Wealth doesn't trickle down – it just floods offshore, new research reveals

[breadandbutterfly]

www.guardian.co.uk/business/2012/jul/21/offshore-wealth-global-economy-tax-havens

""These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

...In fact, some experts believe the amount of assets being held offshore is so large that accounting for it fully would radically alter the balance of financial power between countries. The French economist Thomas Piketty, an expert on inequality who helps compile the World Top Incomes Database, says research by his colleagues has shown that "the wealth held in tax havens is probably sufficiently substantial to turn Europe into a very large net creditor with respect to the rest of the world."

In other words, even a solution to the eurozone's seemingly endless sovereign debt crisis might be within reach ? if only Europe's governments could get a grip on the wallets of their own wealthiest citizens. "

CM - I do agree with you entirely that poorer people are denied opportunities that are readily available to the middle classes.

Of COURSE entrepreneurs exploit their workers. And taxation breaks for those on £10k or less don't take even NMW workers working FT fully out of taxation. And an income of £15k is STILL too low to support a family on.

When employers pay a LIVING WAGE to every employee, from the cleaner up, then and only then will I cease to see it as exploitation, and leaving the State to pick up the tab.

Tax Credits for those in employment should NOT be necessary.

You see, this is why I get irrate with this kind of report. It detracts from where the real debate and indeed outrage should be focused - we should be improving the lot of the poorer sections of society, not getting our knickers twisted about whether or not the wealth that is at the top of society remains onshore or offshore.

CM.

But what is a 'living wage'? And how do you go about introducing one. Because from where I'm standing it means different things to different people.

I know the NMW has a slight variation based on age but at least that's simple to understand.

But a 'living wage' will differ wildly based upon the worker's:

1. Age
2. Living Status (eg. parents, on their own, in a relationship)
3. Any dependants
4. Housing situation (Renting/mortgage)
5. Geographic location (eg. Scotland or London)

Just how do you go about calculating what a 'fair' wage should be without some complex algorithm like they use for tax credits?

So let's say we introduce a law that says the living wage for hiring a 30yr old parent with 2 kids is £25k per year. And an 18yr old with no kids is £15k per year. What will happen? Well employers will be more incentivised to hire young kids instead of the parent. Is that 'fair'? Is that what you wanted to see with the living wage?

The notion of a living wage is great in theory, sounds great too. In practice I don't think it's practical at all.

I do agree though that tax credits shouldn't be necessary for working people and I think we have quickly forgotten that the world still turned and the country still managed perfectly well before their introduction.

CouthyMow I agree that tuition costs make university a much less attractive proposition amongst the poor, however, university is far from being the only route towards a high paid profession. I know plenty of people who are in what I would describe as high paid employment (above £50k) who worked their way up to that position without going through university. Similarly, the best paid person I know learned his technical trade as an NCO in the Royal Navy despite entering as a 16 year old school leaver without a single qualification to his name.

As someone who has interviewed and employed people in the past, I would never discriminate against someone who didn't have a suit. As long as they turned up looking reasonably smart, and didn't look like they were taking the piss, they'd be OK. At the end of the day, it has always been much cheaper to get a motivated person to smarten up a bit than it is to get a smartly dressed person motivated.

My point about the living wage is this. The Rowntree Foundation states that for an individual to achieve an acceptable standard of living and participate fully in society, they need to earn at least £14,400 per year. After income tax and national insurance are deducted, the actual amount of money someone earning that salary takes home is £12324.04. Now, if someone was earning minimum wage and working a 40 hour week, they would take home £12646.40 per year which is £322.36 MORE than the Rowntree Foundation's minimum salary to live in this country.

However, because we are led by incompetent socialists who cannot manage a budget but expect us all to be able to, those on National Minimum Wage, who are legally prevented from selling their labour for a penny less than £6.08 per hour, are still taxed somewhere in the region of £1500 per year. It is that taxation which pushes them under the Rowntree Foundation's level of acceptable living and it is that taxation which is the reason why they will need in work benefits.

The employers are not exploiting the workers; it is the state which is.

Sorry, I made a mistake there. I said that £12646.40 is the take home pay on NWM. This is clearly wrong. What I meant to say (and the whole point I was trying to make) was that £12646.40 is the PRE-tax figure.

It's the paying tax on NMW which pushes people below the living wage rate.

You see, this is why I get irrate with this kind of report. It detracts from where the real debate and indeed outrage should be focused - we should be improving the lot of the poorer sections of society, not getting our knickers twisted about whether or not the wealth that is at the top of society remains onshore or offshore.

Yes, because these two things are totally unrelated.

But what is a 'living wage'? And how do you go about introducing one. Because from where I'm standing it means different things to different people.

You love making the possible impossible, don't you? Always making excuses for why no change is possible, and it's the best of all possible worlds - except when it comes to making it even easier for business to exploit people in the UK.

Why don't you look on the living wage website?:

www.livingwage.org.uk/about-living-wage

---

What is the Living Wage?

A number

An hourly rate set independently and updated annually.

The Living Wage is a calculated according to the basic cost of living in the UK.

In London the rate is calculated by the Greater London Authority, the National rate for outside London is calculated by the Centre for Research in Social Policy.

Employers choose to pay the Living Wage on a voluntary basis.

The Living Wage enjoys cross party support, with public backing from the Prime Minister and the Leader of the Opposition.

Paying the Living Wage is good for business, good for the individual and good for society.
Good for Business

An independent study of the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%.

Two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70% of employers felt that the Living Wage had increased consumer awareness of their organisation?s commitment to be an ethical employer.

Following the adoption of the Living Wage PwC found turnover of contractors fell from 4% to 1%.
Good for the Individual

The Living Wage affords people the opportunity to provide for themselves and their families.

75% of employees reported increases in work quality as a result of receiving the Living Wage.

50% of employees felt that the Living Wage had made them more willing to implement changes in their working practices; enabled them to require fewer concessions to effect change; and made them more likely to adopt changes more quickly.
Good for Society

The Living Wage campaign was launched in 2001 by parents in East London, who were frustrated that working two minimum wage jobs left no time for family life. Over 10,000 London families have been lifted out of working poverty as a direct result of the Living Wage.

The Rate

The London Living Wage is currently £8.30 per hour.

The figure is set annually by the Greater London Authority and covers all boroughs in Greater London.

You can view the 2011 GLA report which explains how the London figure is calculated here.

The National Living Wage for outside of London is currently £7.20 per hour.

The figure is set annually by the Centre for Research in Social Policy at Loughborough University.

You can view the report which explains how the National figure is calculated here.

From November 2012 both Living Wage figures will be announced annually in November of each year.

Living Wage Employers should implement the new rate as soon as possible following the annual announcement and within 6 months.

---

So, in summary, the living wage is calculated based on the cost of living of the area or region. Unfortunately, it is voluntary, which is shouldn't be, just as the minimum wage is not voluntary.

It doesn't matter whether it will fit one particular persons needs 'exactly'.

If someone is in need of a 'living wage', then they will no doubt be better off than on the minimum wage, dependants or not. So even if it isn't quite enough, it will be drastically better than the minimum wage, which is a sick joke.

I agree that there should be no taxation up to the minimum/living wage.

Furthermore, the min wage should be linked to inflation, and increase annually.

Problem with no income taxation is that it would be a gift to all the bitter people who hate the poor - they'd argue that people on minimum wage don't contribute to society (which would be bollocks, but they'd say it. There are enough hard of thinking people who forget that everyone pays tax even if you don't earn enough to pay income tax).

Ttosca - yes, they really and truly are entirely unrelated. The links that the report tries to make are specious and spurious.

Fight the fight that matters, not the one the report is trying to make us have.

CinnabarRed - sorry, I haven't really read the thread - which is the fight that matters???
And when you say "they really and truly are entirely unrelated" do you mean WHERE wealthy people keep their unspent money is unrelated to poverty (ie onshore or offshore, it won't help poor people)? Does HOW wealthy people spend or use their money affect poor people, or is that also unconnected to poverty?

Cinnabar - we've been fed the line that we should let the rich get on with it for years now. We've tried being intensely relaxed about the filthy rich and it has led to MORE poverty, not less. And incidentally a financial crisis caused by the filthy rich.

"
Have you ever played a game of football where the rules are changed arbitrarily, people get sent off for no reason, one team has to play while hopping on one leg, the ref is massively biased, etc? We did this at the 'Make Poverty History' demos in Edinburgh. It was designed to show just how unfair life is for developing countries, and it was brilliant."

this sort of game could equally be used to illustrate the problems facing businesses and HNW individuals as successive governments change the system from year to year. of course, unlike the developing world, they can usually access good tax advice. Or not, as Madonnas case illustrates...

is there more real poverty in this country than thirty years ago?

i seriously doubt it.

"The world's poorest countries, particularly in sub-Saharan Africa, have fought long and hard in recent years to receive debt forgiveness from the international community; but this research suggests that in many cases, if they had been able to draw their richest citizens into the tax net, they could have avoided being dragged into indebtedness in the first place."

this backs up Niceguys point. if anything, this seems to back up lower-level taxation for higher income earners. against the headline on the article, seemingly...

EdgarAllenPimms - that might work in a culture that doesn't aspire to paying a nil rate of tax, making avoidance of any level of tax whatsoever entirely acceptable...

Do the world's poorest countries have high tax rates???? I thought they tended to be far lower than here? Clearly it's not just low tax rates that countries need in order to entice wealthy people to pay tax.

To ensure maximum revenue collection, I would have thought a country would need a reputation for being well run already, uncorrupt, with clear tax and business rules. The more of these areas in which a country falls short, the lower the tax rate it can charge before wealthy people feel justified in aggressively avoiding it. By "getting rid of red tape" holding back the banks from competing globally (funny how the relaxation on controls and oversight over banks is no longer described as that, now that the red tape in question has been shown to have been useful... it does lead one to wonder whether our politicians have the faintest idea what red tape is and what is essential, protective legislation until the shit hits us all, yet they are still busy removing red tape from everything that isn't a bank and freeing up schools, healthcare and other businesses from the pesky stuff) and being entirely relaxed about what sort of wealthy people came over here to spend their cash and buy up our businesses, we didn't as a country do our reputation for being well run and uncorrupt much good, imo. At the same time, we created a hugely confusing tax system. No wonder we are having problems collecting tax.

Our solution appears to be to accept the corruption and lower the tax rate.

Oh, and attempt to clarify the tax system (unsuccessfully).

Rich people like to live in places with an honest and effective police force and legal system, good roads and utilities, street lights, ambulances and hospitals, good public health, a local Mercedes dealer, little gun crime or kidnapping, and an educated workforce with a decent work ethic.

Lots of Russian gangsters millionaires like to live in London because they feel safer and more secure. Lots of plutocrats from oil-rich family nusinesses kingdoms to too.

There's perception and there's reality. Both can be identical although usually they are not. The thing is that perception is almost as important as reality.

I remember years ago a firm I had dealings with had invited all their staff out for celebratory drinks to celebrate the fact they'd hit all their targets for a major customer. Unfortunately the customer in question had the perception the firm was not delivering. Result? The firm was sacked.

It's the same here. If the perception is that the UK is anti-wealth, has complex tax laws, punitive tax rates and anti-business. Then the rich will simply avoid the UK. And unfortunately right now that's the message we seem to be giving.

Corruption isn't really a big issue in the UK. We by no means are perfect but in general corruption in other countries are far worse.

Our tax system is ridiculously complex. Does anyone know exactly what they get taxed? I know I struggle.

You are right Piglet, rich people do like to live in nice places. But we're far from the only 'nice' country. If you are comparing London to say Monaco or the Cayman Islands, I know where I'd rather be living. And if I was filthy rich, bringing my private plane to London for an extended holiday isn't going to be an issue.

Unfortunately, gangsters who like to move somewhere safer and more secure tend to make the places they move to less safe and secure, because the people they've upset follow them and don't always use the legal system to help them get what they expect (particularly if they think the legal system will disagree with them). I just can't help wondering how many Russian millionnaires and oil-rich plutocrats we can support before we become a country rather more like the ones they came from. We need a bit more variety in the wealth that we create and attract - we seem to have focused in the recent past on bringing the rich people in to play, but not working on keeping up the facilities in the playground (health and education of the general workforce, utililties, roads, transport, high quality goods etc.). If the intention is to focus only on keeping the hugely rich happy, with public boarding schools, private healthcare, private ambulances, private security and helicopter pads in order to avoid the roads, I don't think that's any good for this country whatsoever and would rather try and do it without them - and if they expect good public services and a useful workforce to be maintained, then they need to be happy to contribute towards it, somehow, which apparently they are not, they just want the end product ready there for them, provided by wealth created from somewhere other than their own pockets. If only we could all provide amazing facilities on the back of people only spending money for fun.

And we can only sit back on our reputation for being uncorrupt whilst we roll back all our laws and regulations for so long - it seems we are an awful lot less uncorrupt than we claim to be, if the recent past is anything to go by.