Mar 15 2011

Me in the Guardian: 10 Reasons We Should Tax Corporations

Corporate lobbyists have been putting forward a lot of arguments about why taxes on corporations should be cut or eliminated, and arguing that tax avoidance is OK.

It’s time to face these bogus arguments head on. I have a piece in the Guardian today, doing just that, entitled 10 reasons we should tax corporations.

Read it here, and add your comments below.

One of the things that I like most about a lot of the hostile comments on today’s article and my book more generally is that they avoid engaging with the actual issues. Here, at the FCA blog, is a classic example. “You can ponder for yourself whether Britain should accept any lectures on tax avoidance policy from a man who, according to Wikipedia at least, lives with his family in Switzerland.” If you can’t handle the message, smear the messenger! (The reason is here. And to be honest, I’d have been even more guilty had I been living in the UK.) Perhaps the most enjoyable part of the hostile comments comes when the commenter clearly hasn’t actually read the item in question. Tax incidence, double taxation, and so on. If this is your riposte, FCA, then I would urge you to read the article!

Update: here are some more reasons to tax corporations, courtesy of Richard Murphy.

6 comments so far

AlienEdouard 3th March, 2011 8.42 pm

Nick,

One is free to leave where one wishes. Considering that Zurich consistently ranks among the top 5 cities to live in the world, despite all that boredom, while London is not in the top 50, it appears like a sensible choice.

But could you confirm that you pay full UK tax on the earnings from your book (since the vast majority of the readers will be British) and other UK appointments such as Chatham House.

It is a reasonable request from someone affiliated with an organization (TJN) whose philosophy is:

The Tax Justice Network promotes transparency in international finance and opposes secrecy…..

Nick Shaxson 3th March, 2011 8.32 am

AlienEdouard International tax doesn’t work like that. I am resident in Switzerland, so I’m a Swiss taxpayer, not a UK one. And to answer your question, I pay my taxes in full. And for those who might think otherwise, Switzerland isn’t a particularly low-tax country — unless you are super-rich (which I am most definitely not) in which case you can get special cosy deals.

AlienEdouard 3th March, 2011 9.46 am

Thank you for the answer.

The vast majority of the earnings from your book(s) will be generated in the UK as will your consulting/lecturing income. So to quote you, these will depend on: “tax-financed public goods: healthy and educated workforces; good infrastructure; publicly enforced respect for contracts and property rights, and so on”.

All of which will be funded by the British taxpayer, i.e. NOT YOU.

You are also saving yourself a nice amount of taxes. If my memory serves me well the highest marginal income tax rate in Zurich is 40% versus over 50% in the UK. That means that tat you are paying at least 25% less tax in Switzerland than you would in the UK, and probably far more since the Zurich system is far more progressive and various relieves are available for foreign-sourced income.

And not only do you pay significantly less tax but you enjoy the quality of life in a city that the Mercer survey ranks #3 in the world when London does not even appear in the top 50.

It is difficult to not see some “inconsistencies” in your behavior. It is definitely not in line with the TJN’s definition of tax compliance (the link on the TJN’s website leads to this: http://www.taxresearch.org.uk/Blog/2007/01/10/tax-justice-positive-3-tax-compliance/)

But here is an idea: since you are so keen on corporation taxes, why don’t you incorporate yourself in the UK, have your company pay full UK corporation tax (no Murphy-style income splitting or NI dodging)? This would be a way of giving at least something back to the British society that is currently feeding you at no cost.

Nick Shaxson 3th March, 2011 10.30 am

Sorry – most of my family and many of my friends are in the UK, and I think that to argue that I should self-censor because I don’t live there is idiotic. And no, I wouldn’t be paying 50% in the UK, because I wouldn’t earn enough. So I am not sure you’re right.

Now I’ve answered your points and challenges. And now I pose you a challenge in return. Instead of attacking the messenger, how about now engaging with the message itself? That’s by far the most interesting part. It’s like all those people banging on about the Guardian’s Media Group’s tax affairs – instead of actually tackling the points and message raised by Guardian journalists. The reason being that the message is really hard to deal with, isn’t it? The FCA blog had the best go, in my view, but failed to dent the arguments. Now have a go by yourself, point by point.

AlienEdouard 3th March, 2011 10.58 am

Nick,

Point #1 around your tax affairs is extremely lame to say the least. I am not arguing that you should self-censor, this is a gross distortion.

In item #9 of your article in the Guardian you say that it matters where company owners and business activities are, and uses the example that a US mining corporation should pay (corporate) taxes in Zambia because it makes a profit out of extracting that country’s mineral resources.

Well, you are making a profit by selling books to UK readers and (offering consulting services to a UK audience), which is a vast “resource” that has been built thanks to a large extent to taxpayers’ funds. Would it not be “fair” to ask you to pay UK tax on the earnings generated out of that resource, just like it is “fair” to ask the US mining company to pay taxes to the Zambian people?

Point #2 is very valid. Honestly I wish I had the time to do a point-by-point but unfortunately I have a day job, and I am already in enough trouble. Someone on the Guardian website highlighted that your assumption/statement #6 is critical to your line of arguments, and I agree. It is far from undisputable and if it fails, most other arguments fail.

I commit to come back with a more extensive comment if I have some time.

Nick Shaxson 3th March, 2011 9.25 am

AlienEdouard – thanks for the comments.

Re point 9 and your following argument, I am not a corporation. Corporate taxation has a set of fairly well-established principles, whereby countries agree that some tax gets extracted in the ‘source’ country that receives the investment, and some tax gets extracted in the ‘home’ country where the multinational is resident, under treaties and so on. With personal income taxes, the principle is generally that you pay your taxes where you are resident.

You are advising me to set up my tax affairs offshore, in the UK, so as to achieve some goal that I’m not quite clear about. No thanks.

Point 6 is important – they all are – and it is rock solid. Even so, it’s not critical to the line of reasoning. Point 2 is probably the killer, at least from a technical point of view – there’s no way around it. And point 1 is, in my view, similarly important.

Nice try, welcome further comments if you have time. I have given up on commenting on the article itself, it degenerated somewhat after a while.

Also, minor point, but you seem to be confusing Tax Research with TJN. They are separate, though friendly. The link is that Richard Murphy is a senior adviser to TJN. But what he says does not necessarily reflect the views of TJN.

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