January 17, 2011
Wikileaks, Switzerland and Nazis
Wikileaks has been handed confidential information by banker Rudolf Elmer, which threatens to reveal Swiss banking complicity in tax evasion and other criminal activity. Accordingly, Elmer is to go on criminal trial for breaking Swiss bank secrecy laws.
One thing you can expect to hear around the build-up to this case is that Swiss banking secrecy was enacted to protect Jewish assets from the Nazis during the 1930s. This was the line repeatedly deployed in 2008, when US authorities unveiled systematic complicity from Swiss bank UBS in assisting American tax avoidance.
It would be nice for the Swiss if it were true; providing some sort of vague moral justification for the systematic undermining of the laws and revenue authorities of other states. But it’s not true.
From Treasure Islands, the new book by Nick Shaxson you should all read:
“A pervasive story now exists that Switzerland put bank secrecy into place to protect German Jewish money from the Nazis. This myth dates back to a bulletin in 1966 from the Schweizerische Kreditanstalt (today’s Credit Suisse), and Swiss bankers have wielded it to great effect ever since. American officials negotiating a new tax treaty with Switzerland at that time lodged an official complaint after being frequently lectured about the supposed origins of bank secrecy as protection for Jewish money. A Swiss Federal Council report in March 1970 officially endorsed the story, and this was backed up in 1977 by a lurid book by a former Geneva newspaper editor outlining the fabulous story of Gestapo agents infiltrating Switzerland to worm out Jewish bank details. The problem with the story is that it’s not true
Amid the Great Depression, Swiss farmers’ and workers’ movements began in 1931 to clamour for more control over the banks. Bankers feared state inspection of their hitherto closely controlled financial domain would risk secrets leaking out, and they pressed fiercely for a new law, to make it a crime to violate Swiss bank secrecy. By August 1931, the highly-influential right-wing daily Neue Zurcher Zeitung was attacking government oversight of the banks, and in February 1932 a top banker sent the government draft legislation with a clause making it a crime to violate bank secrecy. It was the French scandal [revelations that up to 4 billion francs were being lost to Swiss-facilitated tax evasion schemes] that October, however, which really spurred government into action. A new banking law was prepared and an official draft was ready by February 1933, just eighteen days after Hitler came to power and long before he had consolidated his grip on the German state or even gained control of all of Germany’s intelligence services. The Swiss law finally adopted in 1934 for the first time made it a criminal offence punishable by fines and prison to violate bank secrecy, and was almost unchanged from the original draft. In Germany the death penalty for having foreign accounts undeclared to the Third Reich only appeared in 1936. Even the Swiss Bankers’ Association has no records of the supposed activities of Gestapo agents coming to Switzerland to squirrel out information about Jewish money.”
Of course, even if it were true that Swiss banking secrecy was originally adopted to protect Jewish assets (which it wasn’t), that wouldn’t justify the facilitation of tax avoidance and evasion today. Instead, using of the legacy of the holocaust to provide cover for illicit financial skullduggery simply compounds the distasteful nature of what the Swiss tax haven operation involves.
Incidentally, Treasure Islands continues to pick up excellent reviews. Having started it over the weekend, I can confirm that it’s a cracking read. You should buy it.
December 5, 2010
The Most Odious Vice, or The Coalition’s Dangerous Hypocrisy
Hypocrisy is an inevitable component of politics. Individuals must promote institutional and party commitments they personally disagree with. Parties must sometimes make dishonest pledges to attain power, in the name of achieving a putative greater good. Governments may sometimes secretly contravene their expressed public policies, in the name of national security or prosperity.
But as David Runciman reminds us, an essential task in modern politics is spotting which forms of hypocrisy are necessary costs of functioning government, and which cross the line into moral and political unacceptability.
Consider the dissonance between the Coalition’s plans for economic retrenchment and student finance.
On the one hand, our Government claims that debt is A Bad Thing. Accordingly, it aims to eliminate Britain’s structural deficit in four years. Apparently we must not “burden” future generations with debt. (Ignore for now that Britain has run a structural deficit since the 18th century, allowing us to build railways, urban centres, vast road networks, a free health service and world-class education provision, as well as fighting two world wars and lots of smaller ones. Apocalyptic pronouncements about national debt can be calmly offset by picking up a history book.)
On the other hand, the Government prepares to introduce legislation dramatically increasing the level of fees students must pay to attend university. This means graduates will likely start their careers burdened with £35-40,000 of debt. If debt is such a Bad Thing that a national sovereign state can’t run a structural deficit, why must young people seeking educations – educations which current cabinet ministers received for free – become personally indebted to such enormous levels?
Debt dissonance might not be so bad on its own – but it’s underpinned by a much bigger piece of hypocrisy.
The Tories have constantly insisted that we are “all in this together”. But clearly we are not. Disability living allowance and housing benefit are being cut. The unemployed will undertake forced labour for failing to work phantom jobs in a recession-stricken economy. Poor children will lose their EMAs. Mobility allowances for the disabled and elderly will be removed, confining them to care homes and ending their independence. The list goes on and on – but time and again it’s the poorest and most vulnerable who will suffer.
At the other end of the spectrum, Philip Green avoids billions in tax but is invited to advise the government on how to implement its cuts. Vodaphone systematically avoids billions, and the Treasury effectively gives them the green light. Kraft gives Britain the same treatment. Each year, rich individuals and mega-corporations use the world’s offshore hidey-holes to deprive our Revenue of at least £25billion.
We are blatantly not all in this together; the hypocrisy of telling us otherwise stinks. But hypocrisy is precisely an odious vice; it really gets up people’s noses. Although they are not reacting from revulsion to hypocrisy alone, the outrage that hypocrisy generates has surely animated the student protests and popular anti-avoidance campaigns of recent weeks.
Ordinary people have a formidably capacity to sniff-out intolerable hypocrisy. When even the Daily Mail starts slamming tax-dodgers, a Government should watch out. Politicians can get away with a lot, but outrageous hypocrisy is off the menu. Middle England – feeling the squeeze, and worrying about its kids’ futures – may soon lose all patience with this administration’s predilection for talking out of both sides of its mouth. The Coalition is more fragile than its core ideologues seem to recognise.
April 9, 2010
It’s the electorate, stupid.
I am baffled, or rather deeply troubled, by the argument over Labour’s planned National Insurance rise.
The Tories are saying that Labour’s plans will not only be a “tax on jobs” but an unnecessary one. Apparently Dave Snooty and Pals can find a staggering £27billion in “efficiency savings” that negate the need for the rise. Yep, that’s right: £15billion more than Labour are claiming they can find.
What’s particularly striking is that yesterday’s Guardian reported that
“Senior Labour figures privately acknowledge that they are being severely damaged by the NICs issue, although they will draw some encouragement from a Times Populus poll that shows a Tory lead of seven points, short of the lead needed to give the Conservatives a majority.”
Presumably this is partly because of a bunch of totally-impartial not-at-all-pro-Tory business leaders slammed the NI rise as, er, a tax on jobs. How convenient of them to be on-message for Mr Cameron. No matter that NI hikes are in fact not likely to reduce employment at all, but will instead by passed on to workers in the form of lower wages. Evidence isn’t important, distortion and spin are everything (it’s only an election campaign after all, no need to stop business as usual).
Yet I’m finding the subsequent debacle somewhat bewildering.
Let’s start with the basics. The economy is well and truly and utterly and completely fucked. Big spending cuts are coming. I don’t want to talk about the numbers. Partly because I’ll get them wrong and Tim Worstall will shout at me, but partly because they make me feel sick (“20% cuts for higher education” is as far as I get before the queasiness).
It’s common knowledge that whoever wins this election the axe will eventually fall. But correspondingly in order to fill the black hole some taxes are going to have to rise. Surely this is just obvious. The only sensible thing to do is accept that both are required to then to think carefully about how best to implement the necessary pain.
But instead the Tories claim to be able to magically save £27billion and avoid putting up National Insurance altogether. And if the papers are to be believed Labour are terrified that this is going to work as an electoral strategy.
Yet if Labour are right then the electorate is quite frankly very, very dumb. Firstly voters have to be so naive that they don’t wonder why we’ve been happily pissing £27billion down the drain for no good reason, but that this can now be stopped without hardship. Secondly, they have to not suspect that talk of “efficiency savings” is opportunistic dishonesty from politicians of both sides – but especially from the Tories who claim (without full access to Government figures!) to be able to save twice as much as the other parties. Thirdly, they have to believe that tax rises can be merrily avoided with no bad or significant consequences.* Fourthly, they have to be either so naive or so blinded by a desire to believe in Cameron’s magic bullets of painless austerity not to bother taking a look at the whole package and thinking “pull the other one, posh boy”.
The alternative? That the electorate isn’t dumb and will see through the Conservative promises of righting the economy by waving the magic wand of efficiency savings. But if that’s the case, then those senior Labour sources said to be so worried about Tory strategy are seriously under-estimating the electorate they are supposed to be campaigning to. Which doesn’t bode well for the next 30 days of what passes for Labour’s election strategy.
Either way, it’s not a pretty picture. Both scenarios would seem to tend towards a victory for the blue corner. Democracy eh? Bring back the Philosopher Kings.
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* Yes I know that the Conservative defence-maneouvre is to say that they’ll put up (regressive) VAT instead. But the point is that 1) they are spinning themselves as the party opposed to tax rises and 2) VAT rises will impact voters too, so are voters really all for a rise in this whilst being implacably opposed to higher NI?
February 17, 2010
Redistribution and Elections
The other day I wrote a slightly confusing post about New Labour’s vision of social justice, and how an awful lot of weight has been put on the education system as a result.
My contention was that New Labour has been terrified of talking about inequality, and wanted to undertake poverty reduction only if it was compatible with not reeling-in the better off. Yet to keep-up the image and substance of a party committed to social mobility and fairness, the education system was made the centre of New Labour’s strategy, on the lines that high quality educational opportunity could eliminate undeserved social disadvantage.
I think this thesis is broadly correct. But as originally stated, I inadvertently under-played the extent to which Labour has achieved significant poverty gains, and in the process, some worthwhile redistribution. And that it did this alongside education reforms, not through them. Indeed, especial thanks to Giles for drawing my attention to this table from the IFS:
I’m not a statistician (by any means) so I am happy to be informed of anything that blunts my enthusiasm on this point. But I was staggered when I saw this table. It shows a clear – and considerable – gain for the lowest income households (and especially the very poorest), which is attributable to the tax and benefit system under Labour.
When Stuart White at the Fabian Society calls claims that the poor got poorer under labour “risible“, data like this certainly seems to support him.
But why did this come as such a surprise to me? Or in other words, why haven’t Labour been shouting about this from the rooftops?
A few explanations immediately spring to mind:
- Labour are scared of being tarred with the “big government that penalises hard workers by giving their money to the lazy undeserving poor” brush
- Labour are scared that if they make a fuss about the achievements of the tax and benefit system, they’ll be portrayed in the tabloid press as helping scroungers live the life of Riley at taxpayers’ expense
- Labour are scared that middle class voters, who tend to decide swing seats, will think that the poor have been helped at middle class expense (something made worse by the fact people tend to over-estimate their position on the income and wealth scale, potentially leading many to assume they’ve been hurt by Labour policy when they haven’t)
Prior to 2007 it might have seemed obvious that Labour should reason this way. Re-branding the party away from an “Old” Labour, election-losing image meant dropping overt commitments to redistribution, tax-and-spend policies, and “big government” generally.
Yet this is 2010. There is still widespread public anger at banker’s bonuses. The return of inequality to the political agenda surely matters. So does the widespread realisation via the financial crisis that the world is profoundly more unfair than many had assumed. (It turns out that the super-rich don’t always make their money through sheer hardwork in economically productive activities, but can actually be reckless gamblers who ruin everything for ordinary people, and then still expect a massive pay-packet). And furthermore, a majority of voters supported the 50p tax when it was introduced.
So should Labour now start making a song and dance about its redistributive achievements? Probably not. As Don Paskini recently noted at Liberal Conspiracy:
“Support for redistribution from the better off to those who are less well off has dropped markedly. Fewer than two in five (38%) now think the government should redistribute income from the better off to those who are less well off, down from half (51%) in 1994.” *
Bizarrely, this drop seems to be fuelled in part by falling support for redistribution amongst Labour sympathisers.
Which is all a bit of a bummer. One of the relatively few things that this Labour Government seems to have got right, and they have to keep quiet about it because it’s an electoral loser.
Politics, eh?
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* Then again, Don earlier drew attention to a poll showing “Two-thirds (67%) of respondents say the government should do more to distribute wealth more evenly, while 20% say it should maintain its current level of involvement and only 10% say that it should do less.” That one was done by the BBC/GlobeScan.
I guess the wording of the polls is going to be pretty important, as well as sample-size. Unfortunately, I’m more inclined to put faith in the British Social Attitudes Survey results that Don uses in the more recent post, which showed low support for redistribution.
February 16, 2010
Taking Negative Campaigning to Strange New Places
There’s been something wrong with all the Tory campaign posters so far, even before their myriad and amusing spoofings.
Take the “We Can’t Go On Like This” line, first seen accompanying David Cameron’s shiny airbrushed forehead. Rather than a reason to vote Conservative, it reads like the first stage of a relationship break-up. Almost as bad as “It’s not you, it’s me”, but somewhere above “If you liked it, then you shudda putta ring on it”.
Either way, Cameron’s serious-but-friendly-and-look-I’m-not-wearing-a-tie expression hardly invites the electorate to fall in love.
Last week there were the tasteful “R.I.P OFF” gravestones, taking a mooted proposal, dishonestly elevating it into Labour policy, and turning the morally complex issue of end-of-life care into a macabre political football. But again, the message was hardly “here’s a reason to vote Conservative”. It was more “OOOOHHHH be SCARED, evil Gordon is coming to steal YOUR MONEY when you’re DEAD!”
This week we’re greeted by the “I’ve never voted Tory but…” campaign.
The most incredible thing about this is that the Conservatives are practically admitting that they are a rubbish party, hence why people don’t normally vote for them. The slogan fits the model of “I’ve never licked steaming dog crap before, but I suppose if that’s the only way to save the babies from the baby-grinder…”
I imagine CCHQ thought this would be a clever way to entice new voters. You know, decontaminating the Nasty Party brand by claiming that Ordinaries can vote Tory too. “Conservative Voters: not just climate-change-denying, EU-obsessed, Thatcherite troglodytes wearing tweed!”, or something to that effect.
Yet the negative framing of the slogan may inadvertently prompt people to remember why they didn’t vote Tory the last 3 times. Either way, it tells you something about the Party’s state of self-belief that they admit on their own campaign posters that people think they’re rubbish.
Of course, there’s another good reason why all the Tory posters have been negative, focusing attention on Labour’s failings. Because for as long as the Tories do that, they don’t have to talk about their plans to slash spending and crater the economic recovery, give tax breaks to millionaires, implement incoherent plans to benefit wealthy families at the expense of the poor, their inability to use statistics, or any of the other concrete policy areas that get the party into so much trouble whenever they open their mouths.
Whether this approach will be enough to discourage voters from asking serious questions about Dave and Co for another three months is a big question. This election is Dave’s to lose. And judging by the posters, his party knows it.
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Personally, I think CCHQ should just go with this from now on. It’s to the point, honest, and pretty much spoof-proof.
February 10, 2010
F*** Off
Another day, another Tory advertising campaign.
This one is particularly distasteful.
The Tories are claiming that their posters target a new “death tax” proposed by Labour. The problem is, Health Secretary Andy Burnham has outright denied that Labour are proposing any such thing.
By contrast, I’ve laid out my reasons for opposing the Tories’ own tax inheritance tax cuts for millionaires on numerous occasions.
So let’s all get to work spoofing the latest campaign and making sure people know the facts about how the Tories want to give tax breaks to millionaires whilst drastically cutting public spending.
I like this early make over, hosted by Clifford Singer of mydavidcameron.com, which hits the nail on the head:
In similar vein, here’s my take:
You can make your own – and see other people’s efforts – here.
The original poster has already received a very poor reception from Murdoch-owned Sky News and even The Spectator.
With the abject failure of the airbrushed “We Can’t Go On Like This” poster campaign, one has to wonder if the Tories have made a terrible mistake.
Although they wanted to focus attention on Labour policies, the opportunity is now rife to turn the spotlight on Tory inheritance tax plans. Not least because Labour isn’t proposing a £20,000 “death tax” levy at all.
By contrast, the Tory proposal of tax breaks for the richest 3% of estates in a time of fiscal tightening is surely unwise. If this spoof campaign goes viral like the last one, then Conservative’s own inheritance tax plans are going to be put under repeated public scrutiny. And that won’t serve them well.
The promise of tax breaks for the rich may have gone down well in 2007. But this is 2010. Three years is a very long time in politics.
January 19, 2010
A New England
Billy Bragg – a musician dear to my heart – yesterday wrote that he’ll be withholding his tax payments until Alistair Darling imposes a bonus veto on Royal Bank of Scotland, which we as taxpayers are shareholders of.
Bragg makes some good points in his short piece.
But another he could have made is that RBS routinely withholds tax from the UK Government already. Of course, they call it “tax planning” and have an army of lawyers to create paper trails through shell corporations in offshore financial centres so as to keep their activities on the whisker-side of the avoidance/evasion line.
If Bragg really does withhold his taxes, he could face a criminal conviction. The RBS board, meanwhile, will be busy lobbying the Government over the next finance bill, whilst their avoidance pals in PriceWaterhouseCoopers and Deloitte get invited in to actually write the tax law. I know, because I saw last year’s Finance Bill at the committee stage. It was the legislative version of inviting prisoners to design their own prison.
21st Century Tax: it’s for the little people like us, not masters of the universe like them.
January 18, 2010
More Nonsense from Tories on Tax
Jonathan Isaby of ConservativeHome has responded to my accusation that his pronouncements at the Fabian Conference on inheritance tax were both ignorant and incoherent.
Isaby doesn’t actually mount any counter-arguments to my original post, but just repeats Tory mantra about being able to pass on enormous amounts of property and wealth tax-free to those who’ve done nothing to earn it.
Yet he does deploy one naughty little manoeuvre at the end. He writes: “The whole point, surely, is that under current Conservative policy it is millionaires who will still pay IHT?”
This is very clever. The message is simple: raising the IHT threshold is good for ordinary people, and that’s why Tories think only millionaires should pay it.
Populist. And deeply misleading.
Let’s recall that the median annual salary for a working individual in the UK is less than £21,ooo (which means 50% of the working population takes home less than that). The current inheritance tax threshold is £325,000, over which a tax of 40% is levied.
It would take somebody earning an annual salary of £21,000 fifteen and a half years just to earn £325,000, let alone save it.
So let’s assume that somebody on median income manages to save £2,000 a year – no mean feat if there are kids to feed and bills to pay. In order to amass a prospective inheritance of £325,000 (all of which would still be tax free, remember), this person would need to work for 162 years, albeit not including interest accumulated.
Of course, Isaby and Co. will reply that what matters is property. And it is true that most IHT is due on inherited property, especially houses. But let’s recall that the average house price today is £222,261. In October 2009 it was predicted that just 12,000 households would pay death duties for the coming financial year. That’s out of c.25 million households in the UK. Admittedly, not all of these are eligible for IHT in any given year – but you get the picture when recalling that around 560,000 people die each year in the UK.
So it’s simply not true that IHT, under current arrangements, affects ordinary people. It affects a tiny proportion of the richest estates. And the Tories want to make it affect even fewer.
Now let’s directly examine Isaby’s contention that the Tories are doing the opposite of giving tax breaks to millionaires, and only want IHT to be paid by millionaires.
Imagine Charles is to inherit £1,000,100.
Under current arrangements, he would be eligible for IHT as follows. Charles enjoys a £325,000 tax-free threshold. £1,000,100 – £325,000 = £675,100. This is total upon which tax is due. There is a 40% rate of tax. 40% of £675,100 is £270,040.
Hence Charles, under existing arrangements, pays £270,040 tax on an initial inheritance of £1,000,100, leaving him with £720,060. A rather tidy sum, I’m sure you’ll agree.
Under Tory proposals to raise the threshold to £1,000,000, however, Charles would of course be liable for a 40% rate on only that last £100. He would thus incur a tax bill of £40, keeping the even tidier sum of £1,000,060.
You will notice that in this case, Tory proposals have in fact made Charles a millionaire, compared to what he would have been under present arrangements.
It’s simply not true that the Tories aren’t about giving tax breaks to millionaires. After all, who will benefit from having the threshold on IHT raised by £675,000? Not just those inheriting less than £1million, but all those inheriting over £1 million who now get the first million totally tax free.
A consequence of Tory proposals means that in some cases they will create millionaires by giving out tax breaks to those who already stand to inherit tremendous amounts of unearned wealth. And they want to do all this whilst promising to slash public spending faster and deeper than any other party, threatening the risk of a double-dip recession.
George Osborne told us that we’re all in this together. But we’re not. There’s a class war going on: the Tories are waging it on behalf of the privileged few, against the hardworking ordinary many.
Shout it from the rooftops.
January 16, 2010
Grassroots Tories on Tax: Ignorant and Incoherent
Still one argument being avoided, but it will be dealt with. In the meantime…
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Yesterday at the Fabian New Year Conference I attended the “Will the real David Cameron please stand up?” debate. Polly Toynbee was solid and impressive. So was Sunder Katwala, who pointed out that all recent Tory leaders have emphasised their class backgrounds (Thatcher as grocer’s daughter, Major as working class boy, Howard as grammar schooler) but now that David Cameron is up, suddenly his Etonian background is a no-no subject. (The New Statesman have picked this up).
Mad “Nadine” Dorries provided much amusement when she revealed that she had “spent two nights with four stoners” and that people on sink estates “really want marriage in their lives, but they don’t even have it in their vocabularies”.
Douglas Carswell MP kept trying to flog his book The Plan - co-written with Dan “60 year mistake” Hannan – which he kept reminding us was “only £10″. Somehow the bits about replacing the NHS with a privatised system were transformed into “the monolith of the state doesn’t offer people much choice”, or something.
But best of all was Jonathon Isaby, co-editor of ConservativeHome.
A good question was asked about the madness and injustice of Tory plans to raise inheritance tax thresholds, granting tax-breaks to millionaires when public support for the poorest is to be slashed.
At this point Isaby went a bit, erm, whacky. He declared inheritance tax to be “immoral”, because it penalizes “aspiration” and is a “double tax”.
Let’s take the first claim about aspiration. This is simply nonsense. As Giles recently pointed out to me, most recipients of inheritances are not children or those starting their working lives, they are in their 40s and 50s. To say that people are put-off from aspiring to work hard and succeed because they want to leave even more than £325,000 (or £600,000 for couples) completely tax free to their adult heirs – as oppose to the mere 40% above that threshold currently taxed – is pretty far-fetched.
And furthermore, let’s note some Tory incoherence. The right likes to preach that benefits “disincentivise” the poorest from working, and therefore are bad. But what could be a bigger disincentive to hard work than the knowledge that one stands to gain – through no personal effort whatsoever – considerable sums of money from one’s parents?
And it is a considerable sum of money. As Peter recently noted, somebody on minimum wage would have to work for thirty years to even earn £300,000, let alone save it and pass it on. But that’s not even the level at which inheritance tax kicks in – and when it does begin it’s only at a 40% rate!
What about Isaby’s claim that inheritance tax is “double taxation”? Well this is manifest nonsense too. Let’s say Andy earns a sum of money, and is taxed on it via the usual mechanisms. If his son Bob stands to inherit Andy’s wealth and incurs an inheritance tax, is this double tax? Manifestly not: Bob never paid tax on it the first time around, Andy did. And he’s dead when inheritance tax kicks-in.
But I notice a pattern emerging. The Tories have let it be known that they are considering putting VAT up to 20% post-election. They lambasted Labour’s temporary drop to a 15% rate. Yet if anything is double taxation, VAT is: we get taxed when we earn our income, and then we get taxed again when we spend it because of VAT (which is an incredibly regressive tax, affecting the poorer more than the rich).
For some reason Isaby isn’t slamming VAT as “immoral”, but instead wants tax-breaks for millionaires. Grassroots Tories on tax: ignorant and incoherent.
You can airbrush your posters, Dave, but not your party.
January 14, 2010
Tax Justice Focus
I was kindly invited by my former employers the Tax Justice Network to guest-edit a special edition of their Tax Justice Focus newsletter.
The edition is out today, and focuses on the topic of “Tax Justice and Philosophy”. It contains contributions by:
Dr Martin O’Neill, lecturer in political theory at York University
Dr Martin McIvor, PhD in politicla theory from London School of Economics, editor of Labour journal Renewal
Dr John MP, Member of Parliament for Southport and holder of a doctorate in Philosophy from the Liverpool University
Dr Daniel Mitchell of the Cato Institute, and Hiwa Alaghebandian is a researcher at the College of William and Mary, Williamsburg, VA. (spouting some absolute madness, it has to be said).
Dr Thomas Rixen of the Social Science Research Centre, Berlin
Sheila Killian, lecturer in finance and accounting at the University of Limerick
Richard Murphy, Tax Research UK
John Christensen, Tax Justice Network International Secretariat.
You can download it here (PDF).
Here’s my editorial, to give you a taster:
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Welcome to a special edition on the theme of tax justice and political philosophy. This may seem a strange combination. After all, the Tax Justice Network is a research and advocacy group, dedicated to raising awareness and promoting reform of such practicalities as international accounting standards and tax information exchange. Philosophy, by contrast, turns the mind to quiet and abstract contemplation; to tweed jackets, dusty tomes and ivory towers.
Yet there is an connection here that escapes the hasty observer. John Maynard Keynes remarked that practical men “are usually the slaves of some defunct economist.” Less remembered is the sentence preceding it: the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.”
In a world ruled by ideas, the apparently disconnected enquiries of philosophers eventually shape world-views, orientate debates, influence elections and direct policies. Those doubting this statement should cast an eye to history. For whilst applied Marxism was certainly a humanitarian disaster, who could deny the profound impact of Karl Marx the philosopher-economist?
But there is more value to philosophy than its long-run impact on practical politics. For it is through philosophy that we explore our beliefs and discover where our values lie. This, after all, is particularly important for the Tax Justice Network and everyone who demands tax fairness – two terms loaded with centuries of philosophical baggage.
Fittingly, this edition introduces a spectrum of philosophical approaches. John Pugh MP offers insights from a faith perspective, drawing upon the centuries-old tradition of philosophical Christianity. One need not share Pugh’s spiritual commitments to find significance in his reflections.
In similar vein, Martin McIvor offers us a perspective from the Marxian tradition. The financial crisis has generated an upsurge of interest –frequently superficial – in Marx’s thinking. McIvor shows that notwithstanding the legacy of history (and the lazy outpourings of journalists) Marx’s legacy takes the form of a powerful analytic tool for the critical assessment of capitalism. And as with all good philosophy, one need not be an acolyte in order to gain profound insights from such analysis.
No edition focusing on political philosophy would be complete without reflection from the great intellectual tradition of liberalism. Martin O’Neill accordingly draws on the work of Thomas Nagel and Liam Murphy to show how modern liberal egalitarian insights can make a compelling case for tax justice.
Yet no important philosophical issue ever commands even a broad universal consensus. Thus it is fitting to feature a contribution from Daniel Mitchell and Hiwa Alaghebandian of the Cato Institute, arguing against the consensus of our other contributors. We at TJN firmly believe that their arguments are unsound and inadequate, and have previously set-out some reasons here. Yet we nonetheless thank them for their enduring willingness to engage and contribute. In a world of increased polarisation where reasoned dialogue seems ever rarer, it is a pleasure to have opponents such as they.
Thanks must also be given to Sheila Killian for her review of a new publication of an essay by George Warde Norman on how taxation might promote human happiness. Norman penned the essay in 1821, not long after the introduction of income tax to the UK. But whilst much of his analysis may seem anachronistic and counter to TJN’s aims, it nonetheless yields important insights. In our second review Thomas Rixen considers the merits of a new book exploring the possible role of a World Tax Organisation and how such a thing might be organised. Especial thanks also to Richard Murphy, who at short notice provided an excellent summary of the first decade of what is likely to be an ongoing struggle for tax justice.
Before vacating the floor to our contributors, however, I would like to make a few further remarks about the issue of tax justice and philosophy.
The connections between philosophical reflection, economics and real-world outcomes have already been noted. But in these dizzying times it is worth casting our gazes back to ages past. While it may now appear that market-capitalist societies are a necessary fact of life, this was not always so. If we return to the thinkers of the 18th Century in particular – who struggled to understand, and in many cases legitimise, the emergence of capitalism in its modern form – we see this most clearly.
While philosophers such as Jean Jacques Rousseau decried and denounced the nascent “commercialism”, it is more interesting to examine the thinkers who championed the emerging capitalism. Two in particular stand out.
Although David Hume is now remembered as a philosopher, he was also one of the first modern economists. Indeed, he had an enormous intellectual impact upon his great friend Adam Smith, the “founder” of modern economics. And Smith, of course, was in his day known as a philosopher. Only after his death did his name became synonymous with economics.
Both men were champions of commerce, trade and industry (though neither were free-market zealots, as Smith has so often been mis-characterised). Yet within the worldview of capitalist enthusiasm, both Hume and Smith paid particular attention to the importance of justice in taxation.
In his essay Of Commerce, Hume warns of the danger that the wealthy may exploit the worse-off: “it is easy for the rich, in an arbitrary government, to conspire against them [the poor], and throw the whole burthen of the taxes on their shoulders.” Hume urged strongly against such a state of affairs:
“A too great disproportion among the citizens weakens any state. Every person, if possible, ought to enjoy the fruits of his labour, in a full possession of all the necessaries, and many of the conveniencies of life. No one can doubt, but such an equality is most suitable to human nature, and diminishes much less from the happiness of the rich than it adds to that of the poor. It also augments the power of the state, and makes any extraordinary taxes or impositions be paid with more chearfulness.”
In the year of Hume’s death Adam Smith published his seminal Wealth of Nations, the second volume of which discussed principles of taxation. Although much of Smith’s discussion is now anachronistic, one passage is of particular interest, and worth quoting at length:
“A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.”
Like Hume, Smith was preoccupied by the social impacts of taxation, and is attuned to the issues of justice that arise. Both were champions of trade and commerce, and acutely conscious of tax and its multifaceted importance. They were economists, as well as philosophers.
Whilst it would be disingenuous to claim, across a chasm of 300 years, that either figure provides direct support for any modern viewpoint, there are nonetheless important lessons to be drawn. For it is as true of the early debates of modern capitalism as it is today that taxation and justice are intimately related. In short, economists must still be philosophers.
