I wrote yesterday about an Op-ed in the Wall Street Journal that supported Swiss bank secrecy and encouraged tax competition.
In my critique I said:
Blatantly this is the Wall Street Journal promoting the merits of tax evasion and the role of tax havens in undermining the democratic rule of law.
A Channel Islands critic has persisted in arguing I am wrong. He has said:
Where does he say people should break the law?
Of course, it is typical of those in the financial services industry in such places to be unable to identify tax evasion, but let me offer an explanation from a strong supporter of tax competition, Richard Teather, a UK chartered accountant and lecturer at Bournemouth University, who when speaking of the OECD anti-tax haven initiative says (page 81):
This is attacking a classic use of a tax haven, as explained in the previous chapter, in which a person resident in (or otherwise subject to the taxation system of) a highly taxed country places his capital in a tax haven where it can earn untaxed income. While there are many cases where the home country does not tax foreign source income (such as the UK’s non-domicile exemption discussed above), most Western countries have a worldwide taxation system that seeks to tax the worldwide income of its residents (or all of its citizens in the case of the USA). This tax haven income therefore does not cease (legally) to become liable to tax merely by being earned offshore: it is still liable to tax and the investor has a duty to report it to his home tax authority. In practice, however, if the investor does not report his income, then the home country can have great difficulties in discovering and taxing it, particularly if the haven country has strong banking secrecy laws.
While I am not seeking to condone dishonesty or criminal activity, from an economic perspective this is merely another
example of tax competition: indeed, it is often necessary behaviour in order to take advantage of tax havens. Without the willingness of some to engage in this sort of activity, tax competition would be much less effective and therefore reduce the benefits that flow from it for the rest of us.
Note: criminality is often necessary behaviour in order to take advantage of tax havens. and he then argues the benefits flow to all of us.
He is referring to exactly what the WSJ op-ed was applauding, people hiding their money in tax havens /secrecy jurisdictions out of sight of the US IRS, and he recognises that for the benefits that the WSJ says flows from this criminal behaviour is required.
What more evidence do you need?
These people are seeking to undermine the rule of law and all that goes with it. To put it bluntly, they are attacking the very fabric of our society because they don’t believe there is such a thing. The criminal legacy of Thatcher lives on.
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What is wrong with tax competition? Country A has a smart tax system which collects ample revenue which is spent on high quality infrastructure and public services. Country B has a dumb tax system which discourages business and employment, damages the economy, encourages fiddling and fails to raise sufficient revenue to pay for public services which come up to its citizens’ expections.
Doesn’t the country with the better tax system deserve to succeed?
Would that be Margaret you are impugning? I guess the correct moniker would be Lady Thatcher.
Alastair
You prove what a fool you are
Richard
It is wrong to think that all tax competition is linked to tax avoidance. A good example would be Hong Kong and to a lesser extent Singapore where social provision is either minimal or outsourced, which meant that corporate and personal tax rates were very low, which allied with their strategic locations, meant that both city states prospered after the second world war.
Equally low tax rates can be a consequence of efficient public services, and the prosperity of a nation may be enhanced by efficient public services which facilitate lower taxes relative to surrounding states which in turn lead to greater inbound investment. Nothing wrong in any of that.
In the case of the US, their system positively encourages the use of tax havens by corporations where they have income from sources taxed at a rate higher than the US tax rate and other income producing assets that can be located more flexibly. The US system encourages corporations to manage their effective tax rate in any foreign tax credit limitation basket down to the US rate by mixing high taxed income with low taxed income.
is it really foolish to suggest that if you are going to have a pop at someone you should at least get their name right?
to suggest that it is criminal for governments to set tax rates that are lower than other governments set is clearly absurd, so I guess your criminality charge is referring to how individuals make use of tax havens – the relevant governments being branded as complicit in the act? unfortunately that means it is not lower tax rates as such, but laws that enable individuals to evade tax in other jurisdictions that is your target. Given that such jursidictions are disappearing I am wondering why you are getting your knickers in a twist over this?
Alastair
I got her name right
You proved your obsequiousness
That was the foolish act on your part
Richard
Ahhh – so you don’t like the british honours system! Perhaps my foolishness was to not guess that.
Not true
I have been challenged before now as to whether I would accept a peerage if offered one -and the honest answer is yes, I would, albeit I would vote for abolition of the Lords.
But that’s not the point
I don’t call Gordon Brown Mr – even if shortening to Brown
I don’t do the same for Thatcher
The fact that I loathe her and all she stands for just fuels the reluctance
Richard
Hong Kong, and I think Singapore too, get a big proportion of their revenues from auctioning land leases because all land is state owned. This has enabled them to create good public infrastructure without taxing wealth creation.
Richard,
I think alastair must be winding you up as it is not possible for anyone to be so priggish and deferential in the 21st century.
hmmm, but you call him Gordon, but drop Margaret’s first name. Grumpy but inconsistent.
I’m interested to know what you would replace the Lords with – do you favour the American system?
neither priggish not deferential – but I do think she has earned the title – took a lot of bottle to stand up to the system like she did.
Mister X – X (as you’d clearly like to be called)
Or should I say ‘Sir’?
She got the title for destroying industry and social justice in the UK
Do you call that earned?
As for a replacement – STV on large constituences for 10 year fixed one off tenure
That’s my idea
Richard
Do I detect a double standard? I recall you don’t like the private sector so if she destroyed it as you claim she should be at the top of your christmas list. I think history also shows she has a much better record at reducing inequality than the current mob. Defeating Scargill was her finest hour (although you may argue he defeated himself) but this hardly counts as destroying industry – in fact it was what allowed the UK economy to punch above its weight – she didn’t give up on defeating whitehall, but that is an altogether different kettle of fish
most democracies separate executive and oversight – surely you don’t advocate combining the two?
Alastaier
Get your facts right
a) I support the private sector in which I have happily worked for most of my career
b) She created almost all the increase in inequality since WW2
The rest of your comments make no sense
Try 1) reading 2) arguing
Richard
interesting – I was referring to one of your own posts where you claimed that almost everything you value comes from the public sector.
“She created almost all the increase in inequality since WW2” – Actually I would be interested to hear your justification for this.
By ruthlessly pursuing policies that enabled sound economic growth, whilst championing the individual over the state, I think means she is responsible for the reverse of what you suggest. Personally I think that fostering a dependence on a big brother state and trashing our education system is the more pervasive cause of inequality. Something we can thank socialists for.
Remember I said the private sector supplied the froth on the cappucino – the state the coffee. Nothing wrong with some froth too. I never said there was.
research UK Gini coefficients http://www.poverty.org.uk/09/g.pdf
As usual the rest of what you say is as unfounded as your knowledge of inequality and hopelessly wrong
I find it fascinating that people can have such vastly differing opinions of politicians and what they achieved. BTW I am not particularly banging maggie’s drum. I tend to the view that the world would be a better place without politicians (and lawyers for that matter)
I also tend to the view that inequality is a fact of life, and you can no more change it than stop the tides. Money redistribution sounds like a good idea but in practice it never works. Better to provide opportunities rather than hand outs. I speak from experience – my dad’s background was poverty, but he was lucky enough to benefit from the birmingham education system.
Alastair, I guess you did not experience the 80s and have only read about it. Firstly, I vividly remember the fire sales of new capital equipment and the queues of European investors eager to pick up a bargain. This was the result of the sado-monetarist policies of that woman. There was no recovery until these policies were reversed. Secondly, it was Thatcher’s govt which introduced the comprehensive system, if that is what you are referring to as trashing education.
Hi Carol. Since I entered higher education in 79 I guess I can claim first hand experience of the 80s. I also enjoyed (?) comprehensive education – in fact I was in the first comprehensive year of a former grammer school. I guess I am of an age that remembers what Labour and the Unions did to this country, which is why I think some of Lady Thatcher’s achievements should be applauded. Trashing of the education system is a more recent phenomenon.
Carol,
Thatcher did not introduce the comprehensive system, that was Crosland and Williams a decade earlier. Although it is true that as Education Secretary under Heath she presided over the closure of more grammar schools than anybody before or since, I suspect that it was more a case of her following Whitehall diktat than deliberate policy on her part.
As for the argument that she destroyed industry, this is complete nonsense that gets wheeled out time and time again. Overmanning, inefficient, sleepy, state-owned industries, embarrassing British Leyland cars which broke down a couple of hundred yards down the road: British industry had become a joke by the end of the 1970s. Whether you blame that on restrictive union practices, government policy or management, the fact is Britain had priced herself out of work. If industry hadn’t been sorted out in the 1980s, it would have been ten times as painful when it did happen.
The Left should get real: the UK was a country in long-term economic decline in the period in the years to 1979. Thatcher’s medicine may have been painful at times but it completely transformed the country’s economic fortunes from the sick man of Europe to the world’s 4th largest economy. Only a fool cannot see that.
“She got the title for destroying industry and social justice in the UK”
Thatcher did more to pull down class barriers than any Labour government ever did. Her philosophy was that anyone should be able to set up a business and keep the fruits of their labour. She championed the little person. Remember, she wasn’t elected by the middle classes but by the skilled working classes (the C2s). And that is why the Left have always hated Thatcher: because she gave the working man the opportunity to aspire, to own property and to improve his and his family’s lot. And they said “Yes, please”. This is directly contrasted to the Left who think that the working man should be controlled and kept under the government’s thumb.
I remember listening to a debate where some unreconstructed public school-educated Leftie questioned the temerity of the working class to vote for Thatcher. “How dare they want to improve themselves? How dare they aspire to be middle-class?”, he said. Needless to say I thought him a pillock and have been heartily put off socialism since, especially the version that pervades the British Left. It is patronising and condescending. It is also unpopular and electorally a vote-loser, since the last time a socialist government was elected in the UK was 1974. Socialism dead in the UK? I hope so.