Oh dear, Ritchie\’s at it again

He\’s calculating how much tax havens cost the UK in lost tax. The paper is here.

Method one is to look at some estimates of total wealth, impute a return and then say tax should be paid on that imputed return.

However, some (much? Most? A teensie bit?) of that return will come in the form of unrealised capital gains. Indeed, amongst billionaires you might expect a lot of it to come from such.

We do not tax wealth, nor do we tax unrealised capital gains. Thus this method of estimation of losses fails.

Method two is to refer to his own report The Missing Billions. Which as I\’ve noted before is logically flawed. You cannot estimate tax losses by looking at the difference between headline tax rates and actual tax rates. For Parliament deliberately and specifically includes schemes which reduce tax rates from headline ones.

And somebody used this "research" as the basis for a TV programme.

Sigh.

3 comments on “Oh dear, Ritchie\’s at it again

  1. It’s also nonsense for the same reason that Microsoft’s (or the Film Industry’s) calculations of losses “due to piracy” are pure moonshine.

    In those cases, if the people concerned couldn’t get the products for little or nothing, it does not follow that they would go out and buy them for the full price – most of them in fact would go without or buy something else.

    Similarly, if the people “dodging” taxes weren’t able to dodge, they might move to a different jurisdiction, or simply stop doing whatever it is the State wants to tax them on – such as employing people, or saving, or accumulating useful capital.

  2. Of course, in the USA only the ‘little people’ pay taxes. Not people such as Geithner, Rangel, or Daschle.

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