Martin Wolf has an article in the FT this morning saying that data shows the tide is turning on globalisation. He thinks the proportion of global trade in world GDP, the level of cross border investment and the level of foreign direct investment are all falling.
I think this data may well be right. But there is another explanation to that which he offers. This may all be down to the decline of tax havens. All the anecdotal evidence I am being given at present suggests that companies are getting out of tax haven activity as fast as they are able to do so: they believe public country-by-country reporting is coming and soon and do not want to be caught out in embarrassing situations.
So less trade is being artificially re-routed via tax havens.
And the artificial relocation of assets to tax havens is not happening.
And foreign direct investment is being made more directly, without calling into several tax havens on the way leaving it multiply counted.
The real levels of trade, asset holding and FDI may be exactly as before. It's just the double counting that the subterfuge of tax haven use requires might be on its way out, and with that the numbers may be shrinking. But all that might mean is that the numbers were always as artificially inflated as Ireland's GDP has been by Apple's tax dodging. In which case Martin Wolf may be worrying unnecessarily about the numbers.
Which is not to say that he isn't right about the failings of globalisation that he identifies in his article. They're real. But he should add false accounting to the list of things it facilitated.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Dear Richard,
Dream on with the blinkered UK Leftist socialist Dreams. Competitive tax pricing (i.e. competition which isn’t in the socialist lexicon) will always exist. All the rest is mostly inverted greed which invents all manner of dreams about trillions going through ‘tax havens’ to feed their careers…
Competition means hard working people create jobs to feed those that don’t. Those that don’t are always looking for an angle to get money risk free for life from the hard working without actually having to work..
KR
Bertrand
Bertrand
It’s good to be reminded of the depravity of your thinking and your contempt for your fellow human beings every now and again. You forgot to put in a plug for tax havens this time though. Shame on you.
Richard
Bert – you’re talking total Boulles mate.
The ‘competition’ you promote is far from perfect nor is it fair.
The ‘hard working people’ you lionise are increasingly paying the folk they ‘provide for’ with less wages and less working conditions around the world.
And as for Richard being a lefty – no way – I’ve read his work and I would call his ideas simply ‘functional’ (as well as sensible).
In fact it is your post that is one big dream that officially ended in 2008. So not only are you wrong, but your are also out of date.
Not a good start to the day Bertie. Now go along now and do some more reading and come back when you are less intellectually challenged.
Don’t you mean ‘Competition means hard working people create wealth to feed the greedy, rich gits who live a life of luxury on the backs of the struggling poor sods who don’t’? Just a thought.
hmmm…http://www.christianaid.org.uk/Images/Invested-Interests-Christian-Aid-tax-report.pdf
Toby
What date was that one?
Richard
This sentence would seem to indicate June 2013….
“With tax, trade and transparency the dominant themes at
this month’s (June 2013) G8 meeting in Northern Ireland,
this report attempts, for the first time, to quantify the
role that tax havens to which the UK is constitutionally
linked play in facilitating the flow of FDI into developing
countries, dwarfing that of the BRICS nations”
And much has changed since then
I think that behaviourally there are shifts not yet apparent on the surface
Tax havens are so yesterday. Who needs them when HMRC are so helpful and co-operative?
🙂
You should look up the incorporation statistics for Luxembourg companies. These have been remarkably steady for the last year at historically high levels. Not all of these will be tax avoidance vehicles of course, but looking at the names tells you a lot of them are.
Also, look at latest publicly available accounts of (listed) trust & corporate services providers. None of these suggest a diminishing level of activity.
I think it is far too early to tell.
I was talking about major corporates
There I think something is happening
Also look at the Mossak Fonseca data
I think every major MNC will / should have a discussion at board level whether the continuing use of tax havens is worth the reputational risk. There will be a few that decide it isn’t, but I suspect the large majority will persevere.
What the Mossack Fonseca data tells me is that out-and-out tax evasion/fraud is declining. That’s a success.
The number of major MNCs named in the Mossack Fonseca database is very limited, so we cannot draw any conclusions on their behaviour from that data.
Some will continue
I suspect it will be many fewer than you think
I see there is a screen shot of the conservative front bench today on Sky. I expect you’re amazed that 3 of the 5 people in shot are women.
No, that is about what I would hope for
Anecdotal evidence?
The wishful voices in your head?
No: my discussions with FTSE companies
US inbound investors still have no issue using them, so I doubt our friends in Luxembourg are particularly concerned about their job security quite yet
I daresay the veracity of your premise will much depend on how totally and effectively CRS is eventually truly implemented worldwide and how many substrata of tax evasion/avoidance/ trust and estate profiles it will eventually govern.
And indeed how dilligently jurisdictional tax authorities deal with the plethora of incoming data heading their way.
I accept that
Re the retrenchment of globalisation, I was much more interested in Robert Wade’s letter: http://www.ft.com/cms/s/0/3855d75a-7434-11e6-b60a-de4532d5ea35.html