Chris Giles has an article in the FT in which he says:
Conservative and Labour manifestos fail to grasp economic reality
In the Tory case this is because Giles thinks May wants an evidence free approach to Brexit that cannot be delivered. This we know to be true.
In Labour's case it is because:
Labour's priorities for increased public spending – abolishing student fees and nationalising utilities – shows little grasp of the needs of the disadvantaged nor a strategic understanding of the public finance priorities of the next decade.
I happen to think that a good point: Labour does, I hope, have sufficient plans for tackling real disadvantage from the proceeds of the growth its policies would deliver.
But his criticism of Labour is also unfounded when it comes to the other other issue he mentions, which is:
Labour wants to raise almost £50bn a year from higher taxes with the vast majority coming from companies or richer people. It makes no proper allowance for evidence that both of these targets are rather good at avoiding higher taxes – either by reducing their taxable activity or by changing the appearance of their affairs to the tax authorities.
Giles does here fail to grasp tax reality, as he has so often failed to do in the past. He is not, then following his own precept. This is for three reasons.
First, rules on tax avoidance, and especially as they apply to practitioners and automatic information exchange from tax havens, are going to make this abuse much harder.
Second, country-by-country reporting is going to make abuse by large companies considerably more difficult.
Third, if Labour employs more people at HMRC then the odds change: Giles is making the mistake of assuming ever diminishing tax authority capacity.
He's wrong, in other words. The FT needs to get up to speed on tax reality.
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Hi Richard,
Have you seen todays report from the IFS about the main parties manifestos? I wondered what you might think about this quote:
‘Labour by contrast is proposing very big increases in tax, a bigger increase in spending and, as a result, borrowing continuing around its current share of national income. They would increase spending to its highest sustained level in more than 30 years and taxes to their highest ever peacetime level. Even so the state under Labour would be no bigger than that in many advanced economies. However, their proposed plan for paying for this expansion in state activity would not work. They would not raise as much money as they claim even in the short run, let alone the long run. And there is no way that tens of billions of pounds of tax rises would affect only a small group at the very top as their rhetoric suggests. If they want the advantages of a bigger state they should be willing to candidly set out the consequences — higher taxation affecting broad segments of the population’
Is this a similar case of the IFS not grasping tax reality? Or are they right?
Thanks
Jack
The IFS is right to say Labour is optimistic: I think it true that Labour is pushing the limits of credibility with its estimates although they are very in the plausible range
The IFS is right to say what Labour is planning to spend is entirely affordable when compared to other states
I accept that more tax will be required in due course. The point the IFS refuse to acknowledge is that simply spending more creates that capacity to pay
There is then no problem in finding the money. And people who get decent services will pay for them
I do also wish that the IFS would use wording in their press releases and statements by spokesperson that stops allowing the right wing media to manipulate what they say so much more negatively when it concerns Labour. Thus, although they are actually as critical of both Tory and Labour plans you’d never believe it from the press reports. They do this so frequently that I cannot any longer believe it isn’t intentional.
I have to agree
The evidence is compelling
Very frustrating when they can say Labour’s plans ‘would not work’ and those who don’t have an interest in economics will take it to be an undeniable fact.
Thank you Richard, for giving me a good laugh.
Your three points are truly very funny, even if you didn’t mean them to be.
You can all all the avoidance legislation and all the staff at HMRC that you like but if a business decals to another country you will get nothing in tax. If a wraltwealthy individual leaves, the same. And if someone just stops working because the extra effort isn’t worth it? What would you do? Force them to work?
Still not your fault as it has been decades since you did any real tax. If you ever did of course. What was it your tiny accountancy firm did? Personal tax returns for luvvies?
Those of us in the profession do thank you for providing your accidental humour. A colleague wonders if you did any book-keeping for the film La La Land as you seem to be living there.
The joke is all on you
Almost no one ever moves for tax; the evidence ius unambiguous
And as Warrenb Buffet said, no rational person ever stopped working because they had to pay tax
And if you think they do then your advice must be really dire
Paul Pott.
1 As I suspect you know perfectly well, large multi-nationals do not move their actual operations to save tax. They move their PLC which may well be simply a plate to the lowest tax jurisdiction. Are you seriously so dumb that you think that a coffee MNC would respond to an increase in CT by closing down all its coffee shops in the UK & moving them?
2 Again do you really think someone with an expensive house & children in school here would move because the tax rate moved up by 5%? Thats ridiculous. Obviously, if tax went up a lot, by 15 or 20% say, they might have to move but they’d move to another first world country with a relatively high tax rate. Where do you think they’d go to? Sudan? Panama? Dubai?
In the end tax is only one of the criteria. You would want to enjoy your wealth.
3 Why does your economics always end up that the best way to motivate a rich person is to give him more but the best way to motivate a poor person is to take away the little he has?
You are more patient with fools than I am
Journalists seem to cite IFS without any evaluation of what it says and that is not good for an informed debate. There are all kinds of assumptions embedded within its analysis which are rarely made clear. I will be writing a number of articles on its analysis of the party manifestos and the first one is here
https://leftfootforward.org/2017/05/on-corporation-tax-the-institute-of-fiscal-studies-has-shown-its-neoliberal-prejudice/
Thanks Prem
I agree: IFS is taken at face value but is inherently biased by its economic assumptions that reveal its true sympathies
As Craig Murray has pointed out, the corporate members list of the IFS may tell you something about their independence: it includes BP, British Gas, Deloitte, GE, HSBC, KPMG, Lloyds, PWC, Shell, Lloyds, Standard Life and Zurich.
(Correction to the above)
As Craig Murray has pointed out, the corporate members list of the IFS may tell you something about its independence: it includes BP, British Gas, Deloitte, GE, HSBC, KPMG, Lloyds, PWC, Shell, Lloyds, Standard Life and Zurich.