Socialist strategy on tax and tax evasion

okay I'm continuing my talks that I started yesterday on social strategy I'm moving on now to immediate tax and monetary policies assertions government could follow one of the triumphs of the City of London and the rise of the financial interest that I was talking about in the last video was when Gordon Brown made the Bank of England independent of the still owned by the government this had been an objective of the monetarist economists because they wanted to remove monetary policy as one of the tools that governments could use to maintain full employment after it was put under an independent committee by Gordon Brown and no longer under the direction of the Chancellor of Exchequer its responsibilities were restricted to maintaining the liquidity of the banking sector and controlling inflation what clearly didn't do very well at maintaining the liquidity of the banking sector because we had the Northern Rock actually have a run on the banks which the first time that that happened since the nineteenth century however its policies for controlling inflation where when compared with other central banks not bad it currently has a target of two percent and is supposed to use interest rates to adjust policy if the inflation rate is too high or too low relative to the two percent target now this is better than the European Central Bank which doesn't have to low target and therefore it's not able to engage in expansionary monetary policy so it's not as bad as it could have been however the policy set out completely ignored the trade balance they treated monetary policy as being solely a matter of meeting the requirements of the financial sector the one of the first things a new government should do is give the bit Bank of England two targets both the inflation rate and the trade balance the equivalent target to the two percent inflation target would be to achieve a neutral trade balance us to say neither surplus of exports no surplus of imports you can only have additional targets if you specify additional means of achieving them so if the interest rate is being used to control the inflation rate it can't simultaneously be used to control the trade balance on the other hand intervention in the foreign exchange markets is still possible after Black Wednesday was held that was hopeless for central banks to try and intervene in the foreign exchange markets because the attempt to the Bank of England to hold up the value of pound in the face of Soros is run on the pound completely failed but it doesn't follow from that that the bank cannot hold the value of a currency down that was an attempt to hold the value of the currency up it's quite possible from to intervene in the golden foreign exchange markets to bring the value of the pound down if there's a trade deficit and [Music] if there's a trade surplus they can principle raise the value of the pound because the circumstances of a trade surplus are actually favorable to the limping ell to do that in the longer term the central bank would have a role in the transition to a non-monetary economy regulating and supervising a non-monetary unit of account but I'm not going to cover that until later on when I'm dealing with changes to property relations I'm going to get on now to fiscal policy now up until the Callaghan government ran into a crisis in 1976 it had been accepted that a secondary objective of fiscal policy given that the first objective is to fund government spending the secondary objective of fiscal policy was to maintain an aggregate level of demand in the economy sufficient to ensure full employment state and expenditure investment was expanded in downturns to ensure that those who were laid off in the private sector would be taken on to work on state investment contracts and in the public sector and this was the key to the building up of the strengths of the trade union movement during the 1950s and 60s it's clear to me that surface in the labor party should be advocating that this be restored as a key aim of government fiscal policy in doing this it's necessary to combat the idea which is widespread that nothing can be done about tech unemployment because unemployment it is said is due to automation and the rise of the robot well as I've said in previous talks the rate of improvement in labor productivity in the recent recession since 2010 has been way below the rate of improvement in labor productivity which took place in the first decent sixties in those days we were getting to turn half percent or so improvement in labor productivity it's been under 1% closer to half a percent in in Britain since 2010 if labor productivity has been stagnant since 2010 you clearly can't blame unemployment over that period on robots we were able to have full employment under conditions of much more rapidly rent rising labor productivity in the past the difference is state policy there have been a policy deliberate cuts in government expending to exacerbate the downturn rather than pulses of expanding government expenditure to reduce the downturn the objective has been to further polarize the division of income towards the wealthy rather than the reverse which was the case under previous governments but that's a secondary issue a secondary objective of fiscal policy to maintain full employment the primary objective of fiscal policy is to fund government expenditure and socialists of traditionally advocated direct run in direct taxation for that you can go right back to the Communist Manifesto where it calls for the funding of government expenditure by a progressive income tax and the abolition of indirect taxes that occurs repeatedly in the programs of of traditional socialist policy programs and parties now on leaving the European Union it will no longer be mandatory to maintain value-added tax value-added taxes the only tax that is mandated by the European Union and it's the only source of revenue for the European Union the share of value on tax this is indicative of the very conservative character of the European Union as an economic institution in that it deliberately issues any kind of taxation which could change the relative balance of income between rich and poor now if we look at vit in 1979 shortly after going into the EU v80 was only eight percent it's now 20 percent the Tories have made great play on their ability to reduce the base rate of income tax to 20 percent it used to be 33 percent it's been reduced to 20 percent that's a 13 percent reduction in income tax but the same time there's been a 12% increase in v80 to offset it so that people are actually taxed more heavily now than before because that is a more regressive tax than income tax in the UK you get a tax-free allowance on income tax you you pay no income tax on the first 11,500 that you earn but on on the hand if you go out and spend your 11,500 on goods in the shops you'll be paying 20% v80 on that so the net effect of the shift from income tax to v80 is to transfer the section of income which the poor got untaxed into something that gets taxed as v80 if b80 were abolished and the revenue raised by progressive income tax that's clearly beneficial to those on low incomes and it's possible to have taxes to the bias the opposite way before the v80 the UK had purchased tax which unlike value-added tax was levied only on luxury goods so it was a class-based tax designed to hit those on higher incomes it was introduced during the war when the intention was to divert production from luxuries to war production so that the only civilian production going on was of absolute necessities under the post-war Labour government it was used to divert output from the consumption of the well-off into building up the nationalized industries funding council house building and the welfare state policy response in this area is to say we should be aiming to replace v80 with the luxury goods tax and in general to reduce the share of government revenue raised by indirect taxation and certainly all basic items a working-class consumption should be tax-free there are advantages to being able to selectively raise tax on categories of luxuries that are in in the main imported though it's a little difficult to determine exactly what those would be but you can the imported luxuries if they are heavily taxed will tend to control the trade deficit but the bias of though the class bias of the tax system is absolutely blatant in Britain not only has income tax been reduced and v80 on necessities increased but income of the countless class from dividends is taxed at a lower rate than wages are so the base rate of tax on dividends is only 7% the base rate of tax on wages is 20% the top rate of tax on wages is 45% and the top rate of tax on dividends is only 38% so you couldn't get a clearer example of how the tank system is designed to benefit those who live off the labour of others run those who work for an income the lower rate of tax that shareholders face is an endless blatant example of bias because there's a whole button mass of hidden means by which both firms and individuals who are wealthy use tax havens which are often in British territories to avoid paying tax this use of British territories to avoid paying tax doesn't just affect Britain lots of other countries have rich people who set up their tax base in British colonies in that way a book I recommend is oligarchy by Jeffrey winters where he shows how the tax system of all the Western oligarchies is designed to make the working class and the middle classes pay taxes also excusing the rich let's look at something the concrete dodges that are being used at the moment in Britain a major one is to desire disguise someone's incomes loans a rich person sets up a company in the chat in the Cayman Islands a day then have their salary in royalties etc paid to this company which just builds their employer for services rendered so officially the person is not an employee of whoever they're working for in Britain officially they are just an agent for the company in the Cayman Islands and they're plying services to the British employer on the behalf of this company in the Cayman Islands the money is then all paid to the Cayman Islands and is free from tax the company in the Cayman Islands then loans the money for their personal expenditure or purchases cars for them for company use and they make them alone on a long-term loan which they're not gonna have to pay back before they're dead this is a favorite means by which wealthy media and sports personalities are avoiding their taxes an interesting side effect of this is that it raises the reported trade deficit of the country I suppose the BBC pays a presenter company in the Cayman Islands this serviced by the BBC presenter then appears to actually be an import into this country it appears in the trade statistics as an import and the loans made to the presenter from the company in the Cayman Islands then appears foreign borrowing on the British capital account so the net effect is to raise the tractor the trade deficit entirely artificially as an artifact of people avoiding tax another similar technique is to divert profit into other forms of surplus-value corporation tax is only payable in profits so you get the owners of the firm operating in Britain recapitalizing it replacing share capital with loan capital from a front company in the Bahamas the company in Britain then shows no profits since the all the operating surplus is devoted to paying interest on the loans they took took out from their front company in the Cayman Islands the corporation tax liabilities therefore wiped out and again net foreign debt is increased and outflow of currency is increased another scheme like this is one run by companies which have clear branding an international coffee company for example might claim that it was importing international problem intellectual property in the form of branding from a holding company in Panama so most of its operating surplus is then diverted into royalties supposedly paid for the use of the brand name and goes to Panama where it's not taxed again tax is avoided and a deficit appears on the trade account in this case it'll appear in the foreign trade account as imports of world of of branding in and intellectual property well what's the kinds of response you can make to this obviously dividend income should be taxed at a rate no lower than wages that's all absolutely basic but that doesn't get over the scandal of the Cayman Islands the Channel Islands the Isle of Man the Bahamas etc acting as tax havens but all of these are British overseas territories and in principle they could all be made part of the UK and subject to UK tax and cooperation law if that were done the territories will need corresponding compensation they would need representation in the UK Parliament they would need full rights to further citizens to use the NHS and welfare state and pensions now in the Cayman Islands the and the Bahamas the rights of ordinary people to welfare services are terrible but that doesn't matter since these are tax havens that the British state essentially maintains through the British elite and the elite of other Western countries to avoid paying taxes and that should be put an end for income tax purposes all personal loans that are received by individuals or companies from companies or individuals outside the UK should be treated as income and liable to taxation and instead of basing company taxation on corporation tax you should recognize as Marxist economics does that profit interest rent and royalties are all just diverted forms of surplus-value tax should be levied on the surplus value on the operating surplus and interest rent and royalties would not be deductible for purposes of tax liability there is no point in allowing the property owning classes to avoid tax by moving surplus value between different headings ok I've now covered the economic background economic objectives exchange rate pulse in tax policy I'll let her get on to issues to do with property relations production relations and democracy and defects

Channel: Paul Cockshott

Views: 2,940

Rating: 4.9745221 out of 5

Keywords: tax evasion, income tax, socialism

Id: 4tovsC3-Vdk

Length: 21min 56sec (1316 seconds)

Published: Sat Sep 01 2018