The Joy of Tax in Orlando

Posted on

This is the outline of the talk I gave to the American Tax Association (made up of US tax professors) in Orlando today:

Joy of Tax

American Tax Association

Orlando

26 February 2016

  • The Joy of Tax
    • My argument is simple
    • Tax is the tool with the greatest opportunity to shape the world we want to live in
  • This is a macroeconomic argument
    • We now know how money works
    • According to the Bank of England every text book is wrong
    • We now know loans create deposits and not the other way round
  • How tax works
    • Suppose we got tax wrong too?
    • Suppose governments don’t tax and spend
    • But spend and then tax?
    • Let me assure you that’s what they do
  • How do we know?
    • Over $6 trillion of QE proves it
    • But in fact we’ve always known this – this is why we have a national debt
    • And why we have any government created money – because all of that is created by government over spending not claimed back by tax
  • So what does this mean?
    • Tax never, ever, pays for government spending
    • The primary goal for tax is to reclaim the money the government spends into the economy?
    • Why? To prevent inflation. I told you this was macroeconomics
  • Is that it?
    • No!
    • But what it means is that w have to completely re-appraise what tax is for
  • The six reasons to tax
    • Reclaiming the money spent by the government into the economy as far as is needed to control inflation
    • Ratify the value of money
    • Reorganise the economy
    • Redistribute income and wealth
    • Reprice market failure
    • Raise representation in a democracy
  • To put it another way
    • Tax is not about paying for anything
    • Tax, from beginning to end is all about shaping the economy in the way w want in accordance with our democratic principles
  • Principles
    • Adam Smith
      • Equity
      • Certainty
      • Convenience
      • Efficinecy
    • But this is not 1776
      • And these were largely standards for the administration of tax, not principles on which to base the tax system
    • So in 2016
      • Peace
      • Equality
      • Truth
      • Simplicity
    • Applying this to a real example
      • Country-by-Country reporting
      • An incredibly simple idea I created in 2003
      • Why?
    • Peace
      • John Christensen and I, who were cofounders of the Tax Justice Network were sure there was a transfer pricing problem
      • Developing countries were not collecting the money they were owed
      • Multinationals were transfer mispricing profits to tax havens
    • The consequences?
      • Developing countries were not able to control their economies: the money they need to reclaim is not there to be had
      • Nor is it available from the tax havens
      • So there is international stress: the wrong people have the wrong money in the wrong place
      • Developing countries are constrained on their spending because they have no ability to reclaim money
      • And in many other countries the need to reclaim tax has been shifted from corporations / capital to wealth
      • Stress!
    • But more than that
      • Equality
      • Large and small business are not being treated the same: result a bias to the big
      • And nor are countries being treated the same
      • Whilst access to tax havens has been deliberately designed to creat inequality
      • Faith in the integrity of the system was being undermined
      • This was an issue to address if macroeconomic credibility and faith in government was to be preserved
    • Truth is key then
      • Regrettably some governments have not been committed to truth. Opacity has been their watchword
        • I have defined them as secrecy jurisdications
        • If you want to know who they are read the Tax Justice Network Financial Secrecy Index
      • And some companies have not either
      • Our aim when we set out as tax justice campaigners was to
        • Put large companies on the front pages of newspapers
        • If they used tax havens
        • And if they cost developing countries money
        • With the aim of forcing change from countries and companies
      • And crucially we were always solution focuseed
        • Automatic information exchange
        • Beneficial ownership on pubic record
        • And country by country reporting
        • There were others, but these were key
      • Country by country reporting
        • A method to encourage companies to pay the right amount of tax in the right place at the right time
        • Where right means that economic substance matches accounting form
        • Tell us
          • Third party sales
          • Intra-group sales
          • Number of employees
          • Profit before tax
          • Tax provided
          • Tax paid
          • Equity
          • Retained reserves
          • Tangible assets
        • We can do the big data:
          • Does your reporting match where your profits are likely to be earned
        • So far the evidence is they definitely do not
      • Won at the OECD as part of BEPS
        • Fir tax reporting
      • Now heading for public record in the EU, I suggest
      • Why
        • To provide a tax risk template
        • For
          • Tax authorities
          • Investors
          • Civil society
          • The media
        • This is about holding global companies to account locally
          • And restoring equality for all – as efficient markets demand
        • And what of simplicity
          • Let me not forget the Holy Grail of tax
          • There is no simple tax system in a modern economy
          • But go back to Smith
            • The job is to make sure tax is paid
            • Equitably
            • Certainly
            • Conveniently
            • Efficiently
          • And that requires
            • Good law
            • Investment in tax authorities
            • Every encouragement to transparency
            • And cooperation – call it peace in our time
          • We set out to change the world of tax
            • In some ways that is what we are doing

A mindmap summary of this is here: Joy of Tax Orlando 26-2-16