Good news, I’m just very surprised that Sunak is so in favour.
Top tax havens…
- British Virgin Islands (British Overseas Territory)
- Cayman Islands (British Overseas Territory)
- Bermuda (British Overseas Territory)
- Hong Kong
- Jersey (British Crown Dependency)
- United Arab Emirates
If he is I missed that fact. I thought that alone in the G7 the UK was against.
Sunak has declared it a win for the British tax payer Paul, and indeed it is. The US and UK would have been very anti in the past. I can understand Biden endorsing it from a US revenue AND a social fairness point of view, but as we all know the Tories have no sense of social fairness, so I can only assume it’s from a tax revenue point of view.
Prior to this I would have thought that avoiding been roped into this via EU membership would have been a Brexit driver, and probably was for the banking sector. But given the City’s number one tax avoidance (and evasion?) ranking WW it does seem a strange decision by Number 11. There’s more to come on this.
I’ll ask a few pals in the financial sector what’s going on.
The Guardian didn’t need to do much research for this peace considering how it’s hidden money away in at least 2 of them over the years.
Yes, you’ve mentioned that before Guy, what’s it all about? I mist have missed it.
Personally I don’t blame Google, Amazon, Apple (my new iMac arrived last week from China via Cork for tax reasons), or any of the others for taking advantage of the existing tax laws. In fact, their executives could be held to account by the shareholders for not doing so. It’s the laws that are the problem. I could have used many, many sources rather than the Guardian to highlight the problem. For example:
Microsoft, who were in the news this week for paying no tax on €260B profit channeled through an Irish company with zero employees, have been taking advantage of Irish tax laws since 1985. In those days they used to ship a copy of Windows and other products to Ireland where all the distribution CDs were produced, thus availing of Ireland’s generous “manufacturing” tax rates. These days it’s all about mythical Intellectual Property which has mysteriously bucked the trend and emigrated from America to the Emerald Isle
Not to bash poor old Ireland too much (because as you can see from, my list above, Ireland is not even in the top ten) but I know it’s operations best as I have served on the board of an MNC there, where we, with the help of PWC and KPMG, legally whisked billions of dollars off to the Netherlands and back again, suddenly tax free. It didn’t take too many smarts to know it couldn’t last forever, but it’s over ten years since I was doing that and the gravy train has kept rolling along. And why not, it all legal? Because the billionaires all get more billionairy and the rich:poor divide grows at a pace - that’s why IMO.
So this is the Corporation tax take in a country of only 5M poor souls… Fundamentally it is based on profits made elsewhere.
Amazing, isn’t it? But when the music stops it could be difficult.
The need to channel sales through (in effect bogus) MNC HQs in Ireland has led to it having the third highest GDP per capita in the World (83K, just behind Switzerland on 86K that powerhouse of productivity, Luxembourg, 117K ).
But as I say above, I can’t figure out why the UK, as a true World leader in tax avoidance, corporate and personal, would back the G7 move
Although I believe the actual tax avoidance mechanism used by Microsoft was to extract all the profit as IPR fees from Ireland to the British tax haven Bermuda.
What do you really think should happen @John_Scully ?
On paper it’s a positive move, now let’s see what happens to these pledges and how the GAFA world will respond to the attack (i.e what stratagem they’ll come up with to circumvent the stricter legislation).
States, to thrive, do not have to create institutions that create inequality, and they could easily do far more to reduce inequality but choose not to.
Thomas Piketty and his protégé Gabriel Zucman have repeatedly demonstrated that there are simple solutions for states to combat rampant inequality and tax evasion, and that the fatalisme too often encountered (along the lines of “Countries can’t do much against tax evasion and tax havens”) is misplaced, it is merely a fig leaf to explain away the lack of willpower and lethargy so often displayed by governments (or blocs, such as the EU).
John Lanchester nails it here:
The frustrating thing is that the policy implications of this idea are pretty clear. In the developed world, we need policies that reduce the inequality at the top. It is sometimes said these are very difficult policies to devise. I’m not sure that’s true. What we’re really talking about is a degree of redistribution similar to that experienced in the decades after the Second World War, combined with policies that prevent the international rich person’s sport of hiding assets from taxation.
This was one of the focuses of Thomas Piketty’s Capital, and with good reason. I mentioned earlier that assets and liabilities always balance – that’s the way they are designed, as accounting equalities. But when we come to global wealth, this isn’t true. Studies of the global balance sheet consistently show more liabilities than assets. The only way that would make sense is if the world were in debt to some external agency, such as Venusians or the Emperor Palpatine. Since it isn’t, a simple question arises: where’s all the fucking money? Piketty’s student Gabriel Zucman wrote a powerful book, The Hidden Wealth of Nations (2015), which supplies the answer: it’s hidden by rich people in tax havens. According to calculations that Zucman himself says are conservative, the missing money amounts to $8.7 trillion, a significant fraction of all planetary wealth. It is as if, when it comes to the question of paying their taxes, the rich have seceded from the rest of humanity.
A crackdown on international evasion is difficult because it requires international co-ordination, but common sense tells us this would be by no means impossible. Effective legal instruments to prevent offshore tax evasion are incredibly simple and could be enacted overnight, as the United States has just shown with its crackdown on oligarchs linked to Putin’s regime.
All you have to do is make it illegal for banks to enact transactions with territories that don’t comply with rules on tax transparency. That closes them down instantly. Then you have a transparent register of assets, a crackdown on trust structures (which incidentally can’t be set up in France, and the French economy functions fine without them), and job done. Politically hard but in practical terms fairly straightforward. Also politically hard, and practically less so, are the actions needed to address the sections of society that lose out from automation and globalisation.
Milanović’s preferred focus is on equalising ‘endowments’, an economic term which in the context implies an emphasis on equalising assets and education. If changes benefit an economy as a whole, they need to benefit everyone in the economy – which by implication directs government towards policies focused on education, lifelong training, and redistribution through the tax and benefits system. The alternative is to carry on as we have been doing and just let divides widen until societies fall apart.
Do you remember this Frédéric?
Off the top of my head Karen, I think there should be a minimum of 20% corporate tax Worldwide and that tax should be paid in the same jurisdiction as the profit is made. Though, in many ways I think corporate tax should be even higher than that. Corporations used to exist for the shareholders, the employees and Society. Now shareholder value is all that matters (driven by executive share options etc.) so they should be taxed appropriately.
I think that any individual with over $1B in personal wealth should be taxed at 99%, regardless of where they pretend to live or pretend to be tax domiciled.
I’ve a bit of a chip on my shoulder about being in the squeezed middle. Those unfortunate enough not to have any money pay no tax, and I’m glad my taxes go someway helping them. Those with loads of money pay no tax at all because they can afford the best advice and pay fund fees etc. But the inbetweenies get clobbered. All the bloody time.
The most insidious one for me is inheritance tax. You work all your life, save a few bob and want to pass it on to your sprogs and the bastards tax it all over again. Meanwhile the rich pay SFA because it’s all in trusts.
Bet your sorry you asked now
I do, it’s a perennial topic in the French media. I watched a programme on French TV a year or so ago precisely on that topic, can’t remember what that prog was, but anyway I remember it as Laurence Boone was in it, she’s a fairly famous French economist (well, in France anyhow!) but more importantly she’s pleasant to listen to as she’s very clear and makes those complex topics sound relatively easy to grasp (in other words, she’s good at “vulgarising” as the French say).
Anyway, among her many positions, she is a member of the strategic committee of Agence France Trésor, the agency located on the top floor of the big Bercy Ministry (of Economy and Finance) building by the Seine, this one:
an agency located in a large room (which looks like an investment bank’s trading room) where France borrows a lot of wonga every day. Anyway, she exposed both viewpoints (that of the “rassuristes” - who aren’t alarmed by the size of the national debt - and that of the “alarmistes”). In summary she wasn’t too concerned by the debt given France’s credit ratings and so on.
Great Libération’s front page on Friday:
“Joe Le Taxeur”, nice one!
And if you take that bit from the lyrics:
*Vas-y Joe *
Dans la nuit vers l’Amazone
and change the last word to “Amazon”, it’s uncannily contemporary! (except of course for this, today: Amazon could sidestep tax reform).
That’s a good interrogation, as it can feel very counter-intuitive, and I’ll give you my take on it.
IMHO, there are several reasons to explain why the UK have gone along with it, despite having 4 tax havens/enablers of global corporate tax abuse in the world’s top 10 (British Virgin Islands, Cayman Islands, Bermuda all British Overseas Territory, and Jersey, British Crown Dependency), although they are run independently I believe or with a devo-max regime (it’s not at all like the French Overseas Territories I mean).
In a nutshell: because the US are behind it (opposing the US on this one may harm a future trade deal) and also because domestically it’s a winner (there won’t be many people who’ll stick up for the GAFA), and by the time it’s actually law in the UK, it will have been watered down and will come with the usual slew of loopholes and exemptions.
This initiative has been made possible thanks primarily to the US and the “Bidenomics”. The US of course were dead against it under Trump but Biden has managed to convince the G7 countries to forge ahead with it, including the UK who would have been out on a limb had it dragged its feet.
France managed to make the GAFA cough up a bit recently and pay their just due but there were frictions within the EU (and still are of course) and France seemed to plough a lone, punitive furrow as the US retaliated of course, or threatened to, each time the topic was broached. In 2019, Apple was forced to pay back €500 million to Bercy, the French HMRC (covering a decade of back taxes) and was handed a €1bn fine a year later by the French antitrust authorities. The “taxe sur les services numériques”, the digital tax known as “la taxe GAFA”, was voted in July 2019. Trump counter-attacked by slapping extra tariffs on French goods in the US (U.S. slaps French goods with 25% duties in digital tax row). Europe was planning some sort of EU-wide digital tax for large technology corporations but as of recently France was pretty much on her own, with Germany. The EU has fined tech giants before, such as Google (eg here) but it was for different reasons, mainly to do with antitrust legislation.
Now that the US are on board and leading the charge, it’s much easier for the G7 countries to sing from the same hymn sheet.
So, why did the US push for this “levelling up”? For 2 main reasons.
The US, thanks to Biden and the Covid, have changed their tack on the topic. The Covid has been very costly and they’ve decided to raise taxation on US companies to finance their post-Covid “plan de relance” (their big reset plan) as well as financing long-awaited investments in a number of areas, for which a staggering $6 trillion could be earmarked (Biden to Propose $6 Trillion Budget to Make U.S. More Competitive – The president’s plans to invest in infrastructure, education, health care and more would push federal spending to its highest sustained levels since World War II).
Even in the US, the profits of GAFA have shocked many during these lockdown time of extreme hardship for tens of millions of Americans bereft of a safety net. Amazon’s profits in 2020 for instance went up 84%. Biden figured that it was high time to raise corporate taxation and that they’d have most of the electorate on board on this one.
It’s early days anyway and this bit of legislation will probably be watered down as the successive hurdles are cleared, so countries such as the UK know that on paper it looks punishing but that by the time it’s finalised, it’s likely that the core legislation will have been somewhat eroded or hollowed out. Furthermore, countries are sovereign in matters of taxation and some will certainly introduce loopholes. I’d imagine the UK will be one of those.
The second stage will be getting the G20 countries to reach the same tech tax deal, and whatever agreement is reached is likely to be inferior to the original plan. China is rumoured not to be too keen on this global minimum corporate tax rate, because of Hong-Kong, a big tax haven (the largest in Asia). China may finally agree but probably not on the current terms.
Then the third stage: getting all 37 OECD countries to ratify it. At that juncture, while it’s likely to be ratified, many countries (such as Ireland or The Netherlands) will dig their heels in to oppose any significant loss they’ll incur. Cue technical discussions leading to technicalities modifying the deal etc. and the grand plan will no doubt be further diluted.
The sums involved are not massive anyway so it shouldn’t upset many multinationals. According to Bercy’s calculations for instance, France would rake in an extra €4bn in tax, I’d imagine it’d be the same ballpark figure for the UK. It’s not to be sniffed at of course but it’s peanuts when put in perspective with the much higher tax evasion figures, up to nearly £200bn a year according to some sources. It’s more a symbolic gesture and it’s an easy sell to the UK public (“ça mange pas de pain” as the French say), which will be packaged by the Tories as a massive ground-breaking victory against corporate greed etc. so Johnson and his crew are quids in on this one and it would have been counter-productive to oppose it.
Transaction taxes rather than profit/revenue taxes are the answer. Much harder to escape from those. In other words, kind of like a digital VAT.
Governments must have known this too. As many are saying here, whatever noises the governments make, they could have done this a long time ago and with a high level of effectiveness if they’d really wanted to
The EU has tried in the past to push for an EU-wide “Tobin Tax” on financial transaction (see Financial Transaction Taxes in the EU - an overview) but it never amounted to much, too many disagreements between countries. 4 or 5 EU countries have a domestic one though, France for instance (voted in 2012 under Sarkozy, it’s called the TTF, Taxe sur les Transactions Financières) but it’s sod all basically (0.3% in France) and, in France anyhow, it only applies to share-buying operations from only 134 companies. It yielded €1.8bn in France last year.
Indeed, but not to defend our friends in Bermuda, it’s because Ireland has made imported IPR king (a compensation for the inconvenient demise of the double Irish fiddle with the Netherlands). Not a program specification nor a line of code written onshore but suddenly the MS IPR resides up a boreen in a Ballymagash cottage
Flan O’Brian (of Third Policeman fame) would have loved it
I agree, the UK needs the dosh. Wooster-Mogg and his pals will have to take a pause until normal tax fiddling is resumed.