Tax havens are essential and do us all a favour

Who among Sunday Telegraph readers has not tried to avoid paying tax? I should imagine that most married readers keep their assets in the name of the spouse with the lowest tax rate.

And I would be surprised if readers did not make use of pension tax reliefs and the tax-free lump sum we receive from pension funds.

Those readers who are self-employed will, no doubt, do their best to ensure that they claim the maximum expenses against their income. All this is absolutely right and proper. Our first respon­sibi­lities are to our families, not the state, as long as we give the state in taxation what we legally owe.

However, as soon as we see companies making use of special allowances and schemes to reduce their tax bill, there are furious denunciations. Google, Starbucks and many other companies are vilified for trying to reduce their tax bill by using “tax havens”.

Blog taken from the Telegraph. Read the full article here.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

4 thoughts on “Tax havens are essential and do us all a favour”

  1. Posted 12/11/2012 at 17:51 | Permalink

    If companies like Starbucks do not pay corporation tax here, then they are gaining an unfair advantage over those companies that are too small to take advantage of the fiscal manoeuvrings required to avoid such tax. Starbucks etc are taking advantage of our police for protection, our schools for the education of their staff, our roads for the transport of their materials, etc. etc without making the contributions required to support these facilities. If they pay below-living wages to their staff, then they are receiving a subsidy from the rest of us for the support these people require to live.

  2. Posted 12/11/2012 at 23:11 | Permalink

    @Bob I accept that which is why I mentioned that transfer prices must be appropriate (and they are required to be by law). But Starbucks should only pay corporation tax here if it earns profits here. As it happens, the company itself reckons it pays about 35% corporation tax on all its profits in the EU subsidiaries (which is a surprisingly high figure if it is true). The living wage issue is somewhat different.

  3. Posted 13/11/2012 at 09:02 | Permalink

    The comments by ‘ShadowMatt’ on Starbuck’s blog are appropriate:

    Additionally, it is my understanding that tax havens, through their culture of secrecy, enable the laundering of the proceeds of drug-related and other crime, and allow the kleptocrats of developing countries to hide money stolen from their people. Does IEA support this?

  4. Posted 13/11/2012 at 10:42 | Permalink

    @Bob. This is a complaint often made but it is one difficult to level at the Netherlands or Ireland and, indeed, given their income level tax havens normally have much better governance than non-tax-haven countries otherwise they could not thrive as financial centres. I think that Shadowmatts comments are somewhat silly. Businesses pay business rates precisely for things such as fire/police etc and it is well documented that businesses way over-pay for these things. The facts in relation to how they relate to my article are this. Corporation tax is a tax on profits. Starbucks pays corporation tax where it makes its profits. If the profits are under-stated in one country and over-stated in another this is a matter of perfectly legitimate dispute. If companies do not make profits, they do not pay tax. UK shareholders will, of course, pay tax on dividends remitted (with very little credit most likely for corporation tax paid elsewhere).

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