The tossers at Action Aid again

From today\’s little email of theirs giving journalists a quote or two:

Chris Jordan, ActionAid’s tax expert, said: “Today’s OECD study demonstrating how multinational companies game the international tax system is a welcome breath of fresh air. Yet ActionAid are concerned that the solutions proposed will not bring significant benefits for the world’s poorest countries for years to come.

“The OECD correctly identifies that the lack of a level playing field stifles the development of small businesses, which ultimately stunts economic growth and development. However the incremental reforms it recommends offer limited hope to small business in the short term. A more fundamental revision of the international tax architecture is urgently required.

So, we agree that the payment of tax is a burden on business then. Must be, otherwise having to pay tax wouldn\’t stifle development, would it?

So, what is that fundamental revision of the international tax architecture that is needed? Err, how about not taxing companies so that their development is not stifled?

Or is that just too simple, logical and obvious?

12 thoughts on “The tossers at Action Aid again”

  1. this really is a piss poor argument, I cannot understand why are are so fond of it.

    you observe that taxing one sort of company more highly than another sort of company puts one sort of company at a disadvantage, and from this you conclude the optimal rate of corporation tax is zero.

  2. Luis

    I fail to see where Tim is making any case about differential corporation tax rates. On the other hand, you might be falling into the same trap as many commentators on this matter of assuming that if a company “avoids” tax in one jurisdiction, then it “avoids” taxes in all jurisdictions.

  3. Diogenes

    did you read the OP?

    Tim writes “So, we agree that the payment of tax is a burden on business then” because he’s “caught” the Action Aid agreeing “the lack of a level playing field stifles the development of small businesses”

  4. OK Luis,

    I do not understand the OECD’s point and the summaries I have seen of the report are short on examples. So the proposed solution is to just reword a few paragraphs of the tax code and everything will be solved. That is the approach that has led to the explosion in size of the tx code in the UK in just the last 15 years. That approach is, self-evidently to me, broken since it hasn’t seemed to achieve this bizarre “fairness” objective. But not to worry, a few more words and all will be sorted.

    On the other hand, stopping this failed attempt to sieve transactional flows and taxing something else instead seems eminently sensible to me.

  5. Isn’t the point that big multinationals have far more scope to reduce their tax burden than SMEs that only exist in one country? I’d say that’s an entirely fair point to make, and conclude that as a result big businesses are at a tax advantage over their upstart competitors at least in some times and places.

    If we also accept (as Tim has pointed out) that it’s the SMEs that are the biggest drivers of economic growth then we have a problem. But I wonder to what extent that is true in the capital-poor world.

  6. Luis>

    “you observe that taxing one sort of company more highly than another sort of company puts one sort of company at a disadvantage, and from this you conclude the optimal rate of corporation tax is zero.”

    I suggest you re-read. That’s a straw-man, because it’s not what was written.

    Tim observed that a ‘fundamental revision of the international tax architecture is urgently’ called for, and suggested what it should be in order to achieve the stated aims.

  7. “how about not taxing companies so that their development is not stifled?”

    There’s a very simple justification for taxing companies. It’s because it’s an easy and effective way of gaining tax revenues, especially compared to the alternative of taxing millions of disparate individuals.

    That’s why Governments do it.

  8. Dave

    Tim: “Err, how about not taxing companies so that their development is not stifled?”

    me: “from this you conclude the optimal rate of corporation tax is zero.”

    where is the straw man?

  9. Luis>

    “From this”.

    Or, more precisely (and I note you cut off the start of the quote), the part of the sentence that preceded those words.

    It was:

    “you observe that taxing one sort of company more highly than another sort of company puts one sort of company at a disadvantage, and from this…”

    You appear to be confusing quoting and commenting on an observation/opinion with making the observation/stating the opinion. You don’t seem to have that same confusion when it comes to me quoting you in order to disagree (or you quoting Tim), which is a bit odd.

  10. The more complex the tax code the greater the opportunity to game it, which is why “tax advisers” were the leading beneficiaries of Gordon Brown, followed by insolvency practitioners.
    Tim has advocated flat tax as well as abolishing corporation tax. Bermuda does quite well on consumption taxes, with a nil rate of corporation tax.

  11. Listening to Swiss radio in the van tonight I was struck by the change in the usual TSR1 attitude.

    It’s great that Goldman Sachs has made the US govt shaft our banks. It’s not great that the US taxman gets the personal details of everyone who works for a Swiss bank. It’s unfair that we should exchange our low tax / low unemployment regime for the EU model. Finally (this being free-rider Switzerland) well at least Ireland and Luxembourg are first in line.

  12. Don’t know why all this interest in what Action Aid thinks about corporation tax.
    Action Aid’s a third sector organisation. Like it’s bosom chums in the public sector, its primary purpose is keeping its people in lucrative employment that’s neither strenuous nor intrudes too much on their social life. Taxes, any taxes, contribute to the stream of wealth transference they all leech off. Heaven forbid the wealth should be created by the poor struggling their way out of poverty. They’d be unable to get their snouts in it & who’d be paying all those restaurant bills at conferences on third world famine?

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