he old saying goes that the only things we can be absolutely sure of are death and taxes. Every human being will die one day for certain, although some believe the soul goes on forever, but that’s a topic for another writing. So, at least from the generally held view of death where one stops breathing and all physical/bodily activity stops – yes, death is inescapable. But taxes are another thing altogether according to the men and women over at Tax Justice Network, and what their years of research have revealed is that, for some, taxes are not inescapable. What they’ve found to apply for some people around the Earth is that “the only (singular) thing we can be be sure of is death”.
It’s been some three or four years since the International Consortium of Investigative Journalists (ICIJ) received, then released to the world, computer files on tens of thousands of account-holders using tax haven banks operating in the British Virgin Islands. High-level politicians in several countries became forced to resign, star athletes and famous Hollywood screen idols suffered major public relations scandals, and old money bazillionaires saw their cherished anonymity evaporate. The story went uber-viral and was widely reported in all corners of the planet, and many believed the decades-old, secret tax haven industry was facing a certain death, surely in a short elapsed period when those criminal banks were shuttered and stop all financial activity. You know, when they stopped breathing.
Tax havens are still very much alive and breathing.
Days after ICIJ’s bombshell leak, Britain’s Prime Minister David Cameron and America’s President Barack Obama were giving a press conference after a scheduled meeting. The ICIJ leak had become such a massive global story that it was inevitable the story would come up, and right on camera in front of the world David Cameron spoke about how (paraphrasing) “we are going to eliminate tax evasion!… tax evasion is fundamentally unfair… totally unacceptable!… etc. – and so on…” Old sayings like “death and taxes” hold much truth in them, but David Cameron’s feigned-outrage press statements four years ago relate directly to those old sayings: “talk the talk, but then walk the walk” and “don’t make promises you can’t (or know you won’t) keep”.
Since that bombshell leak four years ago, both developed and developing nations around the Earth have lost trillions of dollars in tax revenue due to the ongoing operations of the tax haven/evasion industry (and it is an industry, facilitated by the world’s most powerful accounting, legal, and banking companies), at the same time suffering the severe economic effects of the now world-recognized term austerity.
“The ability of multinational companies (MNC) to have subsidiaries in many different countries, including in tax havens, create the opportunity for MNCs to shift a lot of profit to those jurisdictions. As you know, whatever can be priced can also be mis-priced. So, as a result a lot of income that could normally be recognized in developing countries ends up being recognized in the tax havens, where the big MNCs have their subsidiaries.”
That statement describes only the tip of the iceberg with regard to the variety of complex, engineered financial products readily available for high-net-worth individuals and corporations wanting to escape “unavoidable, certain-for-all taxes”.
“It’s the sheer unfairness, that if you’re very rich, or if you’re a multinational corporation, you don’t have to pay tax automatically like the rest of us do. But it’s almost become a voluntary activity – you choose to pay. You don’t pay based on your income, based on the profits you make. And that just is felt to be deeply unfair.”
The City of London is the epicenter of the international tax haven industry, where financial engineering takes place resulting in sometimes perfectly legal, sometimes criminal, complex accounting schemes involving banks in British-controlled Cayman Islands, Jersey, British Virgin Islands, and other UK-enabled tax evasion jurisdictions. The Queen’s head/image is on the stamps used by residents in these tax havens, so this corrupt financial industry receives the support of, and is encouraged, at the highest levels of the British government. Perhaps British Prime Minister David Cameron and Queen Elizabeth would conduct a joint public TV address to the people of England and the world, explaining just where the “honorable” process of eliminating “totally unacceptable, fundamentally unfair tax evasion” stands today.
People in nations around the Earth are anxiously anticipating such an address/progress report on tax haven elimination successes, and respectfully ask for more specificity than “we’re working on it”. U.S. Senator and candidate for President of the United States Bernie Sanders of Vermont and Massachusetts Senator Elizabeth Warren have been outspoken on the issue of tax havens and tax evasion. The issue greatly affects Americans and people everywhere in the world, so all candidates for President must – either voluntarily or forced by taxpayers/voters – forthrightly share their opinions and potential solutions.
“The main hope of developing countries have to come out of the economic deprivation, the poverty, the lack of human rights, is to attract technology, attract investments, and to make decisions that are important for their economies. But, if in the process of doing so, developing countries have to give up their fiscal sovereignty, have to give tax concessions to MNCs to locate there, have to agree to coercive corporations and tax treaties, then it is not fair to the developing countries. And that’s why tax justice matters.”
“In the UK and Europe, especially, we’ve been facing years of austerity politics. We’ve seen our public services cut, and al because, as they repeatedly tell us, ‘there is no money’. But clearly, it’s just that companies are choosing not to pay tax, and governments are not doing enough to collect it.”
“The next big threat comes from tax wars. That is, the political pressure to compete on tax and regulation. The risk here is that of a global race to the bottom, which will destroy democracy.”
“Let no man imagine that he has no influence. Whoever he may be, and wherever he may be placed, the man who thinks becomes a light and a power.”
– HENRY GEORGE (1839-1897) American economist, single tax proponent
he concept of land value taxation (LVT) is largely sourced from Henry George’s 1879 book “Progress and Poverty”. American educator Henry Steele Commager said the following about George’s most famous book: “Few other American books and certainly no other economic treatise exercised a comparable influence in the world at large”.
It’s somewhat embarrassing to admit not having read “Progress and Poverty”, but Mr. Commager’s statement and very positive quotes about Henry George from historic figures Leo Tolstoy and Albert Einstein have certainly increased interest in doing so. Equally embarrassing is having to admit less-than-average awareness of perhaps the most relevant economic strategy for today that Mr. George proposed some 130 years ago: land value taxation.
Given that decades of extensive tax evasion by corporations and wealthy people, facilitated by the world’s largest accounting, legal and banking firms, has led to a worldwide combined loss of tax revenue by governments estimated at $1 trillion annually, it was exciting to learn that, since land is immovable and can’t be hidden in offshore accounts, any nation which establishes land value taxation completely eliminates tax evasion. For that one reason alone, politicians from nations around the Earth need to very seriously consider studying and implementing LVT.
Workers in any nation which begins a LVT system can expect to pay a much lower amount in taxes, perhaps eventually paying zero income taxes at all. Such a transition would clearly benefit economic conditions when most people have a significantly greater amount of money for purchases or savings. Implemented LVT systems replacing most nations’ complicated, time-consuming tax laws would be fairer, more efficient, and simplify everyone’s life to a great extent.
Having an embarrassingly low, less-than-average awareness of LVT we’ll let the rest of this post, consisting of information re-posted from websites run by men and women with much higher-than-average knowledge on land value taxation, get into more detail. Let us just say that the concept of LVT seems to have a profound potential for truly creating beneficial societal results, is a “win-win” proposition, and, even after only getting one’s toes wet, has resulted in becoming a big fan.
Let’s put it this way. If the man responsible for the idea of land value taxation – Henry George – received great respect and admiration from the giants Tolstoy and Einstein, well, isn’t that about all one needs to know?
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Cross-posted from www.taxingqofland.org – producers of the 30-minute documentary “The Taxing Question of Land” (video below).
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Today’s blog focuses on a variety of journalists from all sides of the political spectrum who have written in favour of Land Value Tax and also considers the barriers inherent in party politics.
There are Left wing notions that LVT is fair and just. This is important, but what about the economic arguments?
Free-market capitalists and mainstream economists, such as the FT’s Martin Wolf and Samuel Brittan, have both argued the case in favour. Whereas left-liberals argue for land/wealth taxes on grounds of fairness and equality, free-marketeers tend to argue that the rapid accumulation of unearned property wealth over the last 15 years has made us all fat, lazy and unproductive. Tax wealth, so this theory goes, and we will be spurred into competing with fast-growing emerging markets. Right-wing libertarians also argue that wealth taxes are the least bad option because – paradoxically – they do the least to distort or depress wealth-creating economic activity.
We have here a policy that highlights the valuable elements of our political landscape. Left wingers highlight equality and fairness, while Right wingers value wealth creation and economic activity. If Land Value Tax achieves this then why is there a lack of political will to bring this forward?
Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element. The problem was that the amount of preliminary work required would take more than one parliament and any credit for the measure would redound to their successors.
If politicians really want to think about the unthinkable, as they sometimes claim, here is a place to start.
Surely it is time politics grew up or is the UK really being held hostage to the inability of our parties to be able to congratulate and thank each other for what they agree on?
It is worth highlighting exactly what we are discussing and I’ll turn to Martin Wolf, also of the Financial Times, who explains Land Value Tax in terms of infrastructure. Martin Wolf explains we should finance infrastructure costs by raising revenue from the people who benefit, the beneficiaries. In the case of infrastructure this will be landowners:
Consider a simple example. In a busy town the average house price is £300,000, of which half is the cost of building (or replacing) the house and the rest the value of the land. Some way away is an isolated village. Here the identical house costs £200,000, of which just £50,000 is the land value.
Consider what would happen if a road were built, for the first time, between the town and the village. Residents of the town would want to move to the village to take advantage of the cheap houses and the amenities. Assume, for simplicity’s sake, that the benefit of the village’s amenities to the marginal movers offsets the cost of the extra time they would spend travelling. The price of village houses must jump by £100,000.
Owners of the village housing will capture the benefit of taxpayer-funded road-building. To them this will be a massive windfall gain. In general, the rise in the price of land will account for most, if not all, of the capitalised value of the surplus of benefits over costs to users of the infrastructure.
Thus, increases in land values give not only a good indication of the benefits of infrastructure investments, but also provide an efficient and just way of financing their costs. It is efficient to tax these values because the tax would reduce the size of a windfall, while other taxes used to pay for infrastructure reduce effort, penalise the division of labour or discourage capital accumulation. It is also just, because the chief beneficiaries would bear the cost.
He goes on to discuss the benefit to local authorities:
A simple way of financing local infrastructure would then be via a tax on site values. The revenue could go, in whole or in part, to the relevant local authorities. If the latter were also deprived of the right to vary the rate, they would have an incentive to make investments that raise land values and increase their revenue.
At present, however, the lack of any easy means of raising finance is proving a huge obstacle to desirable investments. Then, when investment does take place, as with the Jubilee line, it merely pours vast windfall gains on landowners at the expense of taxpayers. The result has been a long history of inadequate investment and undue reliance on inherently damaging and unjust taxation. The UK is choking on the inadequacy of its own infrastructure. The time to make a change is now.
With thanks to Martin Wolf, this highlights another important argument of our times. How do we give power to our local authorities and give them the tools necessary to create and raise their own revenues to deliver and develop public services? The localism agenda is at the forefront of politics today, well known for the reforms in social housing over the last few years but also is at the heart of Conservative politics. Heseltine himself writes in ‘No Stone Unturned’ October 2012:
2.14 For the UK to face up to the challenge of increasing international competition, we must reverse the long trend to centralism. Every place is unique. Local leaders are best placed to understand the opportunities and obstacles to growth in their own communities. Policies that are devised holistically and locally, and which are tailored to local circumstances, are much more likely to increase the economy’s capacity for growth.
Another current discussion about land and property taxes is the mansion tax. As there has been no discussion about revaluing our properties, the Mansion tax will still be based on the outdated Council Tax valuations made in 1991. As such, money raised will be small and will still be regressive. Regressive taxes means that poor tax payers subsidies rich tax payers. While Progressive taxes mean that neither the rich nor the poor subsidise each other.
Will Hutton writing for the Guardian in March 2012 suggests that Osbourne bring in a land value tax at 0.6% on every property which would result in homeowners with homes of up to £250,000 paying less than they do now– which will create something truly progressive. He also argues the case for business rates:
The British pay council tax on property values unrevised since 1991 – with New Labour typically never finding the political courage to launch a revaluation and thus higher, unpopular council tax bills. A mansion tax is all very well, but if it is based on 1991 valuations it will hardly bring in any revenue. Instead, Mr Osborne should announce a revaluation of the country’s entire housing stock and levy a tax paid in proportion to the new valuations; council tax should be renamed as the housing services tax. To raise sufficient revenue, it would be pitched as an annual 0.6% tax on every property; as a result, homes below £250,000 would pay less tax than now, taking the political sting out of the revaluation.
He should also introduce a land value tax on business and agricultural property; the principle is that as land becomes more valuable because of its business use, so it should attract more taxation. As a partial quid pro quo, suggests Mirrlees, the chancellor should abolish both stamp duty on property transactions and business rates. Business would thus pay tax on the genuine increase in the value of the property and land it is using; home owners on the real value of the housing services they consume – and the Treasury would still be ahead.
The Institute of Fiscal Studies published the Mirrlees Review – Reforming the tax system for the 21st Century. It is well worth a read. In the conclusion we are told to consider what a good tax system should entail:
We should consider the overall system – elements can be more or less green, progressive etc but The overall system should encompass all of these.
Neutrality, treat similar economic activities in similar ways to make the tax system simple and transparent.
Achieve progressivity as efficiently as possible
The report also highlighted 7 major flaws in the current UK tax system, number 6 is:
Taxation of land and property is inefficient and inequitable. There is a tax on business property – a produced input – but not on land, which is a source of rents. Taxation of housing involves both a transaction tax and a tax based on 20 year old valuations.
The report goes on in section 20.2.5 to talk about how to deal with business taxation. They propose replacing the current system of business rates with a land value tax.
“Business rates are not a good tax – they discriminate between different sorts of business and disincentivise development of business property.”
We have the words of a variety of columnists who support Land Value Tax. We can see that this issue fulfils the Left wing value of being progressive, the Right wing value of incentivising wealth creation and also the Economists value of efficiency. Surely the best tax reform policy for our nation is the one that is supported by both Right and the Left, and also by the greatest Economic minds in the country? If this is true, then what will provide the political courage?
Will we be stuck behind the immaturity of being unable to credit our political opponents with the courage to do what is best for us all? Or perhaps we are at the dawn of a new age, a mature age where we can work together to achieve what we already agree on?
I say, let us focus on what we have in common; together we can educate ourselves and raise awareness. Let us stand together and say proudly, “this is our time and together we will bring about fundamental change that will benefit us all.”
Dedicated to promoting principles expounded by Henry George in the conviction that they offer the only true basis of Economic Freedom and Social Justice, and that their application will remove involuntary poverty, promote industrial and international peace, and make all other reforms easier of accomplishment, and generally contribute to the welfare of humanity.
People do not argue with the teachings of Henry George; they simply do not know it . He who becomes acquainted with it cannot but agree. Count Leo Tolstoy
Men like Henry George are rare, unfortunately. One cannot imagine a more beautiful combination of intellectual keenness, artistic form and fervent love of justice. Every line is written as if for our generation. Albert Einstein
The Foundation was established in January 1929, to administer a Trust Fund for spreading a wider knowledge of the social and economic teaching of Henry George as set forth in his books – Progress and Poverty, Social Problems, Protection or Free Trade, The Condition of Labour, A Perplexed Philosopher, The Science of Political Economy and other writings.
The motive for establishing and maintaining the Foundation is the conviction that the principles expounded by Henry George offer the only true basis of Economic Freedom and Social Justice, and that their application will remove involuntary poverty, promote industrial and international peace, and make all other reforms easier of accomplishment, and generally contribute to the welfare of humanity.
The Foundation supports educational courses, meetings, research, and publications directed at promoting a better understanding of George’s ideas and developing them to address the economic issues of the day. Details of our current programme may be found on the web site and by leaflets available at 11 Mandeville Place, WIJ 3AJ or by telephone: 0800 048 8537.
Our main publication is the journal Land & Liberty which has chronicled world events for over 100 years and aims to explore how our common wealth should be used – and to demonstrate that this is the key to building the bridge of sustainability between private life, the public sector and our resources – between the individual, the community and the environment. It aims to put the laws of nature and people at the heart of economics. Land & Liberty is made available free of charge to anybody who registers interest with us on this web site where you can also read recent articles and the latest edition of Land & Liberty.
The Foundation depends upon the voluntary efforts of members, supporters and friends to provide the publications and services we offer and active participation is always welcome.
For more context, perceptions on Land Value Taxation, see the following in-depth article by LVT advocate Fred Harrison:
Palestinians are at the heart of the conflict in the M.E Palestinians uprooted by force of arms.. Yet faced immense difficulties have survived, kept alive their history and culture, passed keys of family homes in occupied Palestine from one generation to the next.
This blog is devoted to legal, historical and human rights matters, in which issues of general concern are addressed freely and spontaneously. It is intended to further an informal exchange of views in the democratic spirit of freedom of opinion and respect for the opinions of others, in an effort to understand rather than condemn, to propose constructive solutions rather than grandstand. The perspective is both from inside and outside the box and the added value lies more in the questions than in the answers.
he old saying goes that the only things we can be absolutely sure of are death and taxes. Every human being will die one day for certain, although some believe the soul goes on forever, but that’s a topic for another writing. So, at least from the generally held view of death where one stops breathing and all physical/bodily activity stops – yes, death is inescapable. But taxes are another thing altogether according to the men and women over at Tax Justice Network, and what their years of research have revealed is that, for some, taxes are not inescapable. What they’ve found to apply for some people around the Earth is that “the only (singular) thing we can be be sure of is death”.
THE ONENESS of HUMANITY 