The BEPS Monitoring Group, an expert body (backed by TJN and others) that works on international corporate tax issues, has published its comments on draft US Treasury Regulations on Country by Country Reporting (CbCR, for an explanation for newcomers, see here). Given the large number of multinational enterprises (MNEs) headquartered in the US, it is crucial for the US to adopt the scheme, if it is to work at all. Continue reading “Will the US Implement Country by Country Reporting?”
David Quentin, guest blogger
We’ve done two blogs in the past week on the fraught question of the ‘incidence’ of the corporate income tax: that is, the question of who ultimately bears the burden for paying the tax. Is it the shareholders of the corporation that gets taxed? Is it the workers? Is it customers? Who is it?
The first blog looks at the nonsense routinely spoken about this issue; the second focuses on a recent television debate between TJN’s Alex Cobham and Tim Worstall.
Now we offer a new guest blog by David Quentin, a UK tax barrister, who fills out the picture by taking a much broader-perspective view of the issues.
A guest blog by David Quentin. Adapted from his original post. Continue reading “The other four fifths of the corporate tax “incidence” question”
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Our tweet of the day:
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
[/vc_raw_js][vc_column_text]The last, truncated paragraph in that tweet reads:
“Continued media coverage about alleged tax abuse, increasingly aggressive actions from tax administrations and the general terms of debate about standard international tax practices show that multinationals have lost control of the “narrative,” Stack said.”
Not only that, but the story begins like with a similarly eye-popping statement:
“The U.S. business community has lost the global public relations battle on international tax planning—and should consider whether a proposed global minimum tax would be better for their interests than continuing with the status quo, a top Treasury Department official said.”
The business community has for so long been busy eating everyone else’s breakfast, lunch, and dinner, and getting everyone else to pick up the tab, that it’s nice to see the tables turned a bit.
This has been achieved, above all, by virtue of taking the debates outside of fiddly, technical arenas and into the economic and political arenas: where it matters most.
But let’s not forget that despite our collective impact on setting the political agenda, the abuses remain rampant. This fight has only just begun.[/vc_column_text][/vc_column][/vc_row]
Every year countries lose billions of dollars to tax avoidance, tax evasion and more generally to illicit financial flows. According to a recent IMF estimate around $700 billion of tax revenues is lost each year due to profit-shifting. In developing countries the loss is estimated to be around $200 billion, which as a share of GDP represents nearly three times the loss suffered by OECD countries. Meanwhile, economist Gabriel Zucman estimates that certain components of undeclared offshore wealth total above $7 trillion, implying tax losses of $200 billion annually; Jim Henry’s work for TJN suggests the full total of offshore assets may range between $21 trillion and $32 trillion.
We want to transform the way that data is used for advocacy, journalism and public policy to address this urgent challenge by creating of a global network of civil society groups, investigative reporters, data journalists, civic hackers, researchers, public servants and others.
Today, Open Knowledge and the Tax Justice Network are delighted to announce the launch of a new initiative in this area: Open Data for Tax Justice. We want to initiate a global network of people and organisations working to create, use and share data to improve advocacy and journalism around tax justice. The website is: http://datafortaxjustice.net/ and using the hashtag #od4tj.
The network will work to rally campaigners, civil society groups, investigative reporters, data journalists, civic hackers, researchers, public servants and others; it will aim to catalyse collaborations and forge lasting alliances between the tax justice movement and the open data movement. We have received a huge level of support and encouragement from preliminary discussions with our initial members, and look forward to expanding the network and its activities over the coming months.
What is on the cards? We’re working on a white paper on what a global data infrastructure for tax justice might look like. We also want to generate more practical guidance materials for data projects – as well as to build momentum with online and offline events. We will kick off with some preliminary activities at this year’s global Open Data Day on Saturday 5th March. Tax justice will be one of the main themes of the London Open Data Day, and if you’d like to have a go at doing something tax related at an event that you’re going to, you can join the discussion here.
Tim Worstall, a British commentator who has launched a number of vitriolic and personalised public attacks on TJN and TJN staff members in the the past, has been in debate with TJN’s Research Director, Alex Cobham, on the subject of corporate tax. (For a flavour of the extraordinary level of vitriol, see this.)
Anyway, here’s the debate.
Make your own minds up about who came off Worst.
On the much-debated subject of tax incidence, Worstall knows (because, as he states, he reads TJN’s outputs assiduously) that the nonpartisan U.S. Congressional Budget Office has highlighted studies that either find “capital bears the majority of the corporate tax burden” or that “even in an open economy, capital could bear virtually the entire tax burden and that the open-economy assumption is not sufficient to shift the burden of the corporate tax from capital to labor.” (And he might like to answer the question of who the ‘workers’ are in a hedge fund or a shell company.)
As this 2012 paper (update: we mistakenly cited it as a CBO paper in the original: please see the comments below this post) put it in the conclusion:
“At the end of the searching, I find some evidence that suggests that corporate taxation may lower wages, but the preponderance of evidence does not suggest any wage effects from corporate taxation.
. . .I close with a political economy point, mentioned by Lawrence Summers at a Hamilton Project forum in 2007. He noted that it was indeed possible that corporate stockholders and managers who resist the corporate tax are not really acting in their own interests because they do not understand corporate tax incidence, since corporate taxes will ultimately be borne by their workers. But it seems far more plausible that they have calculated their interests correctly.”
See much more on this question of tax incidence here.
See also Tim Worstall, curious British attack dog.
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From Citizens for Tax Justice in the U.S., a post that begins by discussing federal tax breaks for manufacturing corporations. And they ask:
“Tobacco companies “manufacture” cigarettes—but do Americans, or lawmakers, really think it’s a good idea for the federal government to subsidise this activity? New financial reports from major corporations in this sector show that cigarette makers are enjoying substantial manufacturing tax breaks for producing products that kill people.”
Continue reading “Should we be giving tax breaks to tobacco companies?”
The IFSC in Dublin: corrupting markets, worldwide
Update: now on Naked Capitalism (and note the comments underneath.)
Update 2, March 1: now with added video at the end: a Live Register report on the IFSC, from 2012.
We have written a great deal about the role of Ireland and the Irish Financial Services Centre (IFSC) and its role as an offshore haven, posing risks not just for tax but for global financial stability too. As Prof. Jim Stewart and others have pointed out: Ireland played an important role in the global financial crisis that emerged in 2007, and in the aftershocks, under a spectacularly tax haven mentality.
Now an excellent piece of digging by two Bloomberg reporters, Donal Griffin and Joe Brennan, takes the story forwards with a tale about Vneshprombank Ltd., a Moscow financial institution that has just had its banking licence revoked after Russian regulators found a $2.5 billion hole in its balance sheet, and a related Irish special purpose vehicle called VPB Funding Ltd. Continue reading “Offshore Ireland implicated in bank collapse, once again”
The Belgian network of tax treaties. (Click to enlarge)
New report 11.11.11: Belgian tax treaties cost developing countries millions every year
A guest blog by Jan van de Poel
As a consequence of dozens of unbalanced tax treaties, negotiated by the Belgian government, developing countries miss out on at least 35 million Euros on tax revenues each year, a new 11.11.11-report finds. While the stated objective of these treaties is to prevent double taxation, they often undermine developing countries’ capacity to invest in sustainable development. 11.11.11 urges Belgian authorities to review these treaties. Continue reading “Belgian tax treaties cost developing countries millions every year”
A new report from Americans for Tax Fairness concludes:
“In addition to dodging its fair share of taxes, Pfizer—maker of Celebrex, Lipitor, Lyrica, and Viagra, among many other health-care products—has also been aggressively raising prescription drug prices, thereby straining patients and our health care system and in some cases putting needed medications out of reach.
By dodging taxes while boosting prescription drug prices, Pfizer squeezes American families and communities from two sides at once. In the company’s biggest insult to America yet, Pfizer’s merger will allow it to go on enjoying all the benefits of being based here—everything from a publicly educated workforce to an excellent communications infrastructure to a reliable patent system—without adequately paying to support them.”
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We’ve mentioned the incidence question several times before, but TJN’s Director John Christensen was at a debate in London last night on the future of the corporate income tax, alongside Mike Devereux of the Oxford Centre for Business Taxation; Helen Miller of the Institute for Fiscal Studies; Simon Walker of the Institute of Directors, and Margaret Hodge, chair of the UK All Party Parliamentary Group on Tax.
It was a wide-ranging discussion, but one question that came up repeatedly was the question of the ‘incidence’ of the corporate income. Put most crudely, is it corporate shareholders who ultimately shoulder the tax charge, or is it workers? There are a number of people who claim that research demonstrates that the tax charge falls squarely on workers: as a top UK tax official put it:
“The consensus, among economists at least, is that it’s predominantly the employee who foots the bill [for the corporation tax.]”
It is this claim that is the great incidence hoax. There is no such consensus: and we argue that the opposite is true.
We thought we’d take the opportunity to re-publish a section of our 2015 document Ten Reasons to Defend the Corporate Income Tax. Don’t forget to go to the original for the all-important footnotes. (See pp 7-8 on this question.) Continue reading “Corporate tax: the great incidence hoax”
From the 2016 budget speech in South Africa, from Finance Minister Pravin Gordhan:
“We will continue to act aggressively against the evasion of tax through transfer pricing abuses, misuse of tax treaties and illegal money flows. Drawing on the work of the OECD, the G20 joint project on base erosion and profit shifting and independent bodies such as the Tax Justice Network, further measures will be taken to address such revenue losses, including inappropriate use of hybrid debt instruments.”
A bit self-congratulatory of us to put this here, but hey. We’d add, however, a couple of things. Continue reading “Quote of the day: South Africa’s Finance Minister”
TJN is a strong supporter of the idea of a Land Value Tax, as part of a comprehensive tax system. It is a kind of wealth tax: a key recommendation in Thomas Piketty’s excellent Capital in the Twenty-First Century, and a long-running recommendation of TJN’s. The LVT, popularised by the 19th Century economist Henry George, building on the work of Adam Smith and David Ricardo, is an effective fair way to raise revenue from rent-seekers.
Now a new report for the London Assembly Planning Committee examines the tax. This is of great relevance in a world of falling interest rates (and possibly, as some argue, ‘secular stagnation’) which has seen a huge rise in asset prices – including house prices, in London and elsewhere. The report contains a map of the countries that have or have had experience with LVT:
Read the report here. This is a thoroughly modern, tax justice idea.
Highlighting a presentation by TJN’s Director John Christensen at the Max Planck Institute in December, and a chapter in a new book by two TJN authors, on the same theme. First, Max Planck, which published the details yesterday:
Click here for the presentation and podcast
Continue reading “National Competitiveness: a Dangerous Obsession”
Lovisa Möller
A guest blog by Lovisa Möller, ActionAid
Developing countries have now signed on to around a whopping 1,500 tax treaties with their wealthier counterparts. These agreements between countries carve up the right to tax business that operate across borders. Continue reading “Report: The treaties that cut taxes in poorest countries”
From the Financial Transparency Coalition, of which TJN is a member.
OECD invites developing countries to join anti-tax avoidance plan, but only after the rules have been written
The OECD’s plan to open the BEPS system to developing countries after it has already been designed highlights the need for a truly universal tax body
Ahead of this week’s G20 Finance Ministers meeting, the Organization for Economic Cooperation and Development announced plans to invite non-member countries to join in its anti-tax avoidance system. The Base Erosion and Profit Shifting (BEPS) project aims to tackle the problem of corporate tax dodging. Although the invitation for inclusion comes as the global discussion about tax dodging reaches new heights, the bones of the plan have been in place for years, leaving no room for substantive input.
The Australian Senate has just passed the Bill that will tie Australia into the new global system of tax authorities sharing information with each other automatically. Unfortunately, this system, set up through the OECD, currently had not allowed full participation by developing countries.
With help from international colleagues, TJN’s Andres Knobel and Joe Stead, we were able to get Labor party support for an amendment to the Bill that will require de-identified aggregated information about accounts held in Australia to be published each year by the Australian Tax Office (ATO.) Continue reading “Australia passes new information sharing provision”
TJN’s Andres Knobel participated in a conference in Panama on February 18-19, hosted by the Inter-American Centre of Tax Administrations (CIAT) & the German International Cooperation Agency (GIZ), and involving tax administrations from Barbados, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Italy, Mexico, Panama, Peru, Portugal, Spain and Uruguay.
The conference’s purpose was to push forwards a new initiative (called DIP) to boost the availability of public information of tax Interest among CIAT member states. In plain English, the proposal involves creating an interactive map with details of all relevant “public” information from each jurisdiction (e.g. commercial registry web-page, registry of importers and exporters, etc.), to give foreign authorities easy access to public information without needing to send a formal request. Continue reading “New project to share tax info in the Americas”
TJN laments the closure of the Centro de Economía y Finanzas para el Desarrollo de la Argentina” (Cefid-ar), an Argentine organisation heavily involved in research on illicit financial flows.
Their work has shed light on capital flight from Argentina, estimating the figures of hidden money held offshore by Argentine residents. Their papers also focused and explained the role of enablers in the illicit financial flows system, and provided insight on transfer mispricing mechanisms by agribusiness exporters, one of the main economic sectors of the country. Continue reading “On the closure of the Argentinian think tank Cefid-AR”
In the underworld, this one is known as the “Bin Laden”
In June 2014 we wrote an article about Big Bills: those high-value cash notes that are primarily of use to the world’s criminals (when was the last time you saw a 500 Euro note in the flesh, for instance?) The countries that print them can literally make a killing from so doing.
Big bills have been in the news again recently, with proposals in Europe stop printing the damn things. A New York Times headline today summarises: Getting Rid of Big Currency Notes Could Help Fight Crime. Continue reading “Big bills: let’s recall them all”
For our workshop on tax havens and corruption at City University, London, 28th – 29th April 2016, our draft programme is here.
Please click here to register, and follow the links.
We are calling for expressions of interest in contributing to an issue of Tax Justice Focus, dedicated to exploring the relationship between corporate tax reform, value theory, and the global transition to a post-capitalist, post-patriarchal, post-work society. An introductory essay is available here, setting out some of the linkages that we perceive to exist between these topics.
Tax Justice Focus is the flagship newsletter of the Tax Justice Network. It is issued two to four times a year, and contains four to six articles roughly 1000-1200 words in length. The articles are pitched for an engaged general audience rather than for an academic one.
If you would like to express interest in contributing an article linking corporate tax reform to any of the following topics please email [email protected] by 31 March 2016.
Contributions from or related to any country will be considered.
The introduction and manifesto for corporate tax reform and value theory is here.