Those were the favourite words of my old deputy head-master. They came to mind when I read that James Owens, chairman and CEO of Caterpillar, said his company spends some $40 million a year on tax planning. He added:
It's a big waste.
As my deputy head would have said:
Just don't do it
To which he would have added his favourite justification:
It's anti-social
Funny. I usually thought he was right then. And I'm sure he'd agree on this right now.
PS Owens made his comment at the same event that Greenspan used to drop a clanger. Must have been a humdinger of a bash.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Good Grief!
Don’t you think it might be worth pointing out the context of the remark? That the tax code is so insanely complicated that he has towaste $40 million trying to understand it? That all of the business people there said please, simplify the thing so that we don’t have to waste this money?
No of course I didn’t Tim.
Because I don’t believe they thought that for one minute.
They just thought they’d like to pay less. I really don’t credit them with more analysis than that.
And as I’ve shown here http://www.accaglobal.com/pubs/publicinterest/activities/research/publications/tech-ft-001.pdf tax simplification is actually code for asking for more means to avoid tax. Which is another good reason not to believe that the context was correctly reported.
Richard
“The leaders of Oracle, Fed Ex and Caterpillar unanimously agreed that U.S. competitiveness, U.S. shareholders and U.S. workers would be much better off if U.S. corporate tax rates were lower, and a lot of deductions, credits and other preferences (e.g., the research and development credit) were eliminated.”
“When Paulson asked panelists whether they’d like to see the corporate tax rate lowered from 35 percent – the top rate today – to 27 percent along with the elimination of preferences such as the research and development credit, Safra Catz, president and CFO of Oracle Corporation, said without hesitation. “I’d trade it in a minute for a simpler, lower rate.””
You clearly read those statements very differently than I do then.
Tim
Sorry – I can’t see your point. The case was for a “I’d trade it in a minute for a simpler, lower rate”.
Not a simpler rate. But a simpler, lower rate.
That’s not the same at all. If he wanted simplicity he would not have needed to add “lower”. But he did.
I stand by my observations. And think they’re right.
I don’t expect you to agree.
Richard
Well of course I don’t agree: If the various deductions are removed but the rate is not lowered than that’s a tax rise.
In order to be revenue neutral the rate needs to come down at the same time.
Tim
No that’s not true. If the allowances are removed more revenue might be raised, but that could be used to lower tax for all companies.
This would still be a tax rise for those abusing the releifs (mainly large corporates) but it would be a fall for those who do not.
So for this reason your logic does not work.
But you’ve also chosen to ignore the fact that so called ‘simplified’ tax systems are in fact a charter for tax abuse. In other words, you’re being rather more selective than me, and without justifying why.
Richard
“If the allowances are removed more revenue might be raised, but that could be used to lower tax for all companies.”
Quite. Thus a lower rate. Rather my point.
“But you’ve also chosen to ignore the fact that so called ’simplified’ tax systems are in fact a charter for tax abuse.”
How so? The most obvious reform of corporation tax is to abolish it (remember tax incidence) and to simply tax incomes at one simple rate. How is this a “charter for tax abuse”?
Tim
I libe in the real world. The theory of tax incidence is a theory: it’s also wrong.
You can live in your right wing fantasy based on such theory if you wish: let the rest of us deal with reality.
PWC agree with me that tax incidence theory is not true.
The IMF agree that flat taxes are not simple, and aare an abuse.
And I’m finishing this correspondence because you’ve now stopped debating anything useful.
Richard
Hi Richard,
Could you clarify what is wrong with tax incidence. Take the example of an employee earning £50,000pa in the UK.
Their marginal rate is 40% + 0.5% employees NI. In addition, the employer pays marginal 12.8% employers NI.
Thinking only about the last £1000, the employer must pay £128 in payroll tax in order to obtain the service of the employee.
Is it not the case that if the government eliminated NI, this money might go to the employee?