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Tax hikes fail to cause ‘brain’ drain in UK

Written By: - Date published: 10:19 am, April 8th, 2010 - 39 comments
Categories: capitalism, class war, tax - Tags: , , ,

Mickysavage pointed us to this piece by the Guardian’s George Monbiot on the rich’s oft-repeated threats that if they don’t get tax cuts, they’ll leave:

It’s a bitter blow. When the government proposed a windfall tax on bonuses and a 50p top rate of income tax, thousands of bankers and corporate executives promised to leave the country and move to Switzerland(1,2). Now we discover that the policy has failed: the number of financiers applying for a Swiss work permit fell by 7% last year(3). The government must try harder to rid this country of its antisocial elements.

Micky wonders why we didn’t see a flood of UK executives, considering our tax rates are so low – if tax is as important as the Right would have us believe. The reality is brain drains from stable first world countries don’t exist. Our emigrants tend to be lower-skilled (because they get much better pay in Aussie) and we import huge numbers of highly qualified people.

Executive flight is the corporate world’s only effective form of self-regulation: those who are too selfish to pay what they owe to society send themselves into voluntary exile. It’s an act of self-sacrifice for which we should all be grateful. It’s hard on the Swiss, but there’s a kind of mortal justice here too: if you sustain a crooked system of banking secrecy and tax avoidance, you end up with a country full of crooks and tax avoiders.

Sadly, most promises of self-imposed exile are empty. They seem to be intended, like Boris Johnson’s warning last year that the City of London would be reduced to a ghost town by the new taxes(4), to dissuade the government from taking action. The universal public response, as Tracey Emin found when she announced that she couldn’t possibly survive here on her scanty millions(5), is ‘Go on then, jump.’

Would that were the attitude here. In New Zealand, the public (by which I mean the half dozen political editors who pronounce what the public thinks on everything) has a slavish attitude to the ruling capitalist class that is quite sad.

But self-awareness is yet to become the bankers’ dominant trait. Last week the president of Barclays insisted that Britain should be ‘immensely proud’ of the bank’s enormous profits(6), while the Royal Bank of Scotland announced that it would give its staff bonuses of £1.3bn – 84% of which belongs to taxpayers – despite making another massive loss(7). The new taxes are being imposed because of the crisis caused by bankers’ greed. Yet the bankers seem to believe that we’ll agree that they are the last people who should have to pay them.

In their Randian fantasy world, the capitalist elite are carrying the rest of us and we ought to be thankful. We know they are what all elites through history have been – parasites and bullies.

There’s something else that the threats tell us: some people appear willing to do almost anything for money. In court papers made public at the beginning of this month, Guy Hands, the owner of the private equity company Terra Firma and the record label EMI, sought to explain why the case he is fighting against Citigroup should not be heard in London. He moved to Guernsey last April to avoid UK taxes. Since then, he says, he has ‘never visited’ his wife and children, who still live in his former home in Kent, for fear of compromising his tax status. For the same reason, ‘I do not visit my parents in the United Kingdom and would not do so except in an emergency.'(8)

Hands, according to the Sunday Times rich list, is worth £100m(9). Were he to allow the Exchequer to reclaim a few of his unnecessary millions, he would face neither ruin nor starvation. He’s reported to work 18 hours a day(10), which means he is unlikely to find much time to enjoy his wealth. It’s hard to see how the fraction he has saved through becoming an economic refugee could bring him any discernible benefit, let alone happiness that could compensate for the life he has lost.

Extreme wealth invariably leads to captivity. Its victims live in an open prison. In Mexico and Colombia, they and their families face the constant threat of kidnap: they must scurry around, screened and shrouded, as if they were coppers’ narks. In Russia they can never be free from the fear of assassination. Everywhere on earth they live behind walls and razor wire, guarded by cameras, dogs, watch towers and sensors. The walls that shut the world out also shut them in.

They must, if they wish to maintain their place on the rich lists, also live in fear of their rivals. Despite their lobbying power, they cannot permanently shake off the authorities, not least because of the irregular tax and accounting methods which helped many of them to become so rich: the remark attributed to Balzac (‘behind every great fortune lies a great crime’) is at least half right. Who in his right mind would volunteer for this life?

Money is like ‘self-worth points’ to these people. It’s acquisition is its own end, because it proves the value of the owner. It’s a diseased view of money, and of life.

The Conservative Party’s most persistent embarassment is the hazy tax status of its deputy chairman, Lord Ashcroft. Ashcroft received his peerage in 2000 after promising that he would become a UK taxpayer. Since then a succession of senior Tories has been quizzed by the media about whether he has redeemed this promise or is still registered in Belize, and they have writhed like hooked eels(11,12,13). Though this issue could explode as the election approaches, neither Ashcroft nor the party have yet produced an answer. This gives us a pretty good idea of what it must be, and of where the party’s priorities lie.

For some of the ultra-wealthy, tax avoidance seems to be a matter of principle: they’ll be damned if they give a penny to the people, whether they would miss it or not. On the few occasions on which I’ve met members of this class, I’ve been struck by their dissidence: they appear to see themselves as lonely rebels engaged in a perpetual fight against authority, even as they strive to get so rich that their own authority becomes impregnable. In fighting the taxman, they draw on a heroic tradition of resistance. In the New Testament, or to the Sons of Liberty seeking American independence, taxation was an instrument of colonial oppression. The context has changed: today the tax avoiders are the oppressors. But they still regard themselves as insurrectionaries.

Tax stops the rich accruing as many self-worth points as they, ceteris paribus, would. But what they fail to understand is that tax is the price of the socio-economic system that they live in that has created such enormous wealth and channeled so much of it to the few at the top like themselves. There’s no point arguing this basic economic theory with them. They don’t understand it.

Now, at last, the net is starting to close. Far too late, the British government has begun to abandon its mystifying tolerance of the loss of its funds. Last year HM Revenue and Customs retrieved three times as much unpaid tax from the very rich as it did five years before(14). In December the government announced that it would impose 200% penalties on people who fail to declare their bank accounts in uncooperative tax havens(15). Last week the appeal court ruled that the British multimillionaire Robert Gaines-Cooper must pay £30 million in back tax, as he retains too many interests in this country to qualify as a resident of the Seychelles(16). The government is considering a new law on British residency, which it will introduce next year, in the unlikely event that it wins the election(17). Why has it left this so long?

These efforts scarcely scratch the problem. International attempts to close down tax havens remain half-hearted. But if by some miracle these measures were to succeed, one haven – let’s say St Helena – should be kept open. It should be furnished only with rudimentary homes. All who chose to could live there in peace. Every penny they possessed would remain safe from the taxman, as long as they never set foot in another land. They could sit in their cells and count their money for the rest of their lives. Parties of schoolchildren would be brought to the island to goggle at these hermits, and learn some lessons about the follies of wealth.

Instead, we give them tax cuts, put them on TV, and raise our children to want to be like these unhealthy social misfits.

39 comments on “Tax hikes fail to cause ‘brain’ drain in UK ”

  1. quenchino 1

    The extremist cult of individualism, the absurd notion that the only absolutes are own personal rights has been the most cancerous, corrosive influence on Western society over at least several generations.

    The result is of course exactly what was planned; a fearful, half-drugged and easily controlled population… a race of wage-slaves living an illusion of independence, when in reality they have none.

  2. tsmithfield 2

    “Micky wonders why we didn’t see a flood of UK executives, considering our tax rates are so low if tax is as important as the Right would have us believe.”

    Most of those who have the balls to leave the mother country have already left. And who here would want to employ the sorry arses anyway, when they have fucked over their own country so badly.

    • Lew 2.1

      Such a classic right-authoritarian response, TS.

      L

    • Bright Red 2.2

      ts. by your logic, anyone who is paying the top tax rate in NZ and hasn’t left is obviously a loser who doesn’t have the balls to leave.

      But that’s you, isn’t it?

  3. prism 3

    Isn’t this ironically priceless writing by Guardian’s George Monbiot. Give that man a – knighthood, a Nobel prize?

    “Executive flight is the corporate world’s only effective form of self-regulation: those who are too selfish to pay what they owe to society send themselves into voluntary exile. It’s an act of self-sacrifice for which we should all be grateful. It’s hard on the Swiss, but there’s a kind of mortal justice here too: if you sustain a crooked system of banking secrecy and tax avoidance, you end up with a country full of crooks and tax avoiders.”

    Sort of like a self-chosen leper colony with mod cons.

  4. PK 4

    Monbiot is quite good on this. He had a good article a couple of years ago too about Northern Rock and libertarianism drawing on his background in zoology:

    “Wherever modern humans, living outside the narrow social mores of the clan, are allowed to pursue their genetic interests without constraint, they will hurt other people. They will grab other people’s resources, they will dump their waste in other people’s habitats, they will cheat, lie, steal and kill. And if they have power and weapons, no one will be able to stop them except those with more power and better weapons. Our genetic inheritance makes us smart enough to see that when the old society breaks down, we should appease those who are more powerful than ourselves, and exploit those who are less powerful. The survival strategies which once ensured cooperation among equals now ensure subservience to those who have broken the social contract.

    The democratic challenge, which becomes ever more complex as the scale of human interactions increases, is to mimic the governance system of the small hominid troop. We need a state that rewards us for cooperating and punishes us for cheating and stealing. At the same time we must ensure that the state is also treated like a member of the hominid clan and punished when it acts against the common good. Human welfare, just as it was a million years ago, is guaranteed only by mutual scrutiny and regulation.”

    http://www.monbiot.com/archives/2007/10/23/libertarians-are-the-true-social-parasites/

    • Draco T Bastard 4.1

      The democratic challenge, which becomes ever more complex as the scale of human interactions increases, is to mimic the governance system of the small hominid troop.

      This is possible but the parasites will scream blue murder. Simply have all business and trust accounts open to public view on the internet. Throw in some publicly supported investigative journalists (rather than the privately owned ones that we have now), an active IRD and the needed oversight becomes possible. While we cling to the deluded belief that business should be private and invisible we have no means of accountability.

  5. tsmithfield 5

    RL “ts. by your logic, anyone who is paying the top tax rate in NZ and hasn’t left is obviously a loser who doesn’t have the balls to leave.”

    Careful about the assumptions you make.

    What I mean about “having the balls to leave” applies over a much longer period than recent times. Over the last few centuries most of those with pioneering spirits have already left England either voluntarily or forcibly to the likes of Australia and New Zealand. The likely result of this is that the remaining gene pool has resulted in an increase in the amount of wosses in the UK who are too timid to take any risks or extend themselves to succeed.

    Evidence? Look at the pathetic performance of UK countries in the likes of the Olympics and other sporting events. Given their relative population size they should be doing a lot better.

    • mcflock 5.1

      Wow TS, it takes real skill to make a house of cards like that.

      Let me get your position straight:
      A) Entrepreneurial and financial advancement is aided by a willingness to take risks.
      B) The desire to take risks and succeed is mostly a genetically-determined characteristic.
      C) UK has had, over the past few centuries, a genetic drain of people inclined to take risks, either as a result of intentional emigration in the hope of advancement in the new world or as a result of deportation of criminals (the concept of a criminal as a failed entrepreneur is most intriguing).
      D) This is supported because UK is currently bad at sport.

      Doesn’t your position suggest that lack of financial success is mostly the result of genetics?

  6. jason rika 6

    Does New zealand have leeches who live off shore to avoid paying taxes? anyone?

    • Bright Red 6.1

      Fay and Richwhite spring to mind

    • Also Douglas Myers springs immediately to mind. He made millions out of booze and then fled after selling to the Chinese. A real patriot.

      Faye set up in Ireland and Richwhite in Switzerland. The interesting common feature of both countries is that they do not have an extradition treaty with New Zealand. I suspect that this was quite an important consideration for both of our “captains of industry”.

  7. tsmithfield 7

    mflock “Doesn’t your position suggest that lack of financial success is mostly the result of genetics?”

    Sort of. There is a genetic link to risk taking behaviour: e.g:

    http://www.nature.com/neuro/journal/v8/n11/full/nn1583.html

    Given that successful business people are often take risks to succeed (preferably calculated risks) and criminal behaviour often involves misdirected risk-taking, then there is likely a genetic root to both successful business behaviour and criminal behaviour.

    .

    • mcflock 7.1

      So a lack of financial success is mostly sort of the result of genetics?

      Actually, before I’m forced to Godwin the debate, you might want to look for another explanation for the lack of brain-drain following UK tax increases.

      • tsmithfield 7.1.1

        At the moment we seem to be discussing genetics and their role in business success rather than the UK situation. So perhaps an expansion on the genetic aspect would be helpful.

        So far as genetics is concerned, there has been the nature v nurture debate for quite awhile now. Both contribute to the way an individual will behave. Someone may have a gene that predisposes them to risk-taking. If this individual is raised in a dysfunctional environment, the gene may be expressed in criminal behaviour. If the individual is raised in a supportive environment, the gene may be expressed in terms of success in business, sports etc or any field where risk-taking can be beneficial. This is not a particularly controversial perspective so there is no need to “Godwin” the debate.

        Given that the British did export a lot of people with likely “risk-taking” genes to Australia. Also a lot of British citizens did leave for the colonies, and it is reasonable to assume that they too would be likely risk-takers given that this sort of move involves considerable risks.

        Therefore, it is likely that the genetic base of risk taking genes will have diminished in Britain and this may well help explain some of the lack of success they have been experiencing in various fields over recent decades.

        • Bright Red 7.1.1.1

          this is so weird. A 1920s-style social Darwinism explanation for why high taxes haven’t resulted in a brain drain.

          essentially, ts’s argument is that the rich Brits aren’t fleeing high taxes because the only people in the UK are the genetic dregs who haven’t emigrated.

          • tsmithfield 7.1.1.1.1

            BR “this is so weird. A 1920s-style social Darwinism explanation for why high taxes haven’t resulted in a brain drain.”

            No its not 1920’s BR. Its actually very current thinking in psychology and would be covered in most psych text books. Genetic factors tend to be quite neutral. The environment tends to determine how they are expressed. So, there isn’t such a thing as a “criminal” gene. But there is a “risk-taking” gene, as I pointed out in an earlier link that can be expressed in various ways.

            BR “essentially, ts’s argument is that the rich Brits aren’t fleeing high taxes because the only people in the UK are the genetic dregs who haven’t emigrated.”

            You’ve got to admit its a bit more novel than the sort of argument you would expect though. I wouldn’t actually be surprised if there is some truth in it either.

            • mcflock 7.1.1.1.1.1

              TS,

              While genetic associations with risk-taking might be accepted by modern psychology, you seem to be suggesting that a hypothesised de-selection of this gene has significant effects on societal outcomes to the degree that it outweighs other factors such as:
              the fiscal deficits of two world wars,
              a rapid re-orientation of the economy post war (and another one thanks to Thatcher),
              and indeed the specific funding models of advanced sporting academies that different nations choose . . .

              yup, I think you’re beginning to scrape the paint of HMS Godwin.

              • tsmithfield

                Don’t take me too seriously here, mcflock. I quite enjoy trying to make arguments that are a bit whacky for the fun of it. Don’t assume I believe everything I write.

                Having said that, I am not entirely devoid of evidence to make my point.

                Here are the total number of medals for GB and Aus for the last four Olympics (as I tallied up from Wiki):

                GB 121
                Aus 194

                So, despite having 1/3 the population, Australia got 60% more medals. This is an interesting comparison, because Australia was the “beneficiary” of those risk-taking genes when convicts were shipped over from GB. Sure, different training methods make a difference. But this much of a difference?

              • felix

                Don’t worry t, regular readers don’t assume you believe anything you write.

                And it’s not because you’re being “whacky for the fun of it”. It’s because you’re too stupid to support any of the bullshit you invent.

              • tsmithfield

                Nice to see you back, felix.

                So, how would you explain the disparity in Olympic medals then? Considering that both countries have strong sporting infrastructures and would presumably be reasonably equivalent in training methods etc.

                Does it boil down to the different genetic make-up of the two countries with respect to risk-taking?

              • felix

                Well that’s just obvious t.

                It’s been well established that tax avoidance, shot put, and 100m sprint all stem from the same gene. The risk-taking gene. And all the risk takers left Britain long ago. Everyone knows that, don’t they?

                Fuck off moron, you won’t get me playing your stupid game. Especially as you’ve admitted you don’t believe any of this shit yourself. Go play at katie’s blog, more your level.

              • Pascal's bookie

                So, how would you explain the disparity in Olympic medals then?

                The brits prefer pub games, fighting in the streets, and intravenous drug use over running around in budgie smugglers?

                Wasn’t it a brit that said something to the effect that only mountain climbing and motor racing are sports, with everything else being just games? I suspect that goes triple for olympic pursuits.

                But are crime rates higher in Aussie? Honestly don’t know, but it would test your theory. Also, and too, is the Australian financial sector more or less risk averse than the City?

  8. burt 8

    The highly paid didn’t run away as much as predicted… probably because like here in NZ they are not paying the higher taxes because they can structure their affairs to avoid the policies of envy.

    Still the people who get off on thinking that rich pricks are being punished to pay for pledge cards new BMW’s don’t really understand that so they just think their govt has achieved what it said it would.

    • Bright Red 8.1

      “probably because like here in NZ they are not paying the higher taxes because they can structure their affairs to avoid the policies of envy. ”

      if they’re not paying the top tax rate how come we need to cut it?

      And how come Treasury says cutting the top rate to 33% will cost half a billion, most of which goes to the top few % of taxpayers?

      I mean, if no-one’s paying the 38% rate, they won’t be getting tax cuts eh genius?

      • burt 8.1.1

        You are confusing mid range wage and salary earners with high earners. Cullen made a art form of this so it is no surprise that you don’t understand the difference.

        In the start of 2008 75% of high school teachers were classified as rich by Cullen’s tax rates, I wonder how the teachers felt being called rich when they were filling out their WFF applications?

        • Draco T Bastard 8.1.1.1

          Again you spin the delusion.

          Tax rates don’t describe who’s rich and who isn’t. They are an imprecise tool used to collect taxes fairly that had even more of it’s precision removed when cut down from five tax brackets to three in going after the delusional “flat tax”. More brackets would help and also putting trusts on the top bracket.

        • Bright Red 8.1.1.2

          burt – $70K plus is not mid range. It’s the top 12% of income earners.

          Have you learned nothing in all the time you’ve been coming here? Has all the information gone in one ear and out the otehr? Have you managed to turn a blind eye to all the graphs?

          • burt 8.1.1.2.1

            Bright Red

            You must be right because apparently half the countries top 100 earners don’t even earn $70K…. You are not getting this point I’m making are you ?

            Draco T Bastard

            The only ones spinning the delusion are the ones who say wealth taxes tax the rich, like Cullen and Bright Red.

      • Draco T Bastard 8.1.2

        From what I can make out BR, they’re now complaining about having to pay the lawyers to set up their tax avoidance schemes.

  9. tsmithfield 9

    Burt, it wouldn’t matter whether they were able to structure their affairs to avoid the tax or not. They still wouldn’t leave. The British are genetically programmed with the “stiff upper lip” thing. They know how to get absolutely rogered. And they know how to pretend they are enjoying it.

  10. And on a side note, Recession !…what recession ?

    2009 will be remembered by millions of ordinary people as the year they lost their job, their house, or the prospect of an education. For the rich, however, it was a bonanza.

    The world’s billionaires saw their wealth grow by 50 percent last year, and their ranks swell to 1,011, from 793, according to the latest Forbes list of billionaires.

    The combined net worth of these 1,011 individuals increased to $3.6 trillion, up $1.2 trillion from the year before. On average, each billionaire had his or her wealth increase by $500 million.

    http://www.wsws.org/articles/2010/mar2010/forb-m12.shtml

    • tsmithfield 10.1

      Pollywog, given the bounce-back in the sharemarket, this is probably not surprising. Remember, the previous year as the comparison point is when a lot of these people lost truckloads when the economy crashed. So, they are experiencing a “V” shaped recovery in their wealth.

  11. Zak Creedo 11

    What a mountain of misunderstanding on the blog and its commentariat!

    Know ye not how these people of whom you are so obviously envious are hopelessly flawed.?

    Discover this—yay find their dependence—and regulate it. Then bijove you’ll have flight, whole Boeing loads..

    But will you be happy with this..?

  12. mcflock 12

    @TS
    “Don’t take me too seriously here, mcflock. I quite enjoy trying to make arguments that are a bit whacky for the fun of it. Don’t assume I believe everything I write.”

    Talking social Darwinism based on complete shit is fun for you? What people do for kicks…
    Trouble is, some folk in ACT might make it a condition of supply & confidence if they get the idea.

  13. RedBack 13

    Having talked to several UK bankers in recent weeks the one thing that still strikes me is their total and utter lack of collective responsibility for the mountainous financial f*** up they caused that has had a massive impact socailly and economically on all of British society. They were still unbelievably moaning that they only got £100,000 bonuses this year instead of their usual £500,000. Absolutley unbelievable arrogance on display. On top of that around 70 odd uber wealthy business leaders have all signed a letter objecting to Labour’s planned national insurance tax rise (1%). Same old story isn’t it. These blokes don’t mind taking as much as they can out of society to make their millions when times are good but like ungrateful spoiled children they don’t want to put anything back when things get rocky for everyone else. That rise in the UK national insurance tax has already been moronically dubbed the “new jobs tax” by the Tory’s and right wing press. In actual fact its a way of trying to find £6bn to keep alot of frontline health and other social services running during the recession. Something the Torys have managed to avoid mentioning is that they have no plan when it comes to addressing this issue should win the general election.

  14. Misses the point that the tax could be 100% – you can structure out of paying the 50p which by now I’m imagining HNWI already have caught on using non-dom structures.

    After the UBS case in Switzerland also there will be a dip in jobs as the banking industry presently is in flux waiting for the net result of actions by the US government. I am surprised the dip was only 7%

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