Ritchie’s non sequitur

This is just lovely, isn’t it?

That’s their description of Corbynomics (although, only after they praise its motives). To reach their conclusions they say:

The £120 billion in missing tax revenues—which is about four times the government’s own estimate—comes from a report by Tax Research, a pressure group. Even if the figure is to be believed—which requires a leap of faith, since the report does not explain its calculations fully—Mr Corbyn’s proposed remedies are wanting. Britain already has one of the smallest shadow economies in the rich world; stopping cash-in-hand payments entirely is impossible (and even if it were not, the extra tax burden would crush some of the economic activity that generates this untaxed income). The Corbyn manifesto vaguely pledges “a proper anti-avoidance rule”.

I think they should read my report on this issue, which explains where every figure comes from, and a wide range of solutions. To be blunt, The Economist made its claims up. And that’s the kindest thing I can say about their claims.

So the Economist echoes (not because I said it, but just because it’s so damn obvious) something I’ve been saying for years. There always will be both a grey and black economy. And all one can do is reduce the size of it, not eliminate it. And Britain has done more than just about anyone else to do so: there’s not much more that can be done.

And, as I’ve also said, Ritchie is entirely ignoring the most basic thing we know about tax: taxing something means that we get less of it. And that applies in spades to that grey market activity. In very large part people are only partaking in the grey market simply because the tax wedge, if applied, would mean that no one would undertake that activity. The moment you start applying the full VAT whack plus income tax and double NI to window cleaning people stop doing it (purely as an example).

There just ain’t that £80 billion there to be captured, even if he is right about the size of the grey and black economies.

And do note how he entirely ignores the point that they actually make. Such a surprise, eh?

25 thoughts on “Ritchie’s non sequitur”

  1. This report on the effect of the EU VAT rules is a nice example of what happens when governments try and hoover up every penny they can get their mitts on.

    Designed to prevent large businesses locating themselves in VAT-competitive territories, it had the predictable effect of drowning small businesses under a sea of bureaucracy, forcing them to access the data required to prove the customer’s location, figure out which of more than 80 VAT rates to apply, and issue an invoice in the correct language, currency and layout.

    Apologies for the Breibart link. They have some good stories but they use Flash, badly, and my poor old laptop staggers to a halt fo a while when I try to read them.

  2. Cash payments are not solely for tax avoidance – small businesses have to pay bank charges on every cheque they pay into their account – and the bank takes three – in some cases five – days to clear them. So if you have a small builder and a sub-contractor for the joinery work it takes over a week for money to get from your bank account to the carpenter’s (or the glazier’s or the plumber’s or …), with two lots of bank charges deducted, and he’ll be liable for interest on his overdraft during that period.
    Sometimes cash payments for small jobs make sense.

  3. “The Economist made its claims up.” And if anyone argues against that assertion, they will be branded a neoliberal troll and barred from commenting.

    Perhaps it would be an idea, instead of these ‘Ragging on Ritchie’ bits, to create a ‘Ritchieballs’ blog. Copy and paste everything he posts on his site (properly attributed of course) and leave the comments open for everyone – including him and his supporters – to contribute.

  4. Poor old fellow.

    He’s bound to find an increasing number of critiques of his ‘work’ in relatively prominent publications as long as Jeremy Corbyn is in the ascendant.

    This will be quite an ugly spectacle and consequently not to be missed on any account.

  5. Note they also call him a “pressure group”, not an “expert economist” or “guru” as other media outlets have.

  6. “I think they should read my report on this issue, which explains where every figure comes from”

    Given everything we know about him, I am dubious about this.

  7. We have quite a proportion of the private sector working for cash in hand while employees of private and public sectors subsidise them by paying for the services the cash-in-hand self-employed use.What the right wing idiot class fails to realise is that they are making doing an honest day’s work for an honest day’s pay a thing of the past.They have sold their rights to these for guaranteed unearned income from rising house/land values, AKA bribes from the scrote masters , so that they too can be work-averse slobs living off a rentier economy.This is not industrialised capitalism.You have destroyed the mixed economy, the socialist Economy and are now destroying the capitalist economy.Well done but as the Express/ Mail tell the work shy scrotes: Don’t worry when the average house price is £1 million we’ll all be independent millionaires !! You know it makes sense.Just vote Scrote!

  8. A) it’s just a bunch of wild extrapolations

    B) he is on record as saying that only 20bn is collectable

    C) you need to invest 3bn in HMRC every year to collect it

    In other words it’s all just a wild erotic tax fantasy, probably to be included in his forthcoming sex manual, The Joy of Tax

  9. So many press articles now saying his ideas are crap, and each one prompts a long blog post from Ritchie in rebuttal, a nice image of him angrily banging away as his state created iMac early every morning. If it keeps him busy, that’s all good.

    With him being touted as a Corbyn adviser and even team member, let’s hope that Friends Provident take a closer look at his work and output.

  10. bloke (not) in spain

    “We have quite a proportion of the private sector working for cash in hand…”
    Why would they do that, DBC ? It’s a high cost way of operating. For anything past window cleaning, the chances of not being paid for what’s being done are quite high. No route of recovery through the courts.
    Could high taxes to pay for socialism have something to do with that?

  11. Perhaps it would be an idea, instead of these ‘Ragging on Ritchie’ bits, to create a ‘Ritchieballs’ blog. Copy and paste everything he posts on his site (properly attributed of course) and leave the comments open for everyone – including him and his supporters – to contribute.

    Good idea
    https://murphyballs.wordpress.com/

  12. He is currently picking a fight with one Paddy Carter. I think it is this guy.

    KEY EXPERIENCE
     British Academy Post-Doctoral Fellow (Optimal Aid Allocation) 2011-2014
     PhD in Economics from Bristol University under supervision of Professor Jonathan Temple
     Former equities analyst and journalist
    QUALIFICATIONS
    2011 Doctorate
    University of Bristol, UK
    Department of Economics
    Essays in Foreign Aid
    2007
    2004
    1996
    MSc Quantitative Development Economics (Distinction)
    University of Bristol
    Postgraduate certificate in Economics (Distinction)
    Birkbeck, University of London
    BA (hons) English Literature and Philosophy
    University of Leeds
    NON-ACADEMIC CAREER
    2004-2006 Equities Analyst, Bridgewell Securities, and RW Baird, London
    2000-2004 Companies Writer, Investors Chronicle, Financial Times Business
    1996-2000 Deputy News Editor, CRN, Incisive Media

  13. We have quite a proportion of the private sector working for cash in hand

    Yeah, but no.

    So there’s plenty of tradesmen who do “homers”, entrepreneurial-but-shifty guys that offer to pressure-wash or resurface your driveway, and I assume taxi drivers and ice cream van owners have fiddles going on.

    Then there’s criminal activity: prossies, drug dealers, counterfeit cigarette sellers, and so on.

    The former aren’t hard to find, but it’d be impossible to eliminate that sort of activity without becoming a police state. We really don’t want the HMRC Stasi hiding in the rhododendrons to watch out for people doing a bit of gardening for beer money.

    The latter can’t be taxed unless we legalise those things.

    And the overwhelming majority of working people do not work for cash in hand. Not many office temps, baristas or regional managers get paid in cash.

    while employees of private and public sectors subsidise them by paying for the services the cash-in-hand self-employed use

    Nah. Public sector employees don’t contribute a net penny towards public services. They “pay” tax, but since all their pay is taken from the taxpayers en masse in the first place, it’s just smoke and mirrors.

    If I give my child £5 pocket money and out of the goodness of his heart he buys me a 10p mixture, he’s still not subsidising me.

    They have sold their rights to these for guaranteed unearned income from rising house/land values, AKA bribes from the scrote masters

    Something… something… bankers…

    You have destroyed the […] socialist Economy

    What does that mean? Do we not have about five and a half million public sector employees in Britain? Does government not spend about 40% of our GDP? Do we not lavish about 720 billion £ every year on the “socialist economy”?

    Have I fallen through some sort of magic portal to an alternate, happier dimension where Mrs Thatcher is still in power and the NHS and BBC don’t exist?

    What is the “socialist economy” in the first place? Isn’t it just the sum of monies confiscated from private sector earnings, then reallocated according to political preferences? Its relationship with the real economy is what mosquitos are to holidaymakers.

    Complaining about the “socialist economy” being “wrecked” is like highwaymen moaning that there aren’t as many rich stagecoach passengers to rob any more.

  14. Surreptitious Evil

    Steve,

    Minor pendantic correction: although prostitutes may be treated by the dibble and the politicians as if they were criminals, they generally are not.

  15. SE – the justice system gets round that by doing a court order preventing them hanging around on those streets.
    Gets annoying when the service helping them operates out of a building in those streets – the local red light district.

  16. @ DBC Reed
    See my comment, timed at 9.44, which explains why your comment, timed at 10.56, is bollocks based on ignorance. Anyone who has ever run a small business knows the additional cost imposed by banks on payment by cheque.
    Are you really trying to claim that my newsagent is seeking to avoid tax when I pay him in cash for a newspaper and that I should write the baker a cheque for 60p every day?

  17. Non sequiturs are Murphy’s speciality. So, here, in response to The Economist, he says : “The first [point] is that [The Economist holds that] the economy is now set to grow forever. Maybe they did not notice economic turmoil this week.” Yet nowhere in The Economist’s piece is the claim made or even assumed that the economy will grow forever and uninterruptedly. Murphy made it up.

    Increasingly now, when PQE is criticised, he retreats to PQE-would-be-an-emergency-response-to-the-next-economic-crisis-if-interest-rates-have-not-risen-by-then; but, when he’s among friends, he reverts to PQE being the magic money tree underpinning the new socialist economics.

  18. Best comment on the grey economy came from the Daily Mash.
    “The money’s only untaxed until it gets to the pub”.

  19. Scoper bleats

    “So many press articles now saying his ideas are crap, and each one prompts a long blog post from Ritchie in rebuttal, a nice image of him angrily banging away as his state created iMac early every morning. If it keeps him busy, that’s all good.”

    FFS In that case Worstall must be riding the sybian to keep himself going. You daft twat.

  20. “See HMRC Business Income Manual para 22005 et seq”

    I got to 21995 and gave up through dehydration. I was so close.

  21. Steve: “The latter can’t be taxed unless we legalise those things.”

    HMRC can collect income tax on illegal activities – don’t you remember the Miss Whiplash case? (Commissioners of the Inland Revenue v Aken)

    But yes, in practice it’s very difficult to do so.

Leave a Reply

Your email address will not be published. Required fields are marked *