From ‘The Newsmakers’, hosted by Imran Garda, a debate on corporate tax avoidance between me and Tim Worstall from the Adam Smith Institute.
The full piece is linked at TJN.
On the subject of incidence, we each made competing claims about the evidence, as you’d expect. To add a little light to the heat, here’s a TJN round-up of economic research findings on this important question; and some interesting points raised from a different perspective by David Quentin.
Hello Alex.
I think David has mischaracterised the economics of tax incidence and what economics has to say about where profits come from. Response here:
https://medium.com/@CarterPaddy/tax-incidence-lawyers-versus-economists-4b2d7963d71#.nq8w8lu6g
[I should say that David thinks I have created a straw man of this position – I honestly cannot see how]
Thanks Paddy. My feeling on a quick read of both is that neither is, perhaps, entirely fair to the other? David doesn’t do full justice to the economic analysis (inevitably as a non-economist?); while your response might be a little more sympathetic to that, and could perhaps reflect a little more the extent to which the incidence argument is still sometimes used to try to shut down debate.
(Often by non-economists in fact. Hmm. Maybe there’s scope for a neutral-ish take on this – not so much on what the evidence says, but rather on what it actually implies, and doesn’t, for debates about corporate tax. Anyone?)
maybe so. it’s hard to see outside one’s own perspective and David certainly thinks I’ve not done him justice, but from my point of view I was simply responding directly to what he wrote. There are, I think, some flat out false claims in there, which I think could be readily acknowledged.
he writes that asking the question of tax incidence is using economic jargon to perform a “rhetorical slight of hand” and yield a misleading answer. Obviously I disagree in the sense that analysing incidence is perfectly legit (or even, necessary) but maybe what he is getting at are anti-tax advocates who try to use the idea that corporation taxes have some incidence on workers as sufficient to demonstrate they are a bad idea. That *might* be the case if incidence large enough (if the impact on investment is large enough) but can be misleading if not set against other considerations. I said as much when I wrote it is “possible that despite corporation taxes having some incidence on workers, other ways of raising the required revenues would be worse for workers.”
So you have in mind something which says OK, suppose the evidence on tax incidence is X, what does that imply about tax policy? I would hope that’s in public economics text books, but I would need to get to the library to find out.
I’d hope so too! I think it would be more a question of pulling out what’s there (rather than reinventing the wheel), and giving some pointers on what it might imply for live policy questions – including, say, the BEPS process, the proposal for unitary taxation, Tim’s suggestion to abolish corporate tax?
that is true every nation will depend on institutions and tax policy