{"id":10763,"date":"2023-07-18T09:36:35","date_gmt":"2023-07-18T08:36:35","guid":{"rendered":"https:\/\/www.taxpolicy.org.uk\/?p=10763"},"modified":"2023-07-18T10:04:21","modified_gmt":"2023-07-18T09:04:21","slug":"oxfam","status":"publish","type":"post","link":"https:\/\/heacham.neidles.com\/2023\/07\/18\/oxfam\/","title":{"rendered":"Oxfam – taxing a windfall that doesn’t exist"},"content":{"rendered":"\n

Here’s Oxfam’s press release<\/a> from earlier this month:<\/p>\n\n\n\n

\"Big<\/figure>\n\n\n\n

To Oxfam’s credit, they now link to the methodology<\/a> from the press release:<\/p>\n\n\n\n

\"Methodology\nWindfall<\/figure>\n\n\n\n

So a company has made a “windfall profit” – and gets taxed at 90% – if its 2021-2022 average profit is 10% above the 2017-2020 average profit.<\/p>\n\n\n\n

Here’s a simple math question: how fast would a company’s profitability have to grow over those six years before it has a 10% profit increase, and therefore a “windfall”? <\/p>\n\n\n\n

Let’s start by assuming no real terms profitability growth at all, and see what happens. Starting with $100 profit in 2017, and using a very simple model that just uprates each year’s profit by global average inflation in the previous year:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Now let’s keep going, and see where zero real terms profitability growth takes us in 2021-22:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

That 11.2% increase is, in Oxfam’s terms, a windfall – and the 90% tax applies (because they only use nominal figures). But in real terms, there’s been no profit increase at all.<\/p>\n\n\n\n

So the answer to the simple math question is: Oxfam forgot about inflation, and compounding. so its methodology will always consider a company to have a windfall unless its profit has shrunk<\/strong> in real terms. They didn’t actually find 722 multinationals that had made a windfall; they found 722 multinationals whose profits hadn’t fallen in real terms (or at least hadn’t fallen much).<\/p>\n\n\n\n

I wrote to Oxfam pointing this out and received a disappointing response (full copy here<\/a>) which justifies reporting profits in nominal figures (which is fine, indeed commonplace), but doesn’t justify using nominal figures\/ignoring inflation to calculate “windfalls”. I don’t think it can reasonably be defended.<\/p>\n\n\n\n

I don’t think this was intentional. Oxfam used to write thoughtful<\/a> pieces <\/a>about the role of taxation in development. Now they just throw out endless<\/a> identikit windfall<\/a> tax<\/a> and wealth<\/a> tax<\/a> proposals<\/a>; how and whether such proposals could actually be implemented doesn’t seem terribly important to them anymore.<\/p>\n\n\n\n

It’s a shame. Oxfam have considerable resources and a large research team. If they turned back to serious tax policy they could do a lot of good.<\/p>\n\n\n\n

<\/div>\n\n\n\n
\n\n\n\n\n","protected":false},"excerpt":{"rendered":"

Here’s Oxfam’s press release from earlier this month: To Oxfam’s credit, they now link to the methodology from the press release: So a company has made a “windfall profit” – and gets taxed at 90% – if its 2021-2022 average profit is 10% above the 2017-2020 average profit. Here’s a simple math question: how fast […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[88],"tags":[192,101],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts\/10763"}],"collection":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/comments?post=10763"}],"version-history":[{"count":7,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts\/10763\/revisions"}],"predecessor-version":[{"id":10840,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/posts\/10763\/revisions\/10840"}],"wp:attachment":[{"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/media?parent=10763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/categories?post=10763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/heacham.neidles.com\/wp-json\/wp\/v2\/tags?post=10763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}