Sunday Thoughts XI (July 2-8)

A selection of links and thoughts that I stumble upon throughout the week – everything from economics to politics to philosophy to the occasional music video. 

I. Brexit Batshittery

There are only nine months left until Brexit, and yet, as the Belgian Prime Minister Charles Michel puts it, “the feeling that dominates is the impression that the British continue to negotiate with the British and not with the EU” (Bloomberg). Continue reading “Sunday Thoughts XI (July 2-8)”

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Sunday Thoughts VIII (June 11-17)

A selection of links and thoughts that I stumble upon throughout the week – everything from economics to politics to philosophy to the occasional music video.

I. The Great Fiscal Escape

In a new paper, the researchers Tørsløv, Wier, and Zucman find that close to 40% of multinational profits are shifted to tax havens each year. They also argue that it’s profits and not productive capital that is moved across borders, and thus a tax cut will most likely fail to substantially create new jobs. You can read about it in The New York Times and the Washington Post, and Paul Krugman also wrote about the topic in his New York Times column – he also discusses the relatively minor effect corporate tax rates have on business investment decisions in general.

The researchers also note that, throughout the world, for one $ 1.00 in wages paid, US multinationals say they make around $ 0.50 cents in (pre-tax) profits – except in Ireland, Bermuda, Luxembourg and the like, where they say they make $ 3.50. These tax havens surely have some crazy-productive workers. Continue reading “Sunday Thoughts VIII (June 11-17)”

Tax Evasion and Tax Avoidance – A Multi-Trillion-Dollar Business

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The topic of income and wealth inequality is closely linked to the practice of tax avoidance and evasion, both by international corporations and by wealthy individuals. For example, it is often argued that an increase in top-income taxes and capital taxes intended to mitigate economic inequality will only end up scaring off investors and high-skilled workers or encouraging them to circumvent the law and ultimately hurting national prosperity. The related difficulties of implementing national policies in a globalised world have been highlighted by the recent disclosures of the Panama Papers and the European Comission’s decision to hit Apple with a tax bill of €13 billion after years of paying an effective corporate tax below one percent due to a deal with the Irish government. Unfortunately, any discussion about tax avoidance and evasion is seriously constrained by the opacity of tax havens and the global financial system and its laws and the lack of robust data. Recent research may help to shed some light on the issue at hand. But while there has been made some progress on the international level recently, it remains highly doubtful whether the gigantic globalised financial shadow economy can be tamed. Continue reading “Tax Evasion and Tax Avoidance – A Multi-Trillion-Dollar Business”