World in Brief: Letters

On big ideas and taxes

The World Today Published 2 August 2013 Updated 7 December 2018 2 minute READ
Illustration: Belle Mellor

Illustration: Belle Mellor

Thought of that

Phillip Blond outlined an easy solution (‘Britain needs to think bigger’, June/July) to the ‘problem’ of academics not having an impact on policy: they need to think bigger. While we sympathize with the call for academics to think more ambitiously, his piece seems curiously outdated. Blond has arrived late to a debate that has been raging within British social science for several years, stimulated in part by a demand from Britain’s research councils that academics demonstrate precisely the kind of ‘serious, sustained, systematic’ impact he calls for.

The public intellectuals praised by Blond all employ the data-driven, evidence-led approach that he argues is problematic. Thaler and Sunstein’s Nudge popularizes decades of research in behavioural economics and psychology.

Jacob Hacker’s careful and empirically grounded research draws on an impressive body of ‘big data’ studies that American social scientists have compiled over decades. Taleb and Gladwell fill their narratives with evidence from longrunning academic research agendas – the kind Blond claims is holding their British cousins back.

Equally, Blond’s claim that academic evidence only has impact when it is accompanied by the big and transformative idea is simply flawed. He struggles to think of any impact by British academics on public policy. On inequality, Sir Michael Marmot, Richard Wilkinson, Kate Pickett and Danny Dorling have built big ideas rooted in analysis of large data to shape international policy agendas. On social cohesion, Ted Cantle reframed our integration policy, while social psychologist Miles Hewstone has used the insights of contact theory to help rebuild community relations.

Blond’s call for big ideas mistakes the packaging for the product. Public academics don’t gain influence simply because they come up with a catchy idea – their public authority flows from decades of research, vetted by their (non-celebrity) peers. Better policy comes less from the big ideas than from clear theory that is tested with good data.

Negative stereotypes of narrow-minded, ideologically driven, incurious and disengaged British dons are widespread and do harm.

In America, politicians making similar arguments recently voted to cut off all federal funding for politicalscience research. The likes of Jacob Hacker will have a much harder time writing their next big idea book when the data they need to develop it is no longer available. This data loss is already happening in Britain.

Robert Ford , University of Manchester, and Matthew Goodwin, School of Politics and International Relations, University of Nottingham

Offshore losses ‘not so taxing’

Professor Palan (‘Tax havens under attack’, June/July) seems surprised that despite all the progress in improving tax transparency over recent years, money is still flowing into so-called tax havens. He should not be. The empirical evidence suggests that the great majority of the flows through international financial centres are perfectly legitimate.

Low taxes, not secrecy, are the defining feature of the offshore centres Professor Palan identifies.

Cayman, Bermuda or the British Virgin Islands are all jurisdictions that are fully compliant with international reporting standards. If an investor is after secrecy they would be better going elsewhere – to the United States, for example, where many states fail to comply with even basic international standards for identifying beneficial owners. Many major corporations, some of them identified by Professor Palan, use offshore centres, but it stretches credulity to believe that they do so for reasons of secrecy. They are so effectively audited, reported on and analysed that any abnormally low tax charge will always attract attention.

Similarly the number one criterion for most individuals using offshore centres is usually to ensure that they do so in ways that are tax compliant.

There are, of course, tax evaders out there. Academic studies have found a statistically significant, but modest, link between improved tax transparency and flows into offshore centres.

One recent report has suggested that perhaps 10 per cent to 15 per cent of offshore funds might be sensitive to improved transparency, in line with estimates of the black economy in most on-shore economies. Those sorts of figures confirm that tackling tax evasion should be an important policy objective. They also confirm, however, that the great majority of offshore funds are perfectly legitimate. This needs to be considered when developing an appropriate policy response.

The debate on tax evasion is bedevilled by extraordinarily widely divergent claims and counterclaims about the scale of the problem.

Domestically, for example, the UK Treasury puts the tax gap at £35 billion; some campaign groups treble that. The Treasury estimate still suggests a problem that needs addressing, but equally highlights the need to ensure that solutions are cost effective and meet legitimate expectations of confidentiality (not secrecy) when it comes to financial affairs.

George Hodgson, Society of Trust & Estate Practitioners