Thank you for the 12" extended remix version answer and I know, we all know, you are keen on MMT but it does not really answer the conundrum of how governments increase their tax take from the super rich. I suppose another way of looking at it is how do we prevent people from becoming this wealthy in the first place because between economic globalisation of Capitalism and Tax Avoidance schemes I am genuinely at a loss of how to stop this phenomenon.
I'll confine my comments to international taxation. I'm not an economist, but people like
Gabriel Zucman study the effect of financial secrecy and tax havens. They argue for transparency - lists of beneficial owners of companies and property. So that's a start. But we also need to look at the current tax rules and what they allow.
We need to be much more robust about loans from offshore entities, especially to natural persons. For instance, Jacob Rees-Mogg was in the news having
borrowed £6m from an offshore company wholly owned by himself. I doubt that he has done anything illegal but it is possible that, by taking it as a loan, he has avoided income tax. What are the loan terms? 0.8% interest. Who will enforce them? Who will check? Would Rees-Mogg take himself to the small claims court in case of non-payment? Anyway, he gets use of the money in the UK without paying income tax. He pays interest effectively to himself, which may be tax deductible in the UK if it's a 'qualifying loan'. And - who knows - the offshore company may not need to pay any tax on the interest income. Clearly, we could change the rules around personal loans from offshore. For instance, we could simply tax them as income.
Also, we should look at corporations. How do they avoid tax? There are 3 main routes (see the 'Tools' section of this Wikipedia entry on
Base erosion and profit shifting): transfer pricing, debt-based manipulation, and intellectual property. The OECD is working on these (see Wiki) but it is slow and, in my view, too timid.
- Transfer pricing: this is the idea that companies within a group should account for transactions between its constituent companies on an arms-length basis. This is a fair principle. But at scale, it is impossible to be perfectly accurate about the arms-length price. So, companies can often charge slightly higher than they might from low-tax jurisdictions and take a sliver of profits offshore with every transaction.
- Interest charges. Governments allow companies to take loans, and claim the interest charges as a tax deduction. So, companies can set up a Luxembourg company to loan money to a UK company. The interest payments flow to Luxembourg tax-free.
- Intellectual property. Companies charge royalties, licence fees, etc from offshore to reduce their tax liabilities in higher-tax jurisdictions.
At their heart, none of these methods are complex. You make your company pay for something in a tax haven/secrecy jurisdiction, and you claim the tax deduction/expense in the UK. That's all. So it's a matter of what tax deductions/expenses we allow.
The tax code is basically a hundred years out of date. Robust changes are scary to wealthy countries, who fear that they will kill the goose that lays the golden egg if they change the rules. So they prefer to think in terms of 'preventing abuses' of the rules. But it only takes the political will to change and the tax code could be tilted very much in favour of the average citizen of wealthy countries. It might hit 'competitiveness', but what good is 'competitiveness' if the mass of people in your country derive no net benefit from it? In those circumstances, i.e. our present circumstances (see 'The Decade The Rich Won'), 'competitiveness' sows the seeds of a discontent that corrodes the fabric of a society and opens the way to authoritarianism. If we want a democratic society, where power is accountable and wealth doesn't dominate and corrupt our institutions, things need to change.
