Opinion

Edward Hadas

Shhh – don’t talk about higher taxes

Edward Hadas
May 7, 2014 14:53 UTC

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Many people assume that tax increases are the only realistic response to excessive income inequality. They are wrong. There is a better way.

The International Monetary Fund first came out in favour of greater “redistribution,” a code word for higher taxes, in February. It joins the Organisation for Economic Co-operation and Development, which issued a big document decrying the privileged position of the richest residents of rich countries in 2011. The OECD has just called for “policies to restore equal opportunities,” another code for higher taxes.

The IMF and OECD certainly are not alone. This year, Thomas Piketty’s “Capital in the 21st Century” has been at the top of best-seller lists. The French economist has helped popularise the idea that an overly privileged “1 percent” needs to be restrained. His main proposal? The elite should pay more in taxes.

Income inequality is worth worrying about. Ethically, pay levels should bear some relation to the worker’s actual economic contribution. Of course, the value of work cannot be measured precisely. But success in the modern economy is too much of a group effort for bosses to be paid massively more than other employees. The rapidly increasing rewards for top executives, identified by Piketty as the main source of increasing inequality in the United States and other rich countries, are unjust.

Apple, hypocrisy and stakeholder tax

Edward Hadas
May 22, 2013 14:00 UTC

Apple is the latest multinational to feel the heat on cross-border tax management. The news that the tech giant used Irish law to lower U.S. tax payments should not have been surprising. After all, “Do no evil” Google had no second thoughts about recording what were essentially British sales as Irish, for the sake of a lower tax rate. It’s hardly likely that Apple, which has cultivated a certain anti-establishment air, would have hesitated.

Indeed, until a few months ago, I don’t think there was a corporate treasurer anywhere who would have taken justice into account when deciding on tax strategy. At most, there might be worries about bad publicity, but the well-established corporate practice of tax dodging had generated little attention.

And who would complain? Lower taxes on profit bring benefits to most people connected with companies; the money that doesn’t go to the government goes to workers, customers and shareholders. Besides, most experts who understand the arcane rules of international taxation are paid to use them to keep payments down.

Taxes and human nature

Edward Hadas
Jan 30, 2013 14:54 UTC

The tax system could well be the most idiotic, hypocritical and unnecessarily complicated part of modern industrial economies. The system needs to be rebuilt.

In developed economies, as governments have expanded, taxes have increasingly been used as a tool of economic and social policy. The rich are taxed more than the poor for the sake of a vision of social justice: from each according his ability. Depending on the jurisdiction, some good cause or another is favoured: house ownership, marriage, children, charitable contributions, savings. For companies, an almost endless series of exemptions, deductions and definitions are supposed to encourage investment, employment or some other desirable end.

Each tax wrinkle produces its own complex set of rules. Taxpayers’ continuous efforts to minimise payments lead to yet more rules. Each tax jurisdiction has its own system, a diversity which both increases the intricacies of international business and creates opportunities for individuals and companies to place income where it is less highly taxed.

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