It is to giggle with Ritchie

So, Richard Murphy, arch exponent of the \”if we tax them more they won\’t leave\” argument.

The reality is they are ‘looking at’ some departments relocating according to the Telegraph.

Not quite the same as Goldman leaving London.

Oh, but they are in part leaving! Or thinking about it as a result of higher taxes.

So where does this leave the argument that the Laffer Curve doesn\’t exist/isn\’t relevant?

Hmm, well, here actually:

And let’s also be clear: the time will come when we will simply have to change the basis of bank taxation to ensure that artificial relocations don’t work.

It’s possible: unitary taxation would do it.

So, let\’s think through that shall we?

The Laffer Curve doesn\’t exist/isn\’t relevant. This is the idea that there is some tax rate above which revenue collected starts to fall (and that there is equally some tax rate below which revenue increases). And vice versa for both of course.

Now Ritchie is an arch exponent of the idea that this is all entirely discredited/irrelevant/applies to very different tax rates than the ones we have/you\’re all neo-liberal bastards for bringing it up.

Now at the moment it is indeed easy for a company to shift its tax residence. It\’s one of those European Union things: free movement of people goods and capital. And companies, being legal persons, have the same right of free movement as individual people do. Further, you get taxed where the head office is, not where the economic substance of your activities takes place.

OK, now, so if we thought that the tax rates we were imposing were likely to make people move to avoid them, what is the implication of that? Yes, we\’ve implicitly accepted that the Laffer Curve is not discredited, is relevant, applies at our current tax rates and isn\’t the phantasm of neo-liberal bastards.

And even if we insisted in public that the Laffer Curve just didn\’t exist then what would we do about such a situation, if we wanted to raise tax rates still further?

Quite, we would change the rules about companies being able to move and restrict their ability to pay tax where the (highly mobile) head office is rather than the (highly immovable) economic substance of their activity is.

We would argue for a move from purely residence based taxation to unitary taxation for example.

That is, in order to avoid moving over the inflection point of the Laffer Curve, to where revenues decrease at higher rates, we would attempt to shift the Laffer Curve so that the inflection point was at higher tax rates.

And all of that means that however much Ritchie says that the Laffer Curve is entirely discredited/irrelevant/applies to very different tax rates than the ones we have/you\’re all neo-liberal bastards for bringing it up, he does actually believe it for his proposed actions are exactly what we would expect from someone who does.

Amusant, non?

2 comments on “It is to giggle with Ritchie

  1. It’d be funny if it wasn’t so serious; these people have taxed the productive economy into bankruptcy and they are desperately trying to pretend to themselves that some fiscal trick or other will get the stream of money flowing again.

  2. I’m so glad you made that NY resolution. If you hadn’t, you would have nothing to write about !

    Alan Douglas

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