The glory of Ritchie. Again

The 1% aren’t playing their part: that’s for sure.

If countries are to get through austerity without social and democratic breakdown there’s no doubt at all that tax haven abuse has not just to be curtailed, but ended. I and the Tax Justice Network have argued for a long time that tax havens are a coordinated assault on western democracy. I think the evidence that this is the case is growing steadily.

This is his informed comment after reading a piece showing that Spanish corporate income tax collections are falling.

Here is the reality, from the original source piece.

That the companies have continued posting profits at all is largely thanks to earnings abroad, but as foreign profits are generally taxed where they are made, Spain\’s coffers have seen less and less.

Rather a different story really, isn\’t it?

Take, as an example, Inditex (Zara etc). Spanish stores are bombed out in a bombed out economy. Not much profit there. UK stores are going alright, German ones going gangbusters. But profits from UK stores go to UK Treasury, Angela M gets to decide how the taxes from the German stores get spent. There is no mystery here.

It\’s just that the Spanish economy is shot and the overseas operations of Spanish multinationals get taxed overseas.

30 thoughts on “The glory of Ritchie. Again”

  1. and remember – Ritchie is vehemently against the expatriation of pre-tax profit and insists it must be reported and paid where it’s made

  2. “Yes, I thought Ritchie thought taxes should be paid in the country they were generated?”

    No no. He thinks foreign companies operating in the UK should pay tax here. But he thinks UK companies operating abroad should pay tax here. He also thinks UK citizens living abroad should pay tax here. And he thinks foreigners working here should pay tax here.

    In summary, he thinks that all companies, all people, wherever they are based, wherever they trade, should pay tax in the UK.

    Remember, he works for the *UK* tax-collectors’ union.

  3. Tim

    What’s interesting as well is another part of Murphy’s piece:

    ‘The latest report issued by the Spanish Observation group for Social Responsibility (!) Found that while 18 of Spain’s 35 Blue Chip companies had subsidiaries in countries considered to be tax havens! By 2010 that number had risen to 30’

    No mention of which countries are considered tax havens! By the data produced by Murphy’s organisation, almost any country ( indeed a debate on this topic was one of the only times I made it on to the comments section) could have been classified as a haven as they all had different rates and it seemed, extraordinarily high levels of avoidance!

    Reading the comments, One of the regulars , Ivan Horrocks apparently thinks the answer is to impose Uniform high tax rates across the European Union. All the populations (including the UK) that lose out can feel happy that their increased tax is assisting their brethren in Greece and Spain (who don’t speak the same language or have the same culture but why let reality intrude?) – the scary reality is that I can see this being used as an excuse for the EU to take a much bigger role in assigning taxation policy to the member states, which is what Murphy and his ilk have been angling for – a regional regime of high tax rates, leading to a global agreement on such things!

  4. Murphy wants every country to collect tax on the worldwide income of its citizens and residents in addition to that on the income generated in the country, with equivalent treatment of companies and partnerships. So, for instance, a French investment banker would pay tax at 125% (dropping to 120% next year) on income earned in the UK.

  5. It’s curious how both Tory and Labour parties are happy to go along with those tax havens they could perfectly well close down: Isle of Man, Jersey, Bermuda, etc. Anyone got any information on this: I mean do senior politicians get donations to their parties if they abstain from interfering, or what? Anyone got any links or explanations for this behavior?

  6. Umm..Ralph…. these places that aren’t part of the UK (or even the EU) – what do you want our government to do with them? Invade? Closing down another nation is kinda scary.

  7. @ Ralph Musgrave
    Jersey is NOT a tax haven as such. It merely has lower taxes because its government did not choose to nationalise and bureaucratise in the late 40s so it has been able to balance its budgets without such high rates of income tax (and as a small island has restricted immigration when faced with a potential flood of immigrants from the UK which means it has a low level of unemployment and welfare benefits).
    Bermuda does have taxes – but it taxes consumption rather income. It has done rather well out of this as anyone who looks at economics without the distortion of a political axe to grind should expect.
    The Isle of Man is small and relatively poor – its fishing industry provided its main export until financial services were developed and that suffered from the side-effects of Russian factory trawlers depradations in the North Sea which pushed more English and Scots fishermen into waters fished by Manxmen. Attacking financial services in the Isle of Man down will merely impoverish it while giving no benefit to mainland UK as financial services there will not relocate to the UK but to some other offshore location.
    None of these (nor Guernsey, Alderney etc) get a vote in UK elections. You want the UK to impose taxation without representation? Ever heard of 1776?

  8. “You want the UK to impose taxation without representation? Ever heard of 1776?”

    Hundreds of thousands of foreign nationals work in this country and pay UK income tax, NI, VAT etc and don’t get a vote.

    (For the pendants: EU nationals get to vote in local elections, but not national elections).

  9. @ Shinsei67
    That is their choice: they have chosen to come here knowing that. What Murphy wants is for the UK to impose, by force if necessary, taxation on other sovereign states including Bermuda and Switzerland.

  10. In the interest of bringing some vague balance to the distortion of Richielogic herein…

    What he wants for individuals is a passport-based tax regime, with the ability to offset tax paid in the country of residence.. and/or an exemption for earnings in a country with tax rates he approves of.

    Thus, if you live in France then you’re free to not pay UK tax on your French earnings… but if you live on Monaco then he’ll have ya.

    I presume that’s how the American system works? And the net result is that you’ll never pay tax at a lower rate than Richie desires.

    With regards to corporates… well he’s all over the place on that one. I think he has a coherent desire.. but he’s forever contradicting himself by jumping on UKUncut-style bandwagons which are at odds with his own preferred ‘solution’.

    Note: I make no claims as to the good-idea-ness of these plans.

  11. @ The Thought Gang
    Maybe, but he also wants Philip Green to pay taxes on the income of his South African-born, overseas-resident wife. NB this is not on money that he has gifted to her, but on her own income from investments that she received when selling the company that she *not he* had built up.

  12. @ The thought gang

    The iniquities of the US citizenship based taxation system are legion, and effectively prevent rational retirement planning.

    There’s a fundamental flaw in Ritchie’s plan: dual nationals living in a third country. My US / UK kids living in CH would be triple taxed, leaving them with basically nothing. Living in CH only functions due to the low tax rate and high salaries, since everything is so damn expensive. Subsistence income is reckoned to be CHF 100 per day, which is about UK average gross earnings at current exchange rates.

  13. Two major flaws with citizenship taxation: you don’t know how much tax you’ll be paying since you don’t know what the exchange rate work m will do during the year.

    And a capital loss can be taxed as a capital gain if the exchange rate changes more than the capital loss, so e.g. a euro loss could be a pound gain if the euro gains more against the pound than the asset loses.

    Lots of examples of practical examples at http://www.isaacbrock.ca

  14. @ fred
    So Howe taxed “real” capital gains (i.e. net of inflation) at income tax rates – Brown deliberately changed the system to tax imaginary profits of long-term investors while reducing the tax on short-term speculators.
    Was Brown just stupid (OK, he *is* stupider than me by surely not by that much) or was he trying to generate animosity against the get-rich-quick brigade which flourished on his watch as never-before?

  15. Bermuda, the Isle of Man and the Channel Islands are not sovereign states (they are not in the same situation as Belize or Canada, which are sovereign states that happen to share a Queen). The UK could, both in law and in fact, demand they follow its wishes.

    The suggestion that people would relocate from CI/IoM to other tax havens is a joke: the whole point of using them is that they are English-speaking common law jurisdictions that you can day-commute from the UK. For Bermuda, this may be more of an issue.

    1776 is a completely daft analogy. The rebellious American colonies had a population approaching that of Great Britain (c.2.5m vs 6.5m), and were an ocean away when shipping was primitive. Any attempt by the CIs and IOM to secede would be readily crushable.

    Ultimatum is simple: “either stay as you are but impose these tax laws OR join the UK OR we’ll impose sanctions backed by credible military threat”.

  16. “The suggestion that people would relocate from CI/IoM to other tax havens is a joke: the whole point of using them is that they are English-speaking common law jurisdictions that you can day-commute from the UK. For Bermuda, this may be more of an issue.”

    You’re right. They could go to Monaco or Switzerland or Gibraltar instead.

    “Any attempt by the CIs and IOM to secede would be readily crushable.”

    By whom? One of Red Ken’s workers’ defence brigades?

    Funny how the left abhors nationalism and militarism until it comes to the issue of tax collection.

  17. It is clearly stated that the UK would defend its interests if any of the Crown Dependencies decided to implement any legislation unilaterally that would be deemed harmful to the UK.

    Basically it would stop said legislation, seeing as it has to approved through the Privy Council, as the proxy of the Duke of Normandy.

    It is unclear what the UK would do if the CDs were to each claim UDI, but suffice it to say that without UK cooperation their finance industry would be close to dead. There simply isn’t enough volume trading that doesn’t go through or comes from the City of London.

    The claims from the CDs that they could be autonomous (or indeed SHOULD be) are based on the ideas of very wealthy lawyers and the cronyist upper echelons of their societies, who actually don’t give a toss what happens to the populations of the islands as they would prefer them to go back to off-radar privateer hideouts and playgrounds for the louche.

  18. BB:
    1) Gibraltar has the same constitutional position as the other Crown dependencies. The others don’t have common law or English as their primary language.

    2) No military force required. Simply halt flights, shipping and financial transfers. GAME OVER.

  19. So Much For Subtlety

    Shinsei67 – “Hundreds of thousands of foreign nationals work in this country and pay UK income tax, NI, VAT etc and don’t get a vote. (For the pendants: EU nationals get to vote in local elections, but not national elections).”

    And for the really pedantic, don’t Commonwealth citizens get to vote as well?

    Which must mean basically f**k all foreigners in Britain can’t. Except Americans.

  20. The UK could, both in law and in fact, demand they follow its wishes.

    And the Crown (not UK) Dependencies could say “bugger off”.

    I think you’d have problems explaining to 16 Air Assault why they were invading Gib (it’s a dump). The Marines might do it just for the irony if you got them pissed enough first. Bermuda would be more popular.

  21. No they couldn’t SE, not without UDI.

    They could try, mind, but they wouldn’t win any subsequent legal and constitutional wrangle.

  22. Its good to know the anti-tax haven brigade approve of bigger countries throwing their weight around in order to bully small ones into doing things they don’t want to. Do as we say or we’ll ‘crush’ you.

    Presumably that approval covers the right of the US to do exactly the same on matters of it’s self interest?

  23. Given that the UK government is currently making, in the strongest terms, the case that 2 Crown Dependencies are self-governing therefore talking to the UK government about them is mostly pointless (Gib and FI), it is hardly going to weaken that case by saying “but, of course, the Channel Islands are different”.

    In fact, the 2007 Framework Agreements with the islands’ governments all include the sentence:

    The UK and the [dependency] will work together to resolve or clarify any differences which may arise between their respective interests.

    Even the damned Kilbrandon report stated that the UK could only interfere to “preserve good government.” This is very different from your

    Basically it would stop said legislation, seeing as it has to approved through the Privy Council, as the proxy of the Duke of Normandy.

  24. Presumably that approval covers the right of the US to do exactly the same on matters of it’s self interest?

    Only for those interests vetted and, eventually, approved by the troika of the Tax Justice Network, the “fair taxation” advisor to the TUC and Tax Research LLP.

  25. It really isn’t in practice, SE. if the UK doesn’t like a proposed legislation, it has the power to stop it. The “good governance” decision is the UK’s, not the CI’s

  26. Arnald,

    Name a piece of legislation that the UK has stopped?

    it ought to be pretty easy to do after all the legislation is passed by the governments in Jersye and Guernsey and then goes to the UK for Royal Assent. Name one piece of legislation that has not recieved royal assent?

  27. If all the financial services companies that cater to “offshore” investors were relocated to Alcatraz, Jersey would not need a top tax rate of 45% in order to balance its budget so to impose it upon the island would not be “good government” in the view of any sane person. If Murphy disagrees with this that is prima facie evidence that he is lying or insane.

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