The Tax Research glossary seeks to explain the terms used on this blog that refer to more technical aspects of economics, accounting and tax. It recognises that understanding these terms is critical to understanding the economic issues that affect us all the time.

Like the rest of the Tax Research blog, this glossary is written by Richard Murphy unless there is a note to the contrary. It is normative approach and reflects post-Keynesian, heterodox economic opinion with a bias towards modern monetary theory. The fact that many items in that sentence are hyperlinked shows that they are explained in the glossary.

The copyright notices pertaining to the Tax Research blog apply to this glossary.

The glossary is designed to achieve three goals:

  • It seeks to provide a short, hopefully straightforward, definition of what a term might mean.
  • It then seeks, when appropriate, to explain what the term means within the context in which it is used. This is meant to elaborate the definition to add to understanding.
  • It then critiques the term, explaining, if appropriate, what the weaknesses inherent in the term or the situation it describes are. The aim here is to empower the reader to understand the issues behind the nonsense that most professions create around their activity to provide them with a mystique that they rarely deserve and which often hides what they are really up to.

The glossary is not complete. It will grow over time. If you think there are entries that need adding please let me know by emailing Please also feel free to suggest edits. The best way to do this is to copy an entry into Word and then send me a track-changed document indicating the changes that you suggest.

Because of the way in which it is coded this glossary automatically cross refers entries within itself and to the blog that it supports and within the glossary itself but if you think a link is missing please let me know.

Finally, if you like this glossary then you might like to buy me a coffee. It has required the support of a fair few to write it. You can do so here.

Glossary Entries

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Money laid aside by its owner out of use for a period of time as they do not wish to use it to fund their spending at that moment.

Savings take money out of circulation. As a result saving reduces the amount of economic activity in an economy. It does so by reducing the multiplier effect in that economy because saving effectively stops money circulating within it. As a result, savings have a negative macroeconomic impact on growth however sensible they might be for the person making them.

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Secrecy Jurisdiction

A secrecy jurisdiction is a place that intentionally creates regulation for the primary benefit and use of those not resident in its geographical domain with that regulation being designed to undermine the legislation or regulation of another jurisdiction and with the secrecy jurisdiction also creating a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

See also tax haven.

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Secrecy provider

Secrecy providers are the  lawyers, accountants, bankers, trust companies and others who provide the services needed to manage transactions in the secrecy space created by a secrecy jurisdiction or tax haven. Offshore could not operate without the existence of these firms.

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Secrecy space

Secrecy spaces are unregulated spaces that are created by a secrecy jurisdiction that are suggested to be outside their domain and so are treated by them as being ‘elsewhere' or ‘no-where'. Both of these are domains without geographic existence.

For a longer explanation, see here.

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The person who establishes a trust by gifting assets to it.

Having made the gift, a settlor is usually supposed to have no further influence over a trust but in many tax havens / secrecy jurisdictions that is not the case and the settlor often remains in complete control of the assets of the trust despite having supposedly gifted them for the benefit of others. These trust arrangements can be considered to be shams by some other jurisdictions.

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Settlor Benefit

Any benefit from a trust that is returned to the settlor.

Under UK law such benefits are prohibited but many tax haven / secrecy jurisdiction locations permit the creation of trusts from which the settlor may benefit as a beneficiary or by way of return of the trust prop­erty. There is some doubt about whether arrangements of this sort can properly be considered to be trusts. They might instead be considered shams but without access to detailed knowledge of the trust arrangements that can be hard to prove.

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Share Premium

The difference between the price paid to a company for a share and its nominal price as set by the company. If a £1 share is issued by a company for £5 then the share premium is £4.

Share premiums are usually paid when shares are issued later in the life of a company when the original shares issued by it will have risen in value. The share premium is intended to create equity between all shareholders by requiring that they broadly equally contribute for their share compared to the value of the company as a whole at the time of the share's issue.

Share premiums represent part of shareholder equity on the balance sheet of a company for accounting purposes.

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The owner of a share or shares in a company or corporation.

In many instances, the registered shareholders of companies are nominees which prevents identifi­cation of the real-life beneficial owners.

Registers of beneficial ownership are meant to address this issue, but none do so effectively as yet, not least because only the holders of stakes of more than 25% are usually required to be disclosed and this rule is easy to arbitrage or evade.

Shareholders do not own the assets of the company in which they own a share and have no claim over those assets unless the company is liquidation when in most instances companies are insolvent with few if any funds then being available for distribution to shareholders.

Shareholders are entirely dependent upon the decision of the directors of the company in which they invest for the payment of dividends: they cannot enforce a claim to be paid, even by passing a resolution in an annual general meeting. They would have to replace the directors instead, which in most quoted companies almost never happens as a result of a shareholder resolution.

As such the idea that a company is run in the interest of shareholders makes little sense, and nor do the ideas behind the concept of shareholder value have any substance to them.

This fact also makes a mockery of the idea that an auditor should address their audit report to the shareholders of a company when those shareholders have one of the weakest relationships with a company amongst all its stakeholders.

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Shareholder equity

Shareholder equity is the total value of a company attributable to shareholders. This is equivalent to the net asset value of the company i.e. its total assets less its total liabilities.

Total shareholder equity is usually made up of the total of:

It is important to note that this sum is not a liability owing to shareholders and that they have no legal right to claim it from the company despite their notional ownership of it. The figure is instead the notional sum that would be due to them in the event of the winding up of the company assuming that all the assets and liabilities were then worth the sums attributed to them on the balance sheet, which is very rarely the case in that situation. The figure is therefore a measure of the change in the value of the capital of the company over time but has no other meaning

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The capital issued by a company subdivided into individual units of nominal value that it decides upon (e.g. £1 each) that are then issued to shareholders as indication of their ownership of a stake in the company, each of which individual subdivided units is called a share.

See also company, corporation and shareholders, share capital and shareholder equity.

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Shell bank

A bank without a physical presence or employees in the jurisdiction in which it was in­corporated.

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Shell corporation

A limited liability entity usually formed in a tax haven or secrecy jurisdiction (including the UK and USA) for the purposes of hiding illicit financial flows, tax evasion or regulatory abuse.

The shell corporation is highly unlikely to have a real trade. Its sole purpose is to hide transactions from view.

No one knows how many such corporations there are, but they are commonplace.

Other names for such entities are sometimes used e.g. ‘brass plate compa­nies', indicating a legal entity whose only real presence is the plaque on the wall of a lawyer's office recording the location of its registered office.

Effective registrars of companies requiring a full range of documents, including details of beneficial owners and nominee directors and nominee shareholders for all entities registered in a jurisdiction to be on public record, are the way to address the abuse created by shell corporations and brass plate companies.

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Source basis taxation

Source basis taxation charges income to tax in the jurisdiction where it is earned.

Source-basis taxation should be compared with residence-basis taxation and unitary-basis taxation.

Under double tax treaty rules, income attributable to a permanent es­tablishment in a jurisdiction is usually taxable at source i.e. in the country where it is earned.

If the person earning that income is also resident in another jurisdiction then it is commonplace for that other jurisdiction where they are resident to also have the right to charge tax in that same source of income, having given credit for tax already paid in the country in which it was sourced.

So, for example, if £100 was earned in country X by the permanent establishment of company A Ltd in that place, on which income country X wishes to charge 15% tax meaning £15 is paid, and then country Y in which company A Ltd is resident wishes to charge the same income to tax at 20% there it can do so, but only after giving credit for the £15 already paid in country X, meaning country Y collects another £5 in tax.

Some countries only tax on a source basis, and consider income earned outside the country exempt. This is commonplace in flat tax systems.

Others tax on the basis of both source and residence (subject to a foreign tax credit) to ensure a more comprehensive approach and to tackle obvious opportunities for tax avoidance arising from shifting a source of income out of a country if a residence basis is used.

Rules can also vary for differing types of income: for example dividends are always deemed to have been taxed at source in the EU and are tax-free in the country of residence of the recipient whether tax has been charged or not at source. This has been abused by countries like Ireland, Luxembourg and the Netherlands, all of which are corporate tax havens.

Compare with residence basis taxation and unitary basis taxation.

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A stakeholder is a person impacted by or with an interest in or concern about the activities of another person or entity.

The stakeholders of companies, corporations and other reporting entities are likely to be:

  • The owners of its capital
  • Other suppliers of capital to the reporting entity
  • Trading partners of the reporting entity
  • Employees of the reporting entity
  • Regulators
  • Tax authorities
  • Civil society in all its forms including local authorities, journalists, academics, civil society groups and individuals.

In the case of most companies, corporations or reporting entities many stakeholders are likely to have more interest in the activities of a company because of its potential impact on their well-being than the owners of its capital.

Despite that, the International Financial Reporting Standards Foundation has ruled through its International Accounting Standards Board that its accounting standards need only meet the needs of shareholders and other owners or suppliers of capital to a company and that the needs of other stakeholders need not be considered in the course of preparing accounts of financial statements.

See also stakeholders of a tax system.

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Stakeholders of a tax system

The stakeholders of a tax system are generally considered to be:

  • The government of a jurisdiction;
  • The legislators of that jurisdiction who are not in the government;
  • The tax authority of a jurisdiction;
  • The electorate of that jurisdiction;
  • Taxpayers within a jurisdiction, whether they are within the electorate, or not;
  • Researchers, whether they are academics, journalists, civil society or those from other backgrounds;
  • International agencies and others in countries other than the jurisdiction being reviewed.

See also tax transparency framework.

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Stock and work in progress

In UK accounting terms stock refers to the value of physical commodities owned by a company for use in its production process or for direct onward sale to customers. An example might be the unsold goods sitting on supermarket shelves.

In US accounting terms, these items are referred to as inventory.

Work in progress (WIP) is usually grouped with stock or inventory in the presentation of accounts. It represents the value of incomplete work undertaken on the creation of goods or services intended for supplied to a customer on an accounting reference date. Work in progress may be physical, such as partly manufactured goods, or intangible, such as the value of time expended by staff that will be billed to clients in due course.

Both stock and work in progress should be valued at the lower of their cost of production or their net realisable value, i.e. what they might be sold for less the cost of their  completion for sale in the following accounting period.

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Supply side reforms

The removal of regulations on business so that they might pursue profit irrespective of the externalities or costs that they might impose on others in society both at the present point in time and in the future.

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