I have had the chance to discuss Andrew Goodall's recent comments on my blog on PWC's World Bank report with him. I see the point he makes about the personal nature of the suggestions I made in the original blog, but do not recant. The reason is simple. PWC actually use the phrase 'connected thinking' as a trade mark. When you fail to evidence that claim I think I can fairly point it out. The claim is based on pride. We all know what follows from that.
And I have to say that Andrew has not justified his own suggestion that my claim that PWC are threat to the world poor is far fetched. My point is simple. The well researched structures that do oppress the world's poor are not an accident. They are created by people. Those are not random people. Most are the real people who run the large businesses, banks and financial enterprises of the world. PWC as the largest firm of accountants in the world service those businesses.
Let be absolutely clear. I am not criticising globalisation by saying this. Nor am I saying business is a bad thing. Or trade. All those things can increase the sum of human well being.
They don't do so to the extent they might. The reason is simple. People like PWC help those enterprises structure their businesses through the offshore world. A world that lacks accountability and transparency. A world used to put pressure on the major democratically elected governments of the world (developed and developing) to change the tax policies that their electorates have approved. They propose tax structures that favour the rich as the owners of capital. And structures that oppress the poor, such as VAT / GST. They promote tax avoidance. They persistently oppose regulation as a burden on business when much regulation protects the majority in society, who are always the 'have nots'.
This is a choice by PWC. Call it a political choice, a moral choice, an ethical choice. It does not matter which. The result is the same. The structures they service DO transfer wealth from the poor to the rich, and by their pronouncements they show they have no intention of reversing the flow. How else can you interpret the implicit call they make that transfer payments through the state sector should be limited when these are the payments that often provide the only means for subsistence for the elderly, the poor, the disabled, the victims of job losses and capital restructuring for which business does not itself bear the cost? Let alone many of the world's children.
Sorry Andrew. Show me why what I'm saying is far fetched and I'll be persuaded. Maybe PWC would like to respond as well. But based on clear reasoning and logical argument I stick to my assertion. PWC are a threat to the world's poor on the basis of the current evidence available.
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Well, I love a challenge. Richard, my comment that your assertion “seems far-fetched” was made in response to two statements. In the headline you said “PwC, a threat to the world’s poor” and later you said: “The conclusion is clear. PwC want to tax the poor.” The second is of course stronger than the first and I chose not to refer to it.
I think most people would dismiss as absurd any claim that any organisation “wants” to keep the world’s poor in poverty. On the other hand, if the global system of which PwC is a significant part — it has 23,000 tax professionals in over 140 countries — is helping to perpetuate poverty, that is a serious matter and the real question is this. What should the firm itself (and other agencies) be doing instead?
There are several aspects of the World Bank / PwC report that concern me and while I don’t have time to discuss them all just now, I have already highlighted real concerns about the impact of tax havens, which the report ignores even though it professes to be concerned with “the need for governments to ensure the effectiveness of the tax systems they implement”.
One more point for now … As I have mentioned, the report’s assertion that a “perfect” VAT can be a “win-win taxation model” is not mentioned in the executive summary. Not surprisingly, it has received little or no press coverage.
The author appears to assume that continued growth in consumption taxes is an inevitable result of reduced corporate income tax rates which are themselves a consequence of “tax competition”. If the multinationals and their global firms of advisers are themselves promoting this “tax competition”, then they can hardly be relied on to provide an impartial appraisal of the suitability of the indirect taxes that governments are having to raise in order to fill the gap.
Andrew,
What you have to rembmberr is that poverty and war are good for business,
The US have just blown $21 billion on the reconstruction of utilities In Iraq without actually making utilities any better.
There are generic drugs that could cost less than .1 of a penny that could be used in the third world, but politicians and drugs companies do not allow this in practice.
A child dies every three seconds in the third world because of lack of water, food or preventable disese, whilst American farmers received huge subsidies to plow 40% of their crops back into the ground.
As a social scientist that has never worked in the finance industry, but has researched its activities I can be more critical of said industries activities.
I think the big 4 are totally shameless, immoral and unethical in their business approach. They wrote the Jersey LLP legislation to protect themselves from litigation and blackmailed the British government to get it implemented.
They appear hell bent on reducing global direct taxation for their super-rich cliental, whilst praising the advantages of indirect taxation which is highly regressive in theory and practice. This is of course without aggressive tax avoidance schemes which is another matter.
Earlier this week I sat in on a Jersey government public hearing regarding zero percent corporate tax. When two witnesses from E&Y and KPMG where asked by a politician about the possible consequences of fiscal meltdown regarding massive changes to fiscal policy the reply from the E&Y and KPMG representatives was a shrug of the shoulders.
No doubt if there is a fiscal meltdown they and their colleagues will be on the first flight out!!!
Chris, in response to your point on preventable deaths … You are right, of course. And the UK media regulator’s decision last year to ban the Make Poverty History “click” advertisements on the grounds that they carried a “political” message was a complete disgrace. This is of course a great moral issue and yet the ads, which highlighted what was happening and referred viewers to the MPH website, was taken off UK television and radio.
Andrew
Thanks for your comments.
I agree with you. It is a strong claim that PWC want to tax the poor, but I base my argument on what is in their report. They do, for example, note that VAT / GST is regressive i.e. it hits the poor hardest. This is universally acknowledged to be true. They also recognise that this can, to some extent be compensated (but in practice not be eliminated) by broad based exemptions from tax for essential items which form a major part of the budget of the less well off. But then they note in their conclusions that there should be ‘limited special systems and exemptions’ in any VAT system. That is a conscious decision to impose tax on the poor, as is their promotion of VAT / GST in general, of which they say:
‘In the end, there is an opportunity for the ‘perfect’ VAT/GST to become a win:win taxation model for businesses, governments and citizens’.
Use of that language is done as a matter of choice. Just a incidentally has been PWCs support for a tax of this exact sort with these exact consequences in Jersey, where the benefit of taxing the poor will be passed directly to the finance industry owned by the wealthy in society. PWC understand the consequences of their choice for the poor. And they are promoting that policy all the same.
I stick by my assertion in the absence of evidence to the contrary. PWC want to tax the poor. To say otherwise would be contrary to the available evidence.
What could they do instead? For a start they could promote tax compliance by business where a taxpayer seeks to pay the right of tax (and no more) at the tight time in the right place. This is possible. And it would mean that those with wealth would contribute their fair share to society, meaning the poor would only be required to do likewise, except in their case that would amount to not a lot. But that’s not what VAT charges them.
Richard
Sol Picciotto (Professor of Law at Lancaster University) made the following comment on the TJN email list when discussing whether the majority of tax legislation is prompted by government incentives or as a reaction to the activities of tax avoiders:
I’d say it’s an interaction between the two. I think John is right,
Treasury and government are reacting to the complexity of avoidance
schemes. But there is a problem of `hyper-lexis’ in Anglo-Saxon
countries, especially the UK, because of the literal approach to
writing legislation. This is carried to extremes in the tax field,
because the assumption is that precise language is needed since taxation
is considered almost confiscation.
That I think explains the resistance to a general anti-avoidance
provision in the UK. It’s also remarkable that attempts to `simplify’
the tax laws have little impact. In the UK the Tax Law Rewrite Project
has so far resulted in five new statutes on income tax, and they are
only just starting on corporation tax! The total number of pages of
legislation has been hardly reduced. An evaluation by MORI showed that
in any case even accountants and lawyers rarely read the legislation
itself (see http://www.hmrc.gov.uk/rewrite/itepa-final-report.pdf)
I have written an academic article on tax avoidance and complexity, if
anyone is interested it’s at http://eprints.lancs.ac.uk/157/
Cheers
Sol