Occasional reflections on Life, the World, and Mathematics

Posts tagged ‘tax’

Taking the lead

The BBC has a surprising headline:

Screenshot 2016-04-15 11.30.25

Leading financial institutions welcomed a crackdown on tax dodging? That’s a surprise. Which institutions are these? Goldman Sachs? Deutsche Bank? Maybe UBS? Well, no. What they mean are International Financial Institutions (capitalised), which is a different thing from financial institutions (such as banks) that happen to act internationally and have the world economy by the throat. Government institutions. Somewhat less surprising.

Even the reference to “financial institutions” (plural) is misleading, since the only institution that is mentioned by name in the article is the IMF. Maybe the World Bank requested anonymity.

 

The value of a reputation

I strongly appreciate the importance of a reputation for probity.

Good name in man and woman, dear my lord,
Is the immediate jewel of their souls.
Who steals my purse steals trash; ’tis something, nothing;
‘Twas mine, ’tis his, and has been slave to thousands.

So many vague accusations and suspicions can float around in everyday life where the best basis for judgement is to appeal to prior probability. But this goes too far:

Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing.

Mossack Fonseca has just mislaid 11 million documents that show its complicity in a vast web of tax evasion through secret accounts in Panama. Even to say that it has operated legally would be stretching credulity. To say that it has been “beyond reproach”… well, I suppose it’s technically true, since no one knew enough about them to reproach them. Similarly a master burglar, when finally caught with his home full of stolen jewels and cash, could say, “This is an outrage. No one has ever cast such aspersions on my good name.”

Feeling good

According to the Guardian,

British taxpayers should expect to feel worse off under whichever party wins the general election next week, according to the Institute for Fiscal Studies.

What a weird circumlocution! We’re not saying that people will be worse off, only that they will feel that way. We’re not even really saying that that they will feel worse off, only that they should expect to feel worse off. And what will be the basis for that feeling? They will be paying higher taxes which, as taxpayers, is all those people care about. It may be that British residents will be feeling better if Labour is elected — their children will have more and better school places, they won’t have to queue at the hospital A&E, they’ll have access to better social services in times of need — but British taxpayers will be down in the dumps. Maybe there’s some way we could get them to meet up, even for the residents to share some of their good fortune with taxpayers.

The funny thing is, the report does not use the expression “worse off” (except in reference to a particular proposed tax change with a cliff-edge effect, leaving some people in a particular income band worse off than if they had lower incomes). It doesn’t include broad statements about people’s general subjective well being, or even their financial well-being. It simply suggests that all the parties are going to raise taxes somewhat, make minor changes to benefits, and overall make the system slightly more complicated and less coherent.

Long-running non-dom com

UK residents who can claim that their real long-term home is somewhere else — perhaps in their family suite in Monaco, or they plan to be buried in the Cayman Islands — are termed “non-domiciled”, and spared the indignity of paying UK tax on their worldwide income. This includes people who were born and lived their whole lives in this country, if their father was foreign (or himself non-domiciled). This last is particularly galling to the ordinary taxpayer.

Now Labour has vowed to do away with the whole farce, leaving the Tories spluttering about the cost to the economy of driving away wealthy job-creators. What’s fascinating is to see Conservatives suddenly arguing that foreigners are making useful contributions to Britain, even if they are benefit cheats tax avoiders. Sure, some wealthy foreigners are probably making a positive contribution to the UK economy, while others are primarily competing with local people for scarce housing. In that they are a lot like non-wealthy foreigners, if we replace “housing” with “jobs”: some make a net positive economic contribution, some don’t.

But no one is suggesting that we really need to make sure that we retain any loopholes that allow impecunious immigrants to claim benefits in ways that seem contrary to any intended purpose or basic civic morality, because otherwise they might leave.

Snitches get stitches, French financial edition

Several newspapers, including Le Monde, have been collaborating to publish information about tax avoidance and money-laundering at HSBC, gleaned from files leaked from the bank’s Swiss dependency several years ago. Now Pierre Bergé, president of Le Monde’s supervisory board and one of the paper’s owners, has

attacked the paper on RTL radio, accusing it of “informing” on the business people, politicians, criminals and celebrities named in the HSBC files.

“Is it the role of a newspaper to throw the names of people out there? … I don’t want to compare it to times past but all the same, informing is informing.”

First they came for the hedge-fund managers…

Holes in the Brussels underwear

One felicitous phrase that has long stuck in my mind, and even substantively affected my thinking, came at the end of an essay by Garrison Keillor, on the social value of hypocrisy. He told of a small town that lost multiple upstanding citizens, including the minister, to serial revelations of adultery. “Sinners are more important to a town’s economy than saintly people are, and they are better citizens. A gnawing sense of guilt makes them more willing to serve on committees.” He concludes with a paean to the communities built by

people with enough holes in their underwear to make them careful crossing streets.

I wonder if EU Commission president Jean-Claude Juncker may be just such a person. The Commission is under pressure to take action against tax avoidance schemes. He is being attacked by some for his role in making tax fraud the driving engine of the Luxembourg economy during his many years as prime minister. His embarrassment has become particularly acute since investigative journalists recently published secret Luxembourg government files on corporate tax affairs. But maybe this makes him just the person to oversee the cleanup. It’s not just the “takes a thief to catch a thief”, knowing-where-the-bodies-are-buried qualification. It’s that he’s sufficiently embarrassed by his past misdeeds to be seeking redemption through honourable work, and he knows that whatever he does will receive an extra measure of scrutiny.

While I’m on the topic, I just want to mention again how irritating I find the disclaimers that always appear in articles on this topic, that “These arrangements… are perfectly legal.” This is wrong for two reasons:
1. Often the laws pertaining to international tax arrangements allow certain transfers to be made for valid business reasons, but not for the purpose of avoiding taxes. Now, they are structured in such a way as to make it impossible to prove that tax avoidance was the purpose, so they can’t be convicted in court, but that’s different from “legal”. As I commented before, it’s like pushing someone off a cliff when no one else is around. No one can prove that it was murder, but that’s different from it being legal.
2. These arrangements are extremely complicated. Their legality depends upon the precise details of how they are structured. This means that only a very careful analysis of the details can determine whether they are indeed legal. What the journalists have found out is that Luxembourg basically rubber-stamped the reports, suggesting that the details have not been authoritatively vetted by anyone. If someone is making good-faith attempts to comply with the law, then it seems fair to treat the result as presumptively valid. If, on the other hand, he is making every effort to evade the intention of the law through technical compliance, then it seems fair to judge only the technical accomplishment of the task, and hammer him for any technical error, even it’s just a misplaced comma.
Live by the technicality, die by the technicality.

Universities and charity

 

Here’s a weird, but hardly novel, controversy: Charity tax row: Oxbridge joins revolt.

The Oxford and Cambridge vice-chancellors wrote privately to Chancellor George Osborne saying his plans risked undermining the culture of university philanthropy. UK universities, which raised some £560m from charitable gifts last year, want him to rethink. Ministers want to stop tax avoidance. Mr Osborne says he is shocked by thescale of legal tax avoidance by multi-millionaires. Under current rules, higher-rate taxpayers can donate unlimited amounts of money to charity and offset it against their tax bill to effectively bring the amount of tax they pay down, sometimes to zero. But from 2013, uncapped tax reliefs – including those on charitable donations – are to be capped at £50,000 or 25% of a person’s income, whichever is higher… An Oxford University spokeswoman said that the government’s own policy emphasised the role of private and philanthropic investment, rather than the public purse. “A step that penalises the government’s own approach seems ill-considered.”

Hmmm. How about this alternative statement:

The university’s own justification depends on its promoting self-consistent argument, rather than specious self-serving sophistry. “An argument that contradicts the university’s own raison d’etre seems ill-considered.”

(more…)

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