Myths and Misunderstandings
< Update: July 2009. On the non-perils of information exchange . >
< Update: May 2009. US-based Citizens for Tax Justice on Myths and Facts about Offshore Tax Abuses including "it's not illegal," + "everyone pays as little as possible" + "it's about avoiding double taxation" + "it will make US businesses less competitive" + "corporations will just leave" + "America's corporate tax rate is high compared to most countries." >
Try this tax justice glossary, with brief explanations of different terms in the tax justice lexicon. There is a short, but growing section of briefing papers, written by tax experts. If you prefer the spoken word, series of Youtube presentations by Richard Murphy will help you understand some of the issues more clearly. He speaks about inheritance tax, tax compliance, tax havens, transfer pricing, domicile, private equity, redomiciliation, and Jersey - and he will be adding more over time.
We also have some information added by theme, below. This section will be expanded over time.
What is a tax haven? There are many answers to this; see this briefing paper for a discussion of the issue, and Richard Murphy's tax-haven category in his blog.
Transfer pricing. See this short youtube presentation by Richard Murphy on the subject, or look at these investigative articles from the UK's Guardian newspaper, identified in this blog for a real-world example. Or look at this short interactive guide to transfer pricing. Remember, transfer pricing itself is a routine operation; it is transfer mispricing that is the problem.
Domicile. See this series of short articles discussing some of the issues.
Tax Competition. There is a section on our website dedicated to tax competition, containing many useful links.
Capital Flight. This is discussed in another section on the TJN website, with useful links at the bottom.
Companies: is tax a cost? See this article in the Guardian newspaper, and our blog .
Tax avoidance is rampant, though companies insist they are cutting their costs to benefit their shareholders. This defence is disingenuous. Tax is not a cost to a company. It is a distribution out of profits. That puts tax in the same category as a dividend - it is a return to the stakeholders in the enterprise. This reflects the fact that companies do not make profit merely by using investors' capital. They also use the societies in which they operate, whether that is the physical infrastructure provided by the state, the people the state has educated, or the legal infrastructure that allows companies to protect their property rights. Tax is the return due on this investment by society from which companies benefit.
International Accounting Standards: an emerging issue for TJN, which is starting to bring this arcane-sounding but enormously important issue to the attention of civil society groups. TJN believes that progress on this issue alone has the potential to benefit poor countries more than all foreign aid. TJN will be producing more material on this in due course; in the meantime read these blogs by Richard Murphy, who provided the accounting expertise for Publish What You Pay's call for Country-by-Country reporting in the extractive industries, and is helping TJN open up a much bigger campaign to achieve Country-by-Country reporting in all sectors, not just the extractive industries.
(to be continued and expanded.)