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AIA

A new president. By Simon Sweetman

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5th Nov 2008
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Vote for Obama flagThere are many things about Barack Obama’s election that are more significant for the USA and the world than his tax policies but hey, this is a column about tax, and of course there is a significant overlap between tax policies and policies for dealing with the current economic crisis (which is not a “credit crunch” – that is simply one of the effects of the unravelling of the games played by the banks with our money).

Obama’s declared policies include small increases in the rate of income tax for those earning over $200,000 a year (hear the piggies squeal!). They also include a recognition that tax havens have formed a large part of the nonsense inflicted on us, and that a workable world financial system, while it will include low tax regimes, cannot include tax havens that operate in secrecy to allow corporations to pretend they are resident there, and wealthy individuals to evade tax. And I mean evade: in evidence to a Congressional Committee the Swiss bank UBS admitted it had 20,000 US resident investors and that 19,000 of them were not declaring the income in the USA.

We may take especial notice here since the Brown/Darling axis seems to be looking for a solution which leaves bankers’ bonuses in place, and the Tories do not seem to have the least idea what to do about a situation created by their mates in the finance business.

However Alistair Darling has now made some remarks about the Isle of Man (which also apply to the Channel Islands) prompted by the fact that UK residents holding investments offshore with Icelandic banks now expect the UK government to bail them out.

Before the current crisis all of this might have seemed so much rhetoric – but it is now clear that cleansing the tax havens must be part of any new financial order.

And do we remember the chief argument against taxing the non-domiciles properly? That these were the people who make the City of London great and that if they had to pay tax they’d go away? Digby Jones has even had the nerve to repeat the argument about bankers’ bonuses, suggesting they would all be off to Shanghai and Dubai. The only possible response to that has two words in it, and is followed by the suggestion that they might indeed like to go and screw up someone else’s economy.

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By User deleted
12th Nov 2008 14:29

a new president
"Those one piece black leather uniforms, whips and chains must be a little sweaty by now. "

I wanna pay higher taxes now lol

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By Mike Bassy
12th Nov 2008 14:15

High Tax loons.
Rather than let the " hang em and flog em " high tax crazies have this debate all their own way, may I point out that if Governments didn't attempt to fleece workers and companies out of every penny they earn by levying punitive tax levels, there would be no demand for low tax havens.

And by the way, I believe that previous contributors are wrong to assume that whatever Barack Obama does will reduce the number of tax havens around the world. Tax levels, like any other commodity in a global market, will be a subject for competition between nations. With many countries now in dire economic straits, what better way to attract rapid inward investment than by offering tax rates which undercut the opposition ? This will create more tax havens, not less, and technoogy will open these markets to the average worker as well as the big players .

The days when Governments levied high tax knowing that there was nothing their own people could do but stump up or face jail are coming to an end. Governments' varied but mostly futile attempts to close down existing tax havens are simply an attempt to slow down the inevitable or an arrogant refusal to acknowledge change. But like all attempts to rig a market, they are, ultimately, bound to fail.

A better debate would be how we spend lower tax revenue more effectively. At the moment, it is mostly used by ruling political parties to shore up their own vested interests. ( just look a the current enormous, Labour-inspired job creation programme in every publically funded authority across the UK).

Right, I suppose I'd better make way for the high tax crazies to tell us all how naughty we've been and how they intend to punish us. ( Oh mercy !! ) . Those one piece black leather uniforms, whips and chains must be a little sweaty by now.

Best wishes,

Mike.

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By AnonymousUser
06th Nov 2008 13:34

Socialist?
An American I spoke to recently said we Brits would do well to take on board that in many ways Obama is to the right of Margaret Thatcher. The suggestion that he might instigate anything approaching socialism is laughable.

He has a lot of expectations to live up to and in the current financial climate I doubt he will deliver even the modest reforms to health care and education which have been suggested. But as Richard says, a level playing field would be good.

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Richard Murphy
By Richard Murphy
06th Nov 2008 12:01

Simon
Well said

Obama will be laden with the expectations of many, and will not fulfil them all. But he has persistently said he will tackle tax havens. His name is on the Stop Tax Haven Abuse Act. I have had the privilege of talking to some of those who helped draft that Act. It's not perfect. But I suspect that if we get John Kerry as Secretary of State then the willingness to tackle this issue will exist and that the right people will join the administration to deliver it.

But in response to the last commentator, what they will deliver will not be socialism. Far from it. What they will actually deliver is a level playing field market in which large companies and small companies, multinational companies and national companies, companies who wish to comply with the law and companies who have sought to evade the law, will compete with each other fairly and appropriately. the result will be that the efficient allocation of resources will take place without the artificial interference of tax havens to distort markets in favour of the already wealthy, large companies and those who are frankly willing to evade or abuse their obligations to society at large.

Creating fair market is not socialism. It is creating fair markets, and that is all. This is what I believe Obama wants to do.

The fact that more tax will be paid on the way is not the issue: there is no moral justification in defending those who break the law, and that without doubt has been the prime intention of tax haven administrations. There is no other reason for the secrecy that they have created.

Their tax rates are not a part of this debate. They can keep low taxes if they wish. the reality is they will not be able to afford to do so: it is only the secrecy that has made them attractive.

Richard Murphy

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By User deleted
05th Nov 2008 16:24

A Socialist State?
Subscribers will need to assess whether the fact that the USA is now a socialist state is a good thing, with all that change of direction means.

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