More good argument on the right direction for tax reform, this time from William Brittain-Catlin in the Guardian:
Governments of progressive nations should leave offshore tax havens and their clients to their own devices, and instead boldly declare that they will refuse to have on their soil any corporation, individual, financial entity or transaction that has an offshore connection through which profits (as well as toxic, hidden losses) are funnelled away to third party jurisdictions.
Onshore you're in, offshore you're out, simple as that. And let us subject every company and individual to the onshore test: a rigorous due diligence investigation to make sure that there is absolutely no offshore tax haven link to any company or person that wishes to use the onshore nation as place to do business in. Those that pass the onshore test will then be welcomed to join in and establish the new order.
Brittain-Catlin argues there is a trade off in this. he’s right. I’m not sure he’s got the trade off right, but this is the direction for travel now.
How about bringing off-shore transactions under the Money Laundering legislation?
“…they will refuse to have on their soil any corporation, individual, financial entity or transaction that has an offshore connection through which profits (as well as toxic, hidden losses) are funnelled away to third party jurisdictions.”
I think this means you will have to return the Mac you have just bought, since Aplle, like all other US manufacturers, makes extensive use of these so-called “tax havens” in its tax planning strategy.
Another attempt to drive companies abroad and UK unemployment up?
1. How would you police companies that operate exclusively online?
2. Being part of the EU,what is to stop multi-nationals from moving all operations to France and simply importing goods and services to the UK.
3. What is the bureaucratic cost of auditing each company and then fighting inevitable legal challenges to decisions.
Richard – when are you going to advocate tax policies that will actually promote growth in the UK?
@Million Dollar Babe
I know it does
So what? I deal with change to the system, not denial of reality as it currently is
@James
Tax havens destroy jobs by misdirecting the efficient allocation of resources, increase inequality and create poverty. They harm the UK as a result
The answers to your questions are simple:
1) No tax relief for any payment to a tax haven
2) No distance VAT registration for sales from a tax haven
3) Personal liability in criminal law for those who sell despite 2 if they come to the UK
4) Tax deducted from all investment income and gains paid to a tax haven
Then see what happens
And re the audit – make the auditors liable for declaring tax haven activity under country-by-country reporting rules
Job done
Now we just need to get the EU on side
Richard,
The purpose of my comment was highlight the absurdity of the Guardian’s contributor.
If these ideas were actually implemented, you/we would have no more US computers, Japanese cars, Chinese toys, Scandi mobile phones. We would also no longer have US-owned cable or sattelote broadcasting services, or French power supplies….
This sounds more like hell (or North Korea) to me than anything else.
@Richard Murphy
Tax havens don’t cause poverty and don’t increase inequality. They may prevent governments from addressing these ills, but in the same way that the absence of 100% income tax and redistribution does.
I’m sure you have seen the complexity of some multinational company structures (as I have). Points 1-4 rely on shafting auditors by making them liable for international legal tax loopholes. Massively increasing their risk, the cost of audits and would probably be resisted by their professional body.
If you have the EU onside – why don’t you just close the loopholes that centre around companies HQs in Netherlands and Ireland?
@James
The point about these companies that exploit tax loopholes and tax havens is that they do not create jobs. Since 1979, when all this laissez faaire clap trap started, unemployment as remained stubbornly high. Prior to this there was almost full employment.
It seems to me that the corporate sector is holding the nation to ransom by saying “Let us off tax or we won’t invest in your country”.
I say, “Well *iss off then, we don’t want your kind here. We can run our own affairs and create our own jobs”
And of course we can if we believe that it is labour that creates wealth, which of course it does.
@James
Online transactions could be taxed in real time by HMRC in a way similar to the way in which the Construction Industry Scheme operates, so that the buyer is obliged to retain 20% of the purchase price and remit it to HMRC. Failure to do so should be an offence under the Money Laundering
legislation which potentially carries a 14 year prison sentence.
I don’t understand your point about a company moving its operations to France. France is not a tax haven and in case the UK has a double taxation agreement with it.
@Million Dollar Babe
and
@James
The usual utter drivel
The reality is we’d have all those products – and no tax abuse
Companies must make money and can only do so from customers – very few of whom are in tax havens
Behaviour would change, dramatically
And your comments show just how stupid (word used advisedly) you are when it comes to politics, economics, auditing and much more
In my opinion there should be more education about tax avoidance that everyone would understand that avoiding tax might help them in short run but in long run it’s just bad for the economy…
I really liked William Brittain-Catlin’s article – with the exception of one stray paragraph which seemed not to fit with the rest of it:
“There will be no hiding place for profits and asset ownership in the onshore economy but neither will there be a return to the high-tax model of the state, a model continuously degraded and made impossible by constant trade-offs with businesses to keep them from fleeing offshore and which, in its ultimate tolerance of offshore practices, led to the rise of shadow banking, the financial crisis and the near bankruptcy we are now mired in.”
But getting rid of offshore wouldn’t affect total taxation as a share of national GDP – it would rebalance that tax from labour and expenditure to corporate profits but there’s no reason to think the overall tax burden would go up or down as a result. Or am I missing something here?
@Howard
If this also tackled higher rate taxpayers who use offshore then the yield may rise at a personal level too
That woild again allow redistribution
But you’re right the overall share of GDP need not change