The monstrous ignorance of @RichardJMurphy

Yup, it\’s on display again. Here he is trying to tackle the corporate tax incidence question:

The first reason why this problem has been so difficult to challenge is that microeconomists are in denial about its existence. That is because under the influence of microeconomic theory it has become commonplace over the last few years for many to argue that companies really don’t pay tax and that, as a result, we shouldn’t really worry about this issue and should be looking to tax others instead.

Let me be blunt. That’s wrong. Companies change who pays tax, where tax is paid, at what rate tax is paid, when it is paid, if at all, and who therefore enjoys the benefit of that tax paid. The argument about whether or not companies pay tax is, in that case, almost irrelevant.

It\’s not the last few years. It\’s since 1899 when Ernst Seligman first pointed it out. And absolutely every economist on the subject (yes, even up to and including Joe Stiglitz, Peter Diamond and Sir John Mirrlees, Nobel Laureates all) agrees on the point. Hell, even Ritchie\’s own partner in stupidity, John Christensen, agrees.

Companies do not bear the economic burden of corporation tax. Some combination of shareholders and workers do. This is not an arguable proposition: the portions are arguable, but not the basic proposition.
But then look at what he says next: companies change who pays tax. That\’s an admission that it isn\’t the company, that it\’s someone else. We have proved that the incidence is not upon the company. Thus, whatever the bleatings, it cannot be irrelevant whether companies pay tax or not. For it is a fact that we must deal with.
I also thought this was wondrous:
However, groups exist because they make more money than separate companies and this adjustment process therefore means that it is guaranteed that we under tax group entities – missing out entirely their group related income.
This is actually something I pointed out to him about his beloved country by country reporting. It stems from the Theory of the Firm. Why do companies exist? Because, at times and in places, a company is more efficient than a mere network of contracts. This extends to an MNC: why have one rather than a series of smaller or national companies each independent? The conclusion of which is that an MNC will be making higher profits than a network of independents precisely because it is an MNC, just because it is.
OK: but this means that you cannot therefore tax an MNC as if it is a series of independents. Thus country by country reporting doesn\’t work. Because you cannot add up the national subsidiaries and thus aggregate up to the value produced by the simple formation of the MNC.
So, he\’s at least grasped one of my criticisms of him. But hilariously, he\’s not grasped it properly:
And third we must have country-by-country reporting – which is the one thing that the G8 really promised and which I first proposed a decade ago. This is a tool for investors and tax authorities alike that by publishing a separate profit and loss account for each place in which a multinational corporation trades shows with a very high degree of probability whether the self declared profits of a multinational corporation in a jurisdiction is supported by the underlying indicators of economic activity – based on sales, people employed and capital invested in tangible assets.
But he\’s just agreed that we cannot aggregate those individual results up to the value created by the MNC. Because the MNC itself, its very existence instead of a network of contracts, adds value. Therefore country by country reporting doesn\’t actually work.
Country by country cannot capture that value that Ritchie insists is created by the group structure. Yet he\’s insisting that we must have country by country in order to capture that value.
Is there no beginning to this man\’s logical abilities?

16 thoughts on “The monstrous ignorance of @RichardJMurphy”

  1. You miss the point again and again. It’s reporting, not calculating. MNC’s have to be able to show what they’ve accounted for and where. Not to calculate how much, but how they’ve done their own calculation.

    It’s really quite simple, Tim.

  2. Is Tim a “microeconomist” – “in denial about Corporate tax incidence existense,” Is he not a full size economist.

  3. He’s not saying that it’s irrelevant whether or not companies pay tax, he’s saying that the argument is irrelevant. The reasoning, I think, being that companies are active players in the game and, therefore, cannot just be ignored.

    Remember.. for Richie it’s not about who does pay the tax, it’s about who doesn’t pay the tax. And where they don’t pay it.

    He will happily campaign to end things like the Channel Islands LVCR loophole.. the benefits of which largely went to UK consumers.. because he knows that someone somewhere is making a profit and not passing on enough of it to HMRC.

  4. “The conclusion of which is that an MNC will be making higher profits than a network of independents precisely because it is an MNC, just because it is…Because you cannot add up the national subsidiaries and thus aggregate up to the value produced by the simple formation of the MNC.”

    I don’t follow the above. Step 1 – a MNC may make more profit than, say, 5 separate cos in five different countries would – that’s why they set it up. Agreed.

    But that extra profit has to show up somewhere – one or more companies in the group have to make more money. Your second point seems (to me) to be that there is some magic “value” created by the formation of the MNC that does not show up in the numbers produced by the subsidiaries and/or the parent.

    Not that necessarily means anything about country by country reporting. Just curious about this “value” that does not appear anywhere.

  5. And yet curiously we also measure “economic outpu” at, er, the corporate level. Isn’t it time we ditched that nonsensical behaviour, for the same reason?

  6. Curious little piece this by Richard Murphy. By “a social science perspective” I thought he might be offering somethin novel. He clearly isn’t offering anything, however, that he hasn’t siad a hundred times before.

  7. A quick trip to Murphy’s blog shows him altering the order of the comments in order to try to present me in a less than intelligent light. Not very impressive.

  8. Quite within his method of thinking. May be a medical term for it but cannot be bothered to look it up.

  9. And he just kept on getting better. I have said it before and it bears repeating now; if you cannot debate, you are not a blogger.

  10. the spud-faced LHTD has just posted this on Twitter:

    “Richard Murphy [email protected] 2m
    I am seriously wondering whether the so called #nhs crisis is simple statistical failure to understand variation from the mean is inevitable”

    Really, genuinely, he’s lecturing other people on statistics

  11. Well, in his little speech to the parliamentary group he felt able to condemn microeconomists (?), the entire tax profession and the world’s accountants.

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