Why the government should act to close corporate tax loopholes

The title of the article says a lot: John Lewis chief calls on government to tax multinational companies properly:
The John Lewis Partnership boss, Andy Street said that there is an unfair advantage exercised by TNC's who are 'domiciled' abroad -often in tax havens and certainly for the purposes of aggressive tax avoidance. They have an unfair advantage over British-based rivals because of the foreign companies have low tax bills meaning that they can spend more on investment in research and development and begin to steal a march.

So if we want there to be British based employment, manufacturers etc, it would be because we'd like for our wealth not to be constantly being expatriated to tax havens and the global 'few'. If we allow this expatriation to continue, it is to consent in our own impoverishment. If we let it continue,  we're allowing corporate asset stripping of the nation.

The business case is the other side of this observation. If we value SMEs, we need to plot against the unfair advantage the combination of tax rules and existing wealth delivers to  the TNC's.  In principle it's the same as anti-monopoly legislation and policies: countering the accumulation of economic power because it tends towards rentier behaviour and the exploitation of others.

Tax, reward and the favours of fortune

I'm feeling a bit vindicated reading the report of this research. I've been saying in several posts over the last couple of years that we should be aware that the talk of rewarding the entrepreneurial is overblown by giving too much credit to their 'exceptional' ability (ie it's not normally that exceptional) and too little to circumstances and the formation by their society (if it takes a village to raise a child, it takes a nation to raise an entrepreneur). This study shows that we humans have a confirmation bias about this that needs challenging. Hey, -and it has a pedagogic dimension too!

 "Humans, however, often rely on the heuristic of learning from the most successful. Our research found that even though observers were given clear feedback and incentives to be accurate in their judgement of performers, 58% of them still assumed the most successful were the most skilled when they are clearly not, mistaking luck for skill. This assumption is likely lead to disappointment -- even if you can imitate everything Bill Gates did, you will not be able to replicate his initial fortune. This also implies that rewarding the highest performers can be detrimental or even dangerous because imitators are unlikely to achieve exceptional performance without luck unless they take excessive risk or cheat, which may partly explain the recurrent financial crises and scandals." Reward the second best, ignore the best:

 And because their success often is magnified or amplified by those good old dynamics to do with the first player in the field being able to set the parameters, make faster progress, accumulate critical economies of scale etc, we should consider a kind of windfall tax approach. I'ts like in the game Monopoly, the ones who get to the premium properties first and have a half decent strategy tend to win; it's not skill, it's luck plus, as I say, a half-decent strategy (but probably no better than most of the other players).

 The lucky few may be more skilful than others eventually, but the way they gain their superior skill can be due to strong rich-get-richer dynamics combined with the good fortune of being successful initially. This can justify a higher tax rate for the richest when their extreme fortune is accumulated in the fortunate fashion defined in this research.

And I thought it quite interesting to note that we need to try to work against the apparently counter-intuitivity about rewards in this kind of case:

policy-makers need to design 'nudges' to help people resist the temptation to reward or imitate the top performers.

Part of what needs to happen though, surely, is that we keep banging on about this research and we keep analysing and publishing and highlighting the luck and happenstance that has actually 'made' these so-called 'self-made men'. Society has helped make them; the rest of us are entitled to ask for a dividend for the investment we have made in their success. We are all shareholders in the common good; it's time to stop exempting those who impress us.

Tax -the fees for participating in society

My more regular readers will find this somewhat familiar: I almost felt like the author must have read a previous blog post or two (like this or this one and even perhaps this one and for a bit of a wider perspective try this) of mine:

Taxes allow the chancellor to fund an infrastructure from which every citizen, rich or poor, benefits. This includes the shoppers at Topshop, owned by Philip Green. Green avoids paying huge sums of tax in Britain by registering his company in the name of his Monaco-based wife, Tina. The government seemed relaxed about those arrangements when they invited Green to advise on how to cut public spending. The message sent out was: it's acceptable to avoid paying taxes in Britain, even when you live here and benefit from the legal, physical and cultural infrastructure that those taxes support.

Indeed I have favoured the idea of thinking of taxes as a kind of subscription: if you want access to the markets and labour and capital of our society, you participate and contribute appropriately and don't try to rip us off. We should call time on freeloading TNC's and their execs who don't stand their round in society.

As the article goes on to say (with emphasis placed by myself):

Google, employing 33,000 around the world, demonstrated even more clearly that this is "a golden age for capital". In the first three months of this year it made a $3bn profit. Google can domicile its profits not in each country in which it trades but wherever, in more than 100 territories, the taxes are least onerous. These arrangements are in place at the same time as many multinationals are shedding proper care of employees in regard to health, pensions and employment rights – leaving governments and taxpayers to pick up the bill. That is morally, economically and socially wrong.

Tax: share the burden fairly or anger will grow | Observer editorial | Comment is free | The Observer

Robin Hood tax: what the Republicans tried to censor....

I'm tempted to say that if the USAmerican Republican in the 90's engineered effectively to censor the idea, then it's an idea worth knowing about. Of course it's now being taken seriously.
What’s not to like? | Inside Story: "Republican senators in the United States had started misrepresenting Tobin’s proposal as a “UN tax.” This was nonsense, of course: taxes can only be collected by governments. Yet that fact didn’t prevent the Republican-controlled Senate from including in the bill authorising payment of US dues to the United Nations a clause prohibiting payment if Tobin’s idea was even discussed in the UN."
The article this quote's from gives some helpful details and summaries of research related to the tax. Here's the summarising final paragraph.

American Nobel economics laureate Paul Krugman argues that a financial transaction tax “would be a trivial expense for people engaged in foreign trade or long term investment; but it would be a major disincentive for people trying to make a fast buck (or euro, or yen) by outguessing the markets over the course of a few days or weeks.” “What’s not to like?” he asks. Critics claim that it would be avoided, but the centralisation of such transactions makes them relatively easy to monitor – if there is a will to do so. The tax is one way of shrinking bloated financial sectors and of raising revenue from those who have benefited most from the explosive growth in the volume of international financial transactions. •

Just how rich someone on £150k pa is ...

Well, I've seen the threats about a brain drain and driving away the financially very successful. And it may be true. But apparently polls show that most Brits seem to support a 50p tax rate for earnings over 150k. And the reason we've heard the downsides first may not be hard to find: "Highly paid editors and proprietors do not much like the idea of being hit in the wallet, and will seek to convince readers that the move is a dangerous one. But there is also a more general failure on the part of the elite to grasp just how exceptionally rich someone on £150,000 - the new rate's threshold - really is."
Quite, and if you need more convincing, just look at the rest of the article. Remember the typical in UK is £16k. The real difficulty is that at 1%, the numbers earning £150k-plus are not great and the revenue is likely to be small (and perhaps shrinking if the 'brain drain' predictions are right). But let's recall that there is a moral case for progressive taxation. Part of that case is that it builds infrastructure that all benefit from, including the wealthy. Another part of the case is the research that shows more equal societies are happier. Another dimension is that by helping the poorer members of society there is a degree of enlightened self-interest for the rich: it helps reduce crime and envy on the one hand and to help make sure that the guilt/yuck factor of having to drive through squalor and deal with smelly people is reduced ;)
Budget 2009: Alistair Darling's 50p tax for high earners 'welcomed' | UK news | The Guardian:

Should USAmerican ambassador be ASBO'd?

Morally; yes, I think. Obviously, under the Geneva Convention legally; no. Here's why I think Boris Johnson, like Ken Livingstone before him, is right to insist that diplomats pay the congestion charge. Boris said 'The Swiss typically have come forward with trying to broker some kind of deal, I'm very keen that whatever deal we do should reflect the fact that these people are using London's roads. This is not a tax, this is a charge for the use of our roads, and I believe the diplomatic community should have the decency to pay it. I intend to stick to that decision.'
To make an analogy, which I think is just; I assume that the embassies pay for their power, sewerage, water, food, and so on, just like anyone else, so a charge for road use like everyone else is fair. I suppose the reason for resisting might be that it could be argued that it is a tax, which diplomats are exempt from. Just shows you how important naming things is, sometimes. If it's named a tax then it keeps company with various other calls on finance that diplomats may ignore. If it's a charge then it keeps company (has a paradigmatic relation to) with calls on money which everyone must pay. However we should note that within the UK system this is not a road tax; that is paid differently. No it's a charge, levied for use. If a diplomat wants to avoid it they should walk, cycle or take public transport (and they'd pay the charges for that too!).
Diplomats deserve asbo for London congestion charge snub, says Boris Johnson | Politics | guardian.co.uk:

Bank of Mum&Dad

I can't decide how much of a story this is. Though the fact I have felt moved to blog it probably answers that. I identify with it. Not reluctantly: I help fund my sons through university. But my motives for doing so comment further on this summary statement.
"'The bank of mum and dad is still a key contributor to students affording further education, even with the additional funding that is available to them.'"
About that additional funding: would that be the meagre burseries or the extra loan? In the former case, it's great to have something, but it's not enough to do without the latter. And while the loan is about as non-toxic as a loan can be (index linked, minimal rate of interest, collected by PAYE like a top-up tax, debt cancelled on retirement if you've not managed to pay it off, and so forth), it is still a loan and many of us don't want our kids to have more of that hanging round them when they start work than they have to. And what's more it's a bit of a disincentive to do voluntary work or to take work for the public good rather than remuneration because the interest still accrues. So, since many of us are actually funding our kids in part, is there an argument for grants paid for out of taxes and squeezing the regressive element out of the equation?
Most university students funded by parents | Education | guardian.co.uk:

The Fate of BC's Carbon Tax

I didn't know that BC had intro'd a carbon tax until I read this Worldchanging article: WorldChanging: The Fate of BC's Carbon Tax It seems that it is a centre-right party that has introduced the legislation, but (if I read the implications aright) they may not have done anything else to make it green: "two messages about BC’s carbon tax come out loud and clear. The first is that revenue neutrality is a bust — people may be willing to live with a new tax on carbon but think that giving the money back is a dumb idea; they would rather have revenues spent on public transit or anything else that would reinforce climate action. Second, they want tough action on industry."
Any BCers or Canadians able to throw more light on that?
As the article points out, what happens here could repercuss more widely.