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What is the Tax Justice Network for?

What is the Tax Justice Network for? The TJN describes itself as,

“an independent organisation dedicated to high-level research, analysis and advocacy in the field of tax and regulation. We work to map, analyse and explain the role of taxation and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens. Our objective is to encourage  reform at the global and national  levels. We are not aligned to any political party. Our network includes: Academics; Accountants; Development organisations and NGOs; Economists; Faith groups; Financial professionals; Journalists; Lawyers; Public-interest groups; Trade unions; Others.”

It sets out its founding objectives as “raising the level of awareness about the secretive world of offshore finance; promoting links between interested parties around the world, particularly involving developing countries; stimulating and organising research and debate; ecouraging and supporting national and international campaign activity”.

The current focus of the TJN is on tax havens, and it has been instrumental in bring the issue to public attention. A statement on the subject tells us

“The TJN promotes transparency in international finance and opposes secrecy. We support a level playing field on tax and we oppose loopholes and distortions in tax and regulation, and the abuses that flow from them. We promote tax compliance and we oppose tax evasion, tax avoidance, and all the mechanisms that enable owners and controllers of wealth to escape their responsibilities to the societies on which they and their wealth depend. Tax havens lie at the centre of our concerns, and we oppose them.”

One might have thought that the TJN would fully support the reform that this Campaign is advocating. They could be useful allies. Certainly they are helping us by providing space to present the case, but TJN itself does next to nothing to promote it and certainly never makes the point that LVT must be a major part of the solution. Directing its attack on tax havens is damaging in that it diverts attention away from the underlying problem of defective tax systems. Obviously if TJN was too up-front about LVT, which must be part of the solution, it would make the vested interests nervous and the economics establishment would suck their teeth, but then anything worthwhile will involve gathering support to shake up the vested interests. However, they have no need to worry when the head of TJN, John Christensen says

“We have had endless and repetitive discussions with advocates of land value taxation.  LVT has a place in a modern economy.  Many of my colleagues support land value taxation, but not as a singly source of revenue.  The idea that LVT can provide the revenue base for a modern economy is simply out of touch with reality.  Worse still, there is a proven link between direct taxation and democratic representation which would be greatly diminished if we shifted the tax base from direct taxation on income and financial wealth to land taxation.”

Stop drinking – stick to fruit juice

Hmm. For the TJN itself not to advocate a substantial switch from existing avoidable taxes to LVT is like a doctor failing to tell an alcoholic to stop drinking. Relapsing begins with the odd tot.

The notion of the link between direct taxation and democratic representation is a based on the delusion  that employees pay tax. It is a deception. It is employers that bear the burden of the cost. Ask one. In the public sector it leads to churning and almost doubles the cost of running the services. The end result is that employers are forced to replace staff by machines or stop providing the service. Sweden is an advanced case, where things are automated to an absurd degree because labour costs are so high due to taxation of labour. At least they have the wit to get the technology to work but with high unemployment this does not make sense.

Mainstream economists often make the assertion that it is impracticable to raise all public revenue from LVT. I assume that is why Christensen makes this statement. It is not surprising because mainstream economics does not have a coherent theory of land economics, which is one reason why the economic tsunami was not noticed until it was almost on us. The point is that whilst land enclosure gives land an artificial scarcity value, existing taxation depresses land values to a far greater extent. This effect could easily be seen in the days when adjacent local authorities set their own rate charges. Rentals reflected the charge payable – high rates depressed rental values and vice versa.

As existing taxes are lifted, land values go up. This creates a virtuous circle, with falling taxes on labour, a growing tax base, a reduction in the cost of providing government services and a cut in the bill for welfare. A determined implementation of LVT would turn the country round for the better within less than a decade. Although these benefits an obvious consequence of the workings of Ricardo’s Law of Rent, they cannot be deduced from mainstream economic theory.

It is important to bear in mind that the concentration of claims on wealth by certain individuals and companies is due primarily to their ability to secure for themselves the revenue streams arising from land rent. When this is taxed at source, there is nothing left to remit to a tax haven, because the only way to become wealthy is through hard work and enterprise, which, we argue, it is neither necessary or right to tax.