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Plain speaking on tax.,
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This review is from: Over Here and Undertaxed: Multinationals, Tax Avoidance and You (Kindle Edition)
Austerity is depressing living standards and morale over much of the world. The two ways out are said to be tax increases and cutting government expenditure. Many speak out against tax rises as 'discouraging business' and 'driving away investment.' Indeed, to many commentators government expenditure is seen to be the cause of the problem.
Richard Murphy puts the contrary view that much of the deficit and debt crisis is made worse by large scale tax avoidance especially by the multi-national corporations. I give it five stars because he manages to convey a clear narrative in a hundred pages or so. John Lancaster's 'Whoops!'covered the banking crisis in a similar way. One of the difficulties is that tax is a complex area usually left to experts and often only commented on in depth in more specialized publications.
Murphy is a Chartered Accountant and has played a leading role in bringing tax abuse to the general public in the UK, writing a blog 'Tax Research UK' and is part of the Tax Justice Network. They have been campaigning for some years and in the last year or so, the issue has been taken up by the media and mainstream politicians. He wrote a General Anti-Avoidance Principle bill which was presented to the House of Commons by Michael Meacher MP. In addition he has advised the TUC and Green Party among others. He has even spoken at the World Bank in Washington.
He explains how international tax laws were written in the 'steam ship age' and this has little relevance to the situation today. He gives examples of how Amazon, Google and others will do extensive trade in the UK but are billed from a low tax jurisdiction. The book was published in February 2013 and is very up to date and with over a hundred references, well sourced.
According to Murphy UK tax avoidance is about £25 billion per year and tax evasion £70 billion. The HMRC disagree but from my limited research , his figures seem to have support from others.
He has a number of suggestions on how to improve things in Chapter 8. An example is the concept, first put forward by him, of 'country by country reporting' whereby the multi-national corporations have to disclose the extent of their trading in each country and not shuffle the profits around between their component parts to minimise tax.
Tax Havens-or to use his term-secrecy jurisdictions-are a large part of the way tax is steered away from national treasuries which means companies who trade entirely within a state or individual taxpayers, have to pick up the bill or go without. Many of these are under British control e.g. Jersey, Isle of Mann, Caymen Islands, British Virgin Islands. Murphy is sceptical of British politicians now in power to really tackle the problem. This would require international co-operation to be fully successful. However, the European Parliament has voted to take action on this issue (April 2012 by about 530 to 70-many of the latter being British Conservatives or UKIP MEPs) but they can only advise as the power of the EU lies with the elected governments of the member states.
His thesis is that once a low taxes become central to an economic strategy, it becomes harder to challenge the larger companies who threaten to relocate abroad ( domestic companies not having that option). He is critical of the cuts imposed on the HMRC -down from 104,000 in 2010 to a projected 61,000 in 2015.
He shows how the accountants Ernst & Young estimated in April 2012 the non-financial companies hold balances of £750 billion, equal to 505 of the GDP. He argues that they are 'choosing not invest because tax is an obstacle but because there is a lack of demand for what they make. This is the fault of the recession and not the tax system.'
The virtue of this book is that is clearly describes the problems and offers what seem to a layman like myself to be workable solutions, at least in part. It is worth stating that he is not anti-business, indeed the reverse, because with a fair tax system, companies can compete on a level playing field and contribute to the common good which in turn sustains them with education, infrastructure and legal frameworks.
This is an important contribution to the debate on how to address the longest and deepest recession since WW2 but it looks at the financial reforms necessary beyond the end of the austerity. I would guess motivation to stick to a less remunerated path than he could have done, comes from his value system which includes the belief in 'plain speaking.'