There is an article on the Conversation website this morning where Pete Hodson (who I guess comes from the Isle of Man) argues:
As in the 1970s, Manx economic and social prosperity is again reliant on one, troublingly fickle, economic sector. This time, it is asset management and offshore investment, rather than deck chairs and ice cream. Severing tax avoidance loopholes must, therefore, proceed gradually so as to protect the Isle of Man from a capital flight cliff-edge. The outcome would be a 1970s scenario of unemployment, emigration and social deprivation.
International wealth flows like water, settling in the jurisdiction where the tax regimes are most advantageous. A knee-jerk clampdown would spook investors and inflict severe economic damage on British Crown Dependencies — most of which lack alternative income streams. We need to instil a moral conscience among the super rich and demonstrate that their taxed wealth provides societal good. Their money — be it offshore, onshore, or in outer space — should be subject to the same tax regime as the rest of us.
Moral pressure and gradual legislative reform can achieve this. But don't proceed in a way which could strip the Manx working class of their livelihoods overnight and for the second time in living memory.
I do not buy this argument. It's akin to saying let's not end the drug trade because some workers may not make a living any more. Or to saying that any technical innovation must be barred for the same reason. To provide another contrast, it's like saying we should have carried on burning coal to save the jobs of mineworkers whatever the environmental consequence.
I accept that there are real issues for those who live on small islands. That's why the UK was so keen to foster tax havens in the first place. That was the wrong decision. So would their perpetuation be now. There is a need to prepare alternative economic plans for these places, and I have offered ideas on this issue. But keeping them as tax havens at enormous destructive cost to the greater economy is not one of the options now available, even if inevitable social disruption follows.
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A better analogy might be the slave trade. If we scrap the slave trade then the poor of Liverpool will suffer.
Really? Is that the best that we can hope for in the United Kingdom in 2017? To scrape a living off the back of what is at best highly immoral and at worst serious crime?
We must aim a little higher than that.
I did think of that one
In my opinion, this applies equally to both the nuclear and arms industries – the former increasingly a white elephant, and a dangerous one at that, as the cost and effectiveness of renewable energy continues to match and outperform nuclear and fossil fuels, while the latter, the arms industry, is, beyond the development of arms for genuine self defence, morally suspect.
Further to this, as a Delegate to the Annual Conference in Harrogate of UNITE in 1999 (when it was still MSF, or perhaps AMICUS), I heard impassioned speeches about the need to protect jobs in those two industries, where UNITE features prominently, with never a reference to the famed “peace dividend”.
To my shame, I didn’t feel brave enough, in this gung ho atmosphere, to ask to speak, and put the argument to Conference that we should be developing new areas of work to fulfil that peace dividend. But I fear I would gave been a lone voice. Richard asks for an informed electorate; equally we need an informed workforce, in the achievement of which the Unions could, and should, play a great part.
Agreed!
The arms industry is a topical example – https://www.telesurtv.net/english/news/UK-Arms-Sales-to-Saudi-Arabia-Skyrocket-by-457-Percent-20171108-0033.html
Also, are we really buying that there is substantial benefit to most working class people in tax havens from the wealth that flows into (but mostly through) them?
I’d be interested to see the “trickle down” effect here.
There is clearly some employment related to the companies that spring up to service the offshore sector but surely it’s more limited than this view insinuates?
Agreed.
No-one is saying that anyone has to suffer.
All that is needed is a courageous government to ensure that it protects is citizens in times of economic upheaval. Why? Because it is in everyone’s best interests.
That is why societies exist – for people to support each other.
Help the the Bristish oversees territories develop other economic options, and give them representation in Partiament!?
I would have no problem with representation
France does it
Time to dig out the old Revestment and Mischief Act of 1765 methinks.
mike dun says:
November 10 2017 at 7:06 pm
Time to dig out the old Revestment and Mischief Act of 1765 methinks.
Somebody else driving me to Google for elucidation. 🙂
Pete Hodson is an unreconstructed, shameless trickle downer. Considerably more interested in his own welfare than that of the poor benighted workers I think.
The fall in house prices, alone, would be a benefit to the workers. And the sense of righteousness that comes from not living on immoral earnings would make them all happier and better people.
There is ample scope for retailing industry on the IOM. All those poor bloody cats for a start. 🙂
“The fall in house prices, alone, would be a benefit to the workers”
Negative equity rarely benefits those that currently have mortgage.
Marco Fante says:
November 11 2017 at 9:21 am
“The fall in house prices, alone, would be a benefit to the workers”
“Negative equity rarely benefits those that currently have mortgage.”
Negative equity isn’t a big problem to people who buy houses to live in. It will inevitably catch out a few optimists, but what doesn’t ?
It is a problem: people need to move for all sorts of reasons
Few buy a house for life
Of course people need to move, but if house prices were sensible in the first place renting would be priced sensibly and people wouldn’t be so easily forced into having to buy as the cheaper option. The entire housing market is fucked up.
Homes are not an investment asset. And shouldn’t be regarded as such.
But when they have been negative equity creates real issues
Let’s not pretend otherwise
The drug trade is a good choice of analogy. People have always taken drugs. Always will. The ‘war on drugs’ has been a losing fight for decades and will continue to be so. Lurid headlines exagerating the dangers carry no weight with users who can see that there is as much danger in alcohol or tobacco or even crossing the road. In fact most of the dangers are created by the illegality.
If you try to stamp out something people want to do, you will always fail. Clear one street corner of dealers, they will move to another. Ban one substance they will develop another.
The only way to take drugs off the street is to make life so good people don’t want them, don’t need them.
There must be a parallel here about tax rates, tax avoidance and tax evasion but I can’t quite work out what it is.
Terry Tibbs says:
November 10 2017 at 7:56 pm
“The drug trade is a good choice of analogy. People have always taken drugs. Always will. The ‘war on drugs’ has been a losing fight for decades and will continue to be so……….
There must be a parallel here about tax rates, tax avoidance and tax evasion but I can’t quite work out what it is.”
The standard and frequently trotted out argument is that by reducing tax for top earners they will be so overcome with gratitude and fellow feeling that the tax take will go up.. Yeah. Right.
The ‘War on Drugs’ (and War on Terror) are both government/taxpayer subsidies for the security industry. Neither is, nor ever was intended to do ‘what it says on the tin’.
The biggest advantage to the illegal drugs industry is that being illegal the activities are not liable to taxation.
Yes, well the obvious point here is that the money ( the demand) that supports a banned or declining trade doesn’t disappear in a puff of smoke when their industry disappears. It generally gets spent or re-directed to somewhere else. So there is no argument in aggregate terms.
The argument is in local and specific terms. How it affects those particular people and places who are dependent on the endangered industry. In aggregate terms the expectation is that the people just move on as new opportunities arise elsewhere. Pete Dodson doesn’t seem to dispute that. He just seems be arguing for a more gradual or considerate change that minimises the shock.
I can’t imagine that the rollback of the tax havens would happen “overnight” anyway.
I think anyone in a tax haven should be able to read the runes by now
I’m guessing that if the World wide gradual fall in average corporate tax rates continues, tax havens will be less and less attractive. They must be worried. They can’t lower less than 0%!
The real worry is the declining tax base
The rate signposts a bigger problem
BTW I was reading an old BBC news item about the revival of Manx language and it said that 53% of the island’s population come from abroad – mostly England.
That somewhat changes the perspective a little on Pete Hodson’s plea.
http://www.bbc.com/news/magazine-21242667
It seems to an uninformed outsider such as me is that the debate has moved on. There are genuine benefits from tax havens such as enabling charities to receive investment income untaxed. Genuine tax avoidance has mostly disappeared. What is needed is a clamp down on evasion by small traders in domestic economies
Oh come on….charities need tax havens?
Pull the other one
I’m pleased to hear that “genuine tax avoidance has mostly disappeared”
Who knew?
It’s an interesting claim
Like so many unsupported by evidence that I can see…and I am looking for it
But what’s a few trillion between friends?
Isn’t a lot of the tax debate populated with unsubstantiated claims? That’s the problem. An unsubstantiated claim that tax avoidance is on the decline gets lumped in with an unsubstantiated claim that companies house is awash with companies being used for tax evasion. Next thing you know, nobody knows what to believe.
But Companies House is awash with companies that do not file accounts or tax
And there is still massive amounts of tax abuse
What are you trying to say?
Are you seeking to deny what is true?
Would it be better for charities to invest directly in countries that deduct withholding taxes on dividends or do it via places where those taxes are not deducted? The same is even more important for insurance companies. If tax evasion is such a big issue, where is your evidence? All these big disclosures, the Panama Papers etc have come up with nothing serious. The Swiss disclosures also showed nothing very interesting or significant
If charities are concerned with the relief of poverty (and they should be) should they pay taxes on their income where it is due?
And why should investors not pay tax to fund the infrastructure that underpins their investment?
And as for tax avoidance – you clearly have not been paying attention. Just look at the data appraised by Full Fact for the UK a day or two ago
And likewise on evasion – the evidence is compelling and published for all who want to see it
You clearly don’t