This is the outline of the talk I gave to the American Tax Association (made up of US tax professors) in Orlando today:

Joy of Tax

American Tax Association

Orlando

26 February 2016

• The Joy of Tax
  • My argument is simple
  • Tax is the tool with the greatest opportunity to shape the world we want to live in
• This is a macroeconomic argument
  • We now know how money works
  • According to the Bank of England every text book is wrong
  • We now know loans create deposits and not the other way round
• How tax works
  • Suppose we got tax wrong too?
  • Suppose governments don't tax and spend
  • But spend and then tax?
  • Let me assure you that's what they do
• How do we know?
  • Over $6 trillion of QE proves it
  • But in fact we've always known this - this is why we have a national debt
  • And why we have any government created money - because all of that is created by government over spending not claimed back by tax
• So what does this mean?
  • Tax never, ever, pays for government spending
  • The primary goal for tax is to reclaim the money the government spends into the economy?
  • Why? To prevent inflation. I told you this was macroeconomics
• Is that it?
  • No!
  • But what it means is that w have to completely re-appraise what tax is for
• The six reasons to tax
  • Reclaiming the money spent by the government into the economy as far as is needed to control inflation
  • Ratify the value of money
  • Reorganise the economy
  • Redistribute income and wealth
  • Reprice market failure
  • Raise representation in a democracy
• To put it another way
  • Tax is not about paying for anything
  • Tax, from beginning to end is all about shaping the economy in the way w want in accordance with our democratic principles
• Principles
  • Adam Smith
    • Equity
    • Certainty
    • Convenience
    • Efficinecy
  • But this is not 1776
    • And these were largely standards for the administration of tax, not principles on which to base the tax system
  • So in 2016
    • Peace
    • Equality
    • Truth
    • Simplicity
  • Applying this to a real example
    • Country-by-Country reporting
    • An incredibly simple idea I created in 2003
    • Why?
  • Peace
    • John Christensen and I, who were cofounders of the Tax Justice Network were sure there was a transfer pricing problem
    • Developing countries were not collecting the money they were owed
    • Multinationals were transfer mispricing profits to tax havens
  • The consequences?
    • Developing countries were not able to control their economies: the money they need to reclaim is not there to be had
    • Nor is it available from the tax havens
    • So there is international stress: the wrong people have the wrong money in the wrong place
    • Developing countries are constrained on their spending because they have no ability to reclaim money
    • And in many other countries the need to reclaim tax has been shifted from corporations / capital to wealth
    • Stress!
  • But more than that
    • Equality
    • Large and small business are not being treated the same: result a bias to the big
    • And nor are countries being treated the same
    • Whilst access to tax havens has been deliberately designed to creat inequality
    • Faith in the integrity of the system was being undermined
    • This was an issue to address if macroeconomic credibility and faith in government was to be preserved
  • Truth is key then
    • Regrettably some governments have not been committed to truth. Opacity has been their watchword
      • I have defined them as secrecy jurisdications
      • If you want to know who they are read the Tax Justice Network Financial Secrecy Index
    • And some companies have not either
    • Our aim when we set out as tax justice campaigners was to
      • Put large companies on the front pages of newspapers
      • If they used tax havens
      • And if they cost developing countries money
      • With the aim of forcing change from countries and companies
    • And crucially we were always solution focuseed
      • Automatic information exchange
      • Beneficial ownership on pubic record
      • And country by country reporting
      • There were others, but these were key
    • Country by country reporting
      • A method to encourage companies to pay the right amount of tax in the right place at the right time
      • Where right means that economic substance matches accounting form
      • Tell us
        • Third party sales
        • Intra-group sales
        • Number of employees
        • Profit before tax
        • Tax provided
        • Tax paid
        • Equity
        • Retained reserves
        • Tangible assets
      • We can do the big data:
        • Does your reporting match where your profits are likely to be earned
      • So far the evidence is they definitely do not
    • Won at the OECD as part of BEPS
      • Fir tax reporting
    • Now heading for public record in the EU, I suggest
    • Why
      • To provide a tax risk template
      • For
        • Tax authorities
        • Investors
        • Civil society
        • The media
      • This is about holding global companies to account locally
        • And restoring equality for all - as efficient markets demand
      • And what of simplicity
        • Let me not forget the Holy Grail of tax
        • There is no simple tax system in a modern economy
        • But go back to Smith
          • The job is to make sure tax is paid
          • Equitably
          • Certainly
          • Conveniently
          • Efficiently
        • And that requires
          • Good law
          • Investment in tax authorities
          • Every encouragement to transparency
          • And cooperation - call it peace in our time
        • We set out to change the world of tax
          • In some ways that is what we are doing

A mindmap summary of this is here: Joy of Tax Orlando 26-2-16