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Richard Murphy on tax and economics

What we so desperately need is government for the interests of the many

3 hours 24 min ago

You could dismiss one report in the Guardian this morning as being of minor concern. It says:

The prime minister, himself a pheasant shooter and deer stalker, is understood to have intervened in December to stop a rise in the cost of a gun licence, which has been frozen at £50 since 2001 – just over a quarter of the £196 that it costs police to issue the licence.

But that’s not a minor concern; it is indicative of what is happening in a government that has lost all touch with any reality but that of the self interest of that tiny proportion of society whose interests it serves.

We cannot, apparently, find money for a great many essential services in society and yet we can subsidise the granting of gun licences to the tune of £17 million a year because the vast majority of the holders of those licences are either in the 1% or work for them.

Yet again, this is indication of government captured for the interests of a few when what we so desperately need is government for the interests of the many.


Vince Cable’s threats won’t beat excess pay. Only real sticks will do that

5 hours 28 min ago

Vince Cable is trying to play tough on executive bonuses. According to press reports he’s said that either businesses must take action to curb them or the government will. It’s a pretty hollow promise for at least six reasons.

First, this has been said before and nothing’s happened.

Second, this comes from the government that has gone to Europe to defend the right of banks to pay extortionate bonuses.

Third, the government is turning a blind eye to the blatant evasion of the EU bonus cap.

Fourth, this government no longer has time left to it to legislate on almost anything new.

Fifth, given that this government so heavily endorses big business cronyism and the capture of both state and private income streams by those who have no entitlement to them for their own private gain no one can take a word it says on this issue seriously.

Last, it’s toothless. Where is the sanction? What threat is being suggested? If it’s another suggestion that all pay must be shareholder approved let’s forget any chance of change; institutional investors don’t cap pay because they want to be part of the gravy train.

So what is needed is real reform, and that does mean sanctions.

Some time ago – at least as far back as 2009 – I suggested a policy to the TUC that has remained its policy since then. This was to impose a cap on the amount of pay that any group of companies could make payment of to a person and still get tax relief on it. My suggestion was that the limit should be set annually and be ten times median pay for the previous year. Median pay in the UK is about £26,500 at present. So this would mean no group of companies could pay anyone more than £265,000 a year and get tax relief on it.

Pay would, of course, have to be widely defined. It would have to include salary, bonuses, all benefits in kind such as cars, pension contributions, share options and so on.

And the rules would need to be right to make sure that excess reward was not paid by service company contracts instead. That would take some interesting drafting for legislative purposes, but could be done.

And I would suggest that when introducing the law disclosure in a company’s accounts of the number of people to whom the cap applied and the amount of remuneration not subject to tax releif should be made mandatory. It’s transparency that imposes constraint.

The result would be straightforward. The cost of paying higher pay would increase. That would not be by chance. It would be deliberate for three reasons.

First clear signals have to be given as to what is considered fair pay in the UK. This measure would deliver that message – and I defy anyone to say pay of above £265,000 is needed.

Second, it stops the UK taxpayer subsidising these excessive rewards by giving tax relief on them.

Third, it makes clear that those who make such payments are likely to be partaking in a process of corporate capture where some in a company are capturing the value added within it for disproportionate personal gain. And that’s a powerful message.

Will this government deliver on this? I think there is no prospect of that. But I do not see why we cannot have hope for the future. Something has to change and this is a case of delivering something that is possible.

PS I am aware that this cap would not apply to rewards paid by owner directors as dividends in private companies – but then these are, in economic terms, not salaries but profit distributions and so are not the focus of the policy I am suggesting, which is meant to address excess salary payments.

The rentiers reign

Tue, 04/22/2014 - 12:52

According to my dictionary rentiers are defined as:

What’s the relevance? It’s this:

That came from the Guardian website a few minutes ago. It reminded me of something I read overnight, from US economist Dean Baker:

The pharmaceutical industry … benefits from enormous rents through government granted patent monopolies. We spend more than $380 billion (2.2 percent of GDP) a year on drugs. We would spend 10 to 20 percent of this amount in a free market. We would not only have cheaper drugs, but likely better medicine if we funded research upfront instead of through patent monopolies since it would eliminate incentives to lie about research findings and conceal them from other researchers.

I have no idea if the ratios Baker (who I consider wholly reputable) are right, but I have a very strong suspicion that they are. His logic on this issue also sits comfortably, I think, with Mariana Mazzucato’s ‘Entrepreneurial State’.

The real plus for society regarding these companies would be that their hold on our well being be reduced. The reality is that we are letting them concentrate it, not least through their ability to extract excess profits long after they can be justified through the operation of state enforced patents.

That’s where the rentier reference comes in. These mergers represent the continuing rise of rentier capitalism; the very sort that adds little value to society but ensures wealth flows to those who control it.

Is BEPS the end of the line for the OECD taxation model?

Tue, 04/22/2014 - 06:14

I was asked to do on interview on various aspects of the OECD’s Base Erosion and Profits Shifting (BEPS) process on Good Friday and actually gave it yesterday. In the intervening three days I had ample time to consider issues over above and beyond the subject of hybrid entities that we were meant to be discussing. Since I have no doubt only a few selected quotes will be used from the interview let me offer some of the broader thoughts here.

First, let’s be clear that BEPS is a G20 initiative, not just an OECD one. That means it involves a slightly bigger participating range of countries than usual but for all practical purposes the fact that this work is being done by the OECD in Paris makes this feel like an OECD project and it is not for nothing that the OECD is known as a club of rich nations.

Second, let’s be aware that this is meant to provide a global tax solution even though only a subset of all nations that are developing it.

Third, let’s be very aware that not all nations are equal when it comes to the OECD. Candidly, there is the USA, maybe the UK, and then there are the rest. Like it or not, if what the OECD comes up with is not Congress friendly, then nothing works. As a result, if the US stamps its foot then everyone jumps. That is massively destructive, not least because Congress is hostile, not least to the OECD. Many right wing Americans think it a profoundly socialist organisation because it produces regulations.

Fourth, let’s also note that the OECD has very mixed form. It is completely wedded to the arm’s length pricing method of allocating profits between companies within a multinational enterprise even though this makes two absolutely absurd assumptions, the first being that all companies within a group are independent of each other when they very obviously are not and the second of which is that there are comparable prices in the world’s market places for any trade undertaken within a group when that is now very obviously untrue given that maybe 70% of world trade is intra-group.

Next, the OECD is opposed to anything looking like formula apportionment of profits between states because that is the alternative to arm’s length pricing. The fact that very often this has to, in effect, happen because there is no data to achieve any other result is beside the point: the OECD has a closed mind on this issue.

It has much the same closed mind when it comes to country-by-country reporting although it has been told to address it. That closed mind is because it thinks it feels like formula apportionment.

And the OECD also lives in a time warp when not comes to accounting. That’s because arm’s length pricing was chosen as the bias for profit apportionment before most countries in the world required multinational companies to prepare consolidated group accounts and as such no one could apportion group profits between states because no one knew what group profits were. The OECD’s accounting logic has never, as a result, moved into the post World War 2 era when group accounting became the norm, and the level of accounting illiteracy in the discussions I have witnessed at the OECD has been staggering.

Add all that to the fact that the OECD simply does not have a prevailing philosophy on tax competition and we have a problem. By that I mean that whilst the organisation is supposedly dedicated to making sure that tax is paid once and once only it was in practice for a long time obsessed only with eliminating double taxation and rarely if ever considered the possibility of double non-taxation. That means it is the architect of many of the problems for which it is now supposed to provide solutions.

And then also consider the fact that when tackling tax havens whilst it said these caused ‘harmful tax competition’ it has never been able to agree if there is a benign form and what that looks like. The consequence has been crippling confusion as states are allowed to undermine each other. The goal of ensuring fair international taxation is compromised as a result with the consequence that the process of base erosion and profit shifting from internationally mobile resources to nationally static tax bases like labour (in particular) has been tacitly encouraged by the OECD. No wonder big business has some liking for it.

Enough of the background to the current problems though: What of the present issues? It seems to me a number of recurring issues are emerging in the BEPS discussions as policy draft after policy draft is rushed out of the various OECD working parties tackling BEPS related issues.

Take the problems of the digital economy. These have been virtually sidelined by saying there is no distinct digital economy. That may be true, but it hardly helps.

And then there are the problems with transfer pricing. However big they are, the commitment is to keep the system, come what may. The US is adamant on this and its will must be done. The same may be true in the digital economy, of course.

Then there is country-by-country, one of the particular issues where the politicians spoke. This suffers the problem of being a tax solution not thought up in either the US Treasury or the OECD itself. It is, as a result, being steadily gutted of all meaningful content as discussion progresses through the OECD. The proposed 15 indicator template is now down to 7. Even then the US is seeking categoric assurances that no one will ever use the data to undertake formula apportionment calculations to see if the profit allocation of a multinational group reflects the likely location of the place where profit was actually earned – even though that is the whole purpose of the exercise.

Then turn to hybrid entities. Apart from the fact that I do not think anyone is happy with the intensely complex draft there is inherent in it the demand that all countries monitor each other’s moves on issue. And that’s where I begin to get alarm bells ringing which suggest that this whole project is just not going to work.

I have to say they’ve been present for a whole. The fact that OECD staff have already been saying for months that if only they had more time they might make BEPS work suggests to me they’re already making their excuses in advance. And the profession is saying the problem is too complex to solve – as was said to me by someone who should know last week. That’s their excuse for saying ‘keep the status quo’ which suits them too well. The result is that what we’re seeing are some fig leaves. There will be a country-by-country template in some form. There will be some changes to arm’s length pricing rules – but they happen periodically, anyway. And there will be more information exchange with tax havens, but I’m looking at substance not form when I say I have alarm bells ringing.

In my view an emerging theme is of the impossibility for many nations of achieving the outcomes the OECD is suggesting. So developing countries will not be able to monitor hybrid entity legislation in other states and deal with it, whatever the OECD wants. And nor will many developing countries be able to reciprocate on automatic information exchange as yet and so may be kept out of it. Likewise they can’t create sophisticated arm’s length pricing teams and have little inclination to do so when then know that however much they invest in them the system does not work and the odds are stacked against them.

Nor does it look as if developing countries will benefit from country-by-country reporting. Moves are being made to ensure that this data only goes to countries with double tax treaties with a group parent company’s host nation. Those treaties are few and far between

I cold go on, but what is becoming clear is that, firstly, by refusing to make fundamental reform that is needed the OECD is piling complexity on complexity and in the process is making an already absurd system untenable in many ways.

Second, by heeding big business and the US too much the OECD is ensuring that demands are made of developing countries that they just cannot meet.

Third, and perhaps most tellingly, too much of any supposed benefit from this process is being denied to developing countries for them, in my opinion, to have any real confidence in this process, at all.

It is this last point that is the most worrying as far as I can see. The BEPS process was, at least in part, meant to tackle the enormous problem of tax being stripped out of developing countries leaving them in poverty and long term aid dependency, neither of which could possibly solve their long term economic problems. And now BEPS is beginning to look like it is going to bypass them, either deliberately on issues like CBC or by making demands of them they just cannot meet on information exchange, transfer pricing, hybrids and other issues.

How will they react? That to me is now the biggest and single most important BEPS question in very many ways. If developed countries fail to deliver a tax solution that meets their needs then I can see no reason why developing countries will then continue to play ball with the OECD. We already have Brazil operating its own transfer pricing rules. They are arbitrary in many ways, but they work for Brazil. China is clearly willing to move the same way. And I am sure many others will too. As for hybrid entities, where the corporate aim is to ensure no tax is paid I think the likely reaction is going to be to demand tax withholding at source on any income stream likely to be routed to such an undertaking.

In fact, this to me seems by far the most likely outcome of BEPS right now. The intransigence of the US position, in particular, promoted no doubt to assist the non-payment of tax by its own multinational companies is going to backfire very seriously unless some very rapid rethinking happens very soon.

The appearance of cooperation on tax across the Atlantic may well dissolve: France is gong to be the first to break ranks on that one.

Then a rapid move towards source taxation with deduction of tax in the country of origin appears to be likely in developing countries, I think.

An attitude of take the tax first and ask questions later will, I think, emerge. In some cases that may be exactly the right thing to do.

But what me will result in is a significant risk of double taxation. I am not a great fan of that, any more than I am a fan of double non-taxation which is what we have got. But the US inspired desire, backed by the OECD, to simply tinker with the existing system looks to me as if it will deliver the exact opposite of the desired outcome on international tax reform. We may be heading for international tax breakdown, and that’s dangerous because protectionism and other such issues follow on very soon behind.

This will be the almost inevitable consequence of setting an agenda for change and then refusing to deliver it at cost to those who most need it.

I could be wrong, but I am worried. BEPS looks like it is failing vey badly to me. They’re already now engaging in ‘pasting over the cracks’ exercises. The time to address the fundamentals is fast running out. We need to be worried.

It’s easier to get data on UK companies with bank accounts in Cayman than Stockport

Mon, 04/21/2014 - 06:51

There’s  a perverse consequence of the new rules on beneficial ownership of companies announced today.  Because the government has not adopted my recommendation that all UK banks should be required to supply information on the beneficial ownership of the companies to whom they provide banking services  but the government has, at the same time, signed information sharing agreements with places like the Cayman Islands, Jersey, Guernsey and the Isle of Man, it will now be easier for HMRC  to find out who is the beneficial owner of a company banking in Cayman  than it will be to find out the same information regarding  UK companies that bank in Stockport, Plymouth, Norwich,  Cardiff or Glasgow.

This is absurd.  We now require banks in all of these territories to exchange information with their own governments  for onward supply to the UK when it concerns companies under UK beneficial ownership,  and we are also requiring all financial institutions in the UK to exchange that information  with the UK government concerning US owned  companies  so that we can send that information to Washington  but we are not apparently not willing to require that UK banks supply this information to Companies House to make sure that fraud, crime and tax evasion are rooted out of the UK economy.

To allow this  absurd situation to have arisen when all the systems to secure the  necessary data  are already in place is almost  incomprehensible,  but that is exactly what the government is doing.

It really is time we got serious about tax evasion, but this government isn’t.

Big business sides with the fraudsters, criminals and tax evaders

Mon, 04/21/2014 - 05:47

I have already written today on the subject of the government’s proposals to create a register of the beneficial ownership of companies, something I have long campaigned for. It would, if done properly, beat con men who trade without sufficient resources, crime laundered through UK companies and a great deal of tax evasion.

What I am quite sure of is that this new law is not being done properly. In fact, it is little better than an honest box arrangement that has no chance of achieving its objectives, and now we know why. As the Guardian reports this morning:

[B]usiness interests including the CBI, the Institute of Directors and the Law Society have mounted a rearguard action to kill off the plan, saying unilateral action would leave British firms at a competitive disadvantage.

For example:

The CBI had told the business department it would prefer a multilateral but private register. It had also warned of “foreseeable concerns around the security and use of publicly available data, such as the ‘profiling’ of individuals based on their company holdings or the targeting of individuals with holdings in certain companies.”


The accountants Deloitte said a public register would discourage foreign investors in UK property and “over-expose the financial position of potentially vulnerable individuals such as children who are the beneficiaries of trusts, or indeed any beneficial owner who has valid reasons to want to protect their privacy”.

This is straightforward baloney. (I am trying to be kind here). To suggest that children will be at risk because they have property in trust is absurd: the fact that they have property is always widely advertised by things like living in large houses, going to very expensive schools and their parents’ conspicuous consumption on things like cars. And then there’s always the media. So Deloittes are simply being disingenuous.

As for the CBI, this is equally hypocritical. Have I heard such howls of protest from them about the sale of tax data to private companies? Oddly, no. And what, may I ask, is wrong with holding people to account for their decisions?

Now I am not accusing Deloitte, the CBI or the Law Society of being on the side of criminals, fraudsters and tax evaders. But just as is the case with their support for offshore secrecy their opposition to any element of transparency always happens to coincide their interests with those of such groups.

I know that what the CBI, Law Society and Deloitte all want is the opportunity to accumulate wealth unaccountably behind as many veils of secrecy as can be put in the path if those seeking to know what they are doing but that, of course, is exactly what the fraudsters, criminal and tax evader wants as well.

These ‘pillars of society’ should really think a little harder. Through their desire to promote their own selfishness (there is no other word for it) they seek to undermine the society that gives them their wealth. By wanting to destroy transparency and accountability they threaten democracy, which has been the bedrock of wealth.

They really are very foolish at best.

Or they could be very much worse than that.


The government has created a new honesty box for corporate fraudsters to disclose their crimes and I guarantee not one will

Sun, 04/20/2014 - 23:57

The government has announced today that:

Measures to improve the transparency of who really owns and controls UK companies have been announced by Business Secretary Vince Cable today. Ministers have confirmed that the Government is to proceed with an open, publicly available beneficial ownership register – a G8 commitment announced by the Prime Minister in 2013. This shows that the UK is leading the world in taking forward measures to enhance corporate transparency.

Adding a little more detail they have said:

A central open registry of information on companies’ ultimate controllers and owners maintained by Companies House. The registry would hold information on individuals with an interest in more than 25 per cent of shares or voting rights in a company, or who otherwise control the way a company is run. Companies will need to supply these details to Companies House when starting up and update them at least once every 12 months. This will include details such as the name, date of birth and nationality.

According to the the Department for Business, Innovations and Skills:

This will help tackle tax evasion, money laundering and the financing of terrorism, and improve the investment climate in the UK.

It is hoped greater transparency will mean honest entrepreneurs and investors can do business more securely in the UK and not be disadvantaged by those who don’t play by the rules. This follows the Business Secretary’s announcement earlier this week which seeks to beef up the director disqualification rules.

Well, I’m sorry to dispel the bank holiday mod of optimism that  Vince Cable does, I am sure, want us to feel about his latest best efforts, but  frankly this is all an exercise in window dressing.

Of course I want a register of beneficial ownership of companies in the UK, just as I also want a register of trusts that shows who benefit from those  so that they cannot be used to disguise the ownership of companies.  In principle, therefore, I should welcome this move, but I can’t for one very simple reason,  and that is that there is no hope whatsoever of these requirements being fulfilled.

That’s a claim that needs explaining, and  the explanation is simple.  Research I undertook in 2011, which I am currently in the course of updating,  reveals that approximately one in five of all annual return forms that should be submitted by companies in the UK, which form is the document on which this new information  on beneficial ownership will be  provided, are  never supplied to Companies House by the companies that have legal obligation to  submit them.  Almost invariably no penalties are imposed for failing to supply this form: instead, rather obligingly, Companies House commences arrangements for the company  that has failed to comply with the law to be struck off  the Register of Companies, thereby removing the directors  of that company from all further obligation to make any disclosure  regarding its affairs.

So,  what the government is, effectively, creating with this new law is an honesty box arrangement where it is saying to all criminals using companies for the purposes of commercial fraud, illicit activity such as money-laundering, or tax fraud involving evasion  that the government would be  very grateful if those criminals would be so kind as to leave their names and addresses on public record so that officials might  call on them later but if they are not so disposed, then Companies House will be equally happy  to erase all trace of their misdemeanour from the record instead, without making further enquiry, or imposing  any penalty.

You might think that in saying this I being just a little facetious, but this, in reality is exactly what this new arrangement represents.  To describe this new law as a fig leaf to  hollowly fulfil a promise David Cameron made at the June 2013 G8 summit is being kind, in the extreme.

What really annoys me is that I did, in face-to-face meetings with the government during the course of the consultation process  for this new legislation, make clear that there was a very simple alternative arrangement available to them that would ensure that this new law could be comprehensively enforced.  In Michael Meacher’s 2103  Private Members Bill in the House of Commons entitled the United Kingdom Corporate and Individual Tax and Financial Transparency Bill,  which I drafted on his behalf, and which Bill  was vigorously opposed by the government  and Conservative backbenchers ( in the latter case largely because some, like Jacob Rees Mogg, feared it might result in more tax being paid)  I suggested a very simple requirements to ensure that the information to disclose beneficial ownership was verified by third parties, meaning that a reliable register of such ownership could be created in the UK.

My proposal was based on the simple fact that, as a matter of fact, every bank that now opens an account for a UK company is required by law to identify the beneficial owners of that company before they can proceed. Therefore, given that the vast majority of UK companies bank with UK banks, there is already available all the information that is needed to create this register of beneficial ownership and all we need to do is require that banks submit this information, which they already hold, to Companies House once a year to confirm that they are, first of all, running a bank account for the company in question (which then also proves that the company is trading, meaning that they are necessarily going to be required to  submit a corporation tax return as well) and secondly that their ownership has been proven.

Of course there would be a small cost to this, but I stress, the cost would be small. After all, the banks necessarily hold this information in a database already, and to supply that information in bulk on to Companies House would, I suspect,  require minimal spending.   We could even compensate them for that cost: at present the annual return fee for a company is just £13.  If that was increased to something only very slightly more realistic (call it £30)  it is likely that more than £42 million could be raised to cover the cost of securing this essential information that would then verify that the Register of Companies that we have available to us to be used to monitor the affairs of trade in this country would actually contain useful, relevant and reliable information. But note that no such proposal is made in the announcement: this is apparently going to be a totally unresourced change, such is the government’s commitment to it.

Candidly, it’s very hard to think that this government is not on the side of the criminal, the fraudster and the tax evader on occasion, because that’s what their behaviour suggests.


On the sale of HMRC taxpayer data

Sat, 04/19/2014 - 05:13

As many will know I have been campaigning for country-by-country reporting of accounting and tax data by multinational companies for overcast decade. As a result of that work, and campaigning by many others, this issue reached the international taxvagendalast year, and then the fight back began.

At the OECD those multinational businesses – whose trading information whether at group or subsidiary level should, in my opinion, be on public record because of the limited liability they enjoy – have been saying two things. The first is that this is an infringement of their right to privacy and the second is that tax authorities can't be relied upon to protect the private nature of this data.

I have to date dismissed both concerns.

However, now we know that the UK government is apparently planning to sell tax payer data to commercial organisations and researchers (although the latter is just PR; they won't be able to afford it). So the very same companies who object to filing information on their tax affairs that will ensure they pay the right amount of tax in the right place at the right time will now be able to buy information on the tax affairs of people who do just that.

You really could not make up such staggering hypocrisy from both big business and HMRC.

On hang on: given who is on the board of HMRC they are of course virtually one and the same thing.

If Labour does not commit to sweeping this board clean on coming to office we've no hope of having a decent tax authority.


Further thoughts on Piketty and Capital

Thu, 04/17/2014 - 05:43

I have been asked to comment on James Galbraith’s review of Thomas Piketty’s book, Capital in the twenty first century, because Galbraith is critical of both the ideas and policy recommendations made in the book unlike, for example, Paul Krugman, who is broadly in agreement with Piketty’s thinking.

Now I should stress I have still not read all of Piketty, but I am accumulating a good collection of reviews. Others include Martin Wolf’s review and Brad Delong‘s. There will, I have no doubt, be many more to come and I am not proposing to make this a review of reviews.

What it does appear to me that Piketty is supposedly guilty of is of proposing what Wolf calls ‘a simple economic model’. That might appear odd in a work of 700 pages but as I mentioned in my own first blog on this issue, the essence of what Piketty is saying is that if the rate of return to capital is greater than the rate of growth in the economy then the result has to be increased inequality because that increased accumulation of capital has to arise as a result of a reduced return to labour. Piketty contends that this historically has been the case, and is again now after a period when this was not true.

The criticisms then appear to have four broad thrusts to them. Galbraith suggests that Piketty is using an inappropriate definition of capital. In Galbraith’s view capital remains plant and machinery – the stuff with which the proverbial widget, much beloved of economic textbooks, are made. I have to say I think Galbraith is both naive in thinking that this is what capital is in an era when such assets make up a small proportion even of corporate balance sheets. Second, I think Galbraith is guilty of a standard macro-economist’s failing: he simply has not comprehended the role or money and so of financial power within an economy. It is an astonishing fact that macroeconomics really does not have an adequate theory of money or of its impact in the real economy. As a consequence it has no way of managing the role of financial capital about which Piketty is rightly concerned because of its impact in the real world. Galbraith’s economic criticisms largely fall apart at this point.

Delong’s critique is potentially more interesting. He argues that Piketty has considered the wrong rate of interest. He says that of the four options for interest rates that could have been used Piketty considers what he calls r2′ which is the real interest rate that is the actual average return on wealth in the society and economy when he should have considered r3′ which Delong defines as the real interest rate that is the average risky net rate of accumulation–what capital receives, minus the risk of confiscation or destruction or taxation, plus appreciation in valuation multiples, minus what is spent in order to keep the world in the appropriate social position. I have not thought this through as yet, and need to, but suspect there is an issue here that does need to be explored if true, but which also might be capable of being dismissed entirely because I suspect that r2 and r3 tend to the same number in the long run which Piketty is considering.

Third, Wolf makes the criticism that Piketty asserts that inequality matters but does not say why. I reiterate, without having read it all I cannot say whether that is fair or not, but I also think it a red herring. Piketty does not, surely, need to cover ground already comprehensively covered by others and there is a growing literature on this issue that seems to me to more than comprehensively deal with this point.

Fourthly, the nature of Piketty’s recommendations comes in for a lot of attention. You could say Piketty did not help himself here by saying that his propsoal for a worldwide wealth tax was unrealistic. I would disagree: in a platonic sense knowing the ideal form of a solution does not appear to me to be a bad thing even if that knowledge is then only of use in establishing a goal against which any pragmatic outcome can then be measured for effectiveness. As such I defend Piketty’s idealism.

I also think Piketty is right to talk tax. He very clearly wrote this book to promote a paradigm shift in thinking, not least on this tax issue. For Galbraith to say that a tax solution is not possible because pre-paradigm shift thinking precludes it is to deny that this book is in itself a change agent. I confess I am surprised by this poverty of both aspiration and thinking on his part.

But that is not to say that Galbraith and Wolf, who also has concern regarding the recommendations, are wrong to say that more practical thinking may also be necessary. Some of that will be on how wealth taxes can be created. That is a task I certainly want to be involved in: I think that this book opens that opportunity just as it also creates an economic framework that justifies much of the work I and others have done on tax havens over the last decade or so. There is much to do here. Associated with other work with which Piketty has been involved in with regard to higher rate taxes, there is also work to do on that issue.

But I also accept that tax alone cannot deal with this issue or inequality and if that is the focus of most of Piketty’s recommendations much as I welcome that pushing of an agenda with which I am involved I would also very clearly have to say that other regulation is essential. We do need living wages. We can cap higher pay. Land value taxation is clearly a way of addressing financialisation of capital, and resulting speculation. We need to redesign incentives in the tax system that reward capital growth such as low capital gains taxes and penalise labour, such as national insurance charges. We need to address issues that allow capital concentration, such as the free flow of capital. The fact that effective tax rates on investment income are so much lower than on wages is absurd. All these are issues to address, as are others.

Piketty is guilty of dreaming, but I do not criticise him for that. Dreamers change the world. But we should not necessarily expect him to deliver all the solutions. That would be unreasonable.

Piketty has provided a theoretical framework, which will no doubt develop, for considering this issue. That’s an amazing achievement. Now it will need to be refined and, more pragmatically, thinkers with other experience will need to offer real world solutions for the issues he identifies. If his own solutions are but bench marks then they have use, as I have noted. But that use will be in assessing the relevance of offered solutions that can deliver real social change that permits the redistribution of wealth that I think Piketty is saying is now the condition for market economies and democracy surviving. Offering those solutions is now a task to be taken on. Galbraith has suggested some solutions, but i think there are more. The great merit of this work, if it proves to be enduring, is that it provides that opportunity for change. That, surely, is an enormous achievement? The rest may be nit-picking.

On Starbucks, territorial taxation and the creation of tax haven UK

Thu, 04/17/2014 - 00:21

I am intrigued by reaction amongst the tax profession to what I wrote about Starbucks yesterday. You won’t be surprised to know that those who have commented have said what I wrote was wrong. That always seems to be the case, so there was nothing new there.

For the record, the error it was claimed I made was to suggest that either a) a UK company is not taxable on its worldwide royalty income and / or b) suggesting a UK company is not more broadly taxable on its worldwide income.

The explanation for the alleged error is very simple. When I talk and write about a company using a generic term such as the normal corporate identity by which it is known (such as Barclays, BP, Google or Starbucks) then I am considering an economic entity as a whole or the specific part of it that is relevant e.g. Shell in Nigeria. That is what, of course, most people would do, because that is a reflection of the economic substance that is being considered. It has become habitual for me to do this: it is one reason why I support the concept of unitary taxation.

Tax professionals do however live in an artificial world where transactions are segregated not with regard to their economic substance but according to the legal form in which they are constructed. So, company in this context means a specific entity.

In that case when tax professionals saw me refer to Starbucks in the UK they presumed I was referring to just one entity. I did not think that way or as a consequence seek to suggest that. I would have thought it self-evident that if Starbucks moves its European HQ to the UK there will be more than one company owned by Starbucks in this country: I cannot imagine why anyone should think that would not be the case. Not do I imagine that such a move would mean that the whole HQ function will exist solely and only in one UK based operation if there is tax advantage to splitting parts of it, if only for legal purposes. Again, I cannot imagine why anyone should think that would be the case when I imagine that to find a situation where that was not true would be nigh on impossible. What I was implicitly referring to – presuming it would be understood as I intended – was the whole structure of entities that will now be controlled from the UK as a result of the European HQ being relocated here could achieve the result I suggested. This may well, of course, be by way of controlling the existing structure in the Nethelands; we have no way of knowing at present.

But, to be explicit, that means that when I said that I thought Starbucks could arrange its affairs in the UK so that it did not pay tax in the UK resident company that might manage its affairs in Europe on income arising outside this country this meant that I thought that a structure of companies could be out in place to achieve that economic goal. It did not mean I thought this possible using just one entity.

Why do I think that this goal could be achieved? Very largely because it seems that many of the changes in corporation tax over the last few years have been made precisely to help achieve this goal. Those who remember the minor spate of corporate evits from the UK in about 2007 and 2008 that so spooked Gordon Brown and Alistair Darling might also recall that many of the companies had significant IP interests held offshore that they thought might fall within the scope of UK tax as a result of potential changes then in the offing regrading UK controlled foreign company rules as a consequence of EU pressure for reform.

That exodus, which cost the UK almost nothing in lost revenue at the time precisely because most of the companies involved paid little UK corporation tax because they were then holding much of their IP offshore and were not remitting the profits made on them back to the UK, gave rise to an absurd panic reaction.

First Alistair Darling relaxed the rules on intra-group dividends from non-UK subsidiaries, exempting them from tax in the UK.

Second under the Coalition the controlled foreign company rules of the UK were largely gutted to eliminate the threat that most management of intellectual property from sources outside the UK could be brought into the UK tax charge.

And, thirdly, territorial tax was introduced with the specific aim of ensuring that no UK based group of companies would pay tax in the UK on income arising to it from outside this country if they structured their affairs with that goal in mind.

Put these changes together and the reality was that the threat to UK companies owning actively managed IP offshore ( which in this case simply means outside the UK) that this income might be brought within the scope of UK tax virtually (one should never say absolutely) vanished. I do not think that was by chance: that was by trumpeted design. Because of the changes at least some of those who left the UK have now come back whilst the use of the UK as a tax haven does seem to be increasing because of the effective ring fence excluding the possibility of non-UK income being subject to tax here that these rules now permit.

It was this broader context in which I commented. I find it absurd, to put it nicely, that the literalism of some in the tax profession appears to deem it inappropriate that I should view groups of companies in this way and that I should be denied the chance to presume such structuring will take place when it is the completely routine practice of that profession to suggest structures designed to achieve such goals.

If someone wants to still suggest that such structuring is not possible I will be intrigued to know how and why the UK has apparently created a tax system where all UK companies are taxed on their IP income from the whole world wherever it might be legally received, but I really do not expect that counter-argument to be offered because I do not believe that to be true. It is quite clear that the UK now has no intention of imposing such charges if the appropriate structures to prevent such a charge happening are now put in place – the creation of which opportunity being precisely what I criticised George Osborne for.

In that case I’ll suggest, unless convincingly corrected, that my comments were correct and that supposed criticisms were based on quite inappropriate assumptions.

Let’s say it very clearly: of the 239,000 new ‘jobs’ last quarter just 19,000 were full time employments

Wed, 04/16/2014 - 14:14

The headline employment data today looks good. 239,000 new jobs.

However, self-employment accounted for 146,000 of the increase. But as I have shown, firstly no one really knows how many self employed people there are and secondly, they earned an average of £10,400 each in 2011-12, on a steadily falling trend. These people will be living below the breadline.

So will those in new part-time work, where the figure rose by 74,000.

There were, therefore, just 19,000 new full time jobs. I bet most of those were minimum wage and zero hours contracts.

The exploitation of the UK goes on.

This is no cause for celebration.

Local authority bonds could deliver the Green New Deal

Wed, 04/16/2014 - 12:58

As some will know, I have been advocating the use of local government bonds to fund local Green New Deals for as long as I have been involved with tax justice campaigning. It was good therefore to note a new post on the Climate Bonds web site that reports that the French region of Ile de France, which includes Paris, has issued its second green bond for €600 million. Tellingly, it was so popular that more was subscribed than originally expected and the offer had to be closed after an hour because by then it was fully subscribed. The interest rate was 18 basis points (0.18%) over French government bond rate – which is attractive to savers but vastly below the cost of the Public Finance Initiative, which is the only option available in most cases to UK local authorities.

I believe that such bonds are a vital part of the devolution of the powers of government to local authorities. With funds borrowed at relatively modest rates local authorities could once again become major house builders to meet local need – as is so obviously necessary. The rent paid would, of course, service the debt obligation.

But this bond finance could also, of course, be used to regenerate the local economy. It is possible to share the savings resulting from domestic green investment. And it is, of course, with capital investment possible to considerably expand the reach of such schemes whilst investment in local sustainable transport infrastructure would be (and should be) sufficient justification to raise the modest sums needed to service debt through council taxes, but with obvious tangible benefits being visible to justify the payment to local electorates.

The examples could go on, but the point is a simple one. In the UK we are suffering massive regional disparity in economic fortunes. It is only by reinvigorating local economies that this can be done, and capital is needed for that purpose. Local bonds could deliver that capital with local savers investing directly or via ISAs and pension funds in the development of the communities where they live.

Isn’t there any better investment option than that?

In that case, why aren’t we seeing this in the UK?

PS These bonds could also be used to buy out crippling PFI contracts, I think, and save the burden these are imposing on so many communities.

Starbucks: another exercise in tax avoidance, this time deliberately promoted by George Osborne

Wed, 04/16/2014 - 12:50

According to Reuters:

Starbucks Corp said it decided to move its European headquarters to the United Kingdom from the Netherlands following criticism over its low tax payments in Britain last year, The Times reported.

The world’s largest coffee chain said the relocation was primarily to get closer to Britain, its biggest and fastest-growing market in Europe, the British daily reported, quoting Starbucks’ president of Europe, the Middle East and Africa, Kris Engskov.

The  obvious question is, why would Starbucks want to do that? Thankfully, there are some obvious answers, but not if you don’t know little bit about the changes that George Osborne has made to the UK tax system since he came into office.

First,  of course,  is the fact that Osborne has cut the UK corporation tax rate from 28% to 21%:  the UK now offers a lower tax rate than the Netherlands.  Some journalists who have  phoned me have presumed that this is the motive for Starbucks, but let me assure you, it is almost irrelevant.

The real reason,  I’m sure, why Starbucks moving is because  George Osborne has changed the UK from having a corporation tax system that charged UK-based companies to tax on their worldwide profits to one where he only charges UK companies to tax on the profits that they earn in this country. This is  the so-called territorial basis for taxation. This has enormous advantage to a company like Starbucks.  That is firstly because  one of the major functions of its European head office is to route the royalties earned on the use of the Starbucks name from each operating country through to Starbucks in the USA.  Because of the UK’s new territorial tax system all the royalties now received  in London from every country in Europe  will now be entirely tax-free in the UK because of George Osborne’s largesse.  Although the Netherlands is generous with regard to its treatment of royalties for taxation purposes, nothing is as generous as to be not charging tax at all, and yet that is the offer that the UK now makes to any multinational company who wishes to use London as its headquarters location.

Second, we know that Starbucks’ Netherlands operation had a forward pricing agreement with Switzerland with regard to the price paid for coffee. Recent evidence is that the UK is willing to sign similar such deals with companies that have a record of apparent tax avoidance. The Daily Mail recently highlighted the fact that Microsoft has signed such a deal to which the UK has acquiesced. I am fairly sure that however generous the deal  the Netherlands offered to Starbucks was, similar arrangements will have now been agreed with HMRC  to ensure that no more taxes paid here that it was Holland. All in all,  that means it highly unlikely that any significant tax will be paid on the margins made on coffee  sales in the UK.

So, why does Starbucks say that it might pay more tax in the UK?  The obvious answer to that is that this  relocation would seem to give rise to  a tax charge in the UK on the profits previously paid as royalties to the Netherlands,  but otherwise  I think it unlikely that any additional tax to be paid. My guess  is that the additional tax paid in the UK will be less than the overall tax paid to date in the Netherlands:  I’m presuming that Starbucks are being nothing less than coldly rational about this move, whatever their PR hype says.

I’m also told by journalist that Starbucks has said that no more than 10 employees will be relocated to the UK as a consequence of this move: let’s not celebrate any massive coup with regard to additional PAYE for the UK as a consequence  of this relocation.

Instead this deal represents Osborne’s deliberate achievement, about which most were sceptical when I had a few others said that it was his objective to turn the UK into a tax haven,  which is exactly what he has done.  Where once a multinational company would have had to locate  in a place like the Netherlands and Switzerland, which deliberately exploited their small size to create a corporation tax system that had all the characteristics of an offshore haven, the UK now  offers a system that is even more abusive  in what otherwise appears to be a respectable trading location.

That,  I am sure, is why Starbucks are moving to London.

And let’s not celebrate this: what it  represents is outright tax abuse promoted by George Osborne the benefit of multinational companies at cost to all the rest of us.


More on corporation tax as a tax on transactions – and the opportunities it gives to design a better tax system

Wed, 04/16/2014 - 08:41

I  wrote a blog yesterday suggesting that despite the impression given by law and practice direct taxes, such as corporation tax, are not in fact taxes on profits, as is implied by their description, but are in fact taxes on specific transactions.  The inevitable adverse reactions were received, suggesting that I had,  as usual, got everything wrong.  Since this is,  however, the inevitable reaction of those with a vested interest in the existing system on every occasion that was to be expected, but in practice the comments  made suggested to me that if anything my theory is closer to the truth than I had expected.

As example, let’s just look for a moment at the potential sources of revenue for a UK company. This diagram helps:

The revenue of the company, by no means all of which will be reflected in its turnover,  but all of which will, eventually, contribute to its profit, can come from a wide variety of sources, some of which are noted above. And,  as this  simplified diagram notes, quite a range of those revenue sources can, even though they give rise to what are described as realised profits (that is, cash in the bank)  give rise to no UK tax liability.

I stress, that is not because the profit is outside the scope of tax: it is because the source of income is outside the scope of tax.  So, for example,  dividends received by one UK company from another UK company are not taxed,  and this now applies to intra-group dividends received from companies outside the UK.  Similarly,  the proceeds of sale of significant shareholdings by one company in another company are not subject to any tax, even though they can give rise to significant capital gains.  Most tellingly, revenue now earned by an overseas branch of the UK company is also outside the scope of UK tax.

Many of these  exemptions ( or loopholes, if you like, for that is what they are) are recent innovations and  only a very few ( such as the receipt of dividends from other UK companies)  have any obvious theoretical justification.  The distinction between realised and unrealised gains is also new:  this aberration, which has  fundamentally undermined the  reliability of all  financial statements,  basically dates from the adoption of International Financial Reporting Standard   as the de facto accounting standards for the UK in 2005.

The reality is that when corporation tax was introduced  I think it was, as the law describes, intended to be a tax on profits.  The fact is that this is no longer the case:  we now have a tax on specific transactions undertaken by companies, less the costs that are allowed by law to be offset against them.  That is something very different indeed  but what it does do is open the opportunity for those with an interest in tax policy design to ask some very relevant questions.  These include  the very obvious ones, such as why have we chosen to exempt those types of income for the currently untaxed, and should we reform that approach?  Likewise, the opportunity to ask about the costs that should be offset  against  taxable revenues is now very clearly within the scope of policy debate.

Once the linkage between profit  and tax is broken, as I think it has been in the case of corporation tax, and to some extent income tax,  them we need to look at the whole basis of tax design again.  It is something I intend to do  because the opportunities that this opens for the taxation of what might be described as ‘bads’  whilst exempting those transactions that we think to be of benefit to society  is one that is too important to miss.

The Fair Tax Mark – my debating points at Mazars tonight

Tue, 04/15/2014 - 17:35

Mid tier chartered accountants Mazars are staging a debate on the Fair Tax Mark tonight. Against the advice of those who have concern for my health I am taking part. This is what I intend to say in my opening comments (click the image for a bigger, easier to read version):

What if we don’t have direct taxes and we only ever tax transactions (wonkish)?

Tue, 04/15/2014 - 09:20

If you talk to tax practitioners they will tell you that tax is divided into two broad types.

Firstly there is direct tax, which, they say, is charged on things like income and profits. Examples would, of course, be income tax and corporation tax but capital gains tax also very clearly falls into this category, as does National Insurance.

The second type of tax is, perhaps unsurprisingly, called indirect tax. These are taxes on specific transactions. The obvious example is VAT, but there are plenty of others. Excise duties, fuel duty, all carbon taxes, insurance taxes, landfill tax and many other taxes fall into this category.

The more I think about it though the more artificial I think this divide is, and the less helpful thinking about tax in this way has been for the creation of good taxation policy. This realisation has, in part, been fuelled by a survey work I have undertaken on 147 different corporation tax systems. The outcome of that work is not yet published but the finding was unambiguous: there isn’t a single corporation tax system that I can find in the world (and the survey covered the corporation tax systems of more than 98% of the world’s GDP) that charges that tax on anything like accounting profit.

Now, of course, we know that in the UK, but then we are reputed to have one of the more complex tax systems. To replicate that finding literally everywhere was, if not surprising, then at least an eye-opener because what this means is that a so-called direct tax is actually no such thing. Corporation tax is, in fact, a tax on specified transactions, just like VAT. If confirmation were needed, when the European Union with drafting the articles for its proposed Common Consolidated Corporate Tax Base it had to be explicit on this issue. In article 10 of the draft CCCTB it says:

The tax base shall be calculated as revenues less exempt revenues, deductible expenses and other deductible items.

You only have to think about that for a moment to realise that what it is saying is that specific transactions are taxed, or are tax allowable: it is not profit that is the basis for this proposed European corporation tax. This is not peculiar to the CCCTB; in effect what I now realise is that this is the commonplace basis the tax assessment for what are supposedly called profits (and in effect, income) around the world. We may start all tax computations with a figure for income, or profit, but that is in itself misleading. That figure is only an approximation to the revenues that are taxable, and even more so, to the expenses that are deductible, and the process of adjustment is not one that comes up with an alternative profit figure; it is an exercise to identify the chargeable and allowable transactions that are within the scope of tax. That is something quite different.

Now, maybe I am slow in realising this, but if I am, then I suggest that I’m far from alone. This suggestion is one I have not seen made. The appreciation does, however, have significance. Once we begin to think that we’re charging transactions to tax it becomes very much easier to think about alternative ways of taxing. It was many years ago that I recall reading the new economic thinker James Robertson suggesting that the object of a tax system was to tax the ‘bads’ in an economy whilst leaving the ‘goods’ alone. This idea is very difficult to reconcile with any concept of taxing either profit or income, but it is very easy to reconcile with a transaction-based approach to taxation: any transaction-based tax necessarily allows for this opportunity, and the truth is that we may only have transaction-based taxes.

The same realisation is also important for another reason, and that is in tackling tax avoidance. The CCCTB definition is very interesting here, and contrasts with the logic of UK jurisprudence on this issue, at least until the introduction of the General Anti-Abuse Rule. That is because the EU rule works on the basis that everything is taxable unless exempted whereas UK taxation law has worked on the basis that nothing is taxable unless specifically charged. Again, a transaction-based approach allows for a change of emphasis.

It does more than that though: it also changes the way in which we need to look at accounts. As I have often noted in the past, the IFRS Foundation have specifically stated that the International Financial Reporting Standards that they publish are not a suitable basis for the preparation of tax calculations, even though they are the only accounts that many companies might produce. Those accounts focus upon a profit figure, which we know to be inherently unreliable. If accounts are, however, to be useful for taxation purposes then there may well be a need for a different focus that seeks to identify particular forms of transaction that may, or may not, be taxable,  but that then opens the question as to who will produce those accounts, and who will set the standards for their production.

I don’t have answers to these questions is yet: I would be interested in informed comments.

We have a choice whose voices we listen to. I say it should be those hardest hit by poverty.

Mon, 04/14/2014 - 08:32

Many people are now realising that inequality matters. Even economists have caught up with the issue. So too has the FT. As it reports this morning the widely reported claim that neoliberalism has solved poverty is little more than a myth:

More than one-third of the world lives on between $2 and $10 a day, making this “fragile middle” the world’s biggest income group. Some 2.8bn people – 40 per cent of the world’s population – were earning $2-$10 a day in 2010, the latest year for which data are available from the World Bank’s income distribution database.

Adjusting for inflation and purchasing power, the share of those living below $2 per day has dropped markedly since 1981 from 70 per cent of those living in developing countries to two in five, but the bulk of those lifted out of poverty remain only just above the line. About 1.5bn people were earning between $2 and $4 a day in 2010, and this $2-$4 group has grown more quickly than any other across the income spectrum.

But as the FT also notes:

Put in a global context, the number of solidly middle-class people remains small, while the fragile middle has grown exponentially.

Data show 2.8 billion people in the developing world sit just above the poverty line, at risk of slipping back as emerging market economies slow

A Financial Times analysis of more than 30 years of World Bank data from 122 countries in the developing world illustrates this change in fortunes. As poverty has fallen, the number of people clustered in a narrow band above the poverty line has grown. But only a relatively small number of people tend to make it beyond that. The result is that four in 10 of the word’s people now live in its fragile middle.

Many of those in that fragile middle swap positions with the poor, often.

We are a long way from solving the problems of poverty. But we could solve them.

We could tax the world’s wealth.

We could really make the world’s multinational corporations pay tax where they earn their profits.

We could tackle tax havens.

We could have progressive taxation.

These would all help, enormously. Tax can, quite literally, liberate people if paid in the right place at the right time.

But the world’s wealthy don’t want these things to happen. By implication, and the causality is direct, they want the world’s poor and fragile people to remain in that state.

We have a choice whose voices we listen to. I say it should be those hardest hit by poverty. What about you?

A quiet revolution in economics: Capital in the 21st century

Mon, 04/14/2014 - 06:55

A quiet revolution is going on in economics. It’s down to one man in particular. His name is Thomas Piketty. His new book is called ‘Capital in the 21st Century’.

I’m not claiming to have read it all as yet, but it seems pretty clear that in his enormous work there is one central idea, ultimately summarised in one graph, reproduced in Paul Krugman’s review in the New York Review of Books. This is it:

In this graph ‘r’ is the rate of return to capital and ‘g’ is the rate of growth in the economy.

If r is greater than g, and you’ll note that expect for the period in the last century it has been, than the return to capital accumulates faster than the growth in the economy as a whole. The result has to be increased inequality because that increased accumulation of capital has to arise as a result of a reduced return to labour.

That, Piketty compellingly argues is the situation we now face. The 1% (or less) are, very literally, taking the rewards due to the rest of us.

What I like is that Piketty is brave enough to say there is a solution. It comes, as I often think solutions come, in the form of tax. He says we have to tax wealth inequalities out of the system out of the economy and we have to tax high incomes because they are not earned. I agree. Quite literally, future prosperity demands that we do so.

Now all we have to agree upon is how to do it.

And then we have to do it, soon.

If we want a new criminal tax penalty demand disclosure of all bank accounts, and target those who don’t report

Mon, 04/14/2014 - 06:26

As some will have noticed, I have been critical of George Osborne’s plans for new tax penalties over the weekend. There have been three reasons for doing so.

First, I am wary if his explanation for this move. I am not convinced this is a real change in policy and is much more a PR exercise.

Second, without staff at HMRC to bring cases any such move is irrelevant and HMRC is scheduled to lose many thousands of staff over the next year or two.

Third, I have problems believing the legal interpretation given to justify the move that it is hard to prove intent in tax evasion cases. I do not agree. What I do think is that some very poor cases – such as the Redknapp case where the defence was there was no taxable income – have been chosen for prosecution and this has seriously undermined HMRC’s position.

Some have, however, interpreted this as me being soft on those who are tax evading. Far from it: I want many more prosecutions, but if we are to have them then let’s get rid of the ambiguities so that cases can be more readily dealt with. There are, of course, ways to do this, but I fear HMRC will not take them.

Let me offer an obvious solution. I would require that a tax return should demand that a tax payer disclosed all their bank accounts. This is, if course, just about the first information always demanded in a tax investigation so it is important. Most of us don’t have many. And it’s not hard to list them all. Then it becomes a relatively simple matter to prosecute someone for failing to disclose a bank account if that is appropriate. No intent need be proven: it’s error that could trigger the penalty. Of course some guide lines would be needed: failing to disclose an account that has not been used for years and has less than, say, £500 in it which has not accessed during a year should not be a crime, but above that a penalty could be imposed – and a criminal one if need be.

And there could be personal penalties for failing to disclose that the individual was a signatory to a corporate bank account. I know for a tiny number of people this will require considerable disclosure. So what? Good governance requires that people know this sort if thing.

And penalties should, of course, relate to domestic as well as offshore abuse. Both are important.

Make this one simple change and motive disappears from the question of culpability: fact determines the issue. Penalties could be geared (I suggest very heavily) to the sums involved. That is tax justice.

What we would then have is a new disclosure mechanism with penalties attached for three issues: offshore tax evasion, tackling the self-employed shadow economy and for using companies for tax evasion purposes. We could get all this in one go, and all with criminal penalties attached. And for most people the cost of compliance would be tiny.

I am not expecting such a neat solution from HMRC this morning when they issue their consultation on this issue. But if I were in the Treasury this is what I would do. And it would work.

The IPCC says we can afford to tackle climate change: now is the time for a Green New Deal

Sun, 04/13/2014 - 17:01

The Guardian notes today:

Catastrophic climate change can be averted without sacrificing living standards, according to a landmark UN report published on Sunday. It concludes the transformation required to a world of clean energy and the ditching of dirty fossil fuels is eminently affordable.

I, and the other members of the Green New Deal group, have been saying so for some time.

Now is the time for delivery. The era of fossil fuel is over. This is the time to release what we call ‘the carbon army‘ to transform our economy.