The Sunday Times has a good feature on tax havens / secrecy jurisdictions:
Gordon Brown will urge G20 leaders meeting in London this week to back a crackdown on tax havens, asking them to agree new rules to punish multinationals that use offshore shelters to dodge revenue bills.
The move is likely to provoke a furious response from British business leaders.
The plan will ask G20 leaders to: single out companies that put valuable intellectual property such as drug patents, industrial designs and consumer brands into tax havens; spread the net on transactions with tax-haven companies much more widely, meaning most deals would become liable for charges; and stop international financial agencies such as the International Monetary Fund (IMF) from making loans to tax havens that flout the new code.
Tax experts questioned the need for a crackdown. Chris Sanger, head of tax policy at the accountants Ernst & Young, said: “This is a very large change in the tax system and one that would need to be very carefully considered to ensure that it did not disadvantage legitimate activity. To my mind this seems to be taking the campaign against tax havens to an extreme.”
A Downing Street source said: “Taken together, these measures would make tax havens increasingly unacceptable and costly to operate. We have made significant progress but we now need to maintain the pressure.”
I admire the courage of E & Y in commenting — at least they did so.
I utterly condemn what they say.
E & Y must know that if tax haven activity were eliminated we would not need about how to pay for the Millennium Development Goals — all the cash we would need would be available.
So I make the point: E & Y does three things in making these comments:
- It supports the continuation of world poverty;
- It supports systems that undermine democracy;
- It declares its support for undermining the rule of law.
They can’t argue — these are facts, and these are the choices they have made.
And full marks to Downing Street if this is the agenda.
Let’s see it delivered in the Foot report.
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Good comments about the effects of tax havens, Richard, and good to try and keep the pressure on the G20 leaders to do something concrete about tax shelters.
I find the concerns about the effects of cracking down on tax havens to be far fetched. Funny how the average working person has to pay relatively high rates of tax on every form of wealth they are lucky enough to be involved with – be it income on salary, consumption tax on spending, fees for a car license, rates for your home, etc – and yet for some in the corporate world the mere thought of being _regulated_ (let alone taxed) leads to hysterical warnings about dire consequences or the economy.
My comment to Chris Sanger would be that all regulations (and all forms of tax) “disadvantage legitimate activity” – but it is the price we pay to live in a modern, civilized society. Well, it is the price SOME of us pay.
The point I am getting at is, its good that the G20 are talking about improving regulation… but it would be even better if they were also thinking about how taxation can actually have a role in mitigating extreme, reckless, and completely unjust economic activity. It is human nature that if you have to pay a tax on something, even a small one, you really think about it before you proceed.
Question: if there were a small transaction tax on all international money transfers, would this completely cripple the world economy? If the answer is no, then could such a tax be used to pay for the boost in the IMF funding the G20 want.
Nicholas Walmsley
Australia
Nicholas
No – such a tax would not cripple the world economy
Those who oppose the tax have argued it would restrict liquidity. Given the problems certain forms of liquidity in the absence of a capital base have been proven capable of creating this might be a good thing.
Given the right design a Tobin Tax could reduce trading volatility – which is very useful.
In principle I support such a tax. In practice I think it will take effort away from tax haven issues which could deliver much more over a broader base of benefit. That’s why I choose to focus on the tax haven issue
Thanks
Richard
@Richard Murphy
Tax havens are a great place to start… really though they should be an easy win. I guess it says something about the state of global politics that regulating something as obvious as tax havens takes great effort.
Do you think there is any interest in new forms of tax amongst the G20 leadership?
Nicholas
Candidly, no.
No sign of it
Richard
Richard,
I can only congratulate you on your analysis of EY’s statement (a shame that the journalists involved did not make that link and therefore make the implications more widely read than those readers of Taxresearch.org.uk).
I wonder whether this even crossed Mr Sangers mind when he made those comments. I suspect that, like many people, he is so indoctrinated in Western-centric dogma that he does not even see the effects and implications of what he has said (otherwise he would have stayed quiet like the other 3 big 4 firms)