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Ragging on Ritchie

Wondrous, just wondrous

Ritchie welcomes Labour’s plan to build many more houses:

If the price is kept sustainable by ensuring land prices do not surge to match the demand for housing – which can of course be fixed by planning legislation – then I will welcome it even more.

But if you fix planning legislation so that land with planning permission is cheap then why the hell do you need the government to go build the houses? You’ve already provided the incentive for private builders to go gangbusters, haven’t you?

It’s entirely typical of the Murph. He builds some grandiose system which requires lots of government intervention and taxing and spending and jobs for the boys like The Murph. But hidden in there is an assumption necessary to make the plan work. An assumption which then also means that the rest of the plan isn’t necessary.

It’s there in his pensions “work” with Colin Hines for example. Pensions should be invested in real assets like green schemes and the like and there’s to be a vast overarching system to make them do so. These green schemes will pay interest on lovely safe bonds to the pension funds.

But if you can work out a way to make green schemes pay interest on lovely safe bonds then you don’t need all the rest of the regulation of pension schemes. Because the pension funds would be just overjoyed to invest in lovely safe bonds.

As above, if land with planning permission is cheap as a result of changes in planning legislation then you don’t need to do anything more. Except, perhaps, get out of the way to avoid being trampled by vast armies of profit seeking builders.

Ritchie goes entirely doollally

Here.

It’s joyous in one manner. His argument is that whoever pays you necessarily, without the possibility of refutation, biases your findings. Therefore, anyone getting paid cannot possibily be independent or unbiased.

As Christy points out, this does indeed mean that everything Ritchie writes must therefore be biased by whoever has paid him to write it.

In fact, rather more so that the person he’s attacking: they at least have the multiple layers of university, department etc between them and the cash. Ritchie receives his directly.

But we’ve already got a system that does this Ritchie

I could not agree more. So long as a reasonable criteria can be defined – and those proposed by the government so far utterly fail in that respect – assessing the suitability of a government contractor on the basis of their tax paid and, as importantly, on their disclosure of their tax paid is wholly appropriate behaviour for any government.

If a company does not pay the tax due then it is prosecuted in the courts. And if the courts say that it has not paid the tax due then it is guilty of tax evasion.

There is no other definition of having or having not paid the tax due.

So, we’ve a very simple method of ensuring your wishes here. Those companies that have been found guilty of tax evasion in court should be struck off the list of government bidders. Those that have not not.

Similarly, the law currently tells companies how they must reveal taxes paid in their accounts. Which all of them do in fact do.

Simples, eh?

And as to this:

And candidly I doubt the EU would uphold a challenge.

If a company is obeying the law in its country of incorporation then it cannot (repeat, cannot!) be barred from applying for UK government contracts.

So if a German company is revealing tax paid according to German law then it cannot be stopped from applying for a UK government contract.

With economists like this we’re doomed, aren’t we?

There are far cheaper, safer, quicker, more efficient ways of addressing the climate challenge than pursuing nuclear power. Accelerating the deployment of energy-efficiency measures, demand-response, demand-reduction and distributed-generation policies, and renewable technologies, would help drive wholesale electricity costs down and deliver more value for money as a pathway to decarbonising electricity generation.

The Green New Deal Group, of which I am part, outlined just such an approach in a report last week. Investment in renewables, alongside a nationwide project to make every building in the country energy-efficient, would create hundreds of thousands of high-quality jobs across the country, as well as reducing both fuel bills and emissions.
Caroline Lucas MP
Green, Brighton Pavilion

That’s from Ritchie who is also part of that Green New Deal.

And Ritchie and Caroline just cannot grasp the fact that if you’re creating hundreds of thousands of high-quality jobs therefore by definition your plan is less efficient. Because jobs are a cost, not a benefit, of a scheme.

Ritchie’s ignorant of active and passive

Remember how a secrecy jurisdiction is defined. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

The impact of all tax haven activity is extra-territorial.

The impact of all tax competition is also extra-territorial.

If it is now illegal for a tax to have an extra-territorial impact the impact is enormous. It is of minor consequence for the FTT, where a few tweaks would solve the problem, but the impact on tax havens and tax competition would be wholly beneficial. Be careful for what you’d ask is what I’d say to those trying to use competition principles to beat the FTT: this could rebound on you, very strongly.

Sigh.

There’s a difference between actively taxing someone in another jurisdiction and passively allowing someone not to be taxed in another jurisdiction.

I am guilty of murder if I murder someone. I am not guilty of murder if I’ve nothing to do with the fact that a bloke 50 miles away glasses someone’s jugular.

France attempting to tax American banks trading French bonds in London is extra-territorial taxation. The UK not taxing Americans trading French bonds in London is not.

Ritchie and philosophy

All property rights are created by law

Err, no.

All legal property rights are created by law, this is entirely true if tautologous.

But there are also so called natural rights. And it’s entirely possible for legal rights to violate such natural rights.

For example, I think we all agree that it is a natural right that a man owns himself. Yet there have most certainly been laws that allow slavery: the legal rights to property being in violation of the natural rights to such.

At which point Ritchie’s argument that property rights are conditional upon having paid any level of tax demanded falls apart. For those legal rights to the taxation could indeed be in conflict with the natural rights of those being taxed.

Farrar’s legal opinion on the taxation of companies

Naturally that commercial judgment must be exercised in good faith in proper discharge of the board’s duties under s.172 Companies Act 2006. Likewise, in order for the board to discharge its duties under s.174 in such a situation, due care, skill and diligence must be exercised in such peripheral matters as selecting and instructing the tax advisers and arriving at an understanding of the options on offer. As with the duty under s.172, however, the duty under s.174 does not generally militate in favour of any specific tax outcome.

Or as we should put that.

Sure, company law doesn’t say that the directors should dodge and dive to avoid all tax. But it also doesn’t lay upon them any duty to not dodge and dive to avoid it.

I’m sure this is the part of it that the Tax Justice Network won’t be highlighting. Company law says that directors should do what they think is best when structuring matters around tax. The behaviour of, say, Google or Amazon is thus perfectly acceptable.

A little lesson in economics for Ritchie: the marginalist revolution

We all know that Ritchie didn’t pay attention to his economics lectures at university. He’s told us so himself.

I’ve also noted an interesting tendency of his to insist that it is neo-classical economics (not just the epithet of neoliberal such) which is wrong. Meaning that he’s missing the entire point of the marginalist revolution: things happen at the margin.

Which leads to this point of his today:

All the usual excuses are rolled out from HMRC before it is noted that:

The large-business service, which deals with the 770 largest businesses, collected an extra £3.17bn in tax in 2012-13, an 8 per cent drop from £3.44bn the year before – and a 25 per cent drop on 2010-11. Extra revenue gained from challenging large businesses over how much corporation tax they pay peaked at £4.1bn in 2010-11.

Let me suggest the two real reasons for the change.

The first is a lack of resources.

The second is a lack of political will: you can’t run a tax haven and then frighten business away by being aggressive.

Oddly, neither are mentioned by HM Revenue & Customs in the explanations they provided to the FT. And so the tax gap will keep on growing.

One point that is worth making is that less tax being collected does not mean that the tax gap is growing larger. Not necessarily at least: it could be that simply less tax is due.

But let’s look at his insistence that more resources are needed. We’ll simply note that he’s paid by PCS, the taxmens’ union, to say this and move on. To point out that the large business service has had more resources thrown its way. Yes, there are fewer taxmen in total but that specific sector of the HMRC has been beefed up.

More resources have been applied and the tax take as a result of those extra resources has fallen. We’re in that Laffer Curve world again. The answer to this of course being that those extra resources have been wasted. There just isn’t the amount of tax there to collect that justifies having more union brothers on the payroll.

We should therefore cut the amount spent upon this large business sector as we’ve clearly gone over the peak of where more resources leads to higher revenue. The very thing that Ritchie is complaining about leads us to reject Ritchie’s argument.

Not that this is the first time this has happened.

The things Ritchie doesn’t know about economics

Quite a long list as you can imagine. But here it’s specifically on interest rates:

Larry Elliott has noted in the Guardian this morning that 10-year gilts are edging towards a 3% interest rate and the pound is rising against the dollar and the euro.

OK, long term interest rates are rising.

But with the City paying more heed to evidence of an incipient housing boom than to Carney’s forward guidance, it is at a loss as to what to do next.

OK, markets doing what markets do, look forward.

And the next best question is who will be brave enough to get us out of it again – by bringing interest rates back under Treasury control so that integrated economic policy can play its proper role in national life again?

And the solution is for interest rates to be set by the Treasury, not the Bank of England.

Eh?

Apparently the Murphmeister is completely unaware that the markets have always set long term interest rates. The BoE (or Treasury) has only ever had control of short term interest rates. Switching control of said short term rates back to the politicians ain’t gonna change the way that long term rates are set.

Now Ritchie doesn’t know anything about nuclear

I remain as worried. And, I think, rightly so. Tokyo remains at risk from this plant, as does a large tract of Japan. If this plant can’t be made safe – and so far there’s been an absurd and wholly inappropriate belief that the market can solve this which is now looking decidedly misplaced – then the impact on the world’s financial systems will be colossal.

Sigh.

Readings carried out by Japan’s Nuclear Regulation Authority at steel tanks used to store thousands of tons of radioactive water showed readings have soared 20 per cent to a new high of 2,200 millisieverts per hour.

The new high was at the same “hot spot” identified by the agency on Saturday, when the level stood at 1,800 millisieverts. Experts say exposure to that level of radiation for more than a couple of hours could prove fatal to a human.

“The radiation concentration was found in the H3 area of storage tanks, which are the same type of tanks that have leaked in the past,” a spokesperson for Tokyo Electric Power Co. told The Daily Telegraph.

“The reading of 2,200 millisieverts was found around 5 cm from the tank, but it had fallen to 40 millisieverts per hour 50 cm from the tank,” the spokesman said.

They’ve found a patch 2 foot across which is emitting beta radiation (ie, stopped by a stout pair of gumboots) well above the level you want anyone to be exposed to. This does not a disaster make.

Tokyo is not in danger. Imagine all those water tanks flooded into the bay: I wouldn’t be all that keen on eating shellfish from the bay for a few years but other than that the total effect on the planet would be around and about zero.

Yes, they need to get the fuel rods out, yes, there’s the cores still to deal with. But they’re not going to go bang, they’re not about to go critical or anything. We’ve a very expensive problem of some very poisonous metal lying around. But no more problem than that.

Ritchie on Vodafone

And the cost in terms of tax lost on that Vodafone dividend? Over £12 billion. That’s what has gone by the wayside.

If the law was different from what it is then the tax bill would be different from what it is.

Well, yes, I suppose so. And if my Auntie had balls she’d be my Uncle.

The UK’s leading tax expert on tax

Vodafone is selling its stake in US mobile network Verizon for about $130 billion according to press reports. That’s more than £80 billion.

And the deal will almost certainly be tax free. No great offshore planning will be needed to achieve this: Gordon Brown introduced the substantial shareholdings exemption in 2002. The result is that Vodafone has an automatic right not to pay tax on this gain in the UK.

Yes, there is that SSE.

But it’s also true that the Verizon stake is being sold for a mix of cash and shares. And the cash part is less than what Vodafone paid for AirTouch 15 years ago. A share swap doesn’t trigger a CGT or corporation tax bill. And if the cash part isn’t a profit…..

Guess who’s getting screwed by the Co Op?

Bondholders will be offered a minority shareholding in the Co-op Bank if they accept the terms of the rescue deal. But the Co-op warned yesterday that the newly-listed bank was unlikely to make a profit for several years.

Mr Taber said: “The Co-op has stated that the bank ‘will not be profitable for some years’, so presumably no prospect of a dividend on the ordinary shares they will be offering pensioners in exchange for their bonds for some years either. So how can their offer as announced to date be suitable for their pensioner investors?”

Yup, all those pensioners who held bonds in Britain’s most ethical bank, run as it was as a mutual, without any of that City trading and investment nonsense.

As Ritchie says:

The farce that the Coop was told recently that its board was not suitable to run a bank because it was not made up of bankers has to go: it’s precisely because people are not bankes that they may be suited to their new roles of making sure banks are clean, although competence will also be important too, of course.

Ethics really are more important than competence in that Courageous State

Hasn’t the Co Op done well this year?

The Co-operative Group has plunged to a £559m first-half loss as bad debts in its banking arm wiped out profits from its supermarkets.

The group said there would be no quick fixes as it embarked on a four-year turnaround plan, after reporting pre-tax losses of £709.4m in the Co-operative Bank in the six months to the end of June.

As Ritchie has said something must change:

The farce that the Coop was told recently that its board was not suitable to run a bank because it was not made up of bankers has to go: it’s precisely because people are not bankes that they may be suited to their new roles of making sure banks are clean, although competence will also be important too, of course.

Clearly we need many more of these oh so competent not bankers running the banks.

Richard Murphy Is resigning from the Tax Justice Network to spend more time with his family.

We have also now become aware that my involvement in TJN has caused some confusion between these focuses of attention and who is responsible for what work and that has not always been helpful. As such we’ve agreed that from now on I will have no formal role within the Tax Justice Network and will not speak for it in future.

That decision has also been precipitated by considerable demands on my time over the last few months that have arisen as a result of the serious illness of a close relative. As a result of those demands I have been advised that I should reduce my work commitments and have accepted that try as I might I have little choice but agree, and on reflection it is my involvement with the Tax Justice Network that has to go.

This is bloody rich from @RichardJMurphy

I have written today about the enormous threat to free speech that the government is intending to rush through Parliament in early September in the form of the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Bill.

This is actually amusing. For he’s claiming that the new law will restrict his right to free speech. Which of course is entirely untrue. It’s actually restricting his right to association. He can say anything at all he damn well likes: the limitations are upon who he works alongside when it is said. You’d rather hope that someone would get right which of their rights is being restricted.

But it gets ever so much better too:

As a chartered accountant, blogger and campaigner for tax reform – two of whose ideas (on a general anti-avoidance principle and country-by-country reporting) have been at least partly adopted by your government – I will be potentially barred from publishing my work, which is partly funded by donations given with the express intention that I seek to change public opinion on matters relating to tax justice, unless in the year prior to an election I:

1) register as a ‘recognised third party’;

2) comply with the requirements of your proposed law;

3) report the donations I receive in an onerous fashion;

4) do not cooperate with others to publish opinions without risk of substantial additional obligations and penalties arising.

Yes, that’s correct. The man whose entire political life is built on forcing everyone into transparency is now arguing that he should not have to be transparent. The man who insists that the groups of people voluntarily associating as companies have to tell everyone all about what they do is now insisting that people who voluntarily associate not as companies don’t have to tell anyone anything. And finally, the man who dismisses the costs and effort of the onerous transparency demands he makes on others seeks to be excused having to be transparent because of the costs and effort associated with being transparent.

That really is gorging on the gateaux while still insisting it’s there and whole and on the sideboard, isn’t it?