Fiona McTaggart MP said in a debate on Google's tax affairs on Channel 4 on Tuesday that she expected companies to pay their fair share of tax.
Madsen Pirie of the Adam Smith Institute immediately jumped on her argument.
"Who is to say what's a fair rate of tax?" he demanded (or words to that effect).
Fiona's response was spot on. "Parliament" she replied.
Quite so. It's called democracy Madsen. And it sets the rules, and the law.
I suspect Madsen found this quite shocking. He was there, of course, to defend Google's use of tax havens to undermine the contribution it makes to the UK economy, which in the process is an act of contempt for UK law and so UK democracy. But in doing so all he confirmed was that the far-right of economics in the UK holds democracy in contempt. The fact that it never even occurred to him that parliament sets the rules on tax is sure indication of that. And the whole tax haven world is premised on the same idea, which is that these places can be used to launch an assault on the democracy of the UK and other countries.
Parliament sets fair tax rates in the UK.
Tax havens are used to undermine them. But don't for a minute doubt that those who use them reveal their contempt for democracy by doing so.
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I think it is quite plain by now that a certain strain of people – of which right wing, neo liberal economists such as Madsen Pirie, are one group – long ago concluded that the world would be a much ‘better’ place (how and for whom is debatable) without democracy as most people would understand the concept. Instead they want to replace it with a cypher (or sham) democracy controlled by corporate interests and the 1%, and/or their agents and representatives. In this model of ‘representative’ democracy politicians are not the representatives of the people, but of an elite. However, to avoid this being seen for what it is – a return to a form of fuedalism – the illusion of citizen based representative democracy is maintained through regular elections, etc, which are actually no more than PR.
This is already the case in the US – or very nearly – as the BBC 4 programme ‘Park Avenue: Money, Power and the American Dream’, broadcast on Tuesday evening, so graphically demonstrated. But it is rapidly heading that way in the UK because our current government (and indeed, many members of the previous Labour adminstration) believe this to be both right and/or inevitable, as do many of the most senior members of the civil service and public sector more generally. And across Europe we see politicians and administrators of much the same hue exercising huge influence. This is why these people do nothing, or the absolute minimum when forced into doing so by public opinion – such as is presently happening with the Starbucks/Google avoidance issue, and sham company registrations (and credit to you and others for getting those issue into the public’s conciousness) to counter the continuing growth in corporate power and influence. Indeed, they actually encourage it in private, while very often speaking against it in public (just another example of PR and mainting the illusion of a citizen based representative democracy).
And then, of course, we have the likes of dear Vince Cable, who is probably still a believer in real representative democracy and see’s the threat to that from corporate power and influence, but is, in fact, a cowardly politician. On that we agree.
I agree that it is for parliament to place fair taxes on people, and I agree that tax havens undermine those attempts at fairness and democracy, but I worry about a possible implication of your argument here Richard.
You don’t want to say that the taxes are fair BECAUSE parliament says so. Parliament could enact very unfair taxes. But there has to be a tax regime in place (even if that is no taxation) and so there needs to be normative political argument about the best form of tax. One answer here is that the democratic decision about taxation is what should count. A better answer I think would be to look to liberal egalitarian political philosophy.
I think the best approach is to ask what tax and benefit policies people would choose if they were choosing them as insurance policies from a hypothetical position of equality where they do not know their family background and wealth/natural talent/upbringing.
You miss the point
A regime can be unfair
But when assessing whether a taxpayer has set a fair rate that regime has to be the benchmark
What else can be?
They can’t set another rate
And nor should they seek to subvert the law – unless it offends real human rights
Just because Parliament sets (or doesn’t set) something doesn’t mean it is (or isn’t) fair. I don’t so suppose you think the 5.5% rate for finance companies is fair.
It is democratically set
I can’t argue with that
I don’t like it – but if I am asked what is fair I have to say it was set by the rule of law and within the right of an elected government so that when apprasing a tax rate I have to say it is fair when it is paid
So if you act within the law, it must be fair.
Because Parliament decides what is fair and then makes the rules.
So those rules are the very definition of fairness.
So if you haven’t broken the law, you are acting fairly.
So by accusing companies of acting unfairly, you are implying they are acting illegally?
Oh hang on. Let’s not be silly now
As we all well know Parliament defines what’s fair
And then that law is abused
And profits are shifted
So laws are indeed bent
That’s what tax avoidance is
Which is why it’s unfair – and indeed, an abuse of the law
As is glaringly obvious to all but those who promote such abuse or who are wilfully blind to it
If profits are being shifted, it is pretty straightforward to deal with it.
if there is no economic substance to such shifting, HMRC merely disregard the shifting and tax the shifted profit and take the profit in UK.
If profits do have economic substance, such as royalties, inflated expenditure etc paid offshore HMRC merely have to adjust the transfer price so that their less expenditure in the UK and hence greater profit.
If HMRC are not doing this, it can only be because they are satisfied that the right amount of tax is being paid.
Simple – if there is abuse, HMRC can fix it.
Your comments are now so trite you are joining the spam pile
“Who is to say what’s a fair rate of tax?” he demanded (or words to that effect).
Fiona’s response was spot on. “Parliament” she replied.
Hmmmm…….Not sure you actually want to be making this argument as nearly everybody considers the word “Fair” to be based on a moral basis, hence the argument even if it is legal it is not fair.
If as you say above something becomes fair only when Parliament says so then logically the 10% Entrepreneurs tax rate for £5m gain is Fair because it was set by Parliament. Also the drop to 45% top tax rate is also fair because again Parliament set that.
Now if you argue that these are actually not fair then it is a matter of personal opinion in which case Madsen Pirie has just as much right to claim what is fair as you do.
So which is it? Parliament sets what is Fair and you cannot argue different…………Or it is a personal choice and everyone is entitled to decide what is fair according to their own morality?
The rates are set by parliament
In a democracy I have to accept at is fair
I therefore accept companies to, broadly speaking, pay them
If they do not that is unfair and an act to undermine the democratic ill
There is no inconsistency in that argument at all
Ivan Horrocks, I think drew attention to the BBC 4 programme ‘Park Avenue: Money, Power and the American Dream’.
This was a revelation and I don’t think it hyperbolic tosay an “American horror story” . I had not appreciated how far “democracy” has been corrupted in the US by wealthy lobbyists. It is quite obvious that the 0.1% have declared a class war on the vast majority.
The fact that senators can be so easily bought by the wealthy lobbyist indicates why the 0.1% and their companies have so little respect for government. Pirie is simply importing this despicable attitude.
I saw this piece on Channel 4 and it confirmed my rule of thumb for sensible political commentary. “If they got a bow-tie then they surely do lie”. It rarely lets me down and saves a lot of time when listening to the right-wing. It seems to be a kind of icon of craziness. By their bow ties shall ye know them…it was said long ago and still applies.
This goes to the heart of the tax avoidance debate. When apologists claim that tax avoidance is “perfectly legal” they imply that it’s perfectly legal to subvert the intention of Parliament; and what’s more they defend it on the basis of rule of law, which if it means anything is that the will of the law maker shall prevail and the law all shall be treated equally. More than accountants, the judges (ex tax barristers) particularly those in the House of Lords and now Supreme Court got us and thus the rest of the word in this mess.
Parliament set these rates/rules in the first place. That is the outrage which disallows the avoiders to be prosecuted!
“Fair” means free of favouritism or bias. I’m afraid there are a number of aspects of Government enacted tax legislation that come nowhere near this definition. For example, the favouritism granted to non doms. The problem is that these manifestly “unfair” aspects of the tax legislation makes it easier for tax dodgers to justify their actions. i.e. the system isn’t fair, I’ve been treated unfairly, so I’m going to dodge taxes to get even.