Home > Uncategorized > Mitt Romney: the Amsterdam tax evasion connection.

Mitt Romney: the Amsterdam tax evasion connection.

The Netherlands are a well known tax haven for foreign companies and investment vehicles, like the Rolling Stones. And indeed, the ‘glimmer twin’generation does know to find Amsterdam when they want to evade taxes. Even when they try to become the president of the USA. Jesse Frederik, A Dutch journalist who also published on this blog, discovered that Mitt Romney, via the Irish company Warner Chilcott, uses the ‘Amsterdam’ tax evasion route, too (oops, in Dutch). Fun fact: the ‘general partners’ of ‘Bain Capital Fund VIII’, people like Mitt Romney, provided 0,1% of the capital of this fund (equal to 3,5 million dollars). But this enabled them to reap 30% of the profits of the fund. Never trust an bankster.

  1. henry1941
    November 5, 2012 at 8:39 am

    It is no use complaining about tax havens whilst neglecting to make the point that, as long as people and corporations are the entity taxed, the system is made for avoidance and evasion.

    Those who want to see an end to tax avoidance need to put their weight behind the tax reform that will transfer responsibility for tax payment onto those who hold land titles. Land isn’t going anywhere.

  2. Podargus
    November 5, 2012 at 6:34 pm

    So,henry,we all need to live somewhere,at least while our backsides point to the ground.
    Your land tax,like a consumption tax,is regressive.That is,it impacts the lower and middle classes much more than the wealthy.But that is the point of it,isn’t it,henry?

    • henry1941
      November 5, 2012 at 7:18 pm

      Do you know what a tax on land values is and how it is intended to operate? The proposal was first put forward in modern times in 1879 and quickly gave rise to a popular movement. If it was regressive, the rich and powerful would have deluged this movement with funds. If only!

      Instead of which a systematic attempt was made to supress it, not just the proposal itself, but the economic principles and theory that lie behind it. So much so that one reason why the study of economics is in such a state of confusion is that important factors in the economic process are simply ignored or dismissed as of no importance. Amongst those who were opposed to land value taxation were Pope Leo XIII, who ordered the excommunication of a New York priest for advocating it, and the British House of Lords who opposed the Bills of 1909 and 1910. So nothing could be further from the truth than the notion that the land value tax proposed here (http://www.landvaluetax.org) is regressive.

      The wealthy garner and maintain their wealth by land enclosure and appropriation of the rent of land. This is in principle identical to the surplus value in Marxist theory. The wealthy then occupy the most valuable land, leaving the poor to fit themselves into the least valuable land as best they can.

    • Derek R
      November 6, 2012 at 1:49 am

      Value of land owned rises with income. In fact those who receive twice the average income are likely to own land which is more than twice as valuable as the average. For those who receive 100 times the average income, the landholding is likely to be far more than 100 times the average in value. So contrary to your opinion, the facts show that Land Value Tax is actually progressive relative to income.

    • November 6, 2012 at 7:46 pm

      “…a consumption tax,is regressive.” It ain’t necessarily so. Depends on its structure. As I said in my original post, it should include standard/itemized deductions and exemptions and progressive rates. Sales tax systems do not have these possibilities and thus are more likely to regressive depending on other aspects of the system, like no sales tax on food or clothing etc.

      • henry1941
        November 6, 2012 at 7:59 pm

        Consumption tax is irrelevant to the real question which is how to raise public revenue in a way that is just, convenient, efficient, certain, has no harmful or bizarred effects and not easily avoided or evaded. History is littered with examples of taxes that fail on all counts, as to most present day taxes. A tax on luxuries is that it leads to endless disputes regarding the definition of “luxury”.

      • Derek R
        November 6, 2012 at 8:02 pm

        Actually sales tax systems do have these possibilities. If you want to see the absurdities that standard/itemized deductions and exemptions and progressive rates can lead to, take a look at the UK’s sales tax, VAT which has all of these. In particular pay attention to the Jaffa cake saga and to the more recent “pasty tax”.

      • henry1941
        November 6, 2012 at 8:14 pm

        That’s only the half of it. Sweden has a universal sales tax. To prevent evasion the tax authorities check and seal every till, and all traders are required to have one, in principle. How is this supposed to work with market traders who do not have an electricity supply to run their till from and who makes tills which will work out of doors in all weathers? To say nothing of the cost and trouble it gives the traders who are often immigrants with poor command of the language.

    • November 6, 2012 at 7:47 pm

      “…a consumption tax,is regressive.” It ain’t necessarily so. Depends on its structure. As I said in my original post, it should include standard/itemized deductions and exemptions and progressive rates. Sales tax systems do not have these possibilities and thus are more likely to regressive depending on other aspects of the system, like no sales tax on food or clothing etc. (Sorry, I put this reply in the wrong location below.)

  3. November 5, 2012 at 9:50 pm

    I wouldn’t mind seeing a debate here about a consumption tax in lieu of an income tax with, of course, the necessary standard/itemized deductions and exemptions as we currently have in our income tax system. Simply put, (and of course it ain’t simple) you would declare all income and subtract what you saved and pay the “consumption tax rate” (progressive of course) on the rest. Please don’t bother to attack the obvious, such as how is income and saving going to be defined. The point is not that a consumption tax would be simpler than an income tax. The point is – would it promote savings and investment rather than consumption? And if so, is this a better outcome than taxing income, especially investment income?

    • henry1941
      November 5, 2012 at 9:58 pm

      But why do you want to punish people for consuming things, or rather, why do you want to punish people who participate in the formal economy rather than in the domestic or household or black economy? Where is the principle behind this suggestion?

      • November 6, 2012 at 4:30 pm

        I suppose the major principles are two. Encouraging savings and putting a larger burden for paying taxes on those who consume the most – in general upper incomes. As to “punishing,” that is only one way to think about any taxing system. Other ways, of course, are effectiveness, fairness, progressiveness, distributional effects…

    • Derek R
      November 6, 2012 at 1:40 am

      The major problem with a consumption tax of the type that you are talking about here is that it is indiscriminate. It would discourage both “good” consumption (which conserves natural resources) and “bad” consumption (which wastes them) without distinction. Likewise it encourages not only investment but also malinvestment.

      Generally speaking it is good in this world of 7 billion people to encourage investment in productive processes which are labour-intensive and require as few natural resources as possible. If there are two methods of producing things one of which requires a lot of labour and few resources while the other requires little labour but a lot of natural resources, a consumption tax will actually encourage the latter since it will drive up the cost of labour owing to its effect on the cost of living. Thus it will encourage manufacturers to conserve labour (which is plentiful) and to increase use of resources (which are scarce).

      Not a desirable outcome.

      • November 6, 2012 at 4:14 pm

        “owing to its effect on the cost of living.” I don’t understand how this works. Would you please explain?

      • November 6, 2012 at 7:11 pm

        “The major problem with a consumption tax of the type that you are talking about here is that it is indiscriminate. It would discourage both “good” consumption (which conserves natural resources) and “bad” consumption (which wastes them) without distinction. Likewise it encourages not only investment but also malinvestment.” But how does our current federal income tax system promote “good” vs. “bad” consumption? Or good vs bad investment?

      • Derek R
        November 6, 2012 at 7:26 pm

        Certainly. A universal consumption tax will be applied to all goods which are sold. Some of these goods are essential, some are luxuries.

        The application of a consumption tax will have little effect on the consumption of essential goods because of their necessity. However it will reduce the consumption of luxury goods. As a result the amount of money spent on essential goods will be more after the implementation of a consumption tax than it was before and the amount of money spent on luxury goods will be less. But once an individual has cut consumption of luxury goods to zero, no more money can be found to spend on the essential goods. If more is needed, as it may well be for the poorer members of society who make up the bulk of the workforce, then the only way it can be raised is by requesting a wage increase.

        So while the consumption tax may have little effect on the cost of living for those who have plenty of luxuries that they can cut from their spending, it has a big effect on the cost of living for those who are already buying only essential goods.

      • henry1941
        November 6, 2012 at 7:27 pm

        Consumption taxes have two effects. The put up the cost of living. They lead to unemployment.

        Nuff said.

      • Derek R
        November 6, 2012 at 7:28 pm

        mcbockalds asked, ‘But how does our current federal income tax system promote “good” vs. “bad” consumption? Or good vs bad investment?

        It doesn’t. That’s one of its defects.

      • November 6, 2012 at 8:09 pm

        Derek R says, ” A universal consumption tax will be applied to all goods which are sold. Some of these goods are essential, some are luxuries.”

        I am wondering…do we understand my original post about a consumption tax differently? I am talking about a consumption tax system that looks very much like our current income tax system, not like our sales tax system – you don’t pay the consumption tax as you buy the product. You would fill out your Form 1040 U.S. Individual CONSUMPTION Tax Return and file it before April 15 of the following year, just like we currently do for income.

      • Derek R
        November 6, 2012 at 8:46 pm

        mcbockalds asked “I am wondering…do we understand my original post about a consumption tax differently?

        No, I understand that alright. You are suggesting a consumption-based tax where the buyer is legally responsible for remitting the tax to the government instead of the standard consumption-based tax where the seller is responsible. However despite that difference the incidence and overall effect of your plan would be identical to the standard universal sales tax, and we have plenty of examples of those right now. So that is why I am discussing it in those terms.

        The only advantage that I can see to your plan over the usual vendor-centred implementations is that the annual return would make it clear to all tax payers just how much they do spend on consumption tax. That lump sum would be much more difficult to ignore than the daily dribs and drabs of the current systems.

      • henry1941
        November 6, 2012 at 9:33 pm

        mcbockalds :
        Derek R says, ” A universal consumption tax will be applied to all goods which are sold. Some of these goods are essential, some are luxuries.”
        I am wondering…do we understand my original post about a consumption tax differently? I am talking about a consumption tax system that looks very much like our current income tax system, not like our sales tax system – you don’t pay the consumption tax as you buy the product. You would fill out your Form 1040 U.S. Individual CONSUMPTION Tax Return and file it before April 15 of the following year, just like we currently do for income.

        That is an idea that was floated in the UK under the title of Expenditure Tax. The real problem with it is that it fails to satisfy any of the principles of natural justice nor the established and acknowledge canons of taxation.

      • November 6, 2012 at 9:47 pm

        Derek R says, “However despite that difference the incidence and overall effect of your plan would be identical to the standard universal sales tax,…”
        That is clearly not the only difference and it is not even an important difference. You are ignoring the key “savings” element.
        The basic difference can be explained this way. When you fill out your new Form 1040 Individual Consumption Tax Return in place of the old Form 1040 Individual Income Tax Return you have to fill in only one new line titled “Savings.” And the instructions on this new line might read, “Subtract this savings amount line from your adjusted gross income.” This is absolutely not like a sales, or valued added tax which have nothing to do with savings. Subtracting savings from income is the key element of a consumption tax system that replaces the typical income tax system.

      • Derek R
        November 6, 2012 at 11:47 pm

        Well, so far I haven’t written about the savings element but I have been thinking about it, so I can see why you might have thought that I was ignoring it.

        The main issue that I can see is that it encourages saving but not investment. So for example if I do not spend money then my bank account grows. Or if I have no bank account, the amount of coins and notes under my mattress grows. So no spending, no tax, more saving. Excellent! Wildly deflationary of course since it kills the circulation of money but we’ll let that pass.

        If on the other hand I spend the money on a bond or on a share, I have to pay consumption tax. And there may be legal arguments about the difference between making a loan to someone (not taxable) and buying a bond from them (taxable). Not so good.

        Well, you may say, let’s exempt bonds, shares and other investments from the tax. Okay, fair enough. But we then find ourselves in the odd situation where I can lend you the money to build and operate, say, a lemonade stand and expect to pay no tax whereas if I build and operate the lemonade stand myself, I will be liable for tax on all the costs involved in building and operating the stand. Hence the tax with these exemptions encourages people to lend money to entrepreneurs rather than to use the money themselves to become entrepreneurs. In fact I might even consider lending my money to foreign companies who are not liable to the tax, so that I can get a better return on my investment. Too bad about the local employment statistics but they are Someone Else’s problem.

        Alright, you say, let’s go one step further and exempt any consumption that’s used for investment purposes. So there is no consumption tax due on any expenditure used for investment purposes. That sounds reasonable. And it is but you have now crossed the threshold of argument and entered the area which will keep lawyers employed for years (as they have been in the UK since the introduction of VAT). It may well be investment when you are spending on lemonade stands but how about when you build an extension onto your house. Should that be looked on as consumption for personal use? Or investment in the value of your property? Does it make any difference if you rent out one of the new rooms to a lodger? What if you make and sell jam there?

        So your proposal sounds straightforward at first hearing but the more we go into it the more issues arise. And I haven’t talked about the accounting work involved in keeping track of the different kinds of expenditure yet. I’ll leave that for another comment.

      • November 7, 2012 at 3:58 am

        Derek R – thank you for your reply.
        Any federal consumption tax (or as the Brits. call it expenditure tax) which subtracts “savings” from income, in order to thus tax consumption, and promote “savings,” is, of course, not simply about “savings.” That is just a ‘short hand’ to mean all sorts of assets and even liabilities. But I don’t need to expand the meaning of “savings” any further. (“Thank” to henery1941’s recent over-the-top pronouncement about natural justice etc., I found a link to the 1978 Meade Committee Report (google it) – a rather lengthy (533 pages) study of British tax systems which concludes on page 518, “We believe …a progressive expenditure tax regime (to combine encouragement to enterprise with the taxation of high levels of personal consumption)…presents a set of final objectives for the structure of direct taxation in the United Kingdom that might command a wide consensus of political approval….”
        I recommend the report as it offers considerable analysis and food for though concerning a federal consumption tax in place of our federal income tax.
        Cheers John

  4. cacciato69
    November 6, 2012 at 12:02 am

    consumption is the problem … 7 billion people consuming resources those who consume far beyond their share should pay taxes commensurate with their consumption Henry

    • Derek R
      November 6, 2012 at 12:26 am

      You said it, cacciato69. Consumption of resources is the problem. Those who consume more than their share should pay taxes commensurate with their consumption. The value of land is closely connected to the value of the resources that can be produced from that land. In fact those resources form the rent. So a tax on rent (aka a Land Value Tax) is a tax on consumption of resources.

      • November 6, 2012 at 10:16 am

        Land cannot be consumed – that’s one of its unique attributes. Its value, and hence its potential, can change because of pollution, weathering, etc. but it still remains as a location on the earth.

        You won’t find a proper definition of land in any economics textbook. Don’t believe any economist’s analysis unless you can be sure that he understands land.

      • derekrss
        November 6, 2012 at 6:25 pm

        Understood, Carol. However the natural resources which give certain pieces of land their location value, may be consumed. Consider a patch of land in the Libyan desert. If it is over the top of an oil deposit, it has value as a result and may fetch a high price from an oil company. Thirty years later when most of the oil has been removed from that region, the value of the patch of land will have dropped considerably as a direct result of the consumption of the oil below it and it will fetch a much lower price.

        This is rather different from the case where use of the land does not reduce its value. For instance if the same patch of land were to be used for solar power generation instead of oil extraction, its value at the end of thirty years would be much the same as it was at the beginning (assuming that no other development happened in the immediate vicinity as a result).

    • henry1941
      November 6, 2012 at 6:42 am

      Surely whether consumption is a problem depends what is consumed? Services given by one individual to another consume next to no resources. And what is “their share” and how should it be determined, and who owns this “share”? And when should the value of this share be paid and to whom, and in what circumstances?

      How much resources are consumed when say, someone cuts your hair or gives you a Spanish lesson?

      And what about “negative consumption” of resources such as recycling and recovery of valuable products from waste materials, or clearing up pollution or reinstatement of damaged natural environments? They get taxed just the same since they too count as consumption.

      • November 6, 2012 at 4:40 pm

        “They get taxed just the same since they too count as consumption.” Two questions; how does this work, how does it affect my “Federal Consumption Tax” return? And is a consumption tax or any tax system expected to solve all problems? Of course not.

      • Derek R
        November 6, 2012 at 7:46 pm

        mcbockalds asked, “How does this work?

        A universal consumption tax is generally implemented as a sales tax or as a value added tax. You can find more information about either on Wikipedia.

        And is a consumption tax or any tax system expected to solve all problems?

        As you say, of course not. But the more problems it solves the better. Even more important, the fewer problems that it creates the better.

        And the major problem with universal consumption taxes of the type that you suggested, as Henry pointed out earlier, is that they cause unemployment, particularly among the workers who produce luxury goods. A second problem is that they are particularly prone to tax evasion. A third which Podargus pointed out is that they are regressive.

  5. Kathleen Maloney
    November 6, 2012 at 10:17 pm

    Yes, ending corporate tax and just tax the income as taxable income to the individuals who are owners on a yearly basis. This makes more sence because the owners will hold their boards and CEO accountable and taxpayers can end a costly bureaucracy which attempts to administrate corporations when that task should be left to their owners. If CEO and Boards do not make any money as yearly income for their owners then their owners will be less likely to be able to dupe new buyers with the sale of stock so the ponzi skeme of public sale of badly preforming stocks marketed by rating agencies who are in a conflict of interest will also end. If those owners want to take that yearly income and spend it or reinvest it that is up to them but it will be taxed in the year earned and like the slaves ofter called workers they too will be contributing to public revenue the same as everyone else. With this increase in public revenue taxes can come down because their will be less eating and drinking of corporate profits.

  6. November 7, 2012 at 4:02 am

    Derek R – thank you for your reply #23 above.
    Any federal consumption tax (or as the Brits. call it expenditure tax) which subtracts “savings” from income, in order to thus tax consumption, and promote “savings,” is, of course, not simply about “savings.” That is just a ‘short hand’ to mean all sorts of assets and even liabilities. But I don’t need to expand the meaning of “savings” any further. (“Thank” to henery1941′s recent over-the-top pronouncement about natural justice etc., I found a link to the 1978 Meade Committee Report (google it) – a rather lengthy (533 pages) study of British tax systems which concludes on page 518, “We believe …a progressive expenditure tax regime (to combine encouragement to enterprise with the taxation of high levels of personal consumption)…presents a set of final objectives for the structure of direct taxation in the United Kingdom that might command a wide consensus of political approval….”
    I recommend the report as it offers considerable analysis and food for though concerning a federal consumption tax in place of our federal income tax.
    Cheers John

    • Derek R
      November 7, 2012 at 4:44 am

      Cheers, John. Sorry I couldn’t be more positive about the Consumption tax idea but as someone who has been interested in tax reform for years, I’ve investigated most of the alternatives fairly thoroughly. They all have advantages and disadvantages, some of which are not apparent at first sight. While Consumption taxes are attractive at first sight, a deeper analysis indicates that they have more cons than pros.

      So far the best system (in my opinion) would consist of Land Value Tax, Resource Extraction Royalties, and a Bank Asset Tax (specifically on loans for land purchase). However I am still prepared to change my mind (as I recently did over the Bank Asset Tax) if I find anything else which would have positive effects on poverty reduction and economic growth.

      • November 7, 2012 at 2:57 pm

        Cheers Derek R. Tax reform is not my area of expertise, only an interest. Indeed, it was only fairly recently that I became aware of the idea of a consumption/expenditure tax and that prompted my original post for a discussion. I appreciate your opinions.

    • henry1941
      November 7, 2012 at 5:28 am

      Over the top? The Canons of Taxation go back at least to Adam Smith. It is really over the top to argue that tax systems should be based on principles of justice? That they should respect rights of ownership (yes that is another minefield).

  7. henry1941
    November 7, 2012 at 3:51 pm

    mcbockalds :
    Cheers Derek R. Tax reform is not my area of expertise, only an interest. Indeed, it was only fairly recently that I became aware of the idea of a consumption/expenditure tax and that prompted my original post for a discussion. I appreciate your opinions.

    Hope the negative response has not put you off your interest. There are no experts in these area, so keep looking at the subject. A good place to start is Adam Smith, and then you can graduate to Henry George and after that there is not, in principle, so very much more to be said.

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