Bolitics The New Condem Government

[peterms]

Oh my god, you didn't just link an article from Richard Murphy did you? Oh christ, you did. That man knows **** all about anything, and is one of the biggest tossers to ever draw breath.

Any comment on the substance of his suggestions for measures which could tackle tax dodging? What other measures do you think might be useful?

[Risso]

Half of what he suggests happens anyway, and the other half is utter nonsense.

"We could demand automatic information exchange from tax havens". Erm, how? Threaten to invade them if they don't?

[peterms]

Half of what he suggests happens anyway, and the other half is utter nonsense.

"We could demand automatic information exchange from tax havens". Erm, how? Threaten to invade them if they don't?

Did you read the whole paragraph? He said HMRC is opposing the international agreements which would facilitate this. I don't think he mentioned invasion, though it's certainly an interesting idea.

Do you think the new requirements on disclosure of financial transactions between offshore shell banks and US banks introduced on the back of 9/11 proved impossible to enforce?

[peterms]

Sorry I'm pretty rushed and have got time to read the article pasted yet but I assume this proposed spending is to be furnished by rolling the virtual printing presses yet again? QE isn't working out very well for the US where it was used as the primary weapon to keep 'investing'.

Where do you think any spending comes from? Where do you think money comes from?

[Awol]

Sorry I'm pretty rushed and have got time to read the article pasted yet but I assume this proposed spending is to be furnished by rolling the virtual printing presses yet again? QE isn't working out very well for the US where it was used as the primary weapon to keep 'investing'.

Where do you think any spending comes from? Where do you think money comes from?

I understand the fiat money system Peter, I also understand that commodities aren't suddenly hugely more valuable but that the strength of the currency they are measured in ($) has decreased. QE in the US has played a large role in diluting that value because too much money was created which will eventually fuel inflation. Simply creating more money isn't a silver bullet.

[peterms]

Oh my god, you didn't just link an article from Richard Murphy did you? Oh christ, you did. That man knows **** all about anything, and is one of the biggest tossers to ever draw breath.

And in return, here's Richard Murphy's view of the Isle of Man.

[blandy]

I'm with Risso on that quoted article - much of it seems like utter guff.

The problem is from the little stuff -

We could do more: we could reconcile Yellow Pages with tax returns. How many businesses do not pay?

We could send tax inspectors to car boot sales to police illegal trading.

We could monitor e-bay for undisclosed trading.

See that's all, well, idiotic. And if that's idiotic, then the more complicated stuff, well that's even more so, much of it.

Why? Well "sending Tax men to car-boot sales" - How much effort would that take? How much would it cost to send a tax man, on a Sunday (overtime) to go to each car boot? And what would he or she see? some people with their car boots open and some old china, linen, a radio and a painting - multiple times over. And maybe some stalls, selling cheap goods, or meat, or whatever. These stalls, they're mostly local businesses. They take cash and cheques. They have their names up on their stall. What are the actual mechanics, the workload to check the takings and so on? it's an absolute mass of red tape and manhours.

Monitor e-bay - is he mad? again the effort, the sheer scale of it. Again, it seems that most of the deals from "shops" on e-bay are based in Hong kong, or wherever. Outside of UK jurisdiction.

There probably are loads of people not paying tax on small turnovers in the UK on e-bay and at Car boot sales. But going after these people effectively would be to spend huge effort for less return. It is certainly not This is all easy stuff to do

And tax havens. They're tax havens because they don't reveal information. They have a vested interest in not doing so. There's mostly cock all else there in terms of them being able to generate income for themselves.

Absolutely both labour and the Tories have turned a blind eye to calls to abide by existing law on the companies based in these places, and that should stop. Both parties have donors who use these places, and it's politically corrupt to carry on as they do. He's right that existing law should be enforced, but off his head if he thinks that new law is the answer, partly because the current law is not rigourously policed.

don’t tell me cutting the deficit without cutting services is not possible It's not possible, sadly. The argument is presented as "either cut services or get the evaders". That's naïve. There is excess and evasion everywhere. Businesses, individuals, councils, claimants, government.....

It shouldn't be "ignore the waste in these (public funded) areas and go after the nasty capitalists". Both need attention. Argument to the contrary, for me, is indicative of an unwillingness to face reality.

[peterms]

Sorry I'm pretty rushed and have got time to read the article pasted yet but I assume this proposed spending is to be furnished by rolling the virtual printing presses yet again? QE isn't working out very well for the US where it was used as the primary weapon to keep 'investing'.

Where do you think any spending comes from? Where do you think money comes from?

I understand the fiat money system Peter, I also understand that commodities aren't suddenly hugely more valuable but that the strength of the currency they are measured in ($) has decreased. QE in the US has played a large role in diluting that value because too much money was created which will eventually fuel inflation. Simply creating more money isn't a silver bullet.

My point was not about the fiat money system, more about all money.

There seems to be some sort of terror of a government "printing money" to create investment, but little understanding that money is in fact created out of nothing ("printed"), but almost exclusively by banks.

If we compare the creation of credit by a government to build infrastructure, invest in green technology or improve education (for example) with the creation of credit by a bank to stoke the house price bubble, it's pretty clear which one is more worthwhile; and yet there's a kind of shrill, arm-waving panic about the idea of governments creating credit. Weimar Republic! Wheelbarrows! Zimbabwe! Hyperinflation!

If we instead compare the creation of credit by either a government or a bank to fund an equally worthwhile type of investment, why would one be bad and one be good? Purely on ideological grounds, or is there some assumed economic reason?

Does your view that we shouldn't "print money" lead you to conclude that banks should only lend money from tangible assets they hold in real life, like cash deposits from savers for example? That would be an interesting road to go down...

[Gringo]

[Risso]

Oh my god, you didn't just link an article from Richard Murphy did you? Oh christ, you did. That man knows **** all about anything, and is one of the biggest tossers to ever draw breath.

And in return, here's Richard Murphy's view of the Isle of Man.

Just about the very best thing about the Isle of Man is that Richard Murphy doesn't live here.

[peterms]

The problem is from the little stuff - ... How much effort would that take? How much would it cost to send a tax man, on a Sunday (overtime) to go to each car boot? ...again the effort, the sheer scale of it. ...

There probably are loads of people not paying tax on small turnovers in the UK on e-bay and at Car boot sales. But going after these people effectively would be to spend huge effort for less return.

Not the place I'd start. Though it's interesting that the government finds it cost-effective to investigate and pursue individual benefits cheats, but the idea of investigating and pursuing individual tax cheats on a similar scale is plainly, evidently so cost-ineffective that it becomes laughable. How does that work, I wonder?

And tax havens. They're tax havens because they don't reveal information. They have a vested interest in not doing so. There's mostly cock all else there in terms of them being able to generate income for themselves.

It's not the people living in tax havens who run them, they don't get the benefits, and whether there is another form of income generation is irrelevant. It's not as though impoverished locals have established tax haven status as an alternative to gathering conch shells.

Of course tax havens don't reveal information. That's why you need to find ways of making them. Usually, that will require international co-operation, and sanctions against organisations and individuals found to have colluded with trying to evade requirements. The threat of the loss of a banking licence, for example, might help some of our bankers re-evaluate their approach towards facilitating some of the stuff that goes on.

And yes, that's a better place to start than car boot sales.

Absolutely both labour and the Tories have turned a blind eye to calls to abide by existing law on the companies based in these places, and that should stop. Both parties have donors who use these places, and it's politically corrupt to carry on as they do. He's right that existing law should be enforced, but off his head if he thinks that new law is the answer, partly because the current law is not rigourously policed.

Of course the existing law should be enforced. However, it invites people to create more and more loopholes which then have to be plugged later down the line. It's not a very efficient approach - a bit like monitoring car boot sales, in fact. We probably need to introduce some new approaches, like a tax compliance duty, for example. Or change to a less easily avoided form of taxation, like a land tax. Or get tougher with moneylaundering, as the US did through new legislation.

don’t tell me cutting the deficit without cutting services is not possible It's not possible, sadly. The argument is presented as "either cut services or get the evaders". That's naïve. There is excess and evasion everywhere. Businesses, individuals, councils, claimants, government.....

It shouldn't be "ignore the waste in these (public funded) areas and go after the nasty capitalists". Both need attention. Argument to the contrary, for me, is indicative of an unwillingness to face reality.

I don't read him as arguing for waste, simply pointing out that with the scale of tax evasion estimated at £70bn and avoidance and non-payment a further £50bn, it is plainly possible, should you so wish, to cut the deficit without cutting services. That the government has chosen the opposite is a matter of political preference. That much, I think, is unarguable.

[Risso]

How much tougher would you like them to be with money laundering? It's already an extremely serious crime that carries hefty sentences.

[peterms]

How much tougher would you like them to be with money laundering? It's already an extremely serious crime that carries hefty sentences.

I would like action to be more effective, because currently it's like scratching the surface - though obviously as with all secret activity, being accurate about the scale is extremely hard. Being tougher would help, but giving it a higher priority and securing more international co-operation are also important.

If the current level of toughness results in this scale of activity continuing, then I think most people would conclude there's something lacking.

An estimate of the scale, quoted by the World Bank:

Baker (2005) presents global estimates of annual money laundering based on a “bottom up” approach. The funds needing money laundering are divided into the three components: criminal, including drugs, counterfeited goods and money, human trafficking, illegal arms trade, and unrecorded oil sales; corrupt, essentially accruing to Politically Exposed Persons (PEPs), the focus of this paper, from illegal activities like bribery, extortion, fraud, and embezzlement from national treasury; and proceeds linked to tax evasion.10 Baker estimates the sums involved from

these three components at a global level of between $1 and $1.6 trillion annually, with roughly half coming from developing and transitional economies.11

10. Politically Exposed Persons (PEPs) are defined in the Glossary to the Financial Action Task Force Forty Recommendations (FATF 2003, p. 14) as “individuals who are or have been entrusted with prominent public functions in a foreign country, for example, Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves. The definition is not intended to cover middle ranking or more junior individuals in the foregoing categories.” The document is available at http://www.fatf-gafi.org/dataoecd/7/40/34849567.PDF

11. For details, see Baker (2005, pp. 165–73 and table 4.4, p. 172). Bottom-up or micro methods are also discussed in Reuter and Truman

(2004, pp. 19–23). They note that the estimates are subject to serious flaws.

Baker, Raymond. 2005. Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free-Market

System. John Wiley and Sons, Inc.

The thing with moneylaundering is that it doesn't stand alone, in some separate category conducted by dictators, gangsters and drug barons. The same tools of hiding transactions, laying false trails and so on are used by tax dodgers as well. Action against moneylaunderers will also raise the tax take.

[blandy]

...Though it's interesting that the government finds it cost-effective to investigate and pursue individual benefits cheats, but the idea of investigating and pursuing individual tax cheats on a similar scale is plainly, evidently so cost-ineffective that it becomes laughable. How does that work, I wonder?

In terms of cost effectiveness, I don't know the figures, but if it is, then it is. But it does seem to be more realistically feasible where you have a list of people, details on the computer, to check whether their circs are as they claim, rather than to go to a car boot at have a bunch of people who you don't know from Adam, and then determine whether they are paying the right amount of tax. It's the opposite way round - for claimants they come to you and ask for money, for people at a car boot you (the taxman) are asking them for money - maybe it's as simple as that?

It's not the people living in tax havens who run them, they don't get the benefits, and whether there is another form of income generation is irrelevant. It's not as though impoverished locals have established tax haven status as an alternative to gathering conch shells.

Yes it is people who live there who run tax havens. The laws of Bermuda, or Jersey or the Isle of Man or the Cayman islands - they're drawn up by people who govern those places. Whether they distribute the wealth ensuing in a way that's egalitarian is another matter.

Of course tax havens don't reveal information. That's why you need to find ways of making them. Usually, that will require international co-operation, and sanctions against organisations and individuals found to have colluded with trying to evade requirements. The threat of the loss of a banking licence, for example, might help some of our bankers re-evaluate their approach towards facilitating some of the stuff that goes on.

And yes, that's a better place to start than car boot sales.

Agreed. But it has to be global, not UK only.

Of course the existing law should be enforced. However, it invites people to create more and more loopholes which then have to be plugged later down the line. It's not a very efficient approach - a bit like monitoring car boot sales, in fact. We probably need to introduce some new approaches, like a tax compliance duty, for example. Or change to a less easily avoided form of taxation, like a land tax. Or get tougher with moneylaundering, as the US did through new legislation.

Partially agree. Personally, I think constantly changing the law is more inefficient than leaving it alone. It's an industry in itself, Government consults tax experts and uses civil servants to devise a way to close a loophole, and PWC or whoever is employed by numerous people to find a new loophole.

Maybe stop changing things and instead concentrate the effort on enforcing what is already law?

I don't read him as arguing for waste, simply pointing out that with the scale of tax evasion estimated at £70bn and avoidance and non-payment a further £50bn, it is plainly possible, should you so wish, to cut the deficit without cutting services. That the government has chosen the opposite is a matter of political preference. That much, I think, is unarguable.

I don't. It's that "either/or" thing again - look at them being nasty going after the weak and leaving the rich alone - it's a caricature. I'm no fan for the Tories, but I do think that concentrating on just on thing, be it benefit fraud, tax avoidance/evasion "waste" or any other ideological favourite it to miss the need to sort out more than a particular bête noire. The whole thing is if not broken, then seriously damaged.

[peterms]

... it does seem to be more realistically feasible where you have a list of people, details on the computer, to check whether their circs are as they claim, rather than to go to a car boot at have a bunch of people who you don't know from Adam, and then determine whether they are paying the right amount of tax. It's the opposite way round - for claimants they come to you and ask for money, for people at a car boot you (the taxman) are asking them for money - maybe it's as simple as that?

As I said, I wouldn't start with car boot sales, and there are far better ways to spend tax inspector time, especially now we only have half the number we used to. Of course if you did want to identify people at car boot sales, it would be very easy to do so, just by requiring that they produce ID in order to sell. No harder than enforcing drinking laws for 18 year olds. No, you won't catch everyone. Yes, you will get most. Is it worth it? Not where I'd start at all, but you overstate the difficulty.

Yes it is people who live there who run tax havens. The laws of Bermuda, or Jersey or the Isle of Man or the Cayman islands - they're drawn up by people who govern those places. Whether they distribute the wealth ensuing in a way that's egalitarian is another matter.

If you'd quoted the tax havens of London and Switzerland, you'd have a point - the people running those probably do live there. The examples you give have sweet little puppet shows to give the pretence of democratic control, but it's a complete sham. There is no real political activity or opposition. Dissenters are easily and effectively marginalised. The important laws are drafted by external institutions, and bounced past the equivalent of a parish council. The whole point of these little places is that they have been captured, there is no opposition, they do what they are told.

Personally, I think constantly changing the law is more inefficient than leaving it alone. It's an industry in itself, Government consults tax experts and uses civil servants to devise a way to close a loophole, and PWC or whoever is employed by numerous people to find a new loophole.

Maybe stop changing things and instead concentrate the effort on enforcing what is already law?

Yes, though the problem is that what we have now invites the employment of lots of people to devise loopholes, and leaving that situation alone won't lead to improvements. That's why there is growing interest in a general anti-avoidance provision - I think it's meant to be in the coalition agreement. Bit more on the general approach here. If we had that as a starting point, then there would be less need to keep tinkering.

...concentrating on just on thing, be it benefit fraud, tax avoidance/evasion "waste" or any other ideological favourite it to miss the need to sort out more than a particular bête noire. The whole thing is if not broken, then seriously damaged.

Yes, though in the context of the original, I disagree with the notion that the deficit is a big problem which must be tackled at whatever cost. It's no more than a bogeyman to frighten us into compliance with what the government is starting to do. But that's not to say that we need to deal with tax dodging and nothing else.

[blandy]

Of course if you did want to identify people at car boot sales, it would be very easy to do so, just by requiring that they produce ID in order to sell. No harder than enforcing drinking laws for 18 year olds. No, you won't catch everyone. Yes, you will get most. Is it worth it? Not where I'd start at all, but you overstate the difficulty.

I don't think I do. The point about car boots, and it was made because the numpty put it in his article as part of a solution, was that it's bonkers. Firstly the cost to send tax people round on their days off, on overtime, to look at how many car boot sales each weekend - a thousand across the country? where there may be an average of 40 stalls, at a guess. thats 40,000 people to be checked & Recorded, and then their tax records checked, and then those records to be reconciled with what was recorded - how much did Mr Smith of 10, the Avenue, Spalding take in cash for his goods. What did he take along at the start of the day? what did he take home. How many other car boots has he done? Can you prove it? - it's a huge workload and certainly likely to cost more than any possible recovery of money.

You could just do spot checks, and reduce the cost....and any possible level of recovery.

Your point about tax havens, I don't agree with. Jersey and the IoM and the Caymans are not tinpot islands with no democracy. They are democratic - they have free elections and so on.

They do very well from their no tax status and their secrecy and I can't see that situation changing, so they're not going to do what the article writer seems to think is a simple matter to make them do.

[Awol]

Does your view that we shouldn't "print money" lead you to conclude that banks should only lend money from tangible assets they hold in real life, like cash deposits from savers for example? That would be an interesting road to go down...

My view isn't that we shouldn't 'print money' but that such a process is not a panacea, has consequences and should be strictly controlled. We've already had QE, the Septics have done it twice (and were considering a third run) and it's not bailed them out of trouble, despite Balls' wailing about how great they were doing which is of course a complete lie.

However as you mention it, I wonder if getting away from fractional reserve banking would actually restore sanity? All that tax from the evil finance industry would dry up overnight though, making our current situaton far worse than it already is..

[Risso]

Of course if you did want to identify people at car boot sales, it would be very easy to do so, just by requiring that they produce ID in order to sell. No harder than enforcing drinking laws for 18 year olds. No, you won't catch everyone. Yes, you will get most. Is it worth it? Not where I'd start at all, but you overstate the difficulty.

I don't think I do. The point about car boots, and it was made because the numpty put it in his article as part of a solution, was that it's bonkers. Firstly the cost to send tax people round on their days off, on overtime, to look at how many car boot sales each weekend - a thousand across the country? where there may be an average of 40 stalls, at a guess. thats 40,000 people to be checked & Recorded, and then their tax records checked, and then those records to be reconciled with what was recorded - how much did Mr Smith of 10, the Avenue, Spalding take in cash for his goods. What did he take along at the start of the day? what did he take home. How many other car boots has he done? Can you prove it? - it's a huge workload and certainly likely to cost more than any possible recovery of money.

You could just do spot checks, and reduce the cost....and any possible level of recovery.

Your point about tax havens, I don't agree with. Jersey and the IoM and the Caymans are not tinpot islands with no democracy. They are democratic - they have free elections and so on.

They do very well from their no tax status and their secrecy and I can't see that situation changing, so they're not going to do what the article writer seems to think is a simple matter to make them do.

Excuse me, we're a "low tax jurisdiction" and don't rely on secrecy. The IOM is well regulated, adheres to international standards and is on the OECD "white list"

[peterms]

Excuse me, we're a "low tax jurisdiction" and don't rely on secrecy. The IOM is well regulated, adheres to international standards and is on the OECD "white list"

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[peterms]

My view isn't that we shouldn't 'print money' but that such a process is not a panacea, has consequences and should be strictly controlled.

I agree.

Further views, where we may disagree, are that creating money should be the preserve of the state, not derogated to private institutions; and that we should be doing it right now, not being panicked by wildly exaggerated scare stories about deficits and debt. Or possibly we don't disagree too much on that either?

However as you mention it, I wonder if getting away from fractional reserve banking would actually restore sanity? All that tax from the evil finance industry would dry up overnight though, making our current situaton far worse than it already is..

The problem would not be the loss of tax from the finance industry (do they pay it anyway?) but the difficulty in adjusting. The whole economy (ours, anyway) runs on the presumption that people carry personal debts at an eyewatering level, and this level of debt dwarfs public debt.

Moving from that to a system where credit is far harder to come by would be like changing from tenth gear to first at 200mph. Perhaps planning a gradual change over a period might be possible, but that implies a degree of management and co-ordination of the economy which it is hard to imagine happening. Another possibility is that some large shock provokes such a shift at a pace we wouldn't have chosen.