In an extraordinarily mistimed move the strongly pro-Brexit billionaire Sir James Dyson has made a demand that the UK join the world's tax havens in abolishing the requirement that private companies (like his) must place their accounts on public record. Little could better indicate the planned tax haven, race to the regulatory bottom, trajectory of those supporting Brexit than such a demand.
James Dyson has slammed UK rules that force privately owned companies to file accounts that can be viewed by the public, describing them as “anti-competitive” and handing an advantage to overseas rivals.
It's true that the US does not require this. Nor do many tax havens. But the EU does, of course. The FT added:
The billionaire inventor, famous for his bagless vacuum cleaners, said he saw “no reason” why private concerns such as his own should have to make the financial disclosures. “It's not so much the cost of it – although there is a huge cost – it's the fact that our competitors in foreign countries can see exactly what we're doing and we have no sight of what they're doing,” said Sir James.
So let me remind Sir James why we might require this. The list is not hard to understand.
First, it's because of limited liability. No one is asking for the accounts of unlimited companies to be placed on public record, just as I do not ask for private tax returns to be put on public record. So if Sir James wants privacy he has the option of enjoying it. All he has to do is agree to pay all his debts in full, come what may.
But, if he wants protection from his creditors if, for example, his £2 billion electric car scheme fails, which limited liability would most likely provide, then he has to make use of a limited liability company.
That choice is, however, not costless. It imposes a real burden on society. BHS proved that, as have so many others, including no doubt Toys'r'Us and Maplin, only yesterday. And the cost falls on a wide variety of people, including providers of loan capital, suppliers, customers, employees, tax authorities, regulators, host communities in the form of local authorities and civil society at large who bear the externalities of business activity. All these groups need to know the risk they take when dealing with a business that may not pay its debts, and require the information to make sure that their down side is managed as far as possible.
I would argue that stakeholders do not get all the information they need to do this at present. Country-by-country reporting is one obvious case where there is an exception. Sir James clearly thinks they get too much. But this is not the point. The point is to ask why Sir James thinks he should get all the gain and those who pay the price get all the cost? The answer is not clear.
Nor is it clear that, secondly, Sir James is really that clued up when it comes to what is an anti-competitive measure. If he had the slightest understanding of economics then he would know that competitive markets are only efficient at allocating resources when all those working in them have perfect knowledge of what their competitors are doing.
Now, I know that perfect knowledge is not possible, of course. But we need to approximate to it. Unless we do the claim that markets allocate resources efficiently really cannot be sustained. What we get instead is market abuse, monopoly, and anti-consumer activity as well as practices where large companies (of which Sir James' is one) tend to exploit smaller ones because there is an unlevel playing field, not least with regard to information. This is what anti-competitive means. Being exposed to the risk that the market might not decide to deal with you because they do not like the risk of doing so, which is what Sir James is worried about, is about creating a competitive environment. Maybe, and I can only guess, it is that which he does not like?
Whatever the reason though, what Sir James does is reveal the true reason why those business persons backing Brexit did so. They wanted to race regulation to the bottom for their own gain at cost to others. This is, of course, the classic tax haven model.
Sir James is, of course, welcome to go to such a place. But he will find there are problems. There will be almost no trained employees, and little industrial infrastructure. There will be barriers to trade. And there are remarkably few customers. That's because the places that permit the kind of secrecy to which he thinks the UK should aspire are far removed from the realities of commerce. Theirs is a world of make believe where all that matters are the rights of the wealthy and their companies to hide from the view of those on whose backs their wealth is made.
I'm sorry Sir James, but that's not the type of country that I, or the vast majority of the people in the UK, want to live.
As I have pointed out, you have options to secure your privacy, and you can afford to take them. But we cannot afford to grant them. You may leave if you wish. But we want a strong, competitive and informed economy, which is not what you would appear to aspire to. If that means there has to be a parting of the ways, so be it. But the UK cannot afford your deeply anti-competitive aspirations.
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Cordless, bagless and and clueless. I think he has something to hide.
The ‘competitive disadvantage’ argument is just too weak.
[…] the broader signalling is more important, and clear this morning. First we have Dyson demanding the UK behave like a tax haven. Now we have a warning that tax havens must be used to subvert the democratic choices of the UK […]
“If he had the slightest understanding of economics then he would know that competitive markets are only efficient at allocating resources when all those working in them have perfect knowledge of what their competitors are doing.”
Two mistakes in one sentence. The first is not Murphy’s, it is the profession of economics which has, bizarrely, defined economics as the “allocation of scarce resources.” That is like saying that football is the “allocation of scarce goals”. The second is Murphy’s. It is not competitors that require perfect knowledge of each others’ businesses, but the regulators that require this knowledge, and even then it is not “perfect” in the sense of internalities, but “perfect” in the sense of externalities.
That aside, I think this article on Dyson is brilliant. I agree: the last thing we need is Dyson on the subject of Brexit.
Mike
A) I am presuming Dyson buys the conventional view of economics and am playing him by the rules of that game
B) in that case I am right on who needs to know, and what
Richard
This is the same bloke whose son wants to fly his helicopter around the country from his country pile to the annoyance of a nearby village if I recall.
We recently had some training from a law firm and they told us that the Dyson family was busy buying up huge tracts of land in Lincolnshire. Why?
Dyson seems like a natural monopolist to me. I used to empathise with his views on how Government did not really support business start ups like his own in the UK. As a result it seems he has is now a natural anti-statist in my view.
But this is what you get when the State is populated by politicians who think it does not have to help people anymore – entrepreneurs or the poor. If the rules don’t support such people, why should they believe in the possibility of a courageous state? Why would they accept rules that seemingly curb their hard won wealth?
This is also the perverse logic of many upset millennials and why we cannot just assume that people know why the NHS and other public institutions are failing and will vote Labour as a result (many may just think that the State is crap). These people would rather insist that others have as little as them and take their frustration out on the Left or immigrants than try to break through their self imposed limitations and lack of imagination about a better way of doing things. They are people without hope.
Dyson is just bitter and twisted in my view (as well as a successful inventor) but I just wish he would go back to his work bench and stay there.
Dyson is also a member of the micro economy. We don’t need another micro economist telling us how to run the macro economy. We’ve had that for years and look where it has got us.
As I recall Dyson gets £1.6 million in farm subsidies a year
And he does not want us to know about his businesses
I rest my case
James Dyson is buying tracts of land, I believe, to avoid inheritance tax. I don’t think working farmland is subject to this?
It isn’y
Maybe not directly relevant but in my opinion Dyson has a long history of unneccessary inventions: the ballbarrow is no improvement on the wheelbarrow, my vacuum cleaner has used the same (cleanable cloth) bag for years- a simpler sturdier device does the same job; when I was motorbike dispatch riding years ago I would look forward to motorway services with hot air driers that you could aim- warming up and drying hands, arms and face. With a dyson airblade you can dry hands only – don`t get your wrists wet. There may be a use for a bladeless fan ( bacteria free chamber needing laminar airflow?) but in yer average office its just a gimmick.
Dyson is no doubt a knowledgeable engineer but he seems to have concentrated on reinventing the wheel – and not necessarily making it any rounder in the attempt.
He’s just so full of himself, what he believes he contributes to the UK economy that he has lost touch with the reality of the support he gets from others to do what he does.
Richard, once again your argument leaves me confused. On 31 January you published a list of tax havens in which the USA, Switzerland, Hong Kong, Singapore and Germany appeared in the top 10. Aren’t they just the kind of economies to which we should be aspiring? What am I missing here?
Why do we wish to aspire to be places that harm fair competition?
So if you want to stay in the EU, the metcantilist outlook of Germany is the major economic force. Tax haven.
If you want to leave, then USA, Singapore and Hong Kong are the examples. Tax havens.
I was hoping for guidance on where there might be a sweet spot. Obviously remaining is not desirable because of the dominance of Germany. But where are the alternatives?
Germany is not ideal – because of its obsession with secrecy after the experience of the 30s
It is not, however, a tax haven
It is a secrecy jurisidiction
The other three are tax havens
I am not an economist but mathematician and computer scientist. I am interested in understanding better the theoretical (and possibly experimental) foundations of the claim that “markets allocate resources efficiently”. Do you have any pointers (references) that could get me started?
In particular, I could see many possible definitions of “efficiently”, is there one that is agreed upon in mainstream economics?
Read any introductory economics text book
This is the whole premise of microeconomic theory
It’s wrong, but that is the claim
“Read any introductory economics text book” — I looked at the Mas-Collel, there is a lot about equilibria, but I didnt see anything about whether markets actually “compute” (or converge to) equilibria. Chapter 17.H contains a short discussion about the question whether there are processes that reach an equilibrium, but even in the very simplified setting considered, the authors say that it works only if the number of commodities is limited to 2. I see not even an attempt at supporting the thesis that “markets allocate resources efficiently”. But it is a big book and I am wondering whether I miss sth?
Keep reading
The whole of economics is about equilibria
That is why macro is about DSGE – dynamic stochastic general equilibrium – modelling based on micro foundations
But if they only discuss existence of equilibria they cannot support the claim that markets are efficient. Markets are efficient would mean (at least) that markets compute equilibria.
I think you have more reading to do
I am not going to do it for you
Is there a branch of microeconomics emerging to deal with abundant resources? We seem to be treating abundance as a scarcity of scarcity at the moment. It’s not a huge problem in most sectors right now, but can only increase with more automation.
Microeconomics assumes a shortage of resources and an excess of wants
Your suggestion drives a stake through its heart