May 2012

Yes, I\’m a bad boy

Germany is playing Israel tonight.

All the local pubs are showing it.

It\’s soccer which is less important and violent than some previous matches.

And while I like, and would happily introduce to my mother (umm, OK, excepting the one that I personally find most amusing but ain\’t that always the case?) all of the Germans I know, have met, umm, I really do think I\’d like Israel to win.

Just \’coz…..


Notes on Ritchie\’s new paper

explanation has been the hegemony of ideas that the Washington Consensus
represents. That consensus opposes progressive taxation: it is its opposition
to the idea that has closed down debate on this and other issues of tax policy.

My, that\’s just astonishing. For given that absolutely every country has a progressive income tax system (yes, a flat tax with a personal allowance is progressive, people face rising average tax rates) either the claim is Ritchiebollocks or the Washington Consensus is pretty feeble. As Ritchie goes on to quote:

The term ‘the Washington Consensus’ was created by the economist John
Williamson to describe the policy measures that developing countries were
required to implement in exchange for development assistance from the
Washington DC based International Monetary Fund and World Bank. Those
policies were considered by Williamson to be ten in number¹, not all of which
related to taxation². As Williamson himself noted with regard to tax³:

Tax reform involves broadening the tax base and cutting marginal tax rates. The
aim is to sharpen incentives and improve horizontal equity without lowering
realized progressivity.

Oh, the Washington Consensus is not against progressive taxation. So, it\’s Ritchiebollocks then.

Then we get a pretty graph showing that indirect taxation has risen as a percentage of the tax take. And yes, it has. But we\’re told it\’s as a result of the Washington Consensus. Erm, no. It\’s from joining the EU and having to have a VAT. Not something Ritchie bothers to mention of course.

There has been another shift that is harder to detect within the tax system,
but which has nonetheless been present. Although looking at raw data
suggests that the amount of corporation tax paid has been broadly static over
the last decade or so, this does not reflect a substantial net increase in the
number of companies operating in the UK economy or the net increase in
their share of GDP.

Erm but as here. Corporate operating surplus as percentage of GDP has not risen in the last 30 years. Actually, it\’s lower than it has been for almost al of that time.


The effective tax rates of large corporations are falling. As a result of these
combined shifts from direct to indirect taxes and because of the fall in
corporate taxes, the UK tax system is clearly regressive.

Ritchiebollocks. More regressive than it was, less progressive than it was (which partially depends upon how regressive VAT is, what with food etc not so taxed and corporate profits taxation is pretty much as it was) I\’ll grant.

Whether it is regressive or progressive as a whole is another matter. As it happens, almost all tax systems everywhere are regressive: yes, even bloody Sweden. The UK tax system is less regressive than many: amazingly, the US system is one of the most progressive: precisely because they do not have that VAT.

The Washington Consensus era has seen a marked increase in inequality in
the UK.

That\’s globalisation for you: higher in country inequality, lower global inequality.

This bit is just stunning:

As is obvious, income and current spending were very closely aligned from
1997 to 2007. The crash of 2008 forced them out of step, and as is obvious, it
was not spending that went wrong; it was a lack of income that gave rise to
the borrowing that the government has undertaken from 2008 onwards.
The tax gap
That lack of income was, of course, missing tax. In no small part that was due
to the existence of the ‘tax gap’. This phenomenon – which is the difference
between the tax the government should be paid in a year if all taxpayers
settled their liabilities owing in accordance with H M Revenue & Customs’
interpretation of tax law and the actual amount collected in practice – is

Apparently there was no tax dodging 1997 to 2007 and we all started dodging £120 billion of taxes in 2008.

Nothing at all at all to do with a slump in the economy, a shrinkage of the GDP that could be taxed. Nothing at all at all….


Finally, they can consume to excess, which is a state only possible with regard
to material goods (we can’t over-consume our intellect, for example

Snigger: over-consume perhaps not but I can think of at least one person who is over-extending it.

These four states clearly suggest that that there is a case for progressive
taxation. It is obviously true that no tax should be due when a person is in
absolute need.

Excellent, os, given that the minimum wage is that level, so we are told, of absolute need, therefore the allowance should be raised to £11,800 a year. Good oh!

According to H M Revenue &
Customs²? a person with income of £10,000 in 2009-10 tax year is likely to
have £585 of investment income included in that sum. A person earning
£500,000 is likely to have £151,000 included in that sum and a person earning
£1,000,000 plus will have an average of £689,000 of investment income. In
that case – using the broad economic definition of rent – it is likely that rents
comprise a significant part of the income of those with the highest earnings
but that they do not of those with low earnings.
It is important to remember that rents are in market based economic theory
a sign of market imperfection that allows a person to charge a price above
that which a perfect market would charge and as such rents fall within the
category of activity needing to be taxed to correct market imperfections due
to externalities that the market is unable by itself to properly price.

Erm, rent does not equal investment income. Nor is rent equal to returns to capital nor is it equal to interest or unearned income.

So this is Ritchiebollocks as well.

The result is that a higher rate of tax is logically due either on investment
income, where most (but not all cases, senior executive pay being an
exception) of those rents are likely to be found or, to cover the exceptions,
on high incomes in general. The latter seems likely to be more equitable and
therefore progressive taxation is appropriate for higher levels of income.

Higher rate of tax on investment income? Now the Murphmeister is disagreeing with every economist who ever studies taxation ever (hyperbole alert).


There is an obvious answer to this: to discourage saving in such periods the
rate of tax has to increase and since those with most savings income are the
well off this implies it is their rate of tax alone that should increase. The result
is a need for more progressive taxation in an economic downturn to
encourage savings to be spent.


Snigger. Someone please go and check Keynes\’ grave for signs of revolution. We want to raise taxes in a recession in order to counter a lack of aggregate demand. Blimey….

This argument is made time and again, not least by the current Coalition
government who have for the first time included Laffer curve³? arguments in
Treasury reports³¹. The argument, in summary, is that as tax rates increase
the work rate of those with high earnings reduces as they substitute labour
for taxed work so that the overall tax yield falls.

What does that even mean?

Substitute leisure for paid labour maybe?

Then he ignores the paper that shows that 54% (including employers\’ NI!) is in fact the peak of the Laffer Curve. Which makes the UK income tax rate peak….erm, 45%.

Higher tax rates aren\’t anything to worry about because:

First of all, as has already been noted, a significant part of the income of the
richest in society is unearned. This is not impacted at all by work incentive
rates. Yield on this will not be reduced as a result.
Second, as Piketty, Saez and Stantcheva note, it is much more likely that
these people will negotiate pay rises and so take an increasing share of
national income (as has been seen for more than 30 years) than reduce

But, umm, we\’ve just been told that the last 30 years has seen an unprecedented lowering of the tax rates on high incomes. At which point people ave been negotiating pay rises and taking a rising share of national income.

So, lowering taxes causes this behaviour and also raising taxes causes the same behaviour?


And it\’s not your property until you\’ve paid the taxes on it either. That\’s his claim. So if someone mugs you for the £100 you\’ve made illegally cleaning windows that\’s not a crime but if you\’ve paid your income tax on the contents of your wallet it is.

At which point I think we can offer Mr, Murphy a hearty Pressdram v. Arkell, don\’t you think?

That consensus is under challenge now. The Tax Justice Network, my own
work, the work of the TUC and PCS on taxation issues,

Actually, that\’s Ritchie, Ritchie, Ritchie and erm, Ritchie.

One question: who paid for this paper? Doubt Ritchie\’s going to write 50 pages for nowt….unless he really is gunning for that peerage?


Ritchie\’s new paper

Yes, it\’s a real cracker. As always.

Over a period of thirty years top rates of income tax have fallen from 60% to
45%, corporation tax rates will have more than halved,

And see page 56 here. The effective average corporation tax rate has barely budged and nor has the average marginal tax rate.

What has actually been done is reducing allowances at the same time as reducing the headline rate. And given that Murphy defines tax avopidance as the difference between the headline and actual rates, this has reduced tax avoidance at the same time.

It\’s also possoible that he\’s got those income tax rates wrong as well. I can\’t remember when it was that the employers\’ NI payment was uncapped. If anyone does know please let me.

The share of national income paid to labour has fallen; the share to
profits has risen.

And we\’ve been through this before as well, haven\’t we? The corporate operating surplus is smaller today as a percentage of GDP than it was in 1982.

It\’s true that so is the labour share of income: but the difference is a rise in taxation and self employment income. Not a rise in profits.

So, if the man\’s going to start with entire bollocks as his inputs then, well, what do you think we\’re going to get out as a result, eh?

Cretins ahoy!

Letter to the DT from the usual suspects:

A recent Organisation for Economic Cooperation and Development report on implementation of its anti-bribery convention was critical of the British Government, which has ultimate and final responsibility for crown dependencies and overseas territories, including a number of tax havens.

Havens can facilitate tax evasion, money laundering and other financial crimes. We estimate that each year they allow some companies to dodge $160 billion in taxes in the developing world – far more than such countries receive in aid.

It doesn\’t matter. Because:\"\"

Note that these are flows, not stocks.

There\’s what, a couple of trillion of FDI in those poor countries? More? The existence of that capital there is vastly more important than any tax dodging that people might be doing with the profits being made from it.

Plus, of course, taxing those returns more is going to reduce the inflows, isn\’t it? As the absolutely standard economics of taxation tell us of course.


Belgians with a sense of humour: who knew?

What is for sale: During Euro 2012, all members of this Facebook Group will root for the national soccer team of the highest bidder, or the national team of his choice. Even if it\’s Holland. We will watch the games, wear the colors, possibly even buy the flag and learn the national anthem. Pictures and videos will be made and sent to the winning bidder to be posted on his or her website. Slight hooliganism is available at extra cost. We can, for example, kick a pigeon or smoke in a non-smoking area if such pleases our master.

Good grief: Zuckerberg has taste?

Meanwhile the owner of a kosher restaurant in Rome\’s historic Ghetto quarter dismissed a row over Mr Zuckerberg not leaving a tip when he and his new wife ate there during their two-day stay in the capital.

Umberto Pavoncello said the failure to leave a tip for a lunch which cost 32 euros (£26) was of no consequence and said he was considering renaming one of the restaurant\’s signature dishes – deep-fried courgette flowers – after Mr Zuckerberg.

Should be zucchini of course, it being Italy, but my they are delicious. Still one of my memories of having lived over there as a child. The flower (after the little bud for the zucchini itself has started to grow, of course,) in a very light batter (similar to tempura?) and then fried in olive oil.

When even the EU says we\’re too highly taxed….

It also concluded that property taxes were the highest in the EU.

Well, that\’s true. The UK gets a larger chunk of its tax revenue from property than any other OECD country in fact. Twice the average. So we can\’t say that property is undertaxed…..

On the cost of flying, it adds: “Aviation is taxed more than in any other member state via air passenger duty.”

Indeed, APD is well above the Stern Review numbers for emissions and really ought to be reduced.

Other problems which are hitting economic growth are identified as the high costs of childcare and the poor skills of many workers.

Childcare is the fault of the last lot. Trying to wipe out the informal sector through regulation has led to costs spiralling. And skills and education? 93% of the people are educated by the State.

Even Adam Smith thought that there was an argument in favour of at least some State involvement here: being in a country that is universally literate is a public good. The problem being of course that the current system doesn\’t actually provide universal literacy….

Andy Coulson perjury charges

Well now, this is turn up for the books.

David Cameron\’s former communications chief Andy Coulson has been arrested and charged with perjury.

Tommy Sheridan was found guilty and jailed over perjury in the same series of cases. So no one can really complain if they have a look at the truth of what everyone was saying in court at the time.

Which leaves the interesting question: whatever lies there were (or were not of course, he\’s been charged only), were they about the same thing? Thus it\’s a case of either Tommy or Andy?

Or were they about different things to do with the same case, thus it being possible for them both to have committed perjury?

I have a feeling it might be the latter….

The ignorance of Daniel Garvin

Ho hum, another campaign from the UK Uncut jobbies. This time about a living wage for all.

It\’s the usual nonsensical mishmash of barely understood figures. The big chart on their website is this familiar one:



The point being made is obvious: wages as a share of national income are down so it must all be going to the bastard capitalists!

Except, of course, as Britmouse charts for us, this isn\’t quite exactly true.




Corporate operating surplus is, by eyeballing, pretty much bang on long term trend. Employers\’ NI has risen substantially, taxes less subsidies has risen substantially (most of that being VAT I think?) and so has other income.

That money just hasn\’t moved from wages to profits. By and large, it\’s moved from wages into employers NI, VAT and a rise in self employed income.

They\’re simply wrong. Again.

There are other errors. For a start, real wages have not fallen they have risen. But the really big one is in this:

Instead of pay rises, we have helped pay our own wages through the £20bn of in-work tax credits spent each year. While tax credits are a lifeline to the 5 million households in the UK that rely on them, they have allowed private companies to shirk responsibility for wage bills, shifting it to the public instead and creating a subsidy for private sector profit.

It\’s a failure of logic.

Assume that the market pure and unadorned does not produce the incomes that we think people should have. Absolutely all of us think this to be so of some portion of the population (none of us think that those in a near vegetative state should sim[ply be left to die in the gutter. The arguments come over where and by what means the resources needed for their sustenance are going to come from, not whether they should come from somewhere or other. At the other end, not all of us are sure that someone straight out of school should be able to afford a 60 inch plasma…at others\’ expense that is).

OK, so, by what mechanism should those too low market incomes be raised?

We\’ve essentially two sources. We can insist that, through a higher minimum wage for example (what is now called a living wage), employers pay more in wages.

This has its downsides. The costs of such higher wages will fall on three groups. Those who employer lower paid workers, those who are customers of lower paid workers and lower paid workers in the form of unemployment. That last will come mostly from changing the capital/labour costs calculation, ensuring technological replacement of that very low cost labour. The first is what is trying to be achieved and the middle one, well, as it turns out, the major consumers of the products of low cost labour tend to be other low waged people.

Just not a good idea.

Or, given that we as a society say that these wages are too low then we as a society get to pay to raise them. All of us: that means the tax system. Meaning that the moral answer is indeed tax credits, or a cbi, or benefits.

Assuming that you buy the original idea: that the market unadorned does not provide sufficient incomes, then we should all pay to top up those incomes. Not dump the costs on employers of low waged workers or those low waged workers themselves.



Radioactive tuna from Fukushima!

Disastrous, nuclear power must obviously be banned immediately!

Cesium-137 has a radioactive half-life of about 30 years, and traces of the isotope still persist from above-ground nuclear bomb tests in the 1950s and \’60s. But cesium-134, which has a half-life of only two years, \”is inarguably from Fukushima Daiichi,\” Stanford University marine ecologist Dan Madigan told CNN.

Madigan is the lead author of a paper published in this week\’s edition of Proceedings of the National Academy of Sciences. One of his co-authors, Nicholas Fisher, said levels of both isotopes detected in fish caught in August 2011 are one-thirtieth the amount of naturally occurring radioactive potassium found in all marine life. It\’s also about 2.5% of the more restrictive limits Japan imposed on fish caught for human consumption after the accident.


Chris Busby\’s paper explaining how this will kill millions will be published real soon now.

So that\’s the end of the UN then

With a line-up that includes Drew Barrymore, David Beckham, Orlando Bloom, and Ricky Martin, the UN\’s choice of ambassadors has been known to cause raised eyebrows or the odd smirk.

Seldom, however, has there been such anger, or questioning of the organisation\’s credibility, as that greeting the appointment of a new international envoy for tourism: Robert Mugabe.

Hang them all.

Timmy\’s rich world problems

A few years back, when the euro was strong against the dollar, I was, in large part, being paid in dollars: calculation of payments was done in dollars you understand. Most of my expenses were here in Europe in euros.

Various bits and bobs have changed and now my income is determined and calculated in euros. However, I\’ve got a fairly chunky piece of $ debt that I am paying down.

The euro sank to a near two-year low against the dollar on Tuesday amid worries about the solvency of Spanish banks, and as the governor of the country\’s central bank quit. The single currency fell below $1.25 after

Sigh, got that the wrong way both times, eh?

I missed this about Lagarde….

Although I did know it, missed making the point:

Ms Lagarde was forced to publish an embarrassing climbdown on her Facebook page over the weekend after being bombarded by hundreds of Greek people who felt insulted by her suggestion that the country’s crisis was partly due to “all these people in Greece who are trying to escape tax”.

However, on Tuesday she had to admit that her $467,940 (£300,000) annual salary and $83,760 of additional allowances are entirely tax-free as the IMF is an international organisation.

An IMF spokesman said: “Salaries, like those in most international organizations, are paid on a lower, net of tax basis to ensure equal pay for equal work regardless of nationality.”

Me, I think it would be interesting to have this work the other way around. Ensure that those who work for these international organisations do not get tax free salaries. Rather, insist, indeed force, them to do their own tax forms (no accountants or assistants!) for country of work, residence and domicile, force them to line up with everyone else for visas and so on. Absolutely insist that they have to live by all the same rules as the little people.

We\’d soon see some red tape bonfires, wouldn\’t we?

The Europeans are panicking

They must be, we\’ve got two entirely opposite proposals out there about the debts.

The plan splits the public debts of EMU states. Anything up to the Maastricht limit of 60pc of GDP would remain sovereign. Anything over 60pc would be transfered gradually into the redemption fund. This would be covered by joint bonds.

It\’s only a couple of days ago that someone was floating the red/blue plan, in which the under 60% of GDP bonds became joint while the over 60% remained sovereign.

They\’ve still really not grapsed the basic problems, have they?

In the short term you\’ve got plummetting money supply in the southern nations. This is not necessary but is sufficient for deep recession.

In the longer term you\’ve the basic comepetiveness problem. Neither of these will be solved by dicking about with who guarantees the bonds.

Finally! Protection for Gingers!

Rosi Prescott, chief executive of Central YMCA, said if there was strong evidence that appearance-related discrimination was widespread, the Equalities Act should be broadened to include it.

That would make it a punishable offence to harass someone because of their appearance, for example by drawing attention to their weight.

She said: \”All the rules that apply under the Equalities Act now would also apply to appearance-related discrimination. They would be applied consistently.\”

Alternatively we could go back to the old sticks and stones…..yes, that\’s a better idea. Let\’s simply scrap the Equalities Act.

Ritchie violates his own damn definition

Worse still, he got the politics wrong. He cut tax for the wealthy but not everyone else. He reduced tax for large companies but not small ones. He supported tax evasion through the Swiss tax deal. He encouraged large companies to take their financing operations to tax havens and in the process harmed developing countries. In other words, he did all he could to increase tax avoidance and evasion whilst increasing the wealth gap.

Let us, just for a moment, assume that as Ritchie states, Osborne intended all of these things.

So what is the definition of tax evasion: that doidging of taxes which is illegal. So, making legal various forms of tax dodging cannot be an increase in tax evasion. It must, in fact, be a reduction of such.

What is the definition of tax avoidance? According to Ritchie it is using the tax law in ways that those who made the law did not intend the law to be used in order to dodge taxes.

But Ritchie\’s allegation here is that Osborne deliberately did this. So there can be no increase in tax avoidance as a result: because the law is being made to specifically allow this activity.

Thus there can only be reductions in tax avoidance and tax evasion as a result of these changes.

It is only possible for there to be an increase in either if avoidance and evasion are not defined as the law would have it, or Parliament or the Chancellor. Only if evasion and avoidance are to be described as whatever it is that a retired accountant from Wandsworth thinks they ought to be. Which is an absurd assumption as everyone will obviously agree.

Oh dear Polly

She manages to ingore once again the basic fact that newspaper chase the prejudices of their readers, not form them.

Never forget what Labour is up against: 80% of newspaper readership for a hundred years has belonged not just to conservatives, but mainly to extreme maverick press barons, using their power to control politics.

We really are in Brecht territory here, needing to elect a new populace.

Oh dear

Cameron\’s former efficiency tsar, Philip Green, is equally efficient in the organisation of his tax affairs: he legally avoids paying millions to Revenue and Customs by paying himself in the form of a dividend to a Channel Islands company owned by his wife, Tina, who in turn is legally resident in the tax haven of Monaco.

Green isn\’t paying himself. His wife is the owner of the company. His wife gets the dividends from the company. End of.

Unless you want to get all anti-feminist and insist that wives are simply extentions of the husband economically and financially.

Pasty tax

Hmm, so, they retreat.

The government\’s reputation has suffered a series of fresh blows as the chancellor, George Osborne, was forced to make two climbdowns over his budget, including scrapping the \”pasty tax\”, and ministers prepared to make a series of new concessions over secrecy.

Osborne is to reverse plans to charge VAT on food that is designed to cool down, such as sausage rolls and pasties,

That was never actually the point though. As EU Referendum has told us innumerable times, the point was to stop the chippies being able to claim back the last decade\’s more or so of VAT that they have been paying.

Under the changes, the government will charge VAT on food designed to be eaten warm, for example on rotisserie chickens sold hot by supermarkets.

Ah, that\’s how to do it.

But now the existential question: is a pasty designed to be eaten hot or cold? A beef and onion pie? A cheese and onion slice? A pizza? Does it differe based upon the intentions? Would a programmer who has pizza for breakfast be able to claim that said pizza was purchased with hte intention of eating it cold?

Only the EU Court can tell us… they had to with Jaffa Cakes.