day.

There’s some serious thinking to do.

There is an alternative

Conservatives Comments Off

Aug 312010

I have the following on the web site of Public Finance, sponsored by the chartered Institute of Public Finance and Accountancy, this morning:

The party conferences are almost upon us. I’ve been invited to them all, and have thankfully got out of most: there is only so much lobbying a man can do before he loses the will to live. But there are common themes that will be relentless and familiar throughout this conference season.

The first will be whether the Coalition government can survive under back bench pressure. I’ll leave others to debate that. The second theme is cuts. I’d like to debate that, but not now. The third is whether there are alternatives to cuts. This seems to me much more interesting than the other two, so it’s to that I’ll turn.

Those of a certain age will remember TINA: Margaret Thatcher’s oft repeated line that ‚ÄòThere is no alternative’. George Osborne has revived TINA with an enthusiasm not seen on his party’s benches since the days of, well, Margaret Thatcher. But, in the end even Maggie was proved wrong. Will Boy George be likewise consigned to the dunce’s corner?

There are three reasons for thinking he might be. The first is that the financial markets may not behave as he expects. For example, far from there being a fear of gilts as he predicted, there’s a demand for them that is almost unprecedented – precisely because in the downturn his cuts threaten to make private sector investment looks decidedly unattractive.

Second, the idea that austerity will deliver the results the government expects is not proven. Certainly market reaction is currently much less favourable to Ireland, which has embraced austerity, than it is to Spain, which has not really done so, at least as yet. There may be reasons for this market reaction – not least that the markets think austerity will not pay, or may cause more harm than good. Any wise public sector finance manager needs a plan B at this time – and it might be called on quicker than expected if a U-turn is demanded soon.

Third, and perhaps most interestingly, the idea that cuts are the only option may yet be challenged. The reality is that, despite the rhetoric, deficits have not been caused by runaway spending. This is not a spending crisis: it is an income crisis. At some point if cuts prove harder to deliver in practice than on a spreadsheet (and those long in the tooth know just how true this can be) then the alternative of raising more revenue – or, heaven forbid, borrowing more to fund investment – has to be a possibility.

Both options exist. I have, for example, argued that the UK has a tax gap – a difference between the tax that should theoretically be yielded by the economy using the laws that are in place, and that which is actually collected. After a long period of denial this has now been conceded – and in December 2009 a tax gap of £40 billion was acknowledged by HMRC. http://www.hmrc.gov.uk/stats/measuring-tax-gaps.pdf . I have argued that it is something more like £95 billion before late paid debt is taken into account. http://www.taxresearch.org.uk/Documents/PCSTaxGap.pdf. Either way, the potential yield from tackling this issue is enormously significant.

No doubt other sectors also have the potential to contribute more revenue if more resources are allocated to the task. The cost of doing so for UK plc as a whole is insignificant when the people so engaged would otherwise be unemployed. Plans for increased revenue raising should therefore be on the radar of anyone who is anywhere near a tax collection process.

And then there is more borrowing. But that, as they say, is for another time.

House prices

Economics 10 Responses »

Aug 312010

Larry Elliott has argued in the Guardian that house prices have nowhere to go but down.

This has to be true.

Most first time buyers cannot enter the market right now. Some have suggested that first time buyers will average age 51 at some point in the near future if trends continue as now. I presume they weren’t serious. If they were they’d have failed to notice that before that happened much property would have to be lying vacant and without owners.

People die!

And unless you’re a high Tory people don’t wait around to move into the parental home.

So the market is always being replenished with property becoming vacant. It is right now. Only so much will be retained for rental – the vagaries of inheritance almost guarantee that. In this case it has to be true that eventually first time buyers determine market prices – what ever credit is available – or even because of whatever credit is available at present. Over supply will eventually push prices down. And there will be over-supply sometime at current pricing.

And that means house prices in the UK (and even more absurdly in Ireland where they remain stratospheric despite 10% being empty) will fall.

All we need to do it begin to force them down.

And yes this will create banking problems, I know. And problems of negative equity, I know. It’s either those or inflation.

Which do you want?

Rotten money has to get out of the system somehow.

There’s a choice to be made. Denying it will not avoid it.

Not the whole truth – but quite a good insight into it

Ethics Comments Off

Aug 302010

From the Guardian, by Theo Hobson:

A basic British political division is not between left and right, or liberal and conservative, but between Schlegel and Wilcox. What separates the two families of EM Forster’s novel Howards End is that the Schlegels worry about how to make the world fairer, with occasionally embarrassing consequences, while the Wilcoxes worry about their stocks and shares. In other words, the Schlegels are afflicted by the complaint we sneeringly call liberal guilt.

Sneer ye not. Liberal guilt is nothing to be ashamed of. It’s really just the political expression of that rather old-fashioned thing, conscience.

‚Ä¶..

In Howards End, Margaret Schlegel eventually forms a surprising coalition with Mr Wilcox. It won’t last; it can’t. You’re either a Schlegel or a Wilcox. And I assure you that Schlegelism will bounce back.

Very good.

The tax gap – good news, and a long way to go

Uncategorized 6 Responses »

Aug 292010

I note from the Sunday Times (behind a paywall, so no link) that:

Kathyryn McKerrow from HMRC’s Business Customer Unit conceded that the Revenue was under pressure to close the “tax gap” – the difference between the tax raised and what is thought to be owed.

Until I began work on this issue the tax gap was an almost unknown subject in the UK.

If that work has helped create this change I’ll keep at it.

There’s a long way to go.

485th

Secrecy jurisdictions, Tax justice 16 Responses »

Aug 282010

I note I am, according to something called Finance Centres International, the 485th most influential person in the world of offshore.

Well, thanks guys.

Four questions then. Why is Dan Mitchell 244th?

And Paul Krugman 407th?

Why am I the only campaigner I can see on the list?

And what’s the importance of Tory MP Andrew Rosindell at 467– a big friend of the British Virgin Islands, I know – who claims on his web site to “Put Britain First” but seems much more interested in offshore?

Austerity does not pay – as Krugman, Ireland and Spain show

ConDems, Economics 22 Responses »

Aug 272010

George Osborne says unless we cuts we’ll suffer a debt default.

Paul Krugman notes the evidence does not back the argument.

Ireland has gone for austerity more than any other nation. And these, as he shows, are the margins it is paying on its debt – the higher the margin the greater the risk being perceived to be:

And then he draws contract with Spain, which has been slow to embrace austerity (and even then, gone too far, too quickly):

Note the difference?

Now tell me austerity pays.

And that markets are demanding it.

Osborne really has got this wrong.

So has Ireland.

What did tax do for you today? #4 – the police

Joy of Tax 16 Responses »

Aug 272010

Sometimes stating the obvious is necessary.

We need police.

We need laws enforced.

And just as much we need their presence in communities – where I suspect they do a lot more simple offering help and direction than they do law enforcement.

I am well aware that there are those on the right who think the police – and even law – can be privatised.

That’s wrong. A coherent system of law and order underpins a society. Only government can command and direct such a service. Only government can pay for it.

That’s the Joy of Tax.