As has become apparent over the last week or so, I am increasingly critical of the current direction and focus of the tax justice movement. I have already published one blog that has been critical of the Tax Justice Network's (TJN) approach to the Biden led global tax plans that have now won G7 and G20 support.
I am well aware that the deal in question is less than ideal. It favours developed countries. It does not include enough companies. The tax rate is too low. The amounts of tax to be apportioned are too small. There are numerous reasons to be critical of it. I am.
However, it is easy to be critical. Let us talk about the pluses. There are aspects to this deal that are extraordinary. First, 130 countries have signed up to this. That is already surprising. And the holdouts are all the usual culprits, and very largely rather obvious tax havens.
Second, the deal does something unprecedented: it creates the international legal precedent to deliver a global minimum tax rate. It does so without violating the rights of any state (although some will argue otherwise, but the way it is constructed permits my claim). And that global tax rate is likely to be effective.
Third, this deal is deeply threatening to tax havens: the zero rate taxes that they offer cease to have appeal for large corporations as a result of this. If that is not of note, what is?
Fourth, this will increase global corporate tax takes. That is good news.
Fifth, and of massive significance, the behavioural impact of all this is dramatic. It hits some very particular types of tax planning and the culture that has supported them very hard. It can be argued it could hit them harder. I agree, it could. But to suggest that this will not change the culture of tax planning would be entirely wrong. It will, and likely as much as it changed when in 2012 Margaret Hodge tore Google, Amazon and Starbucks to shreds in Parliament.
Finally, of course the deal is not good enough, but I have said the same of every OECD led deal to date. They have never delivered all I want. I put it on record now that the 2015 BEPS deal was really quite disappointing at the time, and I had worked very hard to deliver it and country-by-country reporting. I am sure I said so. But now we have another deal. And that is the way that it always works at the OECD. The next negotiation begins as soon as the ink is dry on the last one. And I am certain this is already the OECD's plan: they will also be unhappy with this deal, for sure. They too know it is not all that is needed. But within the constraints of global political economy this is what could be achieved now. That is the fundamental reality that those criticising this deal are missing. Just six months post-Trump this deal is almost wholly unexpected. Of course I am going to celebrate that. But tax justice is not.
The criticisms from TJN are those I have already mentioned. To these they add:
- That the OECD should not be negotiating this deal, and the UN should instead;
- Countries should hold out for a higher tax rate;
- The deal does not fund Covid recovery in developing countries;
- The deal reinforces historic power relationships;
- As a result it is, to quote Oxfam, 'unfair'.
In response to it we got this comment from Alex Cobham, who is the current chief executive of the TJN:
The global minimum corporate tax rate can mark the beginning of the end of the race to bottom on corporate tax. But the OECD increasingly looks unable, or unwilling to deliver a fair and effective reform. Countries should take the opportunity to push ahead with their own reforms, and consider the possibility of future negotiations being held under UN auspices instead.
I think I have a duty to say that this is complete and utter nonsense. As a co-founder of the TJN, as one of the two people who led it for a decade, who co-created with John Christensen all the policies it still pursues, and who has negotiated on its behalf many times in international arenas, I am deeply embarrassed to see its current chief executive issuing a comment that is so utterly ill informed, reveals so little understanding of political economy, and is simply wrong.
As a matter of fact the OECD has delivered an end to the race to the bottom. It is absurd not to recognise this and to congratulate the OECD for doing so.
Instead TJN makes the wholly unfounded allegation that the OECD is not trying, and does not even want to try. My simple suggestion is that if Alex Cobham stopped the abuse of the OECD and others, which has become his stock in trade, and instead invested time and effort in talking to the OECD, negotiating formally and informally, learning the constraints, understanding the mechanisms and working out the arguments that might win rather than delivering the tantrums that can never work, then he might have influenced this process rather than watched it from the sidelines.
John Christensen and I did all those things. That is why the tax reform programme that we co-authored in 2005 pretty much became the agenda for international tax reform for a decade. TJN has undertaken no innovation since then. I should, however, note that this is unsurprising. Neither Cobham, or anyone else in the tight team he keeps around him, has any actual knowledge of tax, in which none of them have ever worked. Nor do they know anything about political economy. Or tax havens as far as I can tell. Or anything else that is much relevant to tax justice come to that. Their skills are only in NGO management and some forms of index creation. It is on the basis of this limited skill set that they criticise the OECD.
So let me put my opinion on record. I have known some in the OECD team for a long time. I have discussed their motivations with them. I suggest Cobham's allegations are insulting, and I can only presume he meant them to be so. I am clueless as what he thinks he might achieve as a result.
What does trouble me though is his totally naive suggested alternatives. First let me deal with the suggestion that the UN should take over negotiation of this issue despite the fact that the UN has neither the expertise or resource to undertake that task, and where, inevitably, the same international players would engage in much the way that they now do at the OECD with the same likely outcomes: that is the way that international political economy (of which the current leadership of TJN seem to know little) operates.
Then let me also address the suggestion that he has also made that this deal is being imposed. If he really thinks that then he has no clue about political economy, and the very real constraints (not least in the US Congress) on this deal. It's actually embarrassing that he has made such suggestions.
To summarise, the only consequence of the demand TJN is making, which others are regrettably echoing, would be to create confusion in international tax negotiation as turf disputes for control took place, with the inevitable consequence being that there would be no progress on anything around this issue for maybe a decade. Unfortunately, I have to wonder whether this is what the current NGO-style leadership of TJN wants. There have long been criticisms of NGOs that do not appear to wish to solve the problems that they are supposedly addressing because that would, of course, make them redundant, and that is not what professional NGO managers rather than dedicated campaigners want. I can literally offer no other explanation for Cobham's suggestion with regard to the UN taking responsibility in this case when there is not a shred of political economic logic in thinking that the UN will deliver any better, quicker or viable solution to the taxation problems that we are facing.
Then let me turn to the suggestion that countries should now institute their own new tax regimes to seek to undermine the impact of this deal. In other words, what Cobham is suggesting is that just as the OECD is bringing one of the most harmful forms of tax competition to a close he wants to reopen it. That would happen because individual country responses would, of course, not just undermine the newly created international tax consensus, but would inevitably create new forms of tax competition, and all the opportunities for abuse that they create.
Again, this is quite extraordinary. Cobham was not around when TJN was created, but in no small part that happened in response to the 1998 OECD publication on harmful tax competition. The question John Christensen and I always asked was what benign tax competition might look like. We set out to prove there was no such thing, and candidly I think the OECD (and increasingly the World Bank and IMF) were persuaded. All three are now proponents of causes we could not have imagined when we stated, including reducing inequality, global minimum corporation tax rates, enhanced transparency around many aspects of tax, and wealth taxes. But now the TJN is actually promoting a new wave of tax competition. It is almost incomprehensible that the organisation to which I dedicated so much time might do that. Bluntly, Cobham and his team are failing the tax justice movement and those countries whose interests they claim to represent very badly indeed. I am ashamed of them.
This blog is already long. I am well aware that some will never talk to me again for writing it. Candidly, I do not care. It took courage to see tax justice through its first decade. If it takes courage to say that TJN, and to some extent many other tax justice organisations, are now failing to deliver the tax justice that we set out to create I happen to be at the point where I am willing to take that risk too.
But I stress, I am not being negative for the sake of it. That was never the way of tax justice campaigning when I was most heavily engaged in it. The simple fact is that the angry, frustrated, inappropriate criticism Cobham has made is deeply revealing. I think it reflects a cause that has utterly lost its way.
The unfortunate fact is that TJN, and regrettably too many others in tax justice, simply does not understand tax. Their refusal, for example, to recognise the significance of MMT and the opportunities it creates for tax to be truly transformational within society is example of that, and deeply worrying. It reveals a campaigning network too invested in its own survival to ask real questions about the campaign it is pursuing. Of course MMT is limited in application to developing countries, but corporation tax is even more so not the answer to all questions. Despite the overwhelming evidence that this is the case, tax justice refuses to see it otherwise.
The last point made is particularly important: corporation tax is a small tax, and although much more significant in developing countries than developed that is at least in part because of the massive underinvestment in domestic tax authorities in those countries, which should be, but has not been, a sufficient priority for tax justice campaigners.
And to fail to recognise the importance of other taxes, and to even to refuse to endorse their capacity to address issues like the funding of Covid in developing countries, as TJN has done recently, is utterly irresponsible.
More than that though, this inappropriate concentration of effort has, as already noted, meant that TJN has failed to innovate. I will address ways it might do so, with enormous potential benefit, in blogs to follow this one. To do that is, I think, important. TJN is what I now consider a failed NGO (it is no longer recognisable as a campaigning organisation, and actually says it is not on its website) that needs to be called to account. My suggestion is that TJN has either to reform, or for the sake of the world’s tax systems, which I am reliably assured it has been doing its very best to undermine by working so hard to oppose the Biden deal, it has to be called out as the opponent of tax justice that it now is.
The reality is that the need for tax justice is as strong as ever. But without a vision, without a policy programme that is innovative or adaptive , and with aggression rather than diplomacy being its approach to the international organisations it has to persuade to change, TJN is not under its current leadership remotely close to being able to deliver on tax justice. I deeply regret that. It profoundly pains me to have to say this. But the time has come to do so. Tax justice demands it and that is what I have always been willing to make sacrifice for. I have stood up against many to fight for tax justice. And if, as I now think is proving to be necessary, that requires that I call out the failings of an organisation I helped create and direct, but which has profoundly lost its way, then that is what I will do.
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Very sorry to hear of your frustration Richard.
A case of the perfect being the enemy of the good maybe by them not accepting that real progress is being achieved by the OECD.
The problem is that it is VERY complicated and the corporate tax lawyers are adept at running rings around the diverse government tax authorities.
We MUST pocket the gains when they are achieved and keep on with the fight.
The alternate Is the continuing errosion of financial base of our Liberal Democracies to be replaced by the much more EFFICIENT financial model provided by the Chinese style autocraties
But for more than a decade we rang circles around the lawyers.
Single mindedly pursuing objectives without understanding them or their contextual logic is now the problem.
The reality is that there are issues to resolve here. But abusing those delivering progress is no way to achieve that and indicates that the ability to argue on substance has been lost. That is what worries me.
I feel you frustration believe you me.
Dear Richard Murphy
I am appealing to experts such as yourself to help build a national government of unity with Citizens assemblies t produce a manifesto asap, before COP22, as the only way to avert or at east ameliorate the environmental crises facing us.
Below is an article sent to Green World. I hope you would be one of the economists showing how people can be protected through the changes to come.
Best wishes and thanks for your work
Alicia Hull
01263761471
Campaigners must change their tactics if they are to succeed in combating the emergencies of climate change and environmental destruction in time.
Current methods can’t succeed.
The current practice of waiting for the government to announce policies before criticising them is hopelessly inefficient. An unsuitable response to the emergency as it would be much quicker for those who know the solutions to announce them themselves. This point was made by a doctor recently. Instead of waiting for the government to review their policy decisions on Covid19, doctors should publish their own review asap. They have the knowledge.
When we know the government has failed to address carbon emissions or protect the environment for decades. And that funded by big business, this represents a conflict of its own interests. And we also know that its ingrained habits of relying on so called ‘market forces’ and its top down approach hampered attempts to solve the Covid19 crisis, it is pretty clear that the government will not address the environmental crises effectively. How much more evidence do we need? By continuing to ask the government to make changes, we are in effect giving them a legitimacy they don’t deserve, wasting our own time and energy. We are becoming part of the problem.
Similarly, we cannot expect any other political party to make changes in time. Their aims may be excellent but the timetable of party political change takes years. It’s totally irrelevant in an emergency. Anyone hoping for a party political solution, or satisfied with incremental changes is denying the scale of the problem and urgency. Only large sale system change can avert or limit the disaster now.
In an emergency when normal processes fail, we must turn to other resources. In this case, the experts who have been warning of disaster and proposing solutions for decades now; and the campaign groups and members of the public who support their views. In other words – Civil Society.
To do this, first of all, the countless very varied campaign groups must come together. We must recognise that the root causes of all our problems, whether social, economic or environmental, are the same — capitalist exploitation and top-down control. And the solutions are the same – environmental protection and social justice. By campaigning separately we have divided our cause and weakened it. Together we will be much stronger and can develop and share a vision for a sustainable future.
Civil society has the power and knowledge to take emergency action; expertise in every aspect of life as well as down-to-earth experience in countless work places and homes. We have the will. Informed opposition to government policies has been widespread for decades. As well as campaign groups, this includes the professionals who argued against ‘austerity’ as well as those so badly let down by it; the 48% against Brexit and those failed in the Covid19 crisis. We are the many. Almost certainly an informed majority are well aware of the urgent need for reform and of many potential solutions. Indeed, this huge task is only possible because most of the problems and solutions have been obvious for years.
We have a duty to act. Our task is to set up an alternative National Government of Unity, the only system which can be installed quickly enough. A system appropriate in war, and now as the threats facing us are greater than those of war.
Bottom up control is essential as top down control has proved devastating. Policies must be directed by Citizens’ Assemblies to ensure that, while informed by experts, they are assessed by the people who will be affected by them. Only when people suffer the consequences of their own policies are they careful to make sensible ones and learn quickly from mistakes.
Decentralisation, ‘subsidiarity’ – making decision as the lowest level possible – should be an integral part of this new grass roots system, with Citizens’ Assemblies for every level. In our fast changing and very specialised modern world, only grass roots involvement will provide enough information — in contrast to the narrow views and interests of out-of-touch politicians. And an informed public will make us far less likely to be fooled by false myths and slogans. By participating we should become the informed public needed in any democracy, and even more essential in this age.
Right now civil society must build a shared vision of the future, explain it to those not yet engaged, and work with experts and communities to set up Citizens’ Assemblies to direct an alternative National Government of Unity. Major institutions — universities, large charities, campaigning and social groups, local councils, churches — should provide experts and organise citizens’ assemblies.
The assemblies should produce a Manifesto for a National Government of Unity as soon as possible. The Manifesto needs to present some basic policy changes, future aims and the principles to be used in deciding policy. This should be possible in a matter of weeks or months. We should not wait to be disappointed by COP26.
Crowd funding could help and social media spread the message. We cannot rely on the main media.
To be credible and gain people’s confidence the Manifesto must be very explicit. It must explain WHAT to reform, WHY, and critically HOW to carry this out in exact detail.
I suggest to achieve this as quickly as possible, separate citizens’ assemblies should be set to answer a few priority topics.
* why it is vital to cut carbon now and how to do it.
* why it is vital to protect nature now and how to do it.
* why it is vital to support people economically through the changes and how to do it.
* why it is important to develop a sustainable way of life and how to do it — the principles, taxes and regulations needed.
* with a promise before the end of the parliament to consider why we need constitutional reform and how to do it.
Clearly much more will need to follow to address many failings in domestic and foreign policy, with the eventual aim of restoring truly democratic party political governments.
We should be confident to act because, as Greta Thunberg has reminded us ‘real power belongs to the people’. Without our consent governments could not function. Workers could bring things to a stop almost immediately. But it is imperative that a manifesto for a national government is agreed first, both to give people the confidence to act and to ensure an orderly transition.
Whether you believe, as I do, that the government is unwilling and incapable of sufficient action, or whether you believe they are doing their best and may succeed, surely no-one could object to civil society helping them by putting in the effort to describe the best solutions and using citizens assemblies to find the acceptable policies?
So ‘IT REALLY IS ALL UP TO US NOW! We have to put the work in, lots of it and fast.
This argument is developed in a book ‘It’s All Up To Us Now. The ABC of Democratic Failure in the UK and What Civil Society can do about it.’ By A J Hull ISBN 978-1-9196037-0-4
Sorry – but I do not think we can set up parallels governments and I am not convinced by Citizen Assemblies – I simply cannot work out their legitimacy or to some degree relevance. I do not think opinion pollsters should determine policy and so am not sure why Citizen Assembles should
I notice that Dr Osita Mba from Nigeria features in your twitter replies.
His best point seems to relate to the legal basis for an Ireland veto, and therefore Cobham is less wrong on this than yourself.
Do you have a refutation of Dr Mba’s point.
You are aware that every day two lawyers go into court, sure they are right and it turns out one was wrong?
Let me respectfully disagree with Ostia Mba, not for the first time. I do not agree with his PhD thesis either. I am not alone.
I also happen to think the argument irrelevant.
Having worked with a number of NGOs from inside and out, it is unfortunate that some are driven more by the desire to protest and campaign than by finding workable solutions to problems. Advocacy and policy functions can be particularly guilty. People working at the sharp end, delivering programmes on the ground tend to be more focused on making progress and getting results than striving for nirvana. A nirvana that often involves moving the goalposts when some kind of success is in sight.
True
The malaise is crippling in the TJN right now
Met John Christensen when I sat next to him at a meeting of the Bretton Woods Project many years ago – a gathering of policy and campaign wonks… We were the two non-wonks I think. Was impressed then and followed the work of TJN ever since.
Subsequently I found myself at a workshop at the World Bank with their programme staff on maternal health and transport access. You could not tell the difference between the World Bank staff and the NGO staff in their knowledge and levels of concern. Not helpful to assume that organisations like World Bank and OECD are automatically and always the enemy.
They are not
Alex Cobham is quoted in a Herald article, which is critical of the Scottish Government, so I’d be interested in your opinion of his comments –
https://www.heraldscotland.com/politics/19437416.offshore-tax-haven-firms-investing-scotland-60-decade/
This is what he says –
“Alex Cobham, chief executive of the Tax Justice Network, said the threat of tax avoidance has “grown significantly” but there are “simple steps” the Scottish Parliament could take to reduce the risks.
He said all businesses operating in Scotland — regardless of ownership — should be required to meet the same tax and financial transparency standards.
This should include publishing full accounts and the identities of the (human) owners. Multinational companies that are already required to provide country by country reporting to HMRC should be required to make this data public also, as the likes of Vodafone and Shell already do voluntarily.
Businesses like Scotmid Coop and SSE have been accredited with the Fair Tax Mark, and this provides effective criteria should policymakers wish to improve standards nationally.”
His point about the Fair Tax Mark is fine, but I don’t see how the Scottish Government can require businesses to publish full accounts and the identities of the (human) owners, nor could they have any effect on country by country reporting – other than to say they support the idea.
(Note: this article is part of a multi-pronged attack on the Scottish Government by the Herald.)
Alex Cobham is not campaigning for this on behalf of the Tax Justice Network, regrettably, so what he is suggesting for Scotland is hard to imag9ne when he will pointedly not do it elsewhere
This is interesting and illuminating and thanks for your bravery in standing up for your integrity to principle, even when it means going against those who were/should be your allies.
I am not familiar with the ins and outs of tax justice, but what is called “tax competition” I can see as inherently negative for tax justice, that is where each State can incentivise a “race to the bottom” and therefore having a commonly agreed “bottomline of 15%” might prevent that kind of adverse tax competition.
However, I have heard news that in “ex red wall” constituencies like Hartlepool their ports will be “free ports”. Whilst this has been received well by its residents for creating jobs, are these the kinds of initiatives that will increase inter-state “tax competition” and so are negative in the long term? When the Tax Justice Network says that countries should “push ahead with their own reforms”, is this permission for this kind of adverse tax competition to multiply?
https://uk-ports.org/hartlepool-named-part-of-teesside-freeport/
My fear is that this is exactly the sort of thing that their excuses could permit – even if inadvertently.
The UK tax justice movement has had remarkably little to say on freeports. I have.
[…] readers of this blog will notice that I have written two posts this week (here and here) with regard to the work of the Tax Justice Network. Â I'm aware that some may also be […]