The Tax Justice Network has just launched a new monthly podcast – The TaxCast.
In each 15 minute show, TJN will be discussing the latest news relating to tax evasion, tax avoidance and the shadow banking system.
In the inaugural TaxCast the implications of the Vodafone vs India landmark tax case are discussed (by me), TJN compares Bill Gates and Mitt Romney’s attitudes to taxation whilst TJN visits the Occupy camp outside St Paul’s Cathedral in London.
Podcast: Play in new window | Download
Avaaz is running the following petition which they aim to present to Prime Minister David Cameron next week. Sign up here, and please, please pass the link on to your friends and colleagues: our politicians are very sensitive on this issue and petitions make a huge difference both in terms of generating pressure and raising public awareness.
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The Great British Tax Scandal
Our tax chief had secret lunches with Vodafone and Goldman Sachs and then handed them billions in tax breaks – while keeping Parliament in the dark!
MPs are outraged, claiming we are owed over 25 billion pounds in back taxes from these and similar dodgy deals. But the tax agency has blocked an inquiry into the scandal and refuses to release documents to shed light on why these tax breaks were ordered in the first place.
By acting together now we can ensure full transparency on the Goldman Sachs and Vodafone deals, and get them to pay the tax they owe. Let’s turn up the heat – sign the petition to David Cameron for tax justice – we’ll deliver it with a splash next week.
Comment is Free has an absolutely first rate piece published this afternoon. Written by Roger Blackhouse and Bradley Bateman argue the case for moral capitalism. They say:
One reason for the problems we face today is that we have stopped seeing taxes as an essential institution in a capitalist economy for if taxes could be raised, especially on those who can most afford to pay them, public services would not have to be cut. We should see taxes as an integral part of a moral capitalist economy, providing health, education and social care outside the market. People should not be afraid to join Warren Buffett in saying the rich should pay more tax. The “Tobin tax” on financial transactions should not be seen as a way to raise funds for the euro, but as a tax that could help stabilise the financial system and as a “Robin Hood” tax.
So well said. And as they conclude:
Such changes need to be analysed carefully, for technical details do matter, but they need to be on the agenda: if we are to save capitalism, as we must if we want prosperity and liberty, we must face up to its moral failings. Unless we do this, we will be unable to imagine a better future, let alone work out how to achieve it.
Excellent Christmas day reading.
The following are on the Guardian letters page this morning. I am a signatory to both:
The public accounts committee’s report into HMRC‘s tax settlements made for compelling reading (Revenue hid ‘sweetheart’ tax deals for big business, MPs say, 20 December). But more fascinating was the feeble response by HMRC and the striking lack of response from either Vodafoneor Goldman Sachs.
Gone are the days when HMRC and Vodafone would come together as an unstoppable dream team proffering denials of tax avoidance as an “urban myth”. Now, we see HMRC weakly saying the committee is misinformed and is basing its conclusions on partial information. We know that the committee did everything in its power to get to the truth, but HMRC obstructed the inquiry by using the veil of secrecy that is taxpayer confidentiality.
It is imperative that the UK’s political and business culture changes so that rich individuals and corporations treat tax avoidance as taboo. It is also crucial that the culture at HMRC changes so that it clamps down on tax avoidance. If this were the norm, the UK could raise sufficient income to protect the services currently under threat from cuts, set an international standard for tax justice, and make progress towards achieving equality in the UK and around the world.
So while we support the efforts of the public accounts committee, we also support the action by UK Uncut Legal Action to challenge HMRC in the high court so that the decision to let Goldman Sachs off its unpaid tax is declared unlawful and the £20m is given back to the taxpayer. It is undeniably in the public interest that this case should go through the courts in order to ensure transparency, accountability and fairness.
Katy Clark MP, Virendra Sharma MP, Jeremy Corbyn MP, John McDonnell MP, Caroline Lucas MP Jonathan Edwards MP, Diane Abbott MP, Paul KennyGMB, Mark SerwotkaPCS, Christine BlowerNational Union of Teachers, Len McCluskeyUnite, Nicholas Shaxsonauthor of Treasure Islands: Tax Havens and the Men Who Stole the World, Richard Murphy, Tax Research, Clifford SingerFalse Economy,Neal LawsonCompass,Greg MuttittWar on Want, John ChristensenTax Justice Network
And:
• We would like to thank you for highlighting the disgraceful treatment of Osita Mba, a personal friend, whose whistleblowing on a deal between HMRC and Goldman Sachs has earned him not praise but disciplinary action and the threat of losing his job and/or prosecution (Report, 15 December).
Without protection, whistleblowers will be reluctant to come forward and divulge information that is in the public interest. We have collected more than 7,300 signatures in a petition in support of Osita and the important role whistleblowers play in serving the public interest. As one of our petition signers, Ben Tisnell, states, “Whistleblowing is a courageous act of public service; those exposing wrongdoing should expect protection in any civil society.” We firmly agree with his view – whistleblowers should not face condemnation but should be protected.
Kerry-Anne Mendoza, Katherine Segal, Maria Murselland 7,300 others
Please support both actions this Christmas. They’re about your freedoms.
A decade ago an article like this would not have happened.
It does now.
Don’t say changing moods is not possible.
This is Simon Jenkins in the Guardian today (edited, of course):
Osborne is the scourge of public sector unions and condemns tax avoidance, yet he refuses to end the scandal of crown tax havens, from Jersey to the Caymans, that enjoy the benefits of British citizenship while enabling individuals and corporations to evade British tax. Last week the European Union lectured Britain on financial regulation, while harbouring on its borders such fiscal black holes as Monaco, Liechtenstein and Switzerland. The thesis, accepted by governments of all parties, that the rich should be allowed to escape tax for their “wealth-creating potential” has surely been exploded by the credit crunch. It is not the kind of wealth Britain can afford. If Goldman Sachs dislikes paying British taxes it should go to Dubai, not just the first-class lounge at Heathrow.
The control of public expenditure is never perfectly equitable. It is war by other means. But when large sections of the public are being asked to bear the burden of cuts in their standard of living – largely through the action and inaction of government – they are entitled to see at least a semblance of fair play.
Just because lobbyists say bonuses and tax havens are “essential to Britain’s recovery” does not mean they are. The government’s tolerance of both is more than stupid. It induces cynicism in the public realm and recruits fair-minded people to the cause of St Paul’s protesters and public sector strikers. Nothing is more crucial to national wellbeing at a time like this than a sense of equality of misery. The British government derides Greece and Italy as countries where taxpaying is “voluntary”. It appears to be voluntary in Britain too.
He’s right.
Creating this awareness has taken a lot of effort. Now we need action to address the issues. When will people get serious about the Tax Gap? It’s entirely possible to do so. But only the Greens take it seriously as yet. That’s to their credit, and none to anyone else.
There’s a fascinating editorial in the FT today. It says:
The need for austerity has forced the government to increase the burden on British taxpayers. At such times, the public must have confidence in the fairness of the tax system. Not only should tax justice be done; it should be seen to be done.
Some of us have said that for some time. Good to see they’ve signed up.
They continue, having reviewed the Parliamentary Accounts Committee report:
While HMRC accepts that it could tighten governance – for instance, dividing the negotiation and separation of settlements, and bringing in an independent assessor to look at deals – there is a case for going further. There are good reasons why everyone should not be able to pick through every individual’s tax returns, but it is weaker in the case of companies (where there is also a greater case for scrutiny given the heftier clout such corporations wield).
Given the complexity of tax, public disclosure of returns may be an ineffective tool. A better way forward might be to require all settlements over a certain threshold to be blessed by a judge before becoming effective. This would preserve flexibility for the taxman, while making sure that the public interest is not left outside the room when deals are cut.
Note they only say that public disclosure of tax returns ‘may be’ an ineffective tool. The possibility that it may also be an effective tool has by default been admitted by the FT as a consequence.
I tweeted that suggestion last night. My friend and colleague Prem Sikka has long argued for it. I think such disclosure a corollary of the right to limited liability – which demands transparency in exchange for the privileges granted.
Without diminishing the suggestion made by the FT of a judge led reviews, I think tax returns on line should happen.
More than that, I think companies should also, as I suggest in the Code of Conduct I have republished today, be required to disclose their tax planning explicitly and all their accounting entries for tax. That would really change the scene, and much for the better. Why so? Because most tax planning is not in the interest of shareholder’s as it misallocates resources within corporations to their detriment. It’s actually designed to trigger executive share bonus schemes – and those are now severely discredited. So the tax planning that drives them should be exposed.
There are occasions when even Guardian economists can prove just how closely wedded to the blackboard and how out of touch with reality they are. Phillip Inman did so this afternoon when writing about corporation tax. He said this afternoon:
Soon there will be no such thing as corporation tax. Among the first items on the shopping list of reforms outlined by Spain’s new prime minister Mariano Rajoy on Monday is a cut in the main business tax.
He said more firms would enjoy a 20% rate as a central plank of his mission to make Spain more business friendly.
And from this Phillip moved on to argue:
The TUC and tax campaigner Richard Murphy’s groundbreaking 2008 report The Missing Billions: The UK Tax Gap (pdf), found a £12.5bn difference between what companies should have paid in corporation tax annually and what they really paid.
Some on the left argue, as the TUC did, that government’s should play hardball with companies and make them pay the full charge.
But not only is that a forlorn task against the run of play (when governments across Europe are reducing corporation tax rates), it is wrong headed.
We need to generate taxes to fund social welfare and for that we need to redraw the tax map. I subscribe to the OECD’s recipe for reform. Despite the Paris think tank’s reputation for rightwing, pro-capitalist reforms, in this case it is pretty even-handed.
It would reduce all taxes on income and increase taxes on spending and wealth.
As he continues:
Unfortunately, the proposal leaves most leftists gasping for air. What do you say when a proposal slays the sacred cows you hold dear, but also slays those of the opposition.
The left loses a tax on businesses, and must suffer the regressive nature of high consumption taxes. On the other hand, workers pay less tax and crucially, the owners of wealth, be they rich individuals or corporations, must pay a new tax on their holdings.
The OECD, like most economists I speak to across Europe, subscribes to a tax on land as the simplest and fairest tax on wealth.
He tries to justify his position:
The shift has many positive benefits. They key must be to unlock a desire for work by cutting taxes on incomes. At the moment we lock families into static or falling living standards, partly through the interaction to income tax, tax credits and benefits.
Consumption taxes rise, but there is evidence that skewing VAT away from food to luxuries makes it much less regressive. Land taxes would discourage the wealthy from hoarding land without doing something with it (planning rules permitting). If they want to live in expensive areas of the country or base their businesses in the south-east, then there would be a significant tax charge for doing so, and one they cannot dodge with elaborate schemes or offshore trusts.
Rajoy is, like most rightwing politicians, only tacking one side of the equation. The left should argue the logic of the right’s position on income taxes with demands for taxes on wealth.
We do argue for a wealth tax Phillip, we do. But we do so based on our understanding of the real world, which is what Inman’s suggestion so clearly lacks.
Let’s just address one very obvious problem. About 700 companies pay more than half of all corporation tax in the UK. Details of the £42 billion paid in 2010/11 are here. But this misses the fact that maybe £12 billion is paid by small business - who should also, as I have shown, be liable for much more if only this tax were not so heavily evaded. Inman says we should have no corporation tax but a tax on wealth instead. How is he going to address the taxation of 1 million or probably more small businesses as a result? And how will he stop everyone forming companies to avoid tax henceforth? The naivety of suggesting the abolition of corporation tax to create this potential tax chaos is staggering. The back hole in government finances would be enormous.
Let’s take a second issue. We would lose £42 billion from corporation tax. Inman suggests we recover this from VAT or wealth taxes. First, Inman suggests we skew VAT from food to luxuries. We already zero rate food. That shows how much he knows about that: precisely nothing by the look of it. Secondly, perhaps he does not realise there is no EU provision right now for a luxury wealth rate of VAT – although I would prefer one. So, to recover his VAT we’d need not a VAT rate of at least 28% based on this year’s forecast yield of £100 billion. That’s going to help inflation, isn’t it Phillip? And boost the economy a lot, isn’t it? Whilst of course creating no labour market distortions, at all. Nor will it create any benefits re-rating issues whatsoever, of course. And let’s ignore for a moment the impact on those on pay freezes. The proposal should make every right thinking person shrink in horror. How come Inman thought of none of these issues?
And can we just ignore the suggestion that income tax rates will fall? How does cutting a whole tax raising £42 billion mean income tax rates fall? That’s just fantasy. Making up the deficit will be enough of a challenge. Other cuts is just a ludicrous claim.
As is the argument for a wealth tax. I agree with these. Fundamentally. Completely. I want them. But there are some conditions. Like securing the data to assess them. And whilst we have tax havens that let anyone hide their wealth in offshore companies – which are tax free entities that no authority asks questions about – the chance of collecting wealth taxes is about zero percent. Of course I want to shatter that secrecy but suggesting a wealth tax without mentioning that pre-condition is plain absurd.
As for taxing land. Yes, I agree: that has to be done too. But there’s an issue Phillip. It’s called cash flow in the first instance. Is it reasonable to charge tax when there is no means to pay it? This is the perennial argument with taxing land. How are you going to overcome it? No mention is made? And then there are other problems you ignore. Like finding the owner. Not all land is registered, and much is registered offshore. How do you overcome that? And last, but by no means least – land (despite the Georgists’s claim) is not the sole source of wealth. Cash generating assets are as well, very much so, but it seems Inman wants to ignore them.
I could go on, but won’t. I want radical reform of taxation. But I also want a tax system that works. I find those like Phillip Inman who’re still wedded to the old theories of economics and who have had no real encounter with the real world of tax where the problem of extracting payment is the number one priority putting forward ideas that are barking mad on a blackboard and economic insanity in the real world profoundly annoying. Even if they do work for the Guardian. Especially when they can only increase the wealth gap in society and the opprtunities for tax evasion that corrode social justice.
Inman owes the Guardian and its readers an apology.
I was asked yesterday if it was true there was such a thing as the Laffer effect – that if taxes in the UK are increased then tax revenues would fall.
I replied that of course there is, very crudely a Laffer effect – if taxes ar 0% or 100% on all income then there’s no tax revenue. In between there are revenues, so in a sense there’s a Laffer curve. But that’s not the argument. The argument is whether or not we’re at the point where cutting taxes would raise revenues. Kevin Drum raised this on Mather Jones a week or two back, and in reply to my questioner I offer some of his commentary as explanation as to why the argument that cutting taxes would help raise revenue now is wrong:
Okay, this isn’t actually raw data. In fact, it’s very, very cooked and calculated data. But just so you know, Peter Diamond and Emmanuel Saez have tried to calculate the tax rate on the rich that would maximize revenue to the government. Paul Krugman summarises:
In the first part of the paper, D&S analyze the optimal tax rate on top earners. And they argue that this should be the rate that maximizes the revenue collected from these top earners—full stop. Why? Because if you’re trying to maximize any sort of aggregate welfare measure, it’s clear that a marginal dollar of income makes very little difference to the welfare of the wealthy, as compared with the difference it makes to the welfare of the poor and middle class. So to a first approximation policy should soak the rich for the maximum amount—not out of envy or a desire to punish, but simply to raise as much money as possible for other purposes.
Now, this doesn’t imply a 100% tax rate, because there are going to be behavioral responses—high earners will generate at least somewhat less taxable income in the face of a high tax rate, either by actually working less or by pushing their earnings
underground. Using parameters based on the literature, D&S suggest that the optimal tax rate on the highest earners is in the vicinity of 70%.
Actually, Krugman is being conservative here. If you assume a broad base and no deductions, Diamond and Saez peg the revenue maximizing rate for top earners at 76 percent. That’s for federal income tax only. (See page 173 here.)
You can decide for yourself if you think top marginal rates should be that high. After all, revenue maximization isn’t our only social goal. Roughly speaking, though, this is a calculation of the peak of the famous Laffer Curve. (For top earners, anyway.) Above 76 percent, you really can generate higher revenues by lowering tax rates. Below that, higher rates generate higher revenue, just like you’d think.
I but that: it accords with the world as I observe it.
So for all practical purposes the answer to the Laffer question of ‘will we increase taxes by cutting rates?’ is a simply and responding ’No’.
NB Can’t remember who sent me the link – but thanks
The following statement was posted on the #occupylsx blog this morning:
- Initial statement of Corporations Policy Group ratified by Occupy London’s General Assembly
- Occupy London asks corporations to engage in dialogue working together to create a socially responsible and sustainable economic system.
Initial statement of the Corporations Working Group, as passed by the OccupyLSX General Assembly on 25th November
“Of the world’s 100 largest economic entities in 2000, 51 were corporations and 49 were countries. [3]
With its relentless pursuit of profit at all cost, the present corporate system fits the definition of a psychopath, driving the rapid destruction of our society and the natural environment. [4]
This is done only to benefit a small minority and not the needs of the 99 per cent. The way corporations and governments are intertwined fundamentally undermines democracy. Corporations are rarely transparent or accountable to the people. This corporate system is broken and we call on the people to reclaim their power and bring about a radical and immediate change.
We propose these following points as first steps towards this:
Globally, corporations deprive the public purse of hundreds of billions of pounds each year, leaving insufficient funds to provide people with fair living standards. We must abolish tax havens and complex tax avoidance schemes, and ensure corporations pay tax that accurately reflects their real profits.
Corporate lobbying subverts our democracy. Last year corporations spent £2 billion influencing the British government. We believe exploitative corporate lobbying has no place in a democratic society. Legislation to ensure full and public transparency of all corporate lobbying activities must be put in place. This should be overseen by a credible and independent body, directly accountable to the people.
The existing system of corporate sanctions allows executives and board members to avoid individual responsibility for the consequences of their actions and inactions. Those directly involved in the decision-making process must be held personally liable for their role in the misdeeds of their corporations and duly charged for all criminal behaviour.
A welcome development at Occupy London is that many people working within these corporations have communicated support for our concerns. We encourage anyone to come forward and offer their opinions, or any relevant information, either openly or confidentially, to add to this discussion.
We recognise that corporate employees may feel like they do not have the power alone to create change, but by welcoming them into talks with Occupy London and working together, we can create a socially responsible and sustainable economic system.”
Notes
[3] Sales: Fortune, July 31, 2000. GDP: World Bank, World Development Report 2000
[4] http://www.thecorporation.com/index.cfm?page_id=47, http://www.commondreams.org/views04/0218-01.htm
The tax justice has been put at the heart of the demands. I am delighted to note that. But so too has transparency and real responsibility. These are key issues and that their importance has been recognised is a big step forward for public awareness of them.
As the accompanying statement from #occuopylsx said:
As Chancellor George Osborne prepares to set out his Autumn Statement on Tuesday, Occupy London – a diverse group of people coming together to challenge social and economic inequality as part of the fight for real democracy – today issued a call for an end to tax havens and schemes that enable the wealthiest in our society to avoid paying their fair share of tax.
It also called for full transparency in corporate lobbying, to be enforced by an independent regulator, and for a change to the current system of corporate accountability that would make decision-makers personally responsible for their actions.
Published as part of Occupy London’s Corporations Policy Working Group’s initial statement, these remedies are intended to begin to address the challenges facing the world Occupy London sees as unfairly dominated by large businesses which wield wholly disproportionate influence, and where politics and the corporate world are “intertwined”.
The third policy statement endorsed by Occupy London – in occupation at St Pauls since 15 October, Finsbury Square since 26 October, and which on 18 November in an act of “public repossession” turned investment bank UBS’s abandoned offices on Sun Street into a Bank of Ideas – its ratification signifies the beginning of the UK Occupy movement putting forward structural alternatives to the present system. The move also follows its initial statement of 16 October and recent publication of its first statement of its City of London Policy Group. [1] [2]
“From the moment the Occupy London Stock Exchange occupation started, in the full glare of the media and in the court of public opinion, we have continually been asked what do you want? What are your demands?” commented Jamie Kelsey, supporter of Occupy London and a member of its Corporations Policy Group.
“For us, the first stage has been a focus on creating a space for dialogue – both physically and politically – bringing people together to educate each other, raise awareness of critical inequalities and to begin examining potential alternatives to the current system – both in terms of incremental changes, as well as the more radical.
“What you are now seeing is the beginning of the next stage with the publication of Occupy London’s policies which detail what we want. We are calling time on a system where corporates and their employees pursue profit at all costs. Just as corporates have played their role in the iniquities of the current system, they are also part of the solution and we invite them to join this important conversation. It is time for a more just society for the benefit of the many, rather than the few, and we together can make that happen.”
The statement was passed by the Occupy London’s Stock Exchange camp (OccupyLSX) at St Paul’s Churchyard as part of its General Assembly on Friday. This was the second time the proposal had been brought before the Assembly: on its first appearance before the GA, the statement was blocked by two supporters of OccupyLSX, who then joined the working group to help produce the second draft.
This is the first policy statement of many from the Corporations group detailing steps forward – expect more in the coming months.
As Chancellor George Osborne prepares to set out his Autumn Statement on Tuesday, Occupy London – a diverse group of people coming together to challenge social and economic inequality as part of the fight for real democracy – today issued a call for an end to tax havens and schemes that enable the wealthiest in our society to avoid paying their fair share of tax.
It also called for full transparency in corporate lobbying, to be enforced by an independent regulator, and for a change to the current system of corporate accountability that would make decision-makers personally responsible for their actions.
Published as part of Occupy London’s Corporations Policy Working Group’s initial statement, these remedies are intended to begin to address the challenges facing the world Occupy London sees as unfairly dominated by large businesses which wield wholly disproportionate influence, and where politics and the corporate world are “intertwined”.
The third policy statement endorsed by Occupy London – in occupation at St Pauls since 15 October, Finsbury Square since 26 October, and which on 18 November in an act of “public repossession” turned investment bank UBS’s abandoned offices on Sun Street into a Bank of Ideas – its ratification signifies the beginning of the UK Occupy movement putting forward structural alternatives to the present system. The move also follows its initial statement of 16 October and recent publication of its first statement of its City of London Policy Group. [1] [2]
“From the moment the Occupy London Stock Exchange occupation started, in the full glare of the media and in the court of public opinion, we have continually been asked what do you want? What are your demands?” commented Jamie Kelsey, supporter of Occupy London and a member of its Corporations Policy Group.
“For us, the first stage has been a focus on creating a space for dialogue – both physically and politically – bringing people together to educate each other, raise awareness of critical inequalities and to begin examining potential alternatives to the current system – both in terms of incremental changes, as well as the more radical.
“What you are now seeing is the beginning of the next stage with the publication of Occupy London’s policies which detail what we want. We are calling time on a system where corporates and their employees pursue profit at all costs. Just as corporates have played their role in the iniquities of the current system, they are also part of the solution and we invite them to join this important conversation. It is time for a more just society for the benefit of the many, rather than the few, and we together can make that happen.”
The statement was passed by the Occupy London’s Stock Exchange camp (OccupyLSX) at St Paul’s Churchyard as part of its General Assembly on Friday. This was the second time the proposal had been brought before the Assembly: on its first appearance before the GA, the statement was blocked by two supporters of OccupyLSX, who then joined the working group to help produce the second draft.
This is the first policy statement of many from the Corporations group detailing steps forward – expect more in the coming months.
We will, and I’ll publicise them too.
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