I have just recorded for Thomson Reuters in anticipation of Thursday's corruption summit and as a reaction to the letter from 300 economists.
The opening question sought to discover why I opposed tax havens. I gave two reasons (one has to be brief when doing these things). The first was that tax havens are deliberately designed to increase inequality in the world, and do so. Thart's because they permit those with wealth to opt out of taxation.
My second reason is that tax havens are deliberately designed to undermine the world's markets, whether they be for capital or trade. This is because market theory (and practice) requires that inf0rmation be available to all participants if they are to make the best possible decisions that will reduce risk, keep the cost of capital to the minimum poissible, allocate capital efficiently, and so maximise prodtcive invetsment and the consequnet opprtunities that can be created for people to enjoy. By creating opacity, delivberately, tax havens seek to udnermine this process.
In this twofold attack, one on the democratic right of governemtns to tax as they will in accordance with the mandate that they have, and the other on the right of markets to operate in the best interests of society tax havens pose a threat to the two pillars on which werstern society has been built. The charge sheet cannot be more serious than that.
Having explored these issues I was then asked a final question, which was what the world would look like of there were no tax havens. I suggested three things.
First, I said we could follow the money. And that would mean more tax would be paid by the right people, in the right place, at the right rate and at the riught time. This would reduce the tax gap, increase tax yield from the wealthy who owe it, reduce government deficits, increase social investment, raise productivity, end the need for austerity and transform the current state of government financing that has had so many pernicious conbsequnces for people around the world. We would all be better off as a reuslt.
But more than that, capital and trade markets would also be liberated to work to best effect. The risk in these markets would be reduced and the rate of return required on capital would fall as a consequnce. This would increase investment and the return to shareholders. Equyity markets could then peform their real task of allocating capital to its most effective users. Growth would follow, and with it an increase in prosperity.
In other woirds, from whichever side of the debate you come, and from both (as I do) then the result of tackling tax havens is an increase in well-being for everyone in the world. I am unambiguous: I am sure that this is true. It is just about impossible for it to be otherwise and tax havens have no way on earth they can counter the argument.
All they can do is throw money at preserving the status quo. I was asked if I could see that status quo suyrving. I made clear that in 13 years of cmapigining we have seen massive change on this issue. And we will see a great deal more. The status quyo is dying. Tax havens will be history at some time in the future. And maybe sooner than they expect.
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Attitudes change slowly, then very, very quickly.
The Mossack Fonseca data heist is still playing out; the latest being revelations of a ‘boiler room’ share dealing fraud targeting British pensioners.
I do not doubt that worse things will emerge: if not from the MF hack, then from the next, and the next after that.
There will definitely be another data theft; and it is worth remembering that state-level adversaries have far better tools than the amateurs who cracked MF. It is certain that every offshore entity creator has been hacked and indexed by the security services, in search of funding for islamic extremists and domestic dissidents; and it is unduly optimistic to assume that they will always walk away from evidence of criminality and tax evasion.
You’ve no doubt also seen the article by Aditya Chakrabortty in The Gaurdian then, Richard?
http://www.theguardian.com/commentisfree/2016/may/10/corruption-developing-world-problem-london-summit-panama-papers
The whole piece is excellent, but the last few paragraphs are a gem:
‘But weren’t we powerless to stop Jersey and the rest? The lawyer went through the precedents. Britain, he pointed out, had repeatedly imposed its law on its overseas governments. In 2000, London forced the Caribbean territories to decriminalise homosexual acts by Order in Council. He thought the same thing could be done to force the offshore havens publicly to disclose who were the ultimate “beneficial” owners of the trust funds.
How long would that take? “Oh, two sides of A4. It could be done by the next morning. All it takes is the will.”’
I might have known that article was coming
It would help if you explained that countries like the UK, Germany, the US, Switzerland and Japan are in the top 10 tax havens, according to the TJN.
The issue looks different once this is known.
I say it often enough
300 Norwich City supporters signed a letter co-ordinated by Tottenham Hotspur arguing that Leicester City “no useful place” in the Premiership. The trouble is that the tax havens are all too useful for some people. corporations and organisations. And with the tech’ facilities now in place and in the future, in effect all of them are just way stations as the money goes round and round.
Excellent comments. Should be required reading for every economics, social and political studies student and every aspiring politician. We live in a critical time facing combined ecological, economic, social and political melt downs. To prevent mass global poverty, resource depletion, irreversible global warming and major social unrest we must get to grips with alternative thinking that you advocate.
Funny how only Nigeria and Afghanistan are “fantastically corrupt.” Motes and beams spring to mind.
Indeed
Two sides of the same coin?
I hope these people and the rest of the private financial extortion industry will be consigned to history very soon too!
https://www.theguardian.com/business/2016/may/10/hedge-fund-managers-salaries-billions-kenneth-griffin-james-simon
Richard
Are you aware of the position and actions of the institute of chartered accountants regarding the summit?
I would hope that they would be a leading light in seeking to outlaw tax evasion and cavalier/agressive tax avoidance.
I have not seen a word…
Oh well , we’ll just have to live on hand outs from the UK then. Can’t help with tax receipts as we’ll all be unemployed lol. We do not all live off the the finance sector you may be surprised to know but minus it there won’t be much left. Apart from online gambling which I doubt you approve of. I know we can grow spuds and catch fish ( forgot we cannot as EU agriculture and fisheries policy has destroyed that as well ). Ivory towers – wish we could all live in one of them.
You will, I admit, have serious migration amongst those who are only there to exploit your island
And I do agree the UK will need to give aid
But let’s not get too generous. Steel workers come first as may those who work for BHS.
That sounds like the same sort of argument used to justify slavery – what will all those people do on these islands if there is no slavery anymore?
I think you’ve got the wrong end of the stick Michael, whatever the solutions may be to creating sustainable island economies defending an obvious injustice is not one of them in my opinion.
Not really , just musing about the consequences which will back to the 60’s with high unemployment and poverty resulting in lots of migration. So the population will shrink , tax revenue will collapse. High transport costs mean that there are no alternatives. The gamers are here due to 0 – 10 so they will be off elsewhere once that ends. So not really trying to justify anything just pointing out the consequences. And nothing is obvious it seems to me , just very grey in about every jurisdiction and I can’t see that changing very much.
So you’d rather live off immoral earnings?
That is a bit harsh as is the slavery analogy . I was merely making the point that the alternative will be poverty unless the UK take the ‘dependency ‘ part seriously . They have never done that before and will not do it in the future. The young will leave ( don’t blame them ) so an old population with no govn revenue will just die off. Those lucky enough to have access to a proper UK passport can come back and leech off the UK system ( not all have ). So that is all fine. I was just trying to point out that ordinary people will suffer. And I doubt that you really care about that as we are the hated tax haven. One mans meat et al. Describing a whole island as pimps should be beneath you I would have thought. I suppose that is what is wrong with the extreme left and extreme right – both far too concerned with dogma that both forget that what people want is their leaders too provide the level of public service required in a cost effective manner. I don’t even know what a libertarian is ( apart from that bloke Johnny Depp played ) . How hard is that? All I see hear are no real solutions – only rhetoric I struggle to understand.
Do you have the same sympathy for the victims of global capitalism?
And the jobs that secrecy destroys?
I thought not
Stop peddling Isle of Man propoganda
A question that I thought of yesterday: if the tax havens refuse to introduce a public register, why not require UK based accountancy firms to provide a register of all their clients in specified tax havens as a condition of being allowed to operate in the UK?
It won’t cover all companies registered in Tax havens, but it will cover a huge number.
Excellent idea
But I could not get it in the UK when a bill I wrote to do that was tabled in 2013
So the democratically elected representatives of the UK have had the chance to consider this issue, and have rejected it.
Am not sure there is much more to say.
That in a democracy all decisions are interim
I am not buying into this. Way too much funny stuff going on.First the Panama papers. No security on these things? Then the politicians start talking about getting rid of tax havens. Really?The politicians are there for the rich and the corporate elite. They DO NOT represent me. So are they going to make some kind of under the radar change that will make it look like the rich are paying more tax but really are not? Some kind of gobbledygook double speak perhaps? Something is very fishy here. Are these Panama papers even real? The jobs that government talks about creating. Not sure if anybody else has noticed, but…. automation is taking over. I can see the government wanting to make a basic income for all, since the robots are taking the jobs over. Kinda hard to create a few million jobs when they are being automated.
Way too fishy.
Do we really believe that if politicians collect more taxes that “This would reduce the tax gap, increase tax yield from the wealthy who owe it, reduce government deficits, increase social investment, raise productivity, end the need for austerity and transform the current state of government financing that has had so many pernicious consequences for people around the world. We would all be better off as a result.” We should perhaps also look at the quality of our politicians and see how well they are enforcing the tax rules of their country on their residents and on what they are spending the tax revenue on. How is it possible for countries with income tax rates of over 50% and social security rates of over 20% employer and 20% employee to have a budget deficit unless they are not enforcing their rules on all residents or spending money on politically correct but not local issues. High unfair tax rates forces people to take avoidance measures and makes it pay to do tax planning. Reduce the rates and spend the revenue in the right places would certainly reduce the appetite to evade.
There is a UK tax gap, I agree
But why is tax unfair?
There is tax evasion at very low as well as at high rates of tax
What evidence do you have that tax rate and evasion are linked?
What evidence do you have that tax evasion exists in low tax countries as well as high. Tax evasion exists everywhere. So does corruption. It is human. However, the the appetite and the cost benefit for tax evasion is reduced if the amount of tax on hard earned money is reduced.
Prove it
Ah you got that wrong a bit. Tax Evasion is illegal and should be rightly prosecuted. Tax avoidance is legal but it does in some circumstances look very bad – rightly so. But if a tax rate is set low ( eg CGT on a business gain at say 20% ) the vast majority of taxpayers would be fine with that. I am sure you know as someone who has built a business sweats blood. I did. Or do you think we should pay more tax for those 70 hour weeks?
.
There is no evidence to support this contention
Jersey needs a general anti-avoidance principle
Now why is that if low taxes prevent tax abuse?
There are some fundamental social and moral principles raised by Karl Horsburgh that need to be questioned, as for too long these capitalist messages have been seen as unquestionable.
1. Why is capital allowed to freely move from country to country and therefore evade many social and environmental responsibilites?
2. Why should capital be allowed to evade the democratic decisions taken by a countries government that is deemed in the best interests of the country?
3. Why are the vast majority of capitalist businesses completely non-democratic in their ownership structures?
4. Why do we listen to the words of autocratic capitalists and allow their interests to dominate a so called democratic nation?
5. As private financial capitalism is essentially “ruled by dictators” who have absolutely no democratic accountability to anyone but their own financial interests, why on earth do we think the results for society will be any better than those in any other dictatorship, autocracy or even plutocracy?
These are the essential questions of our time, not whether the tax rates are fair or unfair on those unfortunate capitalists who moan so much about how hard they are all being treated.
Sadly, the answer to all your questions is simple: he who pays the piper calls the tune.
The wealthy, powerful and psychopathic have always run the joint in their interest.
Apart from a little post-war attenuation, it was ever thus – and, depressingly, most likely always will be.
If people did not invest their money and take risk there would be no businesses. If there are no businesses there are no jobs. If there are no jobs people cannot earn a living and depend on social security. If there are no businesses and no people to pay income tax and VAT there is no social system. Do not punish the entrepreneur for taking risk and providing jobs by taking away more than 50% of his reward for taking the risk and providing the jobs. I am convinced that if we were to ask a contribution from companies and individuals of say 25% most of the use of tax evasive action would actually stop. Add to that the proper allocation of those revenues by politicians would also convince people to do the moral thing. Taking away peoples privacy and choice does not produce the right result.
Oh dear…
What about social enterprise?
What about the state?
What about charity?
All you have said makes no sense at all
It is as bizarre as believing in fairies at the bottom of the garden
MrShigemitsu – I refuse to accept that what has gone before is the way the world will always be. If that were to be true most of us would still be slaves living in an even more violent, primitive and un-civilised world than we do today.
To believe in social progress, requires idealists and dreamers and those with the will to fight for social justice even though it may be past our lifetimes before such changes occur.
Otherwise we would all end up without hope for a better world for our children, grandchildren and their off-springs. I personally refuse to think that way.
Karl – I suppose you mean UK entrepreneurs like the Candy brothers?
http://www.theguardian.com/news/2016/may/11/candy-brothers-offshore-firms-uk-tax-panama-papers
One can only afford Social Enterprise, State and Charity when one has a prosperous economy created by entrepreneurs who are prepared to take risks and lose their money. Stealing their hard earned rewards for taking those risks and providing a livelihood to the rest of the population by punishingly high taxes is a crime in itself. We have plenty of examples of this around the world.
There is a balance here. Restricting freedom of choice just puts the power into the hands of the people who have access to this information and can use it for their own benefit. Big Brother is watching you. 1984 is not so far away with FATCA and automatic exchange of information. We should ensure that our tax authorities can do their job properly. That is the way to make tax collection more fair not make bankers, accountants, lawyers etc the countries tax collectors.
Totally and utterly untrue
Labour creates value: the nature of its contro does not
Stop talking nonsense from Luxembourg
Well I kind of , I think , understand what Karl is saying, i.e. Entrepreneurs drive our economy – well they do . That is fine but we need that . We also need the people I have spent time with this helping with the poor last month in Glasgow and elsewhere. conservative and SNP lot do nil to help them. The odds are there to force them down no matter how they try to better themselves. This has nothing to do with tax justice,. Do that and really help.
So the state does nothing to help the poorest
I am sorry – but this is Isle of Man nonsense supporting Luxembourg nonsense
And fan that I am of business, it is people who create wealth, not organisation structures, and teachers make the same wealth when in front of a private sector or state sector class
You are simply wrong
Michael & Karl – in my 30+ years in private business, I have met several good entrepreneurs who have invested a large amount of time, effort and money (often but not always their own) in developing socially worthwhile businesses contributing to the local economy by paying good wages and benefits for their workers. They have had no need for complex business structures to avoid tax or minimise their obligation to society, because they have had care for the environment and the community in which they operate. They have put more into their community than they have taken out thereby improving the lot of everyone and not just themselves. I will call them positive and constructive entrepreneurs for want of a better word. They are in business and pay their fair share to all their stakeholders (including the tax man) because they can see the value it provides to their community and society as a whole.
But these few entrepreneurs I have met like this are the absolute minority and that for me is the problem with your fictional statements. The majority (by value of business as well as by numbers) of entrepreneurs I have met have been opposite characters who I will call negative destructive entrepreneurs.
These people are primarily (in some cases only) interested in themselves and are hell bent on destroying the community and society in which they operate (and usually don’t live), because that is where profit is to be made by offshoring, outsourcing, breaking pay contracts, removing benefits, reducing all costs to a minimum no matter what the social or environmental cost. And these characters have been most prevalent in the largest organisations and especially the financial investors I have worked with or met along the way.
So when you spout your text book ideas of what such an ideal capitalist entrepreneurial society would look like, in my view you have no idea what is actually going on in the real world and need to go and re-think what your own experiences may actually be telling you (or go and get some real world experience at the sharp end of society)
But if you are one of those people who really only cares about yourself and nothing about society and the environment then you are of course right in your opinion of what value the majority of entrepreneurs bring to this world.
Fair enough Keith if that is your view. But here in Glasgow that is not my experience. Most of us who run a business care about the fact our employees rely on us – and we value them. If you don’t believe that there’s not a lot I can do to convince you otherwise. But hey ho , I deal in the here and now , unfortunately I have to leave changing the world to those with time on their hands.
I do not believe you are in Glasgow
It is not in the Isle of Man, for whom you argue
And as you do, you are clearly trying to prevent change, for which you have time on your hands
Stop dissembling
I believe very many people who run a business care for their employees, my point is there are many that do not or care very little. The greater the separation between ownership and worker and community, the greater the problem in my view. Placing the ownership offshore demonstrates to me little or no care for workers or the local community in my opinion.