Taxes

Another Great Depression or Tax Justice and Transparency? The Tax Justice Network January 2020 Podcast

Published by Anonymous (not verified) on Sat, 25/01/2020 - 7:17pm in

TaxCast ranges well beyond tax today, with topics including IMF warnings, the Brexit rogue UK vision, and looting in Angola.

Trump, Granting Lobbyist Demands, Quietly Handed Billions More in Tax Breaks to Huge Corporations: Report

Published by Anonymous (not verified) on Tue, 31/12/2019 - 7:31pm in

Team Trump keeps soldiering along with its pro-corporate agenda.

Can The EV Revolution Survive Without Tax Credits?

Published by Anonymous (not verified) on Wed, 18/12/2019 - 10:21pm in

Automakers are petitioning for an extension of EV tax credits. How critical is that to sales growth?

Nationalised, State Healthcare Gives the Poor More Money and More Power

Published by Anonymous (not verified) on Mon, 16/12/2019 - 9:57pm in

One of the arguments Conservatives on both sides of the Atlantic have been pushing to attack state healthcare is that, as it’s funded through public taxes, it somehow leaves people worse off. I came across a recent right-wing video on YouTube that seemed to be pushing that line. It proclaimed that American university students were all in favour of Bernie Sanders’ Medicare For All – until they were told what it would cost them. I didn’t watch it, because I knew it would annoy me. Similarly, over here the Tories and Blairites have been telling people that the inclusion of the private sector will bring costs down, thus allowing government to make savings and cut taxes. In fact, private healthcare is wastefully bureaucratic, far more so than state healthcare. But the Tories just want to cut taxes for the rich without making the lives of the poor any better. Indeed, they are determined to make them worse through savage welfare cuts, wage freezes, and further attacks on workers’ rights and employment conditions. And by encouraging more people to take out private health insurance in order to avoid their manufactured problems in state healthcare, the costs are transferred to the consumer. For the rich this is no problem. For middle income groups, it means having to pay thousands for operations and procedures that should be routine and free. They are worse off.

The book Health Reform: Public Success – Private Failure, Daniel Drache and Terry Sullivan, eds., (London: Routledge 1999) makes the point that Lord Beveridge, the architect of the modern welfare state, believed the contrary. State welfare provision which actually leave the poor and working people better off. Without doctors’ and hospital bills to pay for their illness, they would have more disposable income. The book states

It is not sufficiently recognised that by removing the financial burden of catastrophic illness from their wage packets, their disposable incomes would rise. No longer would they have to pay doctors from their pockets when their children were born or they fell sick and when they went to hospital; lack of money did not constitute a barrier to good care. These reforms, along with the spread of collective bargaining in advanced industrial economies, enabled people to enjoy the benefits of an expanded notion of social citizenship. Healthcare and full employment thus constituted a forward-looking framework for social health and not simply clinically provided health care. 

(p. 10).

Which means that the prosperity given to working people through free medical care, full employment and strong trade unions can act as proper citizens, able to make political and economic choices that will affect government.

Which is why the Tories and the Republicans in America have attacked trade unions and scrapped the idea of full employment, because they give working people too much power. And what’s the odds that similar thinking also isn’t one of the factors in their attacks on state healthcare. Oh, they do honestly believe that private enterprise is always better than state provision, but the threat of medical bills in a private healthcare system as well as general poverty is a good way of keeping the workforce cowed and fearful.

NHS privatisation will not make healthcare cheaper and more efficient. It will just make working people poorer and allow more bullying and exploitation from their employers.

Blog Symposium on International Tax Rules

Published by Anonymous (not verified) on Wed, 11/12/2019 - 2:25am in

In response to “The Starving State: Why Capitalism’s Salvation Depends on Taxation” by Joseph E. Stiglitz, Gabriel Zucman, and Todd Tucker for Foreign Affairs, the Roosevelt Institute is hosting a blog symposium to further examine the history of international tax rules and the path ahead toward more inclusive and fair international tax policies.

Opening the symposium with “How the Tax Dilemma Abroad Is Tied to Regressive Policies at Home,” Roosevelt Fellow Todd Tucker examines how international tax rules grew out of the institutional racism and pro-plutocratic government embedded throughout US history.

In “Corporate Tax Negotiations at the OECD: Shifts to Ensure Symmetry and Equity” Valpy FitzGerald and Jayati Ghosh explore the negotiations on corporate taxation at the Organization for Economic Cooperation and Development’s (OECD) BEPS Inclusive Framework initiative.

Finally, in “The Future of Global Corporate Taxation Is More Uncertain Than Ever,” Rasmus Corlin Christensen and Martin Hearson look ahead to the global fight over taxing the new digital economy.

The post Blog Symposium on International Tax Rules appeared first on Roosevelt Institute.

Corporate Tax Negotiations at the OECD: Shifts to Ensure Symmetry and Equity

Published by Anonymous (not verified) on Wed, 11/12/2019 - 2:25am in

The negotiations on corporate taxation at the Organization for Economic Cooperation and Development’s (OECD) BEPS Inclusive Framework initiative have rightly generated much discussion, both on the process and on the proposed changes in tax policies. Allison Christians has pointed to several concerns that developing countries have with both: the proposal is one that has maximum acceptability by the great powers; the process has been significantly influenced by multinational corporations (MNCs) that obviously have incentives to shape the “consensus” to their preferred position; and, possibly as a result, the proposal by the G24 countries—of including significant economic presence in the formula for apportioning profit—has been “completely excised without explanation.” In response, the OECD’s Ben Dickinson has argued that the role of the great powers is only a small part of a more complex picture, with several new alliances at play creating continual flux. Since several countries are threatening unilateral measures to impose taxes on gross income flows, there is a greater sense of urgency to the process, which would provide collective benefits to all those involved in the consultation.

Both sides make valid points. There is certainly something to be noted, even celebrated, in the process so far: Most of all, the important recognition that global profits of MNCs should be taxed according to multilateral agreements, thereby ending tax competition and the use of tax havens. However, it is equally evident that, of the three original proposals from the US, UK, and G24, the outcome has generally tended toward the first one, largely disregarding the concerns of developing countries. This reinforces the need for a joint negotiating position by developing countries, especially to address the central issues of asymmetry and inequity that are missing from the discussion thus far. 

Consider first the issue of negotiating asymmetry. If all participants in a set of negotiations (which are notably not the same as “consultations”!) have the same information and voting rights, then there is clear symmetry. At the “Inclusive” Framework, however, there are major asymmetries. First, information is asymmetrical; both with regard to the underlying data with which costs and benefits of proposals can be judged, and in the professional skills needed to analyse that data. Second, size is also asymmetrical; in terms of ability to persuade other players, derived not only from geopolitical strengths and/or weaknesses but also from size of the economy, scale of investment, number of multinational enterprises (MNEs) headquartered, and their importance, etc. Third, interests are asymmetrical; because beyond the common interest in reducing tax competition and eliminating tax havens, fiscal interests differ depending on whether countries are capital importers or exporters, technological leaders, or followers, etc. 

Such asymmetries could be overcome in two ways. First, the OECD itself could 1) reduce information asymmetry by sharing data and analytics in a much more transparent way, 2) ameliorate bargaining asymmetry by listening to and supporting developing countries, and 3) balance asymmetry of interests by openly recognizing and modelling them differently accordingly. Thus far, none of these changes have occurred. And so the second route becomes important, which would involve recognition of the legitimacy of the position of groupings (such as the G24) and explicitly organizing the Inclusive Framework as a negotiating forum rather than as a “consultation.” 

What about ensuring equity and fairness in this process? This is a complicated matter, especially as there is a collective action problem in taxation, with tax havens and MNCs as free riders. Though all countries gain to some extent, the gains are different for distinct groups according to their relationship to international investment. For example, capital exporters and capital importers obviously have different interests. Because profits of MNCs are essentially global rather than local, the allocation of taxable profits can be arbitrary or at best opportunistic. This is clearly true if only “residual” profits are considered, but that is deeply problematic and enables transfer pricing misuse to continue even as it treats MNC profits differently from profits of purely domestic companies. But it is also true if all profits (including “routine” profits) are considered. 

The other important criterion for taxation is equity; and indeed, both G20 and the OECD Working Party (WP) stress “fairness.” We can distinguish between horizontal (like for like) and vertical (rich versus poor) equity. The criteria for ensuring horizontal equity could include the allocation of taxing rights according to size of economy; very roughly, this could translate into some sort of sales plus employment formula. Negotiating this would necessarily require cooperation of developing countries against the US and the EU. The argument is even stronger with respect to vertical equity, a concept that is implicit in federal fiscal arrangements within nations. In the terms, if taxing rights are global, then they are rights pertaining to the world population. So, vertical equity in its extreme form would require the distribution of taxes to be equal on a per capita basis. In practical terms, this means building a bias towards developing countries. 

Both of these issues underline the importance of the right of developing countries to negotiate collectively. Ideally, therefore, these tax negotiations should be transferred to an appropriate body within the United Nations system. 

The post Corporate Tax Negotiations at the OECD: Shifts to Ensure Symmetry and Equity appeared first on Roosevelt Institute.

The Future of Global Corporate Taxation Is More Uncertain Than Ever

Published by Anonymous (not verified) on Wed, 11/12/2019 - 2:24am in

The global fight over how—and where—to tax the new digital economy is raging on. Just last week, the Office of the US Trade Representative (USTR) published the conclusions from its investigation into France’s new tax on large tech companies, such as Apple, Facebook, and Google. The USTR found that the French tax discriminates against US companies, and it proposed retaliatory tariffs on French wine, cheese, and other products worth $2.4 billion. And this is the French tax that, according to Joseph E. Stiglitz, Todd N. Tucker, and Gabriel Zucman in Foreign Affairs, “does not go far enough.”

At the same time, the Trump administration is threatening to pull the plug on global tax negotiations at the Organisation for Economic Co-operation and Development (OECD), where more than 100 countries have been working to find consensus on a new global tax agreement since 2013. Last Tuesday, Trump’s Treasury Secretary Steve Mnuchin called for a major watering down of proposals on the table and a suspension of all unilateral initiatives like the French digital tax.

The Franco-American conflict is illustrative of the increasing rift in global tax politics, where economic and political transformations are fundamentally reconfiguring the battle lines. This makes the global negotiations unusually hard.

Most prominently, these transformations are splintering the historical alliance at the core of the global tax system: The US and Europe. Since its foundation in the early-20th century, the global tax system has been defined by the mutual interests of large developed countries across the Atlantic.

But now, the rise of the “digital economy” is driving a wedge between the US and Europe. The power of American tech giants is viewed with more skepticism in Europe, where there are comparably few large home-grown tech firms, and many political leaders feel that US firms are not paying the taxes that they should in Europe. Apple is still in court with the European Commission over a decision demanding the tech giant to repay $20 billion in unpaid taxes to Ireland. And more than 10 European countries have announced or implemented special taxes on digital firms, including the UK, Spain, and Italy.

However, Europeans are not alone in wanting to tax the proceeds from the new digital economy. Other large countries, such as India, Russia, and Canada, have also sought new rules to grab a larger slice of the digital tax pie.

The proliferation of unilateral initiatives is a reaction to what many governments perceive as “too slow” progress in global tax negotiations. Historically, these negotiations brought together just a small group of OECD member states; but today, negotiations have been made more difficult by the rising power of non-OECD members, such as India and China, who want to pursue their own agendas.

Developing countries, too, are gaining a formal voice in global tax negotiations. More than 130 countries formally participate in discussions at the OECD’s “Inclusive Framework,” which has meant an escalating complexity of interests and coalitions. Yet, there remain serious criticisms of the true inclusiveness of the Inclusive Framework and the power balances that disadvantage, in particular, African governments. If developing countries are not listened to, they may ultimately not support a new global agreement.

For this reason, we are skeptical of Stiglitz, Tucker, and Zucman’s suggestion that global tax governance should operate through a club model in which “the biggest developed economies (the United States and western European countries) … move first, demanding that firms that trade in their markets follow the new rules and using diplomatic pressure to get other countries to adopt a similar system.” The genie of global inclusiveness is quite rightly out of the bottle, and the survival of the international tax regime rests on making that more, not less, meaningful.

The OECD secretariat—the Sherpa of the negotiations—has tried hard to bridge the gaps, tabling a proposal for a “unified approach” that combines suggestions from multiple bargaining groups to overcome frictions and move discussions forward. The approach would keep large parts of the global tax system as is but also proposes new rules for taxing the “non-routine” profits of large digital and consumer-facing businesses based on a simpler, formulaic allocation of taxing rights amongst countries.

This approach, however, has been met with significant criticism. For a while, it looked like a new global tax deal could emerge around a US-France deal. But Mnuchin’s comments deriding the current direction of travel—which the US was a critical part in shaping—suggest that the US is unwilling to support new rules that depart from long-standing principles underpinning the global tax system, risking a further rise in foreign governments’ tax claims on American corporations. Talks between the US, France, and the OECD are now slated for January, at a time when the OECD had originally planned for high-level political agreement.

If global negotiations fail, countries will take matters into their own hands. Across the world, citizens are watching global tax discussions with an interest never seen before. The public is more engaged, media stories about the taxation of global corporations are now commonplace, and political leaders are increasingly pushed to react.

With more countries pursuing their own solutions, conflict is likely to escalate further, especially as the US is already clamping down on foreign governments trying to tax its tech giants. For now, the outlook for a new global tax consensus remains decidedly bleak. New battle lines, the complexity of negotiations, and a lack of strong political support have all put the future of global corporate taxation in unprecedented doubt.

The post The Future of Global Corporate Taxation Is More Uncertain Than Ever appeared first on Roosevelt Institute.

How the Tax Dilemma Abroad Is Tied to Regressive Policies at Home

Published by Anonymous (not verified) on Wed, 11/12/2019 - 2:24am in

I’m pleased to be able to kick off Roosevelt’s blog symposium on international tax rules, joined by Rasmus Corlin Christensen of Copenhagen Business School, Valpy Fitzgerald from Oxford, Jayati Ghosh from Jawaharlal Nehru University, and Martin Hearson from Sussex. Additional thanks to Tommaso Faccio of ICRICT for helping coordinate.

We are anchoring our blog symposium around the release of “The Starving State: Why Capitalism’s Salvation Depends on Taxation,” an essay by Joseph E. Stiglitz, Gabriel Zucman, and myself for Foreign Affairs. In it, we discuss the disaster that is current international tax rules. 

In this blog post, I want to give the backstory; namely, how these rules grew out of institutional racism and pro-plutocratic government over centuries of US history.  

Much of the current state of affairs on tax is rooted in centuries-old policy choices that allowed elites to limit the capacity of government to do much of anything, including the ability to effectively use sovereign taxing power to restrain the growth of inequality. In order to guarantee that corporations and the wealthy paid little in taxes—indeed, at lower rates than those less well-off—the rich ensured that government was designed and operated in as counter-majoritarian a fashion as possible, positioning powerful unelected judges and malapportioned Senate seats.   

For the US story, the constraints on taxation came early on and were intertwined, from the beginning, with the country’s history of racism. In order to appease Southern slave states, the founders agreed to the infamous compromise whereby slaves would be counted as three-fifths of a person for purposes of representation in the people’s House and the Electoral College. It’s easy to see why Southern elites liked this deal: Slaves did not get a vote, but they did count towards population totals. This inflated the South’s power beyond what it would have otherwise been, and it took a Civil War to have the clause excised through the Fourteenth Amendment to the Constitution in 1868. But less commonly acknowledged and understood is that the three-fifths clause also constrained federal power to institute direct taxes unless on a by-population basis, on the same formula. This greatly limited the scope for progressive taxation, whereby those with greater ability to pay—the rich—contribute a larger share of their income. 

For the first century of American life, the stricture on taxation mattered little, simply because of the limited role of government in a highly agrarian economy. Tariffs—which did a double duty of raising revenues and protecting the fledging Northern manufacturing industry against competition from abroad—sufficed. And though the founders neglected to define “direct”—as opposed to “indirect”—taxation over the course of the 19th century, Congress would regularly pass—and the Supreme Court would often uphold—a wide array of federal taxes, duties, imposts, and excises, including income taxes, stamp taxes, special taxes on holders of bank shares and insurance companies, and more.

But with the rising inequality of the Robber Baron Era, the Supreme Court suddenly flipped. In 1895, in Pollock v. Farmers’ Loan & Trust Company, the court, by a slim 5-4 majority, threw out previous precedents and deemed an income tax (approved to help the nation recover from the depression brought on by the Panic of 1893) as a prohibited “direct tax.” As labor organizers and socialists agitated across the country for factory safety standards, an abolition of child labor, and the eight-hour workday, Associate Justice Stephen Field offered the following reasoning for the reversal: “The present assault upon capital is but the beginning. It will be but the stepping stone to others, larger and more sweeping, till our political contests will become a war of the poor against the rich; a war constantly growing in intensity and bitterness.” Ironically, Field had originally been appointed when the Lincoln administration expanded the court from nine to ten seats as a way to dilute the votes of conservatives. In 1881, he had joined a unanimous court in upholding income taxes used to finance Reconstruction. In dissent to the Pollock decision, Associate Justice John Marshall Harlan painted the majority decision “as a disaster to the country …. It so interprets constitutional provisions, originally designed to protect the slave property against oppressive taxation, as to give privileges and immunities never contemplated by the founders of the government.”

This shift fueled a populist backlash that took square aim at the court as a guardian of plutocratic privilege. The platforms of the Democratic and Socialist parties criticized the decision and called for income taxes and structural reforms. Even Republicans, such as Theodore Roosevelt and William Taft, conceded the necessity of income and even corporate taxes. In a special session of Congress in 1909, it became clear that a coalition of Democrats and insurgent Republicans had the votes to pass a progressive income and corporate tax, with the leaders assuming that the brinksmanship would pressure the court to reverse its Pollock position. The newly elected President Taft was aghast; unsure that the court would back down, he feared that a repeat of 1895 would give ammunition to progressive reformers who wanted to weaken the judiciary. As a former judge, he would not countenance that. Working with anti-tax Senate leaders, he nixed the income tax and instead called for a constitutional amendment strategy—which tax opponents assumed would never attract the necessary three quarters of state votes. Instead, tax advocates exceeded the required 36 states, making it to 42 by 1913. Congress promptly enacted a law that imposed a 1 percent tax on incomes above $3,000 per year and a top tax rate of 6 percent on those earning more than $500,000 per year. Only the top 3 percent richest Americans owed any tax under these rules, which today translates to around $77,000 and $13 million, respectively. 

In the years since, wealthy Americans used our country’s unrepresentative small-r republican structures to fight back, pushing for a more regressive tax code that disproportionately disadvantaged non-white groups. At the state level, racists enacted tax codes that shifted taxation from property owners (who were disproportionately white) to consumers, shifting more of the tax share onto Black Americans and poor white individuals through sales taxes—a pattern that persists today. 

Throughout the 1920s, a Treasury Department led by the uber-wealthy Andrew Mellon presided over a reduction of taxes and the development of capital-friendly international tax rules, approved in due course by a Senate with minimal dissent and sometimes without oversight hearings. These actions instituted the transfer price system that prevails today, whereby corporations, in moving goods across borders, from say one subsidiary to another, pretend that they sell the good at “arms-length prices.” 

When the Franklin D. Roosevelt administration proposed various measures to use the tax code to restrain executive compensation, disincentivize mergers, shrink firm size, and stop corporations from hoarding income, he often found that a strong House majority was not enough. After the Supreme Court struck down early New Deal policies, FDR proposed a bill to overhaul corporate taxes in order to achieve some of these objectives. Despite sailing through the House on a 267 to 93 vote, a mere nine Democratic senators (the majority from the South) defected—stopping the proposal dead. 

And thus, unable to overcome the Senate, the 1920s Gilded Age rules are essentially still on the books today. Multiple generations of US policymakers then imposed similar strictures on the rest of the world through an expansive set of treaties and norms, as my new working paper with Martin Hearson shows.

So, what do we do about these tax rules—both the domestic and international? Check out my piece with Stiglitz and Zucman for ideas. 

But here, let me just dwell on one point. Namely, would America’s history of racist legalism pose an insuperable hurdle here at home? 

The short answer is, most of the reforms we propose could be done within existing constitutional constraints. There is, however, a debate about the wealth tax. While conservatives have claimed that a wealth tax will run up against constitutional strictures on direct taxation, legal scholar Bruce Ackerman has compellingly argued that changes to the Constitution are unnecessary. Under his reading, the Fourteenth Amendment severed not only the racist three-fifths compromise but also the strictures on taxation that went along with it. For him and other scholars, the Sixteenth Amendment, which allows income taxes, was a legally unnecessary political gambit by the Taft administration: Congress can and always could impose wealth taxes, financial transaction taxes, or nearly any other impost that they can conceive of.

Nonetheless, the conservative Roberts Court is unlikely to be sympathetic to that argument, and Mitch McConnell’s Senate is likely to see any of the ideas above as unthinkable, “full-bore socialism.” 

The path forward is to pass the wealth tax, alongside other progressive measures, and pair it with judicial and institutional reforms to undo Senate Republicans’ hard-right court-packing after the Merrick Garland episode and overhaul the Senate itself. Ultimately, so long as our government has a structural counter-majoritarian bias, a pro-majority tax structure will be difficult to institute.

The post How the Tax Dilemma Abroad Is Tied to Regressive Policies at Home appeared first on Roosevelt Institute.

It’s Hammer Time! Cassetteboy’s Latest Video Against Boris Johnson

Mike put this up on his blog a few days ago, but it’s well worth repeating and publicising. Cassetteboy is another group of fun-filled pranksters like JOE, who produce satirical videos by carefully editing the speeches and actions of the great and not-so-good so that they appear stupid and nonsensical. They’ve done this yet again to our unfunny, murderous Prime Minister, Boris Johnson, to reveal how stupid, cruel and massively unjust his government and its policies are. They’ve edited it so that he’s reciting a description of his failings and injustices to the tune of MC Hammer’s ‘Can’t Touch This’. Which, due to Johnson’s own massive deceitfulness and mendacity, has been changed to the chorus ‘Can’t trust me’.

The video begins with Johnson repeatedly stammering out ‘My, my, my’ and then

‘My Brexit is so hard

Makes you say

“Oh my word.

What about my job security?

Sick pay, healthcare and the economy?”

These are the things

You need to discuss

When I say

“Brexit won’t hurt you much!”

Remember the lies on the side of a bus,

I am a guy who you can’t trust.’

There then appears the caption ‘Sacked by the Times for lying’.

He goes on, singing

‘Can’t trust me.

Then another caption ‘Sacked from the Shadow Cabinet for lying’.

Can’t trust me.

I promised thousands more police

But that’s less than we already cut.

If you trust me you must be off your nut.

I lied to the Queen to get Parliament shut.

I say the Tory party ‘Is the party of prosperity

But not for the 130,000 people killed by our austerity.

Nor for disabled people robbed of money and their dignity.

Or the millions of children our policies

Have left in child poverty.

Are those kids mine? probably not

But I won’t admit how many I’ve got’

Another caption here, ‘Wont admit how many kids he has’.

‘Can’t trust me’.

Then another caption: ‘Lied to the Queen to illegally shut down Parliament’.

‘Can’t trust me’.

‘The planet now is burning at a terrifying rate

And I don’t even turn up to the climate change debate.

And now let me say this, two of my biggest disgraces

Are of course that I’m homophobic and a racist.

Stop. Stammer time.’

The video then moves into footage of Johnson stuttering and stammering away, under which appears another caption, (Affected waffle, disguising genuine lack of preparation, competence and decency).

‘Stop. Stammer time.’

One more thing before this ends,

You don’t judge a man’, and the next voice is that of Donald Trump, completing the sentence, ‘by his friends’.

‘Our standards will fall with a bump as I align us all with Trump,

Allow the NHS to fail and off it to Trump for sale.

It will no longer belong to you though I say

That’s not what we’ll do.

Is that true? Here’s one way of proving if I’m lying

if my lips are moving.

Another caption: ‘Won’t apologist for racist and homophobic comments.’

‘Can’t trust me.’

And then the screen is filled with text showing his various failed and harmful policies.

‘Can’t trust me’.

The richest have tax loopholes

While schools can’t afford loo rolls.

We’ve failed the NHS and left the country in a mess and

To the best to fix it are myself and Rees-Mogg

Is like expecting dog shit to be cleaned up by the dog.’

The video ends with a black screen on which the slogan ‘Vote Boris Out’ is written in white text. There’s then the Cassetteboy jingle, the sound of someone sighing or snoozing, and a final scene of Johnson making a throat-cutting gesture at LBC.

The dialogue’s invented, but everything it says is true.

Vote him out!

Here’s the video.

 

 

 

Why the UK Needs a Financial Transaction Tax

Published by Anonymous (not verified) on Wed, 04/12/2019 - 8:34pm in

Claims that a financial transaction tax would be difficult to implement and raise little revenue are fake news.

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