Excellent. Must check this out. Might give me a few new ideas for tax avoidance when arranging my assets. Thanks!

“Secrecy jurisdictions facilitate a wide range of crimes such as tax evasion, non-payment of alimonies, money laundering, terrorist financing, drug trafficking, human trafficking, illegal arms trading, counterfeiting, insider-dealing, embezzlement, fleeing of bankruptcy orders, all sorts of fraud, and many more.”

So do telephones and jetplanes.

Tim, and your conclusion is? Surely you can’t be saying that because we don’t worry about telephones, we oughtn’t worry about secrecy jurisdiictions? By analogy, both telephones and people who handle stolen goods are useful to burglars … so …. what?

As to main post, you write “this is an early step” – early in what sense? “Latest step” might be more accurate. See here for some earlier steps. It’s also worth noting that most of the illicit financial outflow is accounted for by the big trade surplus nations, China and oil producers, and it’s of the form of money going “in” (export earnings) that then vanishes from the accounts. Africa accounts for 3%. The next para about giving aid to “these” economies and about it being at the heart of global poverty doesn’t really follow.

That said, shutting down places than help the powerful and corrupt launder their takings is great thing: I’m sure global poverty is partially explained by powerful and corrupt being able to steal, and in turn stealing is made easier by these jurisdictions.

“So do telephones and jetplanes.”

Which is why we monitor them.

“Which is why we monitor them.”

Actually, we don’t monitor telephones. If the government wishes to do so it must present evidence in a court and get a warrant. As they can do currently with bank account sin other jurisdictions.

What is being argued for above is that there should be unlimited warrantless wiretapping.

Luis Enrique,

Good point, I should indeed have said “latest”.

But thanks – and this goes for you as well Neil – for addressing Tim’s “points”.

Now I don’t have to.

Well done on this initiative – we need more stuff like this, and find ways to turn up the heat on the govt.

“What is being argued for above is that there should be unlimited warrantless wiretapping.”

If this is supposed to be your anology, continued, it’s just wrong.

TJN does not want the equivalent of “unlimited warrantless wiretapping” for secrecy jurisdictions. It would like them to conform to the same standards of financial transparency expected in non-secrecy jurisdictions, to ensure that these jurisdictions are not being (ab)used by tax evaders, criminal gangs, money launderers, terrorists and those committing financial skullduggery, which destablises markets. We would also like transparency, as this promotes free flow of information, which if i remember correctly from economics 101, is a pre-requisite for markets to function efficiently.

Why is it that you free trade rightists suddenly don’t want to extend your arguments about the benefits of free and open trade to places like Cayman, who by providing banking secrecy distort markets, increase risk and uncertainty, and decrease efficiency?

Why is that, exactly?

“Why is it that you free trade rightists suddenly don’t want to extend your arguments about the benefits of free and open trade to places like Cayman,”

Eh? You are the person attempting to curtail trade with Cayman, not I. You are the person insisting that no one should be allowed to trade with them unless they adopt your standards. I’m the person running around saying leave them be and let people trade with them or not as they wish.

Remember?

…he said, missing Paul Sagar’s entire point for comic effect.

Tim, I think you are falling prey to a “if Richard Murphy is for it, it must be wrong” error*

Say I deal in stolen goods. Would you regard attempts to prevent trade with me as “curtailing trade” contrary to logic of free markets? If I sold a service that helped people break the law, would you regard “curtailing trade” with me as bad? As any fool knows, the gains from free markets are predicated on certain institutional arrangements, institutions entail “curtailing” certain activities. Offering services to help criminals launder their cash is one such service we might reasonably curtail without violating any free trade principles, I feel.

Or are we talking at cross purposes, and you think this is about stopping countries offering low tax rates or some such, not explicitly offering services to those wishing to evade the laws of other countries?

* is this the exception that proves the rule, perhaps?

“* is this the exception that proves the rule, perhaps?”

There is no exception to that rule.

“Say I deal in stolen goods.”

This is already dealt with. Even the Swiss banks will cough up criminally aquired gains. So, yes, it is about other things.

“and you think this is about stopping countries offering low tax rates or some such,”

Murphy, among others, has been highly vocal upon exactly this point. “Tax competition” is, in his view, the theft of what rightfully belongs to the State. But then he thinks that obeying the letter of the law is that too….

Take, for example, the definition they use of “secrecy jurisdiction”. It is one that offers certain protections (such as anonymity from the taxman) to people from outside of that jurisdiction. But Switzerland, for example, offers exactly the same protections to all: Swiss citizens and residents have exactly the same protections from the taxman as anyone else. The same is true here in Portugal: the taxman must prove that you are evading taxes before he can peer into your bank account.

So, using their original definition of secrecy jurisdiction, Switzerland isn’t one. Similarly Delaware: the company structure is as open to residents of Delaware as they are to anyone else.

Yes, they want to stop countries competing upon tax rates. Actually, if I thought they were bright enough to know what they were doing, I’d say they were doing it precisely so that the tax incidence arguments about corporate and capital taxes no longer did in fact work.

ok, we were talking at cross purposes somewhat. Still though, some of these places are de facto used by dodgy characters for something ain’t they? How do you explain that if all’s well and good? Can you see no respect in which these places are aiding criminals, any more than say Delaware or Portugal?

Maybe these guys also think the tax man ought to be able to see into your bank accout as they wish, in every country? Paul, what do you say?

“Maybe these guys also think the tax man ought to be able to see into your bank accout as they wish, in every country?”

That’s what “automatic information exchange” means. As far as your money is concerned you shouldn’t be able to hide anything from government. For it’s not really “your money” you see. It’s only what that government, in its bounty, decides you might be allowed to maintain hold of for a while.

For it’s not really “your money” you see. It’s only what that government, in its bounty, decides you might be allowed to maintain hold of for a while.

Or, in the case of the mafia, it’s not really “your money” because you’ve nicked it.

So give us a classical liberal solution to this problem then, Tim. Assuming you see a problem in a network of legal black-holes offering no-questions-asked services to the world’s nastiest people.

“For it’s not really “your money” you see.”

That’s the back-bone of this particular straw man, right there. Nice try, Timmeh.

“Maybe these guys also think the tax man ought to be able to see into your bank accout as they wish, in every country?”

Of course we don’t.

We’re talking about extending the same kinds of information exchange that, say, France and Britain operate already on a bilateral agreement, to every jurisdiction in the world. This isn’t about peering into every bank account and keeping tabs on everybody, it’s about having systems in place which prevent certain jurisdictions offering services that are deliberatly established to undermine the laws of other countries, and turn a blind eye to flows of illicit finance, thus de facto welcoming them.

Unfortunately, we need automatic information exchange precisely because there are at present 60 jurisdictions around the world which exist to create financial opacity and prevent the free flow of information between legitimate authorities. Bilateral agreements just won’t cut it, when the places you are trying to make agreements with have as their express purpose the aim of undermining your legislation and financial authorities.

As a final point, it’s worth noting as well that the use of secrecy jurisdictions is almost exclusively open to only the rich; those who can afford financial advisers etc and have enough money to go offshore in the first place. Given that secrecy jurisdictions are widely used for tax evasion, as well as a whole host of dodgy financial activity – much of which was at the heart of the big financial meltdown of 2008 – it’s worth bearing in mind that the use of these jurisdictions on the wealthy imposes further costs upon those who cannot access the services these jurisdictions provide (in the form of higher domestic taxes to make up for lost revenue, or general economic woe after the financial system takes a dive).

Glad to see that other people can tell Tim’s ridiculous straw man for what it is. What I find fascinating about Tim on this issue is that he writes a blog pointing out several times daily how stupid other people are, yet on this issue he adheres to a conception which is so obviously over-simplistic that, well, it’s hard to see how it couldn’t be stupid to hold it. Luis Enrique – i think it’s fair to say – is probably over to the right somewhat, on most issues political and economic. Yet he can see that there is a great deal of complexity in this issue. Tim, on the other hand, stakes his (oversimplistic) claim, sticks to it, and uses straw-men to pretend there is nothing more complicated going on. Which is a shame, because Tim is no idiot. Yet he persistently desires to act like an idiot on this issue.

Tim: whatever your beef with Richard is (and frankly, I don’t care about it), this issue may be significantly more complex than you are allowing for.

“Of course we don’t.”

OK, I take you at your word.

“We’re talking about extending the same kinds of information exchange that, say, France and Britain operate already on a bilateral agreement,”

Ah, you do.

On to the meat of it.

“it’s about having systems in place which prevent certain jurisdictions offering services that are deliberatly established to undermine the laws of other countries,”

But then I think there are legal regimes which not only should we not care if we undermine, we should actively work to undermine.

For example, imagine someone from a strictly Islamic country. Automatic information exchange would mean telling his home country that he was earning interest on his deposits. He might even be paying tax on that interest, simply calling it “profit share” instead of interest. But well done in enforcing grossly illiberal law internationally: bet you’re proud.

“and turn a blind eye to flows of illicit finance, thus de facto welcoming them.”

We’ve already got pretty good laws about “illicit” finance. What you want to do is extend them from “illicit” to those you don’t approve of.

“their express purpose the aim of undermining your legislation and financial authorities.”

As above, there are those which I think we ought to be doing this to.

“as well as a whole host of dodgy financial activity – much of which was at the heart of the big financial meltdown of 2008″

No, it wasn’t. You’re simply picking up on the Murphyism du jour. There’s nothing about offshore or about information exchanges, or tax, that had anything at all to do with it. Bubbles happen, so do busts. They happened before offshore was invented and they’ll happen whatever happens to offshore of secrecy jurisdictions.

“it’s worth bearing in mind that the use of these jurisdictions on the wealthy imposes further costs upon those who cannot access the services these jurisdictions provide (in the form of higher domestic taxes to make up for lost revenue,”

So you too are either ignorant or in denial of (as with Murphy and John Christiansen) the fact of tax incidence then? And there we were, thinking you were a bright person.

“Tim: whatever your beef with Richard is (and frankly, I don’t care about it),”

Perhaps you ought to. The entire structure is built upon Murphy’s horrible misunderstandings. As above, tax incidence (which Christiansen got hilariously and horribly wrong on my blog), the amount of the tax gap, the definition of a secrecy jurisdiction, his entirely insane views of economics (for example, on his “economics” blog he claimed that neo-liberal economics assumed no scarcity. Given that economics is the study of the allocation of scarce resources this is fatuous even for him).

Look, I know, you’re being paid to do this (Ford Foundation grant isn’t it?) but please, do yourself a favour. Try engaging with the real world rather than Murphy’s would you?

Fuck off and die, Worstall. I’m not paying MY hard-earned money to go to City banker scum, illegal wars and management consultant parasites while your pals get away with their millions and you cheer them on. Why should I pay and they don’t? What sort of person defends this state of affairs? The sort of right-wing cunt and vermin that you are, obviously.

Anyone who is talking bollocks about this 50% tax rate, which one of the few sensible things Brown has done (albeit still too little too late). You already earn fucking £100,000 a year, how could you possibly want any more? Given what they’ve done to this country ever since 1979, I for one will cheer them on at the airport if they take their “talent” elsewhere.

Maybe then we could have some proper jobs in the country instead of sharpening pencils in insurance offices, talking bollocks on the phone and selling each other overpriced shit.

before things get too nasty, could we perhaps clear up whether:

“extending the same kinds of information exchange that, say, France and Britain operate already on a bilateral agreement”

is the same thing as:

“tax man [being] able to see into your bank account as they wish”

and somebody knowledgeable maybe tell us some details concerning when tax authorities will and will not be able to access bank accounts, whether they need to be able to demonstrate need in context of an investigation or what.

Paul,

I think Tim is right in saying that tax havens and secrecy jurisdictions had sweet f.a. to do with yon financial meltdown, and the fact that some shadow banking style holding companies, or whatever, were incorporated in these jurisdictions, has nowt to do with it. I think it’d be best to drop that line of argument.

Tim

OK fine it is possible to think of circumstances where we might wish people to be able to evade the authorities in their home countries, and it would be unfortunate if greater transparency allowed odious regimes to persecute their citizens … but is that empirically relevant? Is that what we’re talking about here? I still don’t understand why you are approaching financial transparency within the setting of our laws and authorities as a “legal regime … we should actively work to undermine”.

Lets split this into two parts.

First, we have criminals, politicians funneling money into personal accounts, and other sundry illegality. Are you saying that the authorities have all the access they ought to have, when investigating these matters, already? If say the relevant authorities in Nigeria want to get their hands on the personal bank accounts of the oil minister, as a matter of fact, are these “secrecy jurisdictions” going to give it up? If it turns out the answer is already yes, then that undercuts everything written in post above about illegality etc. If the answer is “no” then there’s something sensible for Tax Justice to campaign for here, isn’t there? Why would you be wanting to make life easier for corrupt politicians looting their nations?

Second, we have corporations, “legally” – that is, taking advantage of the laws in these secrecy jurisdictions and tax havens, trying to reduce their tax bills. Even here, I’m not sure what your beef is – if the tax man takes a look at the accounts and finds that the laws of respective countries are being upheld, fine, and if they’re being broken, why shouldn’t you want the perpetrators to be caught?

Is it the case that the tax man already has the powers they need to investigate things like this? If which case, I don’t know what Tax Justice is on about. If not, then again, I don’t see why you object to the authorities being able to investigate suspected breaches of the law?

Separately, some people might object to the existence of jurisdictions that allow companies and individuals to “legally” avoid paying taxes … but that’s a different sort of question, not related to secrecy.

@paul sagar – you’ve got Worstall cranking his condescending-o-meter up to eleven, so you must be doing something right. Keep up the good work!

I’ll reply to points tomorrow, if I get time.

I’m not argument-avoiding, i’m just busy.

Sod it, can’t sleep.

But then I think there are legal regimes which not only should we not care if we undermine, we should actively work to undermine.

For example, imagine someone from a strictly Islamic country. Automatic information exchange would mean telling his home country that he was earning interest on his deposits. He might even be paying tax on that interest, simply calling it “profit share” instead of interest. But well done in enforcing grossly illiberal law internationally: bet you’re proud.

On the flip-side, consider an African kleptocrat who defrauds his nation to the tune of billions, using SJs to launder his money into legitimate western bankaccounts. Or international criminal gangs doing the same. Your anti-information exchange stance facilitates this.

So right there, we are at loggerheads. Except for the fact that my side can point to hundreds of billions/trillions of dollars in illicit financial flows, and you can point to vague examples of “Islamic countries” (nice tip to the bogeyman of the day) and how they would apparently use information about financial activities against an individual. Explain to me, Tim: this horrible Islamic regime, why would it need financial information to undertake persecution? Especially if the individual in question was paying their taxes (i.e. what would the motivation be)? From what I gather, such regimes tend to just, y’know, arrest and torture people at will, and don’t really tend to wait for hard evidence before doing these things. They do this stuff already. Explain why automatic information exchange would suddenly endanger these valliant individuals trapped in oppressive regimes you so vaguely gesture about.

But anyway, let’s grant your argument for the sake of it: that automatic information exchange will lead to some nasty regimes gaining information about individuals, and using it as an excuse to harm them. Let’s accept that this may be a bullet we, at TJN, have to bite. But notice what we get rid of: the use of SJs by a whole host of highly unscrupulous individuals and organisations, which certainly cause death and suffering to many thousands of people through their activities right now.

My point is a very specific one: there may be difficult moral trade-offs in this issue, and we may have to face up to them. Yet you set it up as though “automatic information exchange kills!!” and that’s all there is to it. The fact is, secrecy jurisdictions as they are at present facilitate some pretty horrific things. Stop presenting the situation as though you are a champion of the rights of the individual, and TJN et al are apologists for tyrany and murder. It’s more complicated than that.

Having said all that, and ceasing to grant your case for the sake of argument, we’ve blogged at length about how arguments like yours are in fact pretty bogus: http://taxjustice.blogspot.com/search?q=non-perils

We’ve already got pretty good laws about “illicit” finance. What you want to do is extend them from “illicit” to those you don’t approve of.

Well, yes. We don’t approve of tax evasion, criminal proceeds, illegally-obtained flows from the developing world, in particular. We think laws about illicit finance need to catch up to the reality of modern dirty money. We’re trying to make that happen. What’s wrong with that? Or is it that once a legal interpretation is set, we’re not allowed to try and change it through free, democratic organisation and pressure.

To say nothing of your dubious claiim about our “pretty good laws”. I’ve briefed for a Finance Bill (the 2009 one, actually). Our laws are very, very complicated on tax and finance matters, and in many ways fall very far short of being “pretty good”. I draw your attention to the repeal of section 765:
http://www.guardian.co.uk/business/2009/jun/04/tax-gap-section-765-repeal

There’s nothing about offshore or about information exchanges, or tax, that had anything at all to do with it. Bubbles happen, so do busts. They happened before offshore was invented and they’ll happen whatever happens to offshore of secrecy jurisdictions.

Typical disingenuous Worstallism.

1. So the financial crisis had nothing to do with securitised debt, collateral debt obligations, off-balance sheet financing, using securitised products to hide banks’ and other financial institutions’ real liabilities and the toxic debt on their balance sheets? Because all of these things are intimately bound-up with the use of secrecy jurisdictions. That’s why the banks, accountancy firms and lawyers have such a huge presence in so many SJs. (See secrecyjurisdictions.com for the details). [Sorry Luis, I have to disagree with you on this one as well]

2. TJN has never said that SJs caused the financial crisis. Let’s be clear about that. But it is abundantly obvious that SJs were bound up with its causes. People like Gordon Brown and Barack Obama have recognised this fact. Or are the President of the USA and the Prime Minister just in thrall to “Murphyism” too ? (To say they’ve recognised it is, obviously, different to say they’ve acted on it). You’re on the road to conspiracy lunacy here, Tim…

3. Yes, bubbles happen, and so do busts. The latest one was – in part – related to SJs. It’s laughably bad reasoning to imply that because, say, the South Sea Bubble burst and that had nothing to do with SJs (by historical necessity), that therefore no other bubbles have anything to do with SJs! It’s like me saying “people live, people die – the fact that Joe Bloggs is now dead has nothing to do with the fact that I killed him!”. If you meant this as a serious point, then it’s a shocking inability to reason. If it was just typical Worstallist pedantry and skullduggery, well nothing new there.

So you too are either ignorant or in denial of (as with Murphy and John Christiansen) the fact of tax incidence then? And there we were, thinking you were a bright person.

I’ll ignore the personal dig.

I don’t know enough – and notice, unlike you, i’m prepared to admit ignorance of certain matters – about tax incidence to take a stand. What I do know is that – for reasons we’ll get to in a minute – I’m very suspicious of any claim you make about tax or economics. Just because you say “oh, tax incidence means this isn’t true”, doesn’t mean I’m going to believe it (though I do accpet that I need to go and read up about it. But remember, I am the most junior member of TJN. My job is to do dogs-body, largely non-economic and non-mathematical research. They do not depend upon me to do any of that stuff, and thank god. Having said that, I follow the arguments. If I were to come to believe that TJN had it all wrong, I would leave them. Until that day, I’m on board).

Because…

The entire structure is built upon Murphy’s horrible misunderstandings.

Oh really? If this was a story just about Richard, it would be pretty nasty, and probably untrue. When we widen the picture, it’s a joke. You criticise John Christensen, and by implication say he is somehow duped by Richard Murphy. Yet John Christensen worked as a Jersey financier and economist for the States of Jersey for many years. He has seen the world of SJs from the inside. You haven’t. I trust his experience more than your classical liberal prejudices (namely, “I don’t want it to be true, so it isn’t”), i’m afraid. Secondly, let’s take two more examples: Vince Cable and Lord Matthew Oakeshott. They are certainly not “duped” or “in thrall” to Richard Murphy, at all. They disagree with him on lots of things. Vince was a professional economist for Shell for many years. I worked with them (a little bit) when I was an MP’s researcher: they are absolutely convinced SJs are a problem. They really know about this finance and economics stuff, it’s fair to say. They do – i’d say – know far more than you. This claim that “it’s all made up by Richard Murphy” – aside from asking why he would make this up, and exit the chartered accountancy profession after 30 years, at huge personal cost to himself – is idiotic, vapid, ad hominem and – to go back to my point earlier in the day – cheap oversimplification.

the amount of the tax gap

If Richard is so bad at measuring this sort of stuff, how come the World Bank (surely an institution you must love, nay?) signed him up? Do you have better estimates? We’ll get to more on why your estimates shouldn’t be trusted on anything in a minute…

entirely insane views of economics (for example, on his “economics” blog he claimed that neo-liberal economics assumed no scarcity. Given that economics is the study of the allocation of scarce resources this is fatuous even for him).

Right, i’m not going to defend Richard’s blog on economics. Frankly, I don’t agree with much (possibly any) of it. (Indeed, on the matter you refer to about scarcity, I made that exact same point to him on the comments section of that post). However, what I will defend Richard for is the lively, intellectual attempt to try – perhaps, in this case almost certainly, in vain – to come up with something new. The whole point of that blog was to see if there might be “another way”. There’s nothing in itself wrong with challenging estabished paradigms. Having studied a little economics at University, I don’t think Richard got it right. At all. But I’m not going to belittle him for at least trying.

However, that brings us to a very important point about you and economics, doesn’t it? One of the main weapons in your arsenal is to go around bashing other people – sometimes fairly, I will admit – for bad economics. But you do this off the back of a claim – generally implied through your attacks on other people – that you are a “proper” economist who “really” understands economics [those are not attributive quotation marks, but indicative ones].

In particular, you love to lay into Richard about how he doesn’t understand economics. But do you?

Let’s all have a look at this thread:

http://www.liberalconspiracy.org/2009/09/07/public-wants-more-taxes-for-high-earners/

Where Giles Wilkes – chief economist of “Centre:Forum” think tank, and a former City many no less – absolutely takes you to the cleaners in economic debate.

Or this thread, on your own blog:

http://timworstall.com/2009/10/06/oh-dear-trouble-for-tmultiplier/comment-page-1/#comment-35159

Where Giles exposes your very limited economic abilities, again, this time with reference to the basic workings of the Multiplier Effect in a macroeconomic model.

Or over here at Duncan’s Economic Blog, where you start with:

http://duncanseconomicblog.wordpress.com/2009/10/06/osborne-neo-classical-nonsense/#comment-1199

And Giles comes back – polite as ever, though the guy must be exasperated with you at times – with this:

http://duncanseconomicblog.wordpress.com/2009/10/06/osborne-neo-classical-nonsense/#comment-1211

Now, it looks to me as though – contrary to your internet persona – you’re not much of an economist at all. Rather, you do a very good job of pretending to be one, and speaking from Authority in order to tell people to shut up, and then be incredibly rude to them.

For those reasons, I find it very, very hard to trust anything you say about economics, or for that matter, taxation. I take everybody with a pinch of salt. Yes, that includes Richard Murphy (i think Richard would happily admit that everyone who knows him does that! It’s part of the Murphy charm). I just doubt very much that you have the expertise in these sorts of areas that you are so fond of claiming.

Let’s be clear: I am not an economist. I am not much of anything, really. I blog a lot – and usually make lots of idiot errors I then have to correct – and I do basic, dogsbody research for an NGO part-time, and the rest I study esoteric philosophy and intellectual history that nobody cares about. What I don’t do is go around the internet trying to bully people out of positions by waving an Authority wand, which upon closer inspection doesn’t really look very authentic.

So please, don’t offer me condensending advice about who I should associate with, and who I should believe. You’re in no position to lecture me. Quite aside from the fact that the actual substantive points you made about SJs were pretty weak, your ad hom attacks are shallow and, in some cases, apparently deeply hypocritical.

Feel free to add me to your blogging hate-list. I’m sure your trolls need feeding.

Sod it, can’t sleep.

But then I think there are legal regimes which not only should we not care if we undermine, we should actively work to undermine.

For example, imagine someone from a strictly Islamic country. Automatic information exchange would mean telling his home country that he was earning interest on his deposits. He might even be paying tax on that interest, simply calling it “profit share” instead of interest. But well done in enforcing grossly illiberal law internationally: bet you’re proud.

On the flip-side, consider an African kleptocrat who defrauds his nation to the tune of billions, using SJs to launder his money into legitimate western bankaccounts. Or international criminal gangs doing the same. Your anti-information exchange stance facilitates this.

So right there, we are at loggerheads. Except for the fact that my side can point to hundreds of billions/trillions of dollars in illicit financial flows, and you can point to vague examples of “Islamic countries” (nice tip to the bogeyman of the day) and how they would apparently use information about financial activities against an individual. Explain to me, Tim: this horrible Islamic regime, why would it need financial information to undertake persecution? Especially if the individual in question was paying their taxes (i.e. what would the motivation be)? From what I gather, such regimes tend to just, y’know, arrest and torture people at will, and don’t really tend to wait for hard evidence before doing these things. They do this stuff already. Explain why automatic information exchange would suddenly endanger these valliant individuals trapped in oppressive regimes you so vaguely gesture about.

But anyway, let’s grant your argument for the sake of it: that automatic information exchange will lead to some nasty regimes gaining information about individuals, and using it as an excuse to harm them. Let’s accept that this may be a bullet we, at TJN, have to bite. But notice what we get rid of: the use of SJs by a whole host of highly unscrupulous individuals and organisations, which certainly cause death and suffering to many thousands of people through their activities right now.

My point is a very specific one: there may be difficult moral trade-offs in this issue, and we may have to face up to them. Yet you set it up as though “automatic information exchange kills!!” and that’s all there is to it. The fact is, secrecy jurisdictions as they are at present facilitate some pretty horrific things. Stop presenting the situation as though you are a champion of the rights of the individual, and TJN et al are apologists for tyrany and murder. It’s more complicated than that.

Having said all that, and ceasing to grant your case for the sake of argument, we’ve blogged at length about how arguments like yours are in fact pretty bogus: http://taxjustice.blogspot.com/search?q=non-perils

We’ve already got pretty good laws about “illicit” finance. What you want to do is extend them from “illicit” to those you don’t approve of.

Well, yes. We don’t approve of tax evasion, criminal proceeds, illegally-obtained flows from the developing world, in particular. We think laws about illicit finance need to catch up to the reality of modern dirty money. We’re trying to make that happen. What’s wrong with that? Or is it that once a legal interpretation is set, we’re not allowed to try and change it through free, democratic organisation and pressure.

To say nothing of your dubious claiim about our “pretty good laws”. I’ve briefed for a Finance Bill (the 2009 one, actually). Our laws are very, very complicated on tax and finance matters, and in many ways fall very far short of being “pretty good”. I draw your attention to the repeal of section 765:
http://www.guardian.co.uk/business/2009/jun/04/tax-gap-section-765-repeal

There’s nothing about offshore or about information exchanges, or tax, that had anything at all to do with it. Bubbles happen, so do busts. They happened before offshore was invented and they’ll happen whatever happens to offshore of secrecy jurisdictions.

Typical disingenuous Worstallism.

1. So the financial crisis had nothing to do with securitised debt, collateral debt obligations, off-balance sheet financing, using securitised products to hide banks’ and other financial institutions’ real liabilities and the toxic debt on their balance sheets? Because all of these things are intimately bound-up with the use of secrecy jurisdictions. That’s why the banks, accountancy firms and lawyers have such a huge presence in so many SJs. (See secrecyjurisdictions.com for the details). [Sorry Luis, I have to disagree with you on this one as well]

2. TJN has never said that SJs caused the financial crisis. Let’s be clear about that. But it is abundantly obvious that SJs were bound up with its causes. People like Gordon Brown and Barack Obama have recognised this fact. Or are the President of the USA and the Prime Minister just in thrall to “Murphyism” too ? (To say they’ve recognised it is, obviously, different to say they’ve acted on it). You’re on the road to conspiracy lunacy here, Tim…

3. Yes, bubbles happen, and so do busts. The latest one was – in part – related to SJs. It’s laughably bad reasoning to imply that because, say, the South Sea Bubble burst and that had nothing to do with SJs (by historical necessity), that therefore no other bubbles have anything to do with SJs! It’s like me saying “people live, people die – the fact that Joe Bloggs is now dead has nothing to do with the fact that I killed him!”. If you meant this as a serious point, then it’s a shocking inability to reason. If it was just typical Worstallist pedantry and skullduggery, well nothing new there.

So you too are either ignorant or in denial of (as with Murphy and John Christiansen) the fact of tax incidence then? And there we were, thinking you were a bright person.

I’ll ignore the personal dig.

I don’t know enough – and notice, unlike you, i’m prepared to admit ignorance of certain matters – about tax incidence to take a stand. What I do know is that – for reasons we’ll get to in a minute – I’m very suspicious of any claim you make about tax or economics. Just because you say “oh, tax incidence means this isn’t true”, doesn’t mean I’m going to believe it (though I do accpet that I need to go and read up about it. But remember, I am the most junior member of TJN. My job is to do dogs-body, largely non-economic and non-mathematical research. They do not depend upon me to do any of that stuff, and thank god. Having said that, I follow the arguments. If I were to come to believe that TJN had it all wrong, I would leave them. Until that day, I’m on board).

Because…

The entire structure is built upon Murphy’s horrible misunderstandings.

Oh really? If this was a story just about Richard, it would be pretty nasty, and probably untrue. When we widen the picture, it’s a joke. You criticise John Christensen, and by implication say he is somehow duped by Richard Murphy. Yet John Christensen worked as a Jersey financier and economist for the States of Jersey for many years. He has seen the world of SJs from the inside. You haven’t. I trust his experience more than your classical liberal prejudices (namely, “I don’t want it to be true, so it isn’t”), i’m afraid. Secondly, let’s take two more examples: Vince Cable and Lord Matthew Oakeshott. They are certainly not “duped” or “in thrall” to Richard Murphy, at all. They disagree with him on lots of things. Vince was a professional economist for Shell for many years. I worked with them (a little bit) when I was an MP’s researcher: they are absolutely convinced SJs are a problem. They really know about this finance and economics stuff, it’s fair to say. They do – i’d say – know far more than you. This claim that “it’s all made up by Richard Murphy” – aside from asking why he would make this up, and exit the chartered accountancy profession after 30 years, at huge personal cost to himself – is idiotic, vapid, ad hominem and – to go back to my point earlier in the day – cheap oversimplification.

the amount of the tax gap

If Richard is so bad at measuring this sort of stuff, how come the World Bank (surely an institution you must love, nay?) signed him up? Do you have better estimates? We’ll get to more on why your estimates shouldn’t be trusted on anything in a minute…

entirely insane views of economics (for example, on his “economics” blog he claimed that neo-liberal economics assumed no scarcity. Given that economics is the study of the allocation of scarce resources this is fatuous even for him).

Right, i’m not going to defend Richard’s blog on economics. Frankly, I don’t agree with much (possibly any) of it. (Indeed, on the matter you refer to about scarcity, I made that exact same point to him on the comments section of that post). However, what I will defend Richard for is the lively, intellectual attempt to try – perhaps, in this case almost certainly, in vain – to come up with something new. The whole point of that blog was to see if there might be “another way”. There’s nothing in itself wrong with challenging estabished paradigms. Having studied a little economics at University, I don’t think Richard got it right. At all. But I’m not going to belittle him for at least trying.

However, that brings us to a very important point about you and economics, doesn’t it? One of the main weapons in your arsenal is to go around bashing other people – sometimes fairly, I will admit – for bad economics. But you do this off the back of a claim – generally implied through your attacks on other people – that you are a “proper” economist who “really” understands economics [those are not attributive quotation marks, but indicative ones].

In particular, you love to lay into Richard about how he doesn’t understand economics. But do you?

Let’s all have a look at this thread:

http://www.liberalconspiracy.org/2009/09/07/public-wants-more-taxes-for-high-earners/

Where Giles Wilkes – chief economist of “Centre:Forum” think tank, and a former City many no less – absolutely takes you to the cleaners in economic debate.

Or this thread, on your own blog:

http://timworstall.com/2009/10/06/oh-dear-trouble-for-tmultiplier/comment-page-1/#comment-35159

Where Giles exposes your very limited economic abilities, again, this time with reference to the basic workings of the Multiplier Effect in a macroeconomic model.

Or over here at Duncan’s Economics Blog, where you start with:

http://duncanseconomicblog.wordpress.com/2009/10/06/osborne-neo-classical-nonsense/#comment-1199

And Giles comes back – polite as ever – with this:

http://duncanseconomicblog.wordpress.com/2009/10/06/osborne-neo-classical-nonsense/#comment-1211

Now, it looks to me as though – contrary to your internet persona – you’re not much of an economist at all. Rather, you do a very good job of pretending to be one, and speaking from Authority in order to tell people to shut up, and then be incredibly rude to them.

For those reasons, I find it very, very hard to trust anything you say about economics, or for that matter, taxation. I take everybody with a pinch of salt. Yes, that includes Richard Murphy. I just doubt very much that you have the expertise in these sorts of areas that you are so fond of claiming.

Let’s be clear: I am not an economist. I am not much of anything, really. I blog a lot – and usually make lots of idiot errors – and I do basic, dogsbody research for an NGO part-time, and the rest I study esoteric philosophy and intellectual history that nobody cares about. What I don’t do is go around the internet trying to bully people out of positions by waving an Authority wand, which upon closer inspection doesn’t appear very authentic.

So please, don’t offer me condensending advice about who I should associate with, and who I should believe. You’re in no position to lecture me. Quite aside from the fact that the actual substantive points you made about SJs were pretty weak, hence your resorts to the old ad hom that you love so well.

Feel free to add me to your blogging hate-list. I’m sure your trolls need feeding.

FOR FUCK’S SAKE MY MASSIVE REPLY IS CAUGHT IN THE SPAM NET.

SUNNY, DON PASKINI – CAN YOU PLEASE RESCUE IT????

(then delete this comment)

“Say I deal in stolen goods”

I’m curious where the assumption that the tax haven’s primary operandi for allowing bank secrecy is to protect illicit sources of income.

There are plenty of reasons for privacy, not least the one that I am entitled to it.

My money is no-one’s business but my own. What I earn, I earn for myself. I do not wish to dangle that information to any government worker with a keyboard, or for any litigator to see dollar signs on my forehead and consider me worthy of his time.

—

“Fuck off and die, Worstall. I’m not paying MY hard-earned money to go to City banker scum, illegal wars and management consultant parasites while your pals get away with their millions and you cheer them on. Why should I pay and they don’t?”

Sounds like you’ve read The Guardian far too much, and are very confused.

What city bankers are you paying, exactly? Management consultants? It sounds like you earn far too little for any of these types to play any part in your life.

—

“Anyone who is talking bollocks about this 50% tax rate, which one of the few sensible things Brown has done (albeit still too little too late). You already earn fucking £100,000 a year, how could you possibly want any more?”

Maybe I want fast cars and expensive houses. Maybe I want to secure my children’s future. Maybe I want to eat nice food, and never feel I’m in a position to starve. Maybe I don’t want to work the next 30 years of my life. Or heck, maybe I just want to travel and get away with people with comments like yours.

Either way, it’s my right to earn as much money as I want through legal channels and contribute to society in whatever way I see fit. What your logic ignores is the basic law of supply and demand. If I supply something people will want, what right is it of yours to say how my income should be limited?

I, for one, enjoy making 7 figures a year. I have been poor and I’m been comfortable, and I would choose comfortable any day of the work.

As for 50% – one reason I’ll never live in Britain. There’s nothing that country offers that warrants 50% of *my* income. But then, that’s my choice, isn’t it?

“First, we have criminals, politicians funneling money into personal accounts, and other sundry illegality. Are you saying that the authorities have all the access they ought to have, when investigating these matters, already?”

Take Swiss bank secrecy laws. These are obviated if the investigators can show reasonable evidence that they are investigating something which is a crime under Swiss law. It’s very like the double illegality rules in extraditions. It must be illegal both where the crime is alleged to have happened and also in Switzerland where people are saying the money is. Yes, criminals, politicians looting treasuries, drugs, etc, these are all illegal under Swiss law. So those bank accounts can indeed be looked at: if there is at least that minimal level of evidence.

What seriously pisses off people like Paul is that under Swiss law tax evasion (yes, evasion, not just avoidance) is not a crime. Thus accounts are not opened up just because the taxman wants a look. But those protections are also applicable to Swiss citizens and residents. Which means rather, that it’s not a secrecy jurisdiction because that privacy is not on offer just to foreigners.

So they are in fact saying that the domestic laws of a sovereign state must be changed to accord with their view of the way the world should work. (Murphy has more than once recommended a system of sanctions against Switzerland for stealing “our tax money”.) We might think of any number of reasons why perhaps we shouldn’t support a campaign to include the prejudices of a number of economic illiterates into the laws of *other* soverign nations, no?

“If say the relevant authorities in Nigeria want to get their hands on the personal bank accounts of the oil minister, as a matter of fact, are these “secrecy jurisdictions” going to give it up?”

They did with Abacha…..

“Second, we have corporations, “legally” – that is, taking advantage of the laws in these secrecy jurisdictions and tax havens, trying to reduce their tax bills. Even here, I’m not sure what your beef is – if the tax man takes a look at the accounts and finds that the laws of respective countries are being upheld, fine, and if they’re being broken, why shouldn’t you want the perpetrators to be caught?”

Because you’re missing the other half of the campaign. Parking the copyright or patent into an offshore company is legal. Vide Bono and U2s song royalties in a Netherlands company. What they want is that all of this information must be visible so that, despite its legality, “home countries” can see it and then tax it.

Consider another part of the campaign: country by country reporting. This is the idea that everybody doing business in more than one country must present separate accounts for each country that they do business in. They’re missing the very reason that firms exist in this demand. Ronald Coase got the Nobel for pointing out why firms exist: transaction costs. There are times when it is more efficient for things to be done within one organisation (and times when it is not). When it is, that’s why we have a firm. Multinationals, we can thus assume, exist because it is more efficient to have such organisations rather than a series of separate ones either working individually or simply contracting with each other.

An obvious example is that of Big Pharma: you only want to do the invention and testing of the drug once, globally, then sell it in all the different territories. You also obviously want to be able to price discriminate. Richer places will pay more for the drugs, poorer ones will get it at closer to marginal production cost, making smaller or even no contribution to the overhead of having created it originally.

The demand for country by country reporting is the insitence that the multinationals get taxed as if they are not multinationals: that they be taxed as if they are a series of separate firms in each jurisdiction. Which in economic terms is the demand to tax them as if the multinational doesn’t exist: it’s a demand that we ignore the very reason the firm exists at all.

Ignoring the reason for something’s existence as a basis for taxation simply doesn’t sound all that clever.

Further, something that needs to be understood about the whole project. It’s a small group of people who continually quote each other’s reports, failing dismally to note any critique of any one single one of them. I can’t remember which one by Murphy it was (either “The Tax Gap” or “The Missing Billions”) which tried to work out how much was being “lost” to the Treasury by corporate tax manouvres. I was able to show (and this was confirmed by, for example, the sainted Chris Dillow) that Murphy had made an entire cock of his estimates.What he said he had found was the amount lost through fiddling. What he had actually found was the amount of fiddling *plus* the righteous and legal use of tax allowances exactly as Parliament had meant them to be used. He provided absolutely no estimate whatsoever of which was which saying just “it is obvious that much of this is avoidance and evasion” or some such.

But as you go around the Christian Aid, TUC, TJN and so on network, you find Murphy’s number being used uncritically as the amount of avoidance and evasion: despite Murphy and others having been made aware of the error.

Finally, what really pisses me off about their entire campaign is that they really don’t understand the economics of what they’re all talking about. There’s the Coasean point above about why firms exist at all. But more than that they resolutely ignore, stick their fingers in their ears and sing “Na Na Na” when anyone tries to point out something about either tax incidence or tax competition.

In an open economy (and it depends upon how open of course) capital taxes like a corporate income or profit tax are not paid by the owners of the capital in full (and of course they are not paid by the company itself in any scenario). The CBO (ie, an impartial research office for Congress) estimates that 70% of the US corporate income tax is actually paid by the workers in the form of lower wages, only 30% being paid (or rather the economic burden carried by) the owners of capital. Yet when you say, well, but perhaps we shouldn’t have a corporate income tax at all they just shout that you want to benefit the rich. But the incidence of the tax as it is now is not upon the rich: it’s largely upon the worker.

If you start mentioning Mike Deveraux’s estimates, that every £1 raised in corporate profits tax depresses wages by *more* than £1 then they start frothing at the mouth. I wouldn’t want to bet all I own on Deveraux being right in his estimate of the size of the effect but we do know, absolutely, that it is there. And also that it is substantial, if not necessarily over unity.

So it’s entirely feasible for someone like me to come along and say that I want to reduce or even eliminate corporate profits taxes *because* I want to raise the wages of the workers. An argument they simply cannot understand because they refuse to learn the basic economics of what they’re talking about.

Yes, there’s even more to this but some productive work does need to be done today.

I can’t keep up with the reading… OK Tim, we are getting toward some sort of an understanding.

You are not in favour of things that help criminals hide their loot, you think that the authorities already have the powers they need to investigate them, but this is an empirical question (you could be wrong about it) and if it turned out some places were putting ‘secrecy’ barriers in the path of sensible criminal investigations, presumably you wouldn’t be opposed to campaigns to change that.

And you’re saying it’s not a case of simply complying with the tax laws of both countries – there are cases where firms may comply with laws in tax haven country but violate the laws of their own country, and you think they should continue to be allowed to do so, and in secret, because soveriegn states have every right to their own laws and people should be able to use that to their advantage. If I want an assisted suicide, I go to Switzerland, for example. Well, I’m just not sure about that, I can’t help feeling it’d prefer if rich citizens and corporations were not able to evade the taxes the democratic process has determined they should face by taking advantage of expensive lawyers and international variation in tax laws. On the other hand, you can’t stop people and businesses emigrating if they want to. I suppose greater homegeneity in tax law across countries would have its advantages. I’m uncomfortable I don’t know enough about what the existing state of affairs is (the scope for tax evasion is often exaggerated I know; see Guardian v Tesco), and exactly what changes are being proposed, but in principle I’m think I’m still siding with the Tax Justice lot here (less sure on specifics).

On all the other stuff, about this idea of country by country reporting, that’s too much for me to take in right now. I’m afraid I don’t understand your Coasian arguments either; I cannot immediately see how the Coasian logic behind the existence of multinational firms is undermined by changing the way they are taxed. But I don’t understand what Tax Justice think it woudl achieve either.

Paul, I think there’s a world of difference between being “bound up” with the causes of a crisis, and playing a significant causal role; yes the banks used them while doing what they did, but had secrecy jurisdictions not existed, I don’t think it would have slowed them dowm much. Anyway, all I’m saying is that I’d go softly on any “secrecy jurisdictions helped causes this crisis” arguments. Oh, and while Tim is wrong on economics from time to time, I’m don’t think failing to immediately grasp the mechanisms of the Ilzetzki, Mendoza and Vegh multiplier paper is too damning. I mean, he should have got it if he’d read it more slowly and I suspect he understands it now it’s been pointed out. Of course you can have a grasp of basic economics and still be wrong on some of the big questions, as is Worstall, the terrible righty. (contrary to your perception, I think of myself on the left).

Tim, just want to say, *extremely* lucid points that you’ve made… very sensible and backed up with facts.

To Luis and others–

What I often wonder in word battles like these, is where the passion for arguing the so-called ‘tax justice comes’ from.

Is it simply a question of morality and fairness? Does it personally spite you that there are richer people in the world than you, who may be paying a lower % of a certain type of tax? Have you been personally affected by this?

I am honestly and genuinely curious. I see people like Murphy and crew attacking ‘offshore’ with such gusto and I think… why, exactly? To what end do they want to achieve, and where lies their motivation? Are they paid by onshore governments to highlight and tackle these issues?

In my mind, the issue of taxation was a very simple one. I’m a UK citizen and I chose to move away from the UK because I do not enjoy the increasing socialist mentality of the state, and in largepart, it’s people.

In my income bracket, I would be paying over 50% of my earnings in taxes. For what I was getting in return, I did not consider it a fair price, and so moved away to what I would consider greener pastures. My new country offers a better standard of living, generally friendlier people with more welcoming attitudes, better weather, much less crime, better food, social encounters, etc. The list goes on; some of it trivial, but still very important in my overall determination of a suitable place to live. Oh and I pay a *lot* less tax — hundreds of thousands of pounds per year, less.

I, for one, wonder where the economic reasoning of tax homogenizing comes into play. This particular country manages very well, with a very strong economy, taxing its citizens at a much more efficient %. Why should they play to the whims of other countries? As Tim rightly said, a sovereign nation is a sovereign nation – it doesn’t matter what you or I *think* they should do, their laws and decisions not only above and beyond you, they sidestep you altogether.

I find it extremely perverse the notion that one citizen/resident of one country – especially one in a failing economy, who’s onshore over-taxation and hypocritical stance on its own foreign residency policy is not aiding its current position, should have the right to meddle in the affairs of a totally sovereign and distinct nation.

Would you open your front door to strangers, and allow them to come in an re-arrange your furniture, and told you how you should live your life? What would it have to do with anyone but you?

Right on, Tim – one intelligent voice on what seems to be this whole site!

“On the flip-side, consider an African kleptocrat who defrauds his nation to the tune of billions, using SJs to launder his money into legitimate western bankaccounts. Or international criminal gangs doing the same.”

We already have methods to deal with this. Turn up with reasonable evidence that a crime has been committed (as above, very like an extradition request) and you get the info. Turn up saying “We’d like to see if what we think is a crime but you Mr. Swiss judge do not” and you’ll get a thick ear: just as you would rightly get one if you said that “We’d just like to put this bloke in jail on remand for a few months if that’s all right with you. No, no proof, no evidence, not even reasonable suspicion, we just think he should do some pokey.”

“Let’s accept that this may be a bullet we, at TJN, have to bite.”

Err, no, I don’t see you offering to serve the jail sentences. The bullet will have to be bitten by someone else. “Console yourself Mohammed, console yourself. You’re suffering because Paul Sagar thought the trade off was reasonable. No, of course he didn’t ask you what you thought about the trade off: what do you think he is, a democrat or something?”

“My point is a very specific one: there may be difficult moral trade-offs in this issue, and we may have to face up to them.”

Good, we begin to get somewhere. There are indeed trade offs here, between freedom and liberty, between privacy rights and your desire to stick with people with taxes and so on. But as above, you’ll not have to face up to them, it will be other people who get the shitty end of the stick. So let’s have the full thing out in the open shall we? Let’s go through the whole tax incidence, tax competition, privacy, etc things spelt out. And let’s have real figures not what Murphy has been cooking up on the sly for years.

“and TJN et al are apologists for tyrany and murder.”

That’s not an allegation I’ve made but I’ll do so if it will make you happier. The allegations I havew made are that you are ideologically driven ignorants which may or may not be less of a blow to the ego.

“We don’t approve of tax evasion, criminal proceeds, illegally-obtained flows from the developing world, in particular.”

Well, no. You’re extending it to tax avoidance and Murphy has even indicated that the mere asking for clarification of what the tax law is is equivalent to trying to evade said law. It’s very much a basic point of English law that we are allowed to, it is our right to, organise our affairs so as to minimise our (legal) tax bill. Murphy disagrees with that basic point: you wonder why people are suspicious of his grand plans for re-ordering the global finance set up?

“So the financial crisis had nothing to do with securitised debt, collateral debt obligations, off-balance sheet financing, using securitised products to hide banks’ and other financial institutions’ real liabilities and the toxic debt on their balance sheets?”

I’m sure that the Sun rising in the east had something to do with it as well. But that list is just about as wide as using the rotation of the earth as an explanation.

There are two very simple explanations. Each captures some of the flavour and no single one (of even a vastly longer list) captures it all.

1) Banking systems that do not have deposit protection schemes are subject to runs. The shadow banking system (ie, those wholesale markets that NC was borrowing on, just as an example) did not have deposit protection. There was a run. It’s easy enough to look back now and say this but that is an at least partially valid explanation. Banking systems are subject to runs.

2) The American housing bubble. Everyone assumed that the various regional US housing markets were not correlated. They would not all fall at the same time. Indeed, they didn’t all fall at the same time, but there was enough correlation to make all mortgage backed bonds fall in value at the same time. That was the unknown unknown.

These two are vastly more important than the idea that HMRC should be able to look at the balance of my (non-existent of course) account in Leichtenstein.

“TJN has never said that SJs caused the financial crisis. Let’s be clear about that. But it is abundantly obvious that SJs were bound up with its causes.”

No it isn’t. Northern Rock didn’t fail because of Granite. It failed because it couldn’t finance its new loans, the ones it hadn’t already securitised through an SJ.

“People like Gordon Brown and Barack Obama have recognised this fact.”

My my, aren’t you the naive one about politics? You’ve never heard the phrase “you don’t want to waste a good crisis”? You’ve never observed politicians taking action to do something they’ve always wanted to do but didn’t have the excuse for until now?

You know, like hedge funds had absolutely crap all to do with this but new regulations are now being imposed upon hedge funds and private equity as a result: because there’s now a good excuse?

“It’s laughably bad reasoning to imply that because, say, the South Sea Bubble burst and that had nothing to do with SJs (by historical necessity), that therefore no other bubbles have anything to do with SJs!”

It’s also shockingly bad logic to state that because there is a bubble and a bust and SJ’s exist therefore the bubble and the bust have to have something to do with SJs. I didn’t exist the last time a British bank had a run on it but don’t go blaming it on my existence.

“Having said that, I follow the arguments.”

Excellent, do so. Here is St Cable of Vince on tax incidence:

http://www.guardian.co.uk/commentisfree/2009/feb/03/vince-cable-tax-revenue

“Companies are, of course, not individuals but legal entities. Any corporate tax is ultimately passed on somewhere else – in reduced dividends or wages or in higher prices.”

OK? Companies do not bear the economic burden of taxes placed upon their profits. Either the owner of the capital pays it, the workers do in lower wages or the consumer does in higher prices. There is no free lunch with corporation tax. It is always paid, in the end, by an individual somewhere. And, in an open economy, that’s going to be the worker in the form of lower wages (at least, the bulk of it is).

This isn’t some right wing point, it’s not a liberal,calssically or neo- one, it’s simply a fact about the world.

“You criticise John Christensen, and by implication say he is somehow duped by Richard Murphy. Yet John Christensen worked as a Jersey financier and economist for the States of Jersey for many years. ”

And from my interactions with him an extraordinarily bad economist. He turned up on my blog to start arguing about tax incidence as above. He claimed that the argument only worked in a closed economy and that as we had an open economy it wasn’t relevant. He was of course 180 degrees entirely cock eyed, for tax incidence doesn’t work in a closed economy, it works in an open one. Like the one we have in fact. Perhaps my experience with him has been a touch limited but I’ve not read anything of his elsewhere which has so far made me change my mind.

“Secondly, let’s take two more examples: Vince Cable and Lord Matthew Oakeshott. They are certainly not “duped” or “in thrall” to Richard Murphy, at all. They disagree with him on lots of things. Vince was a professional economist for Shell for many years.”

We’ve already got Vince on tax incidence above. The point of which is that it entirely invalidates the general screaming about “companies must pay their fair share”. For companies don’t pay anything at all, d’ye see?

“This claim that “it’s all made up by Richard Murphy” – aside from asking why he would make this up, and exit the chartered accountancy profession after 30 years, at huge personal cost to himself ”

Err, a few details. Murphy qualified in the mid 80s. He sold out of Murphy Deeks Nolan (think that’s the right name) just after the turn of the millenium. I make that 20 years. From what I gather the firm had some 800 clients: mostly individuals from what I gather. Arts types and so on who needed self employed taxes done for them (he and his then partner/s did the artists tax yearbook for a number of years). One estimate I’ve been given of his likely income from that partnership was £75,000 a year ish. That’s a good screw certainly, but I wouldn’t be at all surprised to find that he’s on something not all that far from that now.

But there’s more! His current wife is a GP: his first wife was a partner in that accounting partnership/firm. Peeking into another man’s motivations is always difficult but is it even vaguely possible that the partnership broke up for reasons a little less elevated than the idea that Murphy wished to devote himself to saving the world?

(BTW, all of that is publicly available and I’ve known it for some time. I only mention it because of what you have posited above, that he has deliberately taken a sacrifice to move from being an accounting partner to his current situation. )

“If Richard is so bad at measuring this sort of stuff, how come the World Bank (surely an institution you must love, nay?) signed him up? Do you have better estimates?”

I’ve shown that his estimates are based on faulty logic, yes. So much so that they simply cannot be believed. So yes, I have got a better estimate. “Less than R. Murphy proposes”.

“generally implied through your attacks on other people – that you are a “proper” economist who “really” understands economics [those are not attributive quotation marks, but indicative ones].”

No, I always explain, very carefully, that I am not an economist. I have no advanced degrees in the subject, I have never been employed as an economist and have no claim whatsoever to that title. I always say that I am an interested amateur, no more. The value or not value of whatever *I* say about economics is contained in what is said, not who is saying it.

“Where Giles Wilkes – chief economist of “Centre:Forum” think tank, and a former City many no less – absolutely takes you to the cleaners in economic debate.”

He does? I say that property is not taxed lightly. When we look at the OECD figures property is not taxed lightly. *Shrug* that can be many things but doubt it’s being taken to the cleaners. True, he then goes on to point out that wealth isn’t taxed very much in the UK: but then that was a claim that I made too. That we don’t have many wealth taxes.

On the second, Giles manages to get entirely the wrong end of the stick. The paper I was quoting from was not an abstract model at all: it was empirical research. You know, those facts which are meant to at least make us think about changing our minds?

Giles is freethinkingeconomist is he? You meant the bloke who said this about me?

“I think your view is bang-on for the longer term supply potential of the econoomy. And that is what will ultimately matter – what will keep the line pointing upwards rather than flat. Those supply side considerations will really matter, once again. For most of economic history, your sort of considerations, not the Keynesian sort, have been relevant.”

Oh. I have been woodshedded then.

“Now, it looks to me as though – contrary to your internet persona – you’re not much of an economist at all. Rather, you do a very good job of pretending to be one, and speaking from Authority in order to tell people to shut up, and then be incredibly rude to them.”

As above, I never claim to be an economist. Only an interested amatuer. Rude? Well, there are people out there that it is necessary to be rude to. Politicians and other assorted idiots for example.

“You’re in no position to lecture me.”

Quite, but I can point you to where there is real information, knowledge, no doubt?

Why not start here.

http://en.wikipedia.org/wiki/Tax_incidence

*** gets to work on 5000 word comment ***

*Just got back from 4 hours in Moorfields eye hospital, have serious infection in right eye, no contact lenses for 2 weeks, have lost glasses, reading computer screens painful*.

Will reply in due course, but it’s not going to be today, I’m afraid.

Suggested reading in anticipation of my eventual reply:

On tax incidence:

http://taxjustice.blogspot.com/2008/06/incidence-brigade.html

http://www.guardian.co.uk/commentisfree/2009/feb/05/comment-tax-avoidance

On the links between SJs and the financial crisis:

http://www.taxjustice.net/cms/front_content.php?idcat=136

+ Sol Picciotto’s piece in the FT a few months back

Genuinely sorry I can’t engage on this point properly today (and unlikely until Sunday). I feel like a right weasle starting such a big fight, throwing down the gauntlet in the massive comment above, and now not engaging.

But my eye really does hurt rather a lot. Sorry.

Paul, of course: physical illness is a sound reason for delaying a joust.

Get well soon.

These lists are such a waste of time. They all instantly shoot themselves in the foot by declaring that ‘low tax’ is a bad thing. Yes, tax havens have low taxes, but low taxes do not make a tax haven.

Laughably the list of 60 countries has the UK down as having low tax. UK tax take is 35-40% of GDP. How is that, by any definition ‘low tax’?

Wow. What a phenomenally ambitious and worthy project. Bless you for it. And go for it!

A humble suggestion, if I may. If you’re up in the middle of the night again (I know how it goes, and yes, I don’t follow my own advice), please please please put your available energy into developing and expanding the site and not in jousting with idiot timewasting trolls like Tim Worstall.

Simply refer him to the advice @19 sentence 1 and put your available energy into building this marvellous idea.

Perhaps I’m reading it incorrectly but am I right in saying that the list of jurisdictions encouraging corruption includes France and Germany but excludes Russia, Croatia, Czech Republic and the Dominican Republic?

Bizarre.

“please please please put your available energy into developing and expanding the site and not in jousting with idiot timewasting trolls like Tim Worstall”

He’s an idiot and a timewaster because his politics are different than yours?

What makes you so sure that *yours* are right?

What have you ever contributed to the world apart from opinion?

If you’re going to make a comment like that, at least have something to say.

Otherwise, the only one looking like an idiot, is you.

@37 You’ve left the country.
Up to and until such time you are required to continue making a contribution to UK for that British passport of yours, I think you should spare us your views on how to tax money made in this country.

“He’s an idiot and a timewaster because his politics are different than yours?”

He’s a clever lad in some ways, but he has this ridiculously narrow ideological prism through which he insists on viewing every damn thing. It is proven time & again that this prism provides a false & distorting view. But, as taking a look at things without the prism is non-negotiable for him, he is in effect a timewaster. Like debating the Jehovah’s Witnesses.

Paul Sagar has better things to do with his time, like developing his website.

“Up to and until such time you are required to continue making a contribution to UK for that British passport of yours, I think you should spare us your views on how to tax money made in this country.”

You know, that’s a very amusing and funny comment. Well, it is on a thread where some bloke living in London is telling us all about his campaign to make 60 independent and sovereign countries change their privacy and tax laws so as to accord with his views of how they should do it.

Either Joseph (and myself, the TPA bloke, Uncle Tom Cobbley and all) has the right to comment on the UK tax system and so does Paul have the same right to comment on any tax system he desires: or, if only those who are subject to a specific tax regime can comment on it then Paul’s entire campaign is, by your standard, verboeten.

Do make a choice there, won’t you?

Not verboten, but just good manners. It is completely absurd for a British passport holder resident abroad not paying tax in UK to be insisting that we residents of UK should have shit public services and a shit public realm in order to please them, whether he be Joseph or that Director of the Taxpayers Alliance.

I thought this debate was about (a) taxation of people and companies enjoying the benefits of a UK passport or a UK company registration (b) taxation of money made on activities in UK sovereign territory.

Obviously what citizens of independent and sovereign countries do in their own independent and sovereign countries is their own affair. People like Joseph are free to hand in their passport, and I suggest they do so.

“I thought this debate was about (a) taxation of people and companies enjoying the benefits of a UK passport or a UK company registration (b) taxation of money made on activities in UK sovereign territory.”

Oh no, Paul and the TJN are much more ambitious than that.They’re talking about the taxation of activity by a, say, Delaware registered company doing business in, say, Angola.

“Obviously what citizens of independent and sovereign countries do in their own independent and sovereign countries is their own affair.”

Not according to Paul and the TJN they’re not.

Presumably the American members of the TJN are leading on that.
My understanding is that TJN is an international organisation working for solidarity amongst all the wealth creating and producer countries against the tricks of the super-rich.

Fucking hell! It says here Tim Worstall lives in Portugal.
http://www.taxresearch.org.uk/Blog/2009/10/10/taxpayers-alliance-director-is-not-alone-in-benefitting-from-the-eu/

I had thought Tim deluded but not subject to my earlier comment, which I will now amend accordingly:

It is completely absurd for a British passport holder resident abroad not paying tax in UK to be insisting that we residents of UK should have shit public services and a shit public realm in order to please them, whether he be Joseph, that Director of the Taxpayers Alliance or Tim Worstall.

It’s hardly a secret that I live in Portugal. That’s why in fact I phrased things this way:

“Either Joseph (and myself, the TPA bloke, Uncle Tom Cobbley and all) has the right to comment on the UK tax system and so does Paul have the same right to comment on any tax system he desires: or, if only those who are subject to a specific tax regime can comment on it then Paul’s entire campaign is, by your standard, verboeten.”

“t is completely absurd for a British passport holder resident abroad not paying tax in UK to be insisting that we residents of UK should have shit public services and a shit public realm in order to please them, whether he be Joseph, that Director of the Taxpayers Alliance or Tim Worstall.”

This appears to mindicate that Strategist doesn’t have a clue about the nature of this debate and, as Joseph commented, is making himself look like an idiot.

Tim,

I’m still not great, vision-wise, and I’ve got absolutely loads on my plate (MA degrees have a lot of reading, it turns out). So i’ll just reply to the points I think are most pertinent:

We already have methods to deal with this. Turn up with reasonable evidence that a crime has been committed (as above, very like an extradition request) and you get the info

The problem is, when you got to an SJ and say this, they say “OK, give us definitive proof that this person/organisation has committed a crime, and we’ll lift the secrecy veil for you”. And in reply, the relevant authority says, “er, I don’t think you understand; the definitive proof is in your jurisdiction. We have lots of strong suspicions – here, look at all of those – but until we see the info behind your secrecy veil, we can’t prosecute”. To which the SJ replies: “sorry, we run a Catch-22 system here: if you don’t already have the information you need to prove criminality, then we won’t give it to you. Of course, if you do already have it, then there’s no point asking us for it, eh?”

It’s very convenient for SJs, of course. They can claim that they comply with international efforts to stop criminal activities, by saying that they will co-operate with other jurisdictions who provide proof of wrongdoing…knowing full well that the proof of wrongdoing is hidden in their jurisdiction.

As a case in point that laws on this matter are not up to scratch, look at how damn difficult it’s been for the US authorities to bring even a few of the people responsible for the UBS scandal to account. Switzerland just kept playing the “well where’s your proof?” card over and over again. This wouldn’t have happened with e.g. France.

Err, no, I don’t see you offering to serve the jail sentences. The bullet will have to be bitten by someone else. “Console yourself Mohammed, console yourself. You’re suffering because Paul Sagar thought the trade off was reasonable. No, of course he didn’t ask you what you thought about the trade off: what do you think he is, a democrat or something?”

Er, it wasn’t a claim about what i as an individual would have to suffer. It was a point about how – at the level of legislation-formation and policy-making – there may be competing values and difficult choices to be made. It was a point about how, in politics and life, we can’t always have it all, whatever side we’re on. That if there are two options, both of them may carry undesirable consequences, and yet nevertheless one option must be chosen in favour of the other. But I think you knew that, and just wanted to play your usual card of honing-in on one very tangental point and ignoring the substantive argument lying behind it.

But as above, you’ll not have to face up to them, it will be other people who get the shitty end of the stick

Again, you are setting this up as though TJN wants to move from a situation where nobody gets the shitty end of the stick, to one where some people get a shitty end of a stick. But of course, that’s not how we see it at all. We see a world at present where a lot of people get the shitty end of the stick due to the way SJs operate at present. We think it would be possible to change that state of affairs, in order for many of those people to cease receivign the shitty end of the stick. Now you say “hang on, what you want to bring about may mean that new people get the shitty end of the stick who didn’t before”. What i’m saying back to you is: “Well maybe. I think we have good reasons to doubt it – but let’s say you are right; maybe some new people will get the shitty end of the stick who didn’t before. But maybe that is what has to be accepted, if that’s the consequence of stopping lots and lots of other people getting the shitty end of the stick”.

Now, there’s a further issue here. You think we are just wrong in our thoughts about who gets the shitty end of the stick, and what would happen if we changed the system. That’s an empirical question, and we do indeed need to thrash that one out (as TJN has, it’s fair to say, gone a long way to try and do, however much you may dislike the project, you can’t deny we do a lot of research). If it turns out that in fact all the empirical arguments go your way, then I’ll leave TJN. I just don’t think they do/will. But until that point can you stop carricaturing TJN as though we’re just about causing hardship to some poor individuals somewhere, gleefully rubbing our hands at the thought of the state getting bigger? And can you conisder – a-la-LuisEnrique – that we may indeed by right that the status quo is very very bad for lots of people at present, and we may want to think about changing that?

The allegations I havew made are that you are ideologically driven ignorants which may or may not be less of a blow to the ego.

Hmm, but “ignorants” who spend a lot of time working in this field, right? If we’re going to play this game, then you look to me very much like an ideologically-driven nay-sayer who wants to push a very simplistic view of the world in order to be able to ignore all the inconvenient truths you’d have to face up to if you abandoned your simplistic picture where people like TJN are just mad ideologues, where the world of high finance isn’t full of skullduggery and abuse, and where everyone is rich because they deserve to be so everyone lower down the pile should just shut the fuck up, and let the well-to-do get on with doing whatever the hell they like. Because, y’know, when rich people do whatever the hell they like this never, ever harms those lower down the scale, and so those people have zero right of redress to maybe stop the better-off from doing whatever the hell they like. Hmm?

<blockquote<These two are vastly more important than the idea that HMRC should be able to look at the balance of my (non-existent of course) account in Leichtenstein.

Sure. Accepted. But if banks are more susceptible to runs because, as you say, they operate extensively in the shadow banking system, and this shadow system is faciliated greatly by the use of SJs, then don’t we now have a case for dealing with the financial secrecy that SJs produce, which is a key part of the shadow system?

And again, just because banks experience runs, it doesn’t mean that all runs are equal. We’ve been through this point before, but last time we talked about “bubbles”. The logic is the same. And you haven’t refuted it.

No it isn’t. Northern Rock didn’t fail because of Granite. It failed because it couldn’t finance its new loans, the ones it hadn’t already securitised through an SJ.

And Northern Rock did not cause the crisis, but was rather its first victim and (almost certainly) a catalyst to further collapses. So your point is?

It’s also shockingly bad logic to state that because there is a bubble and a bust and SJ’s exist therefore the bubble and the bust have to have something to do with SJs.

Which was never my logic. My argument contained a vital empirical premise: SJs were bound up with the crisis, as a matter of fact. Which makes my reasoning – my logic, if you like – absolutely sound. Of course, if my empirical premise is wrong – as you claim it is – then my argument fails. But the problem is not in my logic, it’s in my claims about empirical truths. Making it somewhat ironic for you to acuse me of logical fallacies, as you clearly weren’t able to spot what was going on in my arguments here…

There is no free lunch with corporation tax. It is always paid, in the end, by an individual somewhere. And, in an open economy, that’s going to be the worker in the form of lower wages (at least, the bulk of it is).

But hang on a minute. Taxes are paid after profit is declared. This means that pre-tax profit is calculated. Profit = revenue – costs [yes? or is it more complicated than that? genuine question]. Worker wages are a part of costs. Thus by the time it comes to calculating and paying tax, worker wages have already been taken into account. Surely, then, the parties that experience the effects of after-profit-tax are those receiving dividends? What’s left after pre-tax profit gets shared between the tax man and those who receive dividends. If the tax man takes more, those receiving dividends get less. I’m fine with that. The return one accrues from being e.g. a shareholder receiving dividends is all well and good, but first of all the contribution to the society that makes institutions which are profit-making possible in the first place needs to be paid.

The only way I can see that wages get reduced by higher corporation tax is if companies anticipate their likely tax bill, want to maximise what they pay-out to those receiving dividends (e.g. shareholders), and thus supress costs in anticipation of declaring pre-tax profit, e.g. by in this case suprressing wages, meaning that pre-tax profit is greater than it would have been, the taxman gets a bigger cut, but then so do those receiving dividends vis-a-vis what they would have gotten if costs hadn’t been lowered (by reducing wages).

Now, there is obviously a good case for arguing that, in the interests of workers, corporation tax should not be too high or else it will impact upon them. There’s also an argument for saying that organised labour should be strengthened in order to have the power to resist wage-supression, meaning that shareholders – who are, after all, merely rentiers [is that an ok term to use?] – have to deal primarily with the impact of tax, because workers wont take a pay-cut. Which I’m pretty much ok with, to be honest. I don’t see why workers should suffer the burden of tax – which is the contribution to society which allows profit to be sought in the first place – while shareholders, who themselves contribute nothing to the running of a business and merely make a return from investment, don’t. I accept the case is going to be different with small business, those that aren’t owned by shareholders, etc. But what I’m saying is that just because corporation tax may have the effect – as a fact about the world we live in and have experience of – of lowering worker wages, that’s not therefore a knock-down argument against corporation tax. It’s complicated. And for that reason, you can’t use that one article by Vince Cable as some sort of knock-down (especially when it doesn’t address my substantive point about your slightly odd theory that everyone is just duped by Richard

As for the rest of this stuff – the personal stuff – I’m going to leave it aside. I actually regret bringing it up at all, in hindsight.

I am going to start reading about Tax Incidence, though.

Hmm, having read what Wiki says about tax incidence:

<blockquote<Most public finance economists acknowledge that nominal tax incidence (i.e. who cuts the check to pay a tax) is not necessarily identical to actual economic burden of the tax, but disagree greatly among themselves on the extent to which market forces disturb the nominal tax incidence of various types of taxes in various circumstances.

The effects of certain kinds of taxes, for example, the property tax, including their economic incidence, efficiency properties and distributional implications, have been the subject of a long and contentious debate among economists.[4]

The empirical evidence tends support different economic models under different circumstances. For example, empirical evidence on property tax incidents tends to support one economic model, known as the "benefit tax" view in suburban areas, while tending to support another economic model, known as the "capital tax" view in urban and rural areas.[5]

There is an inherent conflict in any model between considering many factors, which complicates the model and makes it hard to apply, and using a simple model, which may limit the circumstances in which its predictions are empirically useful.

I’m thinking this is going to be rather complicated. And it may not be a straightforward case of one side being thick and wrong and the other clever and right. Hmm…

“As a case in point that laws on this matter are not up to scratch, look at how damn difficult it’s been for the US authorities to bring even a few of the people responsible for the UBS scandal to account. Switzerland just kept playing the “well where’s your proof?” card over and over again.”

Very much my point. Double criminality is required, as it is and should be in extradition (absent the European Arrest Warrant). Tax evasion isn’t a crime in Switzerland.

“But I think you knew that, and just wanted to play your usual card of honing-in on one very tangental point and ignoring the substantive argument lying behind it.”

No, I’ll go for the alternative explanation here please Brucie. I’m vastly more interested in, worried about, freedom and liberty (it’s, umm, what “liberal” means) than I am about how money gets repurposed or taken from Peter to give to Paul.

“What i’m saying back to you is: “Well maybe. I think we have good reasons to doubt it – but let’s say you are right; maybe some new people will get the shitty end of the stick who didn’t before. But maybe that is what has to be accepted, if that’s the consequence of stopping lots and lots of other people getting the shitty end of the stick”.”

Sure. I understand your argument. I just disagree with it. In fact, one of the reasons I disagree with it is because I understand it.

“That’s an empirical question, and we do indeed need to thrash that one out (as TJN has, it’s fair to say, gone a long way to try and do, however much you may dislike the project, you can’t deny we do a lot of research). If it turns out that in fact all the empirical arguments go your way, then I’ll leave TJN.”

You don’t have to leave TJN. That’s not my point at all. That I think the *results* of what TJN is proposing will be to make the poor poorer is why I argue about it all. What you do with your life is entirely up to you. You know, this “liberal” shtick once again.

“But until that point can you stop carricaturing TJN as though we’re just about causing hardship to some poor individuals somewhere, gleefully rubbing our hands at the thought of the state getting bigger?”

But Murphy is indeed that. This isn’t a caricature, it’s a simple statement of what one of TJN’s guiding lights actually believes and proposes.

“the status quo is very very bad for lots of people at present, and we may want to think about changing that?”

Sure: agreed. The thing is, I also have thoughts and ideas about how to make the currently destitute not so. Roughly the same way that we ourselves became not destitute. Roughly the way that hundreds of millions of Chinese and Indians became middle class over the last few decades: the biggest reduction in human poverty ever in the history of our entire species. Trade, globalisation, get government the fuck out of the way of trying to regulate and control economies….you know, this liberal shtick.

Re the rest on corporation tax:

“I’m thinking this is going to be rather complicated. And it may not be a straightforward case of one side being thick and wrong and the other clever and right. Hmm…”

I don’t claim to be clever, nor do I claim that you are thick. Only that, on this specific issue, that I am correct for I am standing upon the shoulders of giants. For I have read the economists on this issue rather than the accountants…..

*Just got back from 4 hours in Moorfields eye hospital, have serious infection in right eye, no contact lenses for 2 weeks, have lost glasses, reading computer screens painful*.

omg! Paul Sagar = Gordon Brown! AICM share of the proceeds of the Tote.

The thing is, I also have thoughts and ideas about how to make the currently destitute not so. Roughly the same way that we ourselves became not destitute. Roughly the way that hundreds of millions of Chinese and Indians became middle class over the last few decades: the biggest reduction in human poverty ever in the history of our entire species. Trade, globalisation, get government the fuck out of the way of trying to regulate and control economies….you know, this liberal shtick.

Roughly the same way that we ourselves became not destitute.

You mean like Edward III brought in Flemish weavers, centralised trade in raw wool and banned the import of woollen cloth to encourage domestic upgrading? Doesn’t sound too liberal too me.

Roughly the way that hundreds of millions of Chinese and Indians became middle class over the last few decades: the biggest reduction in human poverty ever in the history of our entire species.

You mean not embracing free trade, just slightly freer? Like only bringing down tariffs after increased growth rates have been instigated?

It isn’t nearly as simple as you make out Tim and you know it. Success doesn’t always come in a neoclassical package.

“Up to and until such time you are required to continue making a contribution to UK for that British passport of yours, I think you should spare us your views on how to tax money made in this country.”

—-

I’m a British citizen. I have the same rights to vote and make amends to the country I was born as people who are living there today. In fact, I do believe the British government has just bought a ton of Yahoo! advertising space to alert overseas residents on exactly the same.

I find it amusing you make a point of stating ‘how tax money is made in *this* country’, and then go on to state you should be able to poke your nose into the affairs of entirely distinct, sovereign nations.

Is the hypocrisy there not blindingly obvious? Or are you, too, a passport holder of, say, Switzerland, Andorra, Monaco and the other countries that make up the 15% of all countries worldwide that could be considered tax havens?

How are you entitled to that double standard?

As far as ‘handing in my passport’, that would hardly be an issue – I’d just use my Canadian or Australian passport to travel with instead, or move to any of the tax havens in Europe that grant me residency and therefore, visa-free travel throughout the EU.

Of course, before any of that occurred, I’d have plenty of tax-free income garnered over the years to be able to retire off the proceeds. Ahhh, blissful freedom. How do you sleep at night.

“But hang on a minute. Taxes are paid after profit is declared. This means that pre-tax profit is calculated. Profit = revenue – costs [yes? or is it more complicated than that? genuine question]. Worker wages are a part of costs. Thus by the time it comes to calculating and paying tax, worker wages have already been taken into account.”
—-

It’s a little more complicated than that.

For example, I ran into a situation with my previous onshore business in which I wanted to purchase another business.

I had the money on account – however, I was not able to deduct the acquisition of the new business at a rate of 100%. It was amortized into a tax deductible payment over a 5 year term… meaning, the tax I would have had to pay on profits in acquiring the business, would have been more than my gross revenue for that year.

I fought with HMRC over this for a while, with back and forths with the accountant and in the end, I just couldn’t do it.

Your logic works on the assumption that:

* Other UK suppliers are happy with their post-tax bottom lines enough not to inflate their prices, which in turn, increases supply costs.

* Every type of business expense is deductible at a rate of 100%.

* Having to increase product prices for the likes of VAT / confiscatory sales taxes doesn’t create a market advantage for anyone priced outside of that ruling zone or another EU member state, to such an extent that my customers go with competitors or foreign companies (as has been the case a lot in several software-based companies I’ve owned… being undercut by Americans)

* Employees are the ones ultimately responsible for their taxes, and it’s not an employer’s role to increase their wages so that their net take-home is enough to afford a lifestyle in and around the area of their employment (I can tell you, from employing a staff force of 50+ individuals, that this is typically *not* how they see it… an employer also often assumes the unwritten role of ‘carer’, let me tell you.)

* All businesses structured in a way that every worker is an employee, and receives a tax deductible wage. That’s rarely the case in practical business scenarios, especially with smaller firms and family-run businesses, where the employees get paid, costs are covered, and the owner lived on whatever’s left at the end of it.

* That there’s enough initial profits to ensure that everyone in the chain is paid a decent wage, all bills are paid on time, and what’s left at the end of it is enough to either distribute as dividends, invest or expand. Purchasing a new plant and machinery, for example, is granted a 40% first year capital expense allowance… which means the other 60% comes from post-tax profits.

I wonder, in reading these posts, whether people who fight for ‘tax justice’ have ever owned a business or enterprise of any kind… or whether the majority tend to be employees, who rely on the so-called ‘system’ to provide for them.

It would go a long way in explaining attitudes.

Personally, I’ve *had* to understand both sides of the argument in order to enjoy a successful business… and in my position, knowing the economic realities and having to juggle them on a daily basis has given me somewhat of a different experience to what many fellas on here seem to think.

Just my two cents.