I seem to be upsetting left wing anarchists as well as the usual right wing trolls at the moment.
I must be doing something right.
Nov 262011
I have the following on Comment is Free this morning:
The Tax Justice Network has published new research I have undertaken on its behalf. Using data sourced from the World Bank, CIA World Factbook, the Heritage Foundation and World Health Organisation this research – for the first time ever as far as we know – estimates tax evasion for 145 countries in the world covering 98% of world GDP between them.
The result is astonishing: between them these countries lose $3.1 trillion to illegal tax evasion. That is more than 5% of their GDP. To put this in context, that’s also 54.9% of those same countries total spending on healthcare.
The research will, however, be controversial. For example, the findings show that tax evaded in the UK might be £69.9bn a year. This is extraordinarily close, despite very different bases of calculation, to my 2010 estimate for the Public and Commercial Services Union of £70bn, which HM Revenue & Customs and the government have always challenged. They say the figure is only £35bn a year for the UK, including tax avoidance, which I additionally estimate at £25bn.
It is important to highlight such differences of opinion. Across the world governments have paid too little attention to tax evasion, claiming the issue is smaller than it really is. They have done so because like the UK they only look at errors in the tax returns they receive, ignoring the fact that serious tax evaders are outside the system.
That negligence is now costing us dearly. For example, Italy is losing €183bn a year to tax evasion in my estimate. Its total external debt is €1.9tn. If it had only suffered the UK’s rate of evasion in the last decade then its deficit would be less than half that sum now. The same would also be true for Greece, and only slight less so for Spain. In other words, if tax evasion had been taken seriously and been tackled in these countries we would not have a crisis in the eurozone today.
Something similar could be said for the UK. The US has an evasion rateabout two thirds that of the UK. If we had reduced our tax evasion rate to US levels in the last decade we might owe £200bn less in debt now. Alternatively, cuts of more than £20bn a year could be avoided in the UK economy now with our debt still being tackled at the current rate. That could prevent most of the current stress in the NHS; sixth formers would still have maintenance allowances and we might not be facing a national strike next week.
Most importantly though I believe that this reduction in tax evasion in the UK and elsewhere is possible. As the Tax Justice Network’s new Tackle Tax Havens website shows, tax havens help serious tax evaders hide their crime. We could stop that by demanding that tax havens be transparent about the individuals, companies, trusts that use these places, starting with the UK’s own tax havens and then moving on from there. The world’s shadiest places and their users would then come under the scrutiny that’s needed to make sure tax is paid.
We could change things at home too. Despite government claims that they are tackling this issue they’re still planning to cut 12,000 jobs at HM Revenue & Customs over the next few years; job losses that will simply deny our tax authority the people needed to chase tax due by cheats in this country. That makes no sense. Twenty thousand new staff at HMRC could transform government finances and with it the state of our national economy. Tackling tax evasion is in the national interest and in the world’s interest. Now we know just how much tax is evaded a new strategy for tackling the world’s deficits is available.
We could stop the cuts: we can collect tax due instead. That way we all win.
I made a speech at a TUC rally a year or so ago when I said the following:
If we spent the money that the government proposes to spend on tackling benefit fraud on beating tax cheats then I can tell you this with absolute confidence we wouldn’t get back £1 billion a year. We would get back £20 billion a year.
And by chance that’s the annual investment that we need now if we want to turn this economy around to create the jobs we so badly need – and which would create the wealth and generate the tax – all the tax – we need to clear the deficit.
Which is exactly why we don’t need cuts.
But the Conservatives won’t do this.
And I’ll tell you why.
They would rather the tax cheats of this country have this money than the pensioners of this country have this money.
Better that the cheats have their ill-gotten gains, they say, than the children of this country get the education they need.
And the better the accountants, the lawyers and the bankers have this money they say than the sick, the unemployed, the disabled, the public servants and the defenders of this country have it.
That’s the Conservatives’ choice. It’s a choice to support tax cheats.
It’s the wrong choice.
You know that.
I know that.
Together we must fight them.
We must fight for fair taxation.
We must fight for the jobs of those who will collect tax.
And we must fight so that the honest people of this country can have the money that the Conservatives will give to the cheats.
That’s the fight we have on our hands
And friends that is the fight we must win.
I stand by that analysis.
My logic is a simple one, but one that is rarely said. By choosing to leave money in the shadow economy – which is what the government is doing by choosing to cut staff at HMRC – it is deciding that it is better that criminals - because that is what tax evaders are – have money than do children who need education, pensioners who need to keep warm, those on benefits who simply can’t make ends meet, the disabled who need services, armed forces who need kit and so much more besides.
I make it clear, this is an explicit choice by our politicians right now: they are choosing to support criminality.
They are doing so because they think the consumer spending of criminal tax evaders is more important to the economy than meeting the social needs of the young, the poor, the disabled, the vulnerable, those who defend and protect us and those who ensure that these services are delivered.
And let’s be clear: in making that choice they’re saying they think that money paid to the government is wasted. But they’re wrong! tax does not disappear. It is not a black hole. It is spent! It is spent on supporting these groups in society who need to spend to meet their needs and in paying the public servants who support them. So it directly supports consumption too. But consumption by different people. Tax collected supports consumption by those in need and those who work for an honest living. But the government is choosing instead to support consumption by those who steal to pay for it.
The choice the government is making by reducing the resources to tackle tax evasion is therefore a simple one. They’re saying they think criminals are more important than honest people in real need. And that criminals are more important than people who work for an honest living.
That’s why they choose to ignore £69.9bn of tax evasion in the UK a year.
That’s why they’re sacking tax inspectors.
And they’re wrong to do that. Because in doing so they’re ignoring the biggest single criminal activity in the UK, and the one that’s tearing the heart out of our society and our economy.
And that’s why tax evasion has to be tackled. Now.
Nov 252011
The research the Tax Justice Network has published this morning on tax evasion is, I think, shocking.
The full report is here. I’ve posted a summary table of tax evasion for 145 countries, here.
The real question is why does this matter? What’s the problem with the UK losing £69.9bn a year to tax evaders? What’s the problem with Italy losing €183bn a year as a result of its 27% shadow economy – a shadow economy of the same size as that in Greece and more than twice the size of that in the UK?
The answer is that it matters for three reasons. The first is that we wouldn’t have a world economic crisis now if we hadn’t had tax evasion. The current crisis focuses on the Euro. Italy is at its epicentre. It has external debt of €1.9 trillion. If only it had suffered the UK’s rate of evasion in the last decade then its deficit would be less than half that sum now. The same would also be true for Greece, and only slight less so for Spain. In other words, if tax evasion in these countries had been taken seriously and been tackled in these countries we would not have a Euro crisis today. That’s how important tax evasion is.
Something similar could be said for the UK. The USA has an evasion rate about two thirds that of the UK. If we had reduced our tax evasion rate to US levels in the last decade we might owe £200 billion less in debt now. Alternatively, cuts of more than £20 billion a year could be avoided in the UK economy now with our debt still being tackled at the current rate. That could prevent most of the current stress in the NHS; sixth formers would still have maintenance allowances and we might not be facing a national strike next week. That’s how important tax evasion is. We wouldn’t need cuts if we tackled it.
Perhaps as important as either of those is, however, the long term impact of tax evasion. When tax evasion is widespread, and that’s obviously true in Greece and Italy but it’s also becoming the case in the UK too, then honesty goes out of the window. No one knows who to trust. No one can succeed running an honest business. Corruption becomes endemic. And with that all prospects for investment in growth, wealth creation, public goods, our future, the elderly, the young and the disadvantaged disappear too. In other words, tax evasion creates poverty.
That’s why tax evasion matters.
Nov 252011
The Tax Justice Network has issued new research this morning linked to the launch of its new website – Tackle Tax Havens.
The research highlights the cost of tax evasion – which tax havens assist and facilitate – to the world economy.
I undertook this research for the Tax Justice Network, assisted by Tess Riley.
The data used for the research covers more than 98% of world GDP and 145 countries. The full analysis is available here.
Using sources such as the World Bank, CIA World Factbook, research from the World Bank on shadow economies and Heritage Foundation I was able to prepare what I think likely to be the most reliable estimates of tax lost to tax evasion in the world’s most significant economies. This is summarised in the table below. The data tax evaded is shown in both US dollars and local currency converted at 2010 rates.
| Country | GDP | Size of Shadow Economy | Tax lost as a result of Shadow Economy | Cost of tax evasion, local currency |
| US$’m | % | US$’m | m | |
| Albania | 11,786 | 34.3 | 982 | 104,483 |
| Algeria | 159,426 | 32.6 | 4,158 | 304,145 |
| Angola | 84,391 | 46.6 | 2,399 | 215,901 |
| Argentina | 368,712 | 25.3 | 24,347 | 96,902 |
| Armenia | 9,265 | 44 | 685 | 246,553 |
| Australia | 924,843 | 14 | 39,879 | 41,474 |
| Austria | 376,162 | 9.7 | 15,653 | 12,053 |
| Azerbaijan | 51,092 | 58 | 5,245 | 4,301 |
| Bahamas | 7,538 | 26.5 | 336 | 336 |
| Bahrain | 20,595 | 17.9 | 177 | 67 |
| Bangladesh | 100,076 | 35.3 | 3,109 | 214,504 |
| Belarus | 54,713 | 46.4 | 7,718 | 23,229,967 |
| Belgium | 467,472 | 21.9 | 47,605 | 36,656 |
| Belize | 1,432 | 42.9 | 139 | 279 |
| Benin | 6,633 | 49.8 | 568 | 285,953 |
| Bhutan | 1,516 | 28.7 | 39 | 0 |
| Bolivia | 19,786 | 66.1 | 3,727 | 25,943 |
| Bosnia and Herzegovina | 16,888 | 33.6 | 2,134 | 3,200 |
| Botswana | 14,857 | 33 | 1,481 | 9,994 |
| Brazil | 2,087,890 | 39 | 280,111 | 481,791 |
| Bulgaria | 47,714 | 35.3 | 5,609 | 8,413 |
| Burkina Faso | 8,820 | 40.5 | 432 | 217,538 |
| Burundi | 1,611 | 39.5 | 115 | 142,376 |
| Cambodia | 11,343 | 48.7 | 580 | 2,458,723 |
| Cameroon | 22,394 | 32 | 1,326 | 667,237 |
| Canada | 1,574,052 | 15.7 | 79,575 | 81,166 |
| Cape Verde | 1,648 | 35.4 | 120 | 9,815 |
| Central African Republic | 2,013 | 45 | 72 | 36,017 |
| Chad | 7,588 | 43.7 | 176 | 88,453 |
| Chile | 203,443 | 19.3 | 7,303 | 3,554,466 |
| China | 5,878,629 | 12.7 | 134,385 | 896,351 |
| Colombia | 288,189 | 37.3 | 20,746 | 39,833,161 |
| Comoros | 541 | 38.7 | 23 | 8,171 |
| Costa Rica | 34,564 | 25.8 | 1,391 | 698,279 |
| Cote d’Ivoire | 22,780 | 45.2 | 1,565 | 787,703 |
| Croatia | 60,852 | 32.1 | 4,551 | 25,442 |
| Cyprus | 25,039 | 28 | 2,748 | 2,116 |
| Czech Republic | 192,152 | 18.4 | 12,799 | 238,571 |
| Democratic Republic of the Congo | 13,145 | 47.3 | 815 | 733,053 |
| Denmark | 310,405 | 17.7 | 26,921 | 153,991 |
| Dominican Republic | 51,577 | 31.9 | 2,468 | 91,438 |
| Ecuador | 58,910 | 32.4 | 3,054 | 3,054 |
| Egypt | 218,912 | 34.9 | 11,766 | 68,123 |
| El Salvador | 21,796 | 45.1 | 1,278 | 1,278 |
| Equatorial Guinea | 14,007 | 31.4 | 40 | 19,923 |
| Estonia | 18,674 | 31.2 | 1,882 | 22,583 |
| Ethiopia | 29,717 | 38.7 | 1,139 | 18,775 |
| Fiji | 3,009 | 32.4 | 206 | 374 |
| Finland | 238,801 | 17.7 | 18,260 | 14,060 |
| France | 2,560,002 | 15 | 171,264 | 131,873 |
| Gabon | 13,011 | 47.5 | 612 | 307,940 |
| Gambia | 807 | 44.3 | 69 | 1,922 |
| Georgia | 11,667 | 65.8 | 1,912 | 3,364 |
| Germany | 3,309,669 | 16 | 214,996 | 165,547 |
| Ghana | 31,306 | 40.6 | 2,618 | 3,797 |
| Greece | 304,865 | 27.5 | 29,427 | 22,659 |
| Guinea | 4,511 | 39 | 259 | 1,571,866 |
| Guinea-Bissau | 879 | 40.9 | 37 | 18,456 |
| Guyana | 2,222 | 33.7 | 151 | 30,403 |
| Haiti | 6,710 | 56.4 | 390 | 15,007 |
| Honduras | 15,400 | 48.3 | 1,212 | 22,915 |
| Hungary | 130,419 | 24.4 | 12,888 | 2,798,244 |
| Iceland | 12,594 | 15.6 | 788 | 92,231 |
| India | 1,729,010 | 22.2 | 71,394 | 3,262,719 |
| Indonesia | 706,558 | 18.9 | 17,761 | 158,070,661 |
| Iran | 331,015 | 18.3 | 3,695 | 30,407,146 |
| Ireland | 203,892 | 15.8 | 9,922 | 7,640 |
| Israel | 217,333 | 22 | 16,017 | 58,944 |
| Italy | 2,051,412 | 27 | 238,723 | 183,817 |
| Jamaica | 13,995 | 34.8 | 1,266 | 108,646 |
| Japan | 5,497,813 | 11 | 171,147 | 14,347,246 |
| Jordan | 27,574 | 18.5 | 934 | 663 |
| Kazakhstan | 142,987 | 41.1 | 16,279 | 2,401,100 |
| Kenya | 31,409 | 33.2 | 2,179 | 176,314 |
| Kuwait | 109,463 | 19.3 | 317 | 89 |
| Kyrgyzstan | 4,616 | 40.4 | 435 | 20,335 |
| Laos | 7,492 | 29.6 | 277 | 2,226,225 |
| Latvia | 24,010 | 29.2 | 2,040 | 1,102 |
| Lebanon | 39,155 | 33.1 | 2,151 | 3,227,116 |
| Lesotho | 2,132 | 30.5 | 410 | 2,901 |
| Liberia | 986 | 44.2 | 125 | 6,107 |
| Libya | 62,360 | 33.7 | 715 | 893 |
| Lithuania | 36,306 | 32 | 3,555 | 9,421 |
| Luxembourg | 55,096 | 9.7 | 1,951 | 1,502 |
| Macedonia | 9,118 | 37.6 | 970 | 44,436 |
| Madagascar | 8,721 | 40.8 | 459 | 922,877 |
| Malawi | 5,106 | 41.8 | 352 | 53,176 |
| Malaysia | 237,804 | 30.9 | 11,243 | 35,639 |
| Maldives | 1,480 | 29.5 | 92 | 0 |
| Mali | 9,251 | 40.7 | 565 | 284,251 |
| Malta | 7,987 | 27.2 | 782 | 602 |
| Mauritius | 9,729 | 22.7 | 420 | 12,714 |
| Mexico | 1,039,662 | 30 | 25,576 | 319,696 |
| Mongolia | 6,083 | 17.6 | 330 | 416,289 |
| Morocco | 91,196 | 34.9 | 8,562 | 72,773 |
| Namibia | 12,170 | 30.3 | 915 | 6,466 |
| Nepal | 15,701 | 36.7 | 599 | 43,717 |
| Netherlands | 783,413 | 13.2 | 41,157 | 31,691 |
| New Zealand | 126,679 | 12.4 | 5,419 | 7,262 |
| Nicaragua | 6,551 | 44.6 | 526 | 11,460 |
| Norway | 414,462 | 18.7 | 32,629 | 202,302 |
| Oman | 46,866 | 18.4 | 259 | 101 |
| Pakistan | 174,799 | 35.7 | 6,365 | 545,492 |
| Papua New Guinea | 9,480 | 36.7 | 925 | 2,295 |
| Paraguay | 18,475 | 38.8 | 846 | 3,975,539 |
| Peru | 153,845 | 58 | 14,277 | 40,403 |
| Philippines | 199,589 | 41.6 | 11,707 | 516,283 |
| Poland | 468,585 | 27.2 | 44,482 | 138,339 |
| Portugal | 228,538 | 23 | 19,817 | 15,259 |
| Qatar | 98,313 | 18.8 | 906 | 3,297 |
| Republic of the Congo | 11,898 | 46.4 | 293 | 147,263 |
| Romania | 161,624 | 32.6 | 15,016 | 49,404 |
| Russia | 1,479,819 | 43.8 | 221,023 | 6,940,116 |
| Saudi Arabia | 434,666 | 18.1 | 5,193 | 19,472 |
| Senegal | 12,954 | 43.8 | 1,038 | 522,584 |
| Sierra Leone | 1,905 | 45.6 | 94 | 388,967 |
| Singapore | 222,699 | 12.9 | 4,079 | 5,385 |
| Slovakia | 89,034 | 18.1 | 4,722 | 3,636 |
| Slovenia | 47,763 | 26.2 | 4,705 | 3,623 |
| Solomon Islands | 679 | 33.6 | 55 | 407 |
| South Africa | 363,704 | 27.3 | 25,518 | 180,411 |
| South Korea | 1,014,483 | 26.8 | 72,320 | 83,902,586 |
| Spain | 1,407,405 | 22.5 | 107,350 | 82,659 |
| Sri Lanka | 49,552 | 43.9 | 2,893 | 322,157 |
| Suriname | 3,252 | 37.8 | 259 | 726 |
| Sweden | 458,004 | 18.8 | 41,244 | 290,359 |
| Switzerland | 523,772 | 8.5 | 13,089 | 13,089 |
| Syria | 59,013 | 19 | 1,144 | 53,124 |
| Taiwan | 430,600 | 25 | 13,887 | 423,549 |
| Tajikistan | 5,640 | 42.2 | 445 | 1,958 |
| Tanzania | 23,057 | 56.4 | 1,925 | 2,854,202 |
| Thailand | 318,847 | 50.6 | 25,814 | 776,997 |
| Trinidad & Tobago | 20,398 | 33.4 | 1,322 | 8,353 |
| Tunisia | 44,291 | 37.2 | 3,691 | 5,351 |
| Turkey | 735,264 | 31.3 | 54,082 | 81,664 |
| Uganda | 17,011 | 42.3 | 856 | 1,980,582 |
| Ukraine | 137,929 | 49.7 | 25,844 | 203,906 |
| United Arab Emirates | 230,252 | 25.9 | 1,073 | 3,940 |
| United Kingdom | 2,246,079 | 12.5 | 109,216 | 69,898 |
| United States | 14,582,400 | 8.6 | 337,349 | 337,349 |
| Uruguay | 40,265 | 50.6 | 3,647 | 72,575 |
| Venezuela | 387,852 | 33.8 | 17,829 | 46,355 |
| Vietnam | 103,572 | 15.1 | 3,691 | 71,972,390 |
| Yemen | 26,365 | 27.1 | 522 | 111,618 |
| Zambia | 16,193 | 47.1 | 1,335 | 6,573,437 |
| 61,737,918 | 3,132,490 |
Interesting commentary from Andreas Whittam Smith in the Independent this morning, who says:
What are people angry about? The deepening recession? Yes. The high level of youth unemployment? Yes. The excesses of the bankers? Yes. But more than anything, I believe, people are rattled by the widening gap between the “haves” and the “have-nots”. The banners at demonstrations that proclaim, “We are the 99 per cent” speak eloquently to that. “We are getting nothing, while the other 1 per cent is getting everything.” Many people think so.
And he concludes:
[G]overnments can make changes in personal taxation. They can deal with the hidden truth about taxes on the very rich: that they are easily avoided.
The millionaire who, when his fortune is made, goes to live in the Isle of Man, is a tax dodger. The rich man who purchases a farm for its tax advantages, even though he has zero knowledge of and interest in agriculture, is a tax dodger. The employees of investment banks who benefited from trusts that gave them non-repayable loans so that they could avoid paying National Insurance (schemes that were subsequently closed down by HM Revenue & Customs) were tax dodgers. Making the rich pay all their taxes would be a good place to start in the enormous task of reducing inequality.
Precisely so.
But the tax profession is clearly already lining up to oppose Graham Aaronson’s proposed attack on the most egregious tax abuse schemes.
Will those who support tax abuse never listen?
And why do government’s continually listen to the abusers and not those who want to do the tight thing? Why is it so hard to support ethical behaviour?
George Osborne seems partial to borrowing my ideas.
The General Anti-Avoidance Rule is now on the agenda.
Now he’s borrowing from a document Colin Hines, Alan Simpson and I wrote in 2003, called People’s Pensions.
As the FT notes this morning:
George Osborne will next week hang a “for sale” sign over British infrastructure projects worth tens of billions of pounds, as he attempts to tempt UK pension funds, oil-rich Gulf states and other sovereign wealth funds to pay for new roads, railways, housing and other projects.
The chancellor wants to address what officials say is the “ridiculous” situation where Australian and Canadian pension funds are prepared to invest in big UK infrastructure projects, while their British counterparts are often unwilling to do so.
As we wrote in 2003:
People’s Pension will be backed by People’s Pension Funds. These entirely new funds will be created to provide a way in which pension contributions can be invested in the building of new public infrastructure projects such as:
• schools and universities
• hospitals and other health facilities
• transport systems (including railways, trams and bus networks)
• social housing
• sustainable energy systems
Looks like it’s taken them eight years to realise that back then we’d worked out how to solve the problem of PFI, pay for infrastructure and meet pension need all at the same time.
It’s a shame Labour didn’t listen then. We’d not be in the mess they’re in now if they had.
Still, borrow away George. But do, for heaven’s sake, make sure that this is an explicitly marketed option under the new NEST pension arrangement so people can invest their pensions locally. Because that’s what we really need: the chance for people to invest locally for current and long term gain in the UK economy.
There’s more on this here, in my more recent publication ‘Making Pensions Work‘.
Nov 242011
Next week up to 3 million people will strike for fair pensions.
I support their call.
That call is summarised in this leaflet.
I was happy to endorse the back page of that leaflet:
