Author: davidajepson

by

Fear of the robots is founded in the messy reality of labour — FT.com

Interesting argument about how technological innovation which increases productivity should lead to higher wages creating demand for new jobs to take those made redundant by the new technology. Everybody happy in the long run, of course we know what happens to people in the long run.

What this assumes is that technological innovation will lead to growth and the problem is that does not seem to be happening at the moment and even if it did there are some “headwinds” which might undermine the growth potential.

When the employment destructive potential of robots is discussed there is always a quick reference to how wrong the luddites were. I guess this is another thing about being wrong in the long term. How much consolation that is to luddites who only lived short term is debatable.

It is not clear that the current innovations are qualitatively different from previous ones and thus may have a qualitativly different economic effect. Mr Weldon is right however about the way power relationships will structure how new technologies are implemented and the economic impact they have on labour. The current levels of inequality means that much power is concentrated in very few hands. This has the potential to generate tensions which are resolved in seismic rather than evoutionary ways.

Political context matters in the face of rapid technological change, writes Duncan Weldon

Source: Fear of the robots is founded in the messy reality of labour — FT.com

by

The budget of the European Union: a guide – Institute For Fiscal Studies – IFS

Fascinating to see what scale the bloated bureaucracy of Europe operates on. This is a really useful summary of who pays what and who gets what out of the EU. As background for a decision about whether we want to remain in or out of the EU it is excellent.

Source: The budget of the European Union: a guide – Institute For Fiscal Studies – IFS

by

Live Feed | Does Starbucks Pay Enough Tax?

How and Why We Tax Large Multinational Firms The 2015 Annual Public Lecture ”Does Starbucks Pay Enough Tax? – How and Why We Tax Large Multinational Firms” will be given by Professor Rachel Griffith.

Source: Live Feed | Does Starbucks Pay Enough Tax?

The Institute for Fiscal Studies (IFS) is a genuine national treasure. Its enlightenment focus on facts means that its publications are always interesting. Prof Rachel Griffith is theResearch Director at the IFS and gave this really interesting lecture on Corporation Tax at The Royal Economic Society in 2015.

She makes the point that Corporations are not people and when they pay tax it simply redistributes the burden of that tax amongst real human beings. If corporation tax goes up it can be paid for by employees through lower wages, by consumers through higher prices or by shareholders through lower dividends.

She also points out that the level of the tax take provided by Corporations over the past thirty years has been remarkably consistent at around 7% of total tax revenue despite the fact that the tax rate has fallen from 52% in 1980 to 20% in 2015.

In her lecture she looks at the way in which Corporations are currently taxed based upon the location their corporate registration as opposed to where they generate their profits.

It is worth watching the lecture to help clarify some of the issues around a more effective and progressive taxation system that works in a world of global multinational corporations.

by

The Hidden Wealth of Nations

Recently read a really interesting book on the issue of the moment following the leaking of the Panama papers. It is by Gabriel Zucman and in a very concise and clear 116 pages sets out the scale of the problem of tax havens, how they operate and what might be done about them.

He estimates on a conservative basis that some 8% of personal financial wealth amounting to $7.6 trillion is held in tax havens. By way of comparison the UK’s total GDP is about $2.5 trillion. Also this does not take any account of income that is hidden by corporations.

Zucman looks at the history of the growth of private banking in Switzerland at the centre of much of the operations that utilise other tax havens to make as opaque as possible who owns what and where it should be taxed. He addresses a number of myths about Swiss banking and illustrates that any reform predicated on the goodwill of the bankers is doomed to fail as it has done in the past.

He goes on to contrast the European Union’s Savings Tax Directive (STD) which he believes to be essentially flawed with the United States approach through the Foreign Account Tax Compliance Act (FATCA) (where is that final T?). Whilst FATCA might not be perfect it is having an impact and has much to recommend it.

Essentially if banks do not themselves let the US tax authorities know what holding US citizens have in their overseas accounts then the US will impose a 30% tax on all interest and dividends payments from the US to that bank. They can also levy substantial fines. To ensure bankers apply FATCA they encourage whistle blowers to let them know of abuses. What is more they pay them handsomely. Bradley Birkenfield an ex-employee of UBS was paid $104m for revealing the non-compliant activities of his former employer.

Whilst FATCA is a real step in the right direction Zucman identifies three other things that should be done on a global scale to address the problem of very wealthy people hiding their wealth from the tax man.

Firstly, he proposes a worldwide register of wealth that would be a public record of the beneficial owners of stock, share and bonds and ultimately all derivatives. In fact national and regional registers of stocks and shares already exist however they are private documents. By bringing them into a single, public register it would make visible the financial wealth of all individuals.

Secondly he recommends that sanctions against tax havens should be proportional to the losses that they impose on other countries. This is in essence what FATCA does with banks. By doing this the economics of being a tax haven break down.

Finally, he recommends that international taxation agreements should be amended for corporations. In essence this would mean taxation of multinationals should derive from their consolidated profits. So if Starbucks sells 50% of its products in the US and employs 50% of its people there and has 50% of its plant then it should pay 50% of its tax there. This gets around the issue of having transfer-pricing arrangements where subsidiaries, providing services based in tax havens, charge large fees to the US subsidiary thus reducing its tax bill their, shifting it to the lower rates in the tax haven.

It would also address the nonsense that a company like Apple with $500bn in the bank borrows money in the US to pay dividends because if it repatriated the profits from abroad they would be subject to tax.

Others have suggested that individuals should have a strict liability to inform the state of all their wealth and income. If they fail to do so and thus hide wealth from the state then they forfeit the right to state protection for that wealth. If it is found then 100% of it is immediately confiscated, and to assist the process anyone who reveals the existence of the wealth can claim 50% of it as a bounty. I do like something that is clear and simple.

We have had years of fine words about what we are going to do about tax evasion and tax havens it is time something started to happen. The governments seems to have two responses first “well Labour did nothing about it”. So what. Labour aren’t in power. Second, the Prime Minister has been spearheading the issue in Europe. Well the tax deals done so far with large multinationals suggest he might want to get his spear out over here.

The first step might be to appoint a few tax inspectors to replace those that have been made redundant since the government came to power. They are an unusual part of the government machine in that they bring in vastly more in tax than they cost. Surely austerity demands we maximise our income. What business, even one wanting to save money would sack people collecting more than they coast to employ?

If the MP’s expenses scandal was anything to go by, the press will probably have more interesting revelations to bring out of the 11m+ documents over the coming days and weeks.

Now is the time to push our politicians to do something significant about tax havens and tax evasion. If you want to get a good overview of the issue in a short but well argued book this is it.

The Hidden Wealth of Nations: The scourge of tax havens. G Zucman. The University of Chicago Press. 2015.