It's Davos time: the moment in the neoliberal calendar when he high priests of exploitation gather to celebrate their ability to pillage on behalf of the few. Which also means it's that moment when the rhetoric of a world leader or two turns, with a token message, to the issue of tax.
Two years ago it was David Cameron putting corporate tax abuse on the G8 agenda at the same time that he was slashing the UK corporate tax rate, disembowelling our controlled foreign company rules and passing patent box and treasury function legislation to either make the UK a tax haven or encourage the use of tax havens by companies based in this country.
This year it is Barack Obama who, after seven years in the White House and when he has no chance of delivering on the promise says he wants to tax wealth and banks more heavily. The Republicans are, of course, lined up to oppose him saying that taxing the wealthy would reduce the rate of economic growth contrary to all evidence when US growth is now entirely dependent on US state intervention. No doubt, however, they will get their way, for the time being.
But, as Oxfam point out in a new report today, almost 50% of all wealth is now owned by the top 1%, and much of that by the tope 0.1% of wealth holders in the world. We live in a time of obscene inequality which has delivered no proven benefit at all to the world at large.
What is more, we will soon have the data we need to tax wealth. The big problem in tackling wealth in the past has been locating it. Capital flight to tax havens was, even five years ago, so easy that any wealth tax was bound to be little more than an honesty box arrangement. That is beginning not to be the case. Automatic information exchange for income taxation purposes has the side effect of supplying significant wealth data to the world's tax authorities. 91 countries are scheduled to take part in such information exchange within 3 years.
There is one notable exception: the USA. Whilst the US has been at the forefront of the demand for tax data with its FATCA (Foreign Accounts Tax Compliance Act) it steadfastly refuses to supply information to other country's tax authorities on income earned in the USA - which may well make the US the favoured home for looted funds in the very near future. I am sure there are banks there that will be more than willing to give a home to such funds.
But, the US apart, the world is becoming more transparent. The ability to hide wealth is diminishing. The chance of imposing effective wealth taxes is growing. The design of such taxes is an issue I will be discussing in meetings this week and will, I hope, be a part of my work this year.
Davos will probably ignore the issue and throw up its hands in horror at the idea. But Piketty, automatic information exchange, and the obscenity of the current world wealth allocation all demand it. So too does economic growth demand it, and the demand for healthcare, education and a decent standard of living for all require it: we know that wealth concentration is an obstacle to all these things.
Obama may be flying kites on this issue, but that, I have to admit, is better than nothing. He's showing which way the wind is blowing. And widespread wealth taxation will be a reality within a decade, I am sure.
Now who's going to say so at this year's election?
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The Green Party in their 2010 General Election Manifesto p14/15 state they want to “promote fairness, sustainability and citizenship”. Under the heading TAXES TO REDUCE INEQUALITY includes these policies: Introduce new higher rate of income tax at 50% for incomes over £100,000….. Increase the main Corporation Tax…back to 30% Raise Capital Gains Tax… Crack down on tax havens and other methods of tax evasion….
I assume the Green party will continue and enhance their policies on fair taxation for 2015 election.
I hope so too
The Green Party in the US is very disappointing concerning economic issues, especially tax issues. Lots of great sounding platitudes, but terrible specific policies. It doesn’t help that some of their leaders are trust-funders and landlords, so of course they’re not going to support higher taxes on landlords or wealthy capital owners. Their platform calls for taxing corporations more heavily even though corporations don’t “pay tax,” they merely collect tax from others. Only people pay tax. In most cases any tax collected by corporations is paid by their customers through higher prices, or the taxes are imposed on their workers though lower wages. Only if their customers and workers can’t be saddled with the higher tax, then the corporate tax might impact executive salaries/benefits and corporate shareholders.
Large businesses (including corporations, but also partnerships, trusts, special-purpose vehicles and all sorts of other exotic fictional entities created by lawyers around the world) are great for collecting taxes, but the profits tax is the worst tax ever since it’s so easy to move costs and profits around the globe. The only business tax that makes sense is one based on gross sales (receipts) or maybe net sales (gross receipts less local labor costs).
Anyone supporting “higher corporate profit taxes” is no friend to meaningful tax reform.
So something is hard to do well so let’s not try
As a maxim for life I can think of few worse
But that’s hat you propose
Do you set out to fail at all you do?
Richard
But some of that global 1% is you an me. The boundary for global 1% is about $1m including private pensions. So, what are we supposed to do about that? Give our wealth away?
Ian
That is a meaningless example
Of course there are absolute poverty issues
But there are also relative issues as well and so using a global figure is a deliberate distraction
That said, I would be applying wealth tax on net worth of $1m in the UK. It would not be much – I would want a progressive tax – but I could not imagine having a wealth tax that did not start there
And for the record – and it’s easy to find – the house my wife and I own is worth £425,00) and yes, I have some pension saving
But i am not asking for people to give wealth away
I am asking for modest taxation
But I have paid tax due on all my savings, investments and property. I started with nothing, and indeed for a good proportion of my life I had no wealth as my assets were vastly less than my mortgage debts.
Why should I have to pay more?
Because you did not do that all by yourself by a long way
Society provided you with the infrastructure and protection to accumulate wealth and requires a small return in exchange
Bit unfair to say that 1% threshold example was meaningless as the Oxfam paper was about the global figures. And on a global basis many people in the southern half of the UK will be in that global 1% simply by virtue of having a mortgage-free home – as Ian said. On a world-wide basis it’s us that have to pay the extra tax to fund transfers elsewhere in the world because most of us are HNW in global terms. Can’t imagine that people in the developed world are going to vote for that but morally we should be doing it.
And as I said, I think wealth fax should begin at $1 million
You are incorrect Richard in saying that “you did not do all that yourself by a long way”. Of course one can. I am privately educated and obviously paid fees at university. Society has not aides me in any way. In fact, they have only been a hindrance. Why should I contribute to the masses?
If your comment is serious, and I presume it is not, then the ‘education’ you got was seriously deficient.
Who educated your teachers?
And who paid for the university?
And who supplied the whole infrastructure – from supplying the means to pay and the protection for the property from which payment was made – that got you there?
I am hoping you are not as naive as you would wish to represent yourself to be
“Of course one can. I am privately educated …”
It beats me how someone who starts with nothing can be privately educated – doesn’t it have to be paid for? How could you have done that all by yourself? Sounds to me rather more like you were born with the proverbial silver spoon?
As for your view of society as “the masses” – words fail me. I can only assume you must have a very lonely life.
Indeed
‘Society provided you with the infrastructure and protection to accumulate wealth and requires a small return in exchange’
But I paid for this via my taxes, did I not?
No you didn’t
The state owned the moeny you settled in tax
It was never yours in the first place
So take into account the fact that higher earners contribute more to the state than those that earn less. However everybody shares in the state infrastructure equally although those that avail themselves of private healthcare and schooling take less out than those that do.
Your wealth tax is nothing short of politics of envy. And will ultimately kill the goose that lays the golden egg.
High earners do not contribute more
More of their property belongs to the state because the state has afforded them greater benefit in providing the opportunity to accumulate, and protect, it
There is not an iota of envy in my proposal
What have I to be envious of, for a start. I suggest you are projecting your own emotions onto me, and others. It’s a common weakness of those with some wealth they’re paranoid about losing
This concept of yours about the state ‘owning’ the money it collects in taxes is meaningless.
If I am UK tax resident and sell a asset that releases a large capital gain CGT is due. If I move abroad and become non-uk tax resident and sell the same asset, no CGT is due. How then does the state ‘own’ that tax?
If I do not contribute £40k to a pension I pay more tax on my income than if I do. How then does the state ‘own’the tax on that £40k?
Absolute bottom line is that people are free to leave the UK and take everything they own with them. Income is no longer within the remit of the UK and neither even are most UK based assets when sold to release the gains. So much for the state ‘owning’ the tax due on them.
It’s a pointless, meaningless tautology tho say that the state can collect all the tax that the state collects.
Perhaps you merely want to say you believe the state should have confiscatory powers over 100% of a persons income and assets and allows by good grace that the individual can keep some of it.
Good luck with that.
This is so bizarre I can’t be bothered to respond
It is increasingly looking as though inequality may be a key factor forcing down demand. This is closely linked to government, consumer and domestic property debt in developed countries. To remedy the situation and to enable the economies of the affected countries to function properly as well as to stop the theft from developing countries, dramatic action is needed. Better tax recovery and a wealth tax are tools for stopping the problem emerging. Busting the Billionaires and leaving them no-where to run is what we need.
The US apart? Have you not forgotten China and Russia, Iran, N Korea, etc, etc, .
This may surprise you, but not many people hide their wealth in North Korea
You say the U.S. refuses to supply data to other tax authorities?
Surely this is not correct.
I thought the UK and US now had a reciprocal agreement? and that HMRC would in future receive full account details (balance, interest received, dividends received) of any US accounts held by UK residents?
FATCA is a one way ticket
You should check again Richard.
It clearly says on the UK government website.
Implementation of the UK-US Agreement to improve International Tax Compliance and to implement FATCA.
Note 14 clearly states:
“As part of the agreement the U.S. has agreed to provide the UK with reciprocal data on the U.S. accounts of UK persons.”
Do you think this is incorrect?
The standard for FATCA is not reciprocal
This is an exception, not the rule
I remember reading in an economics tax book many years ago that the most effective wealth tax we ever had was the old domestic rating system.