They went that Huawei: Britains crucial 5G call
hello and welcome to the intelligence on Economists Radio I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events. Shaping your world hit. He Africa's tax collectors. Loopholes loopholes abound. Plenty of people simply dodged taxes leaving with some reason the well-connected can skip out to governments are concluding. There's just too much potential revenue there to ignore. And what exactly is the right size for a team to few dulack ideological diversity. Too many and you can't hear the boss at a meeting. We look into the sociology behind getting the number right. Uh but I after competing pressure from the world's two largest superpowers written has made a contentious decision. Yesterday it's government announced that hallway alway giant Chinese Tech Company would be allowed a substantial but limited role in building the country's whizzy fifth-generation or five g mobile phone networks. The decision will please Britain's network operators likewise low prices and expertise but it will upset America. Britain's closest ally which worries that that Wa Wa is under the influence of the Chinese government it all comes at a sensitive time for the so-called special relationship between Britain and the US on Friday Britain and will exit the European Union and then looked to America for a favourable new trade deal and the decision marks split in five is an electronic spying packed with its roots in the Second World War. The comprises America Britain Australia Canada and New Zealand. Australia has already followed America's lead and band while way meanwhile other countries including Germany and Spain must now decide whether to follow in Britain's footsteps after my shaggy nizing the British government insist decided that it will allow while way of China to supply kit for its five G. telecoms network but in a limited way keeping it out of the core network and limiting its market chat thirty five percent. Daniel Franklin is our diplomatic editor. The core is the most sensitive sensitive bit of the system that has the most say in handling where the data go. As opposed to the periphery which is reckoned to be less sensitive although the distinction in between the two can sometimes be a bit blurry. And why has America Ben so upset by this. America has been lobbying really hard to get Britain as a stray Leah for example has done to block while we altogether because it sees while we as a risk of potentially a company that could be used by by the Chinese state to spy on pretty much anything likes and I think it plays into the a growing sense of China as a strategic rival for America occur. And here's a technology in which China is actually head so its particularly sensitive. It's really at the nexus of these twin worries of China's arrival in China is a country that is Overtaking in America in certain technologies of future. Why is this such a pointed question around five G. When when the world is already covered with has it's been covered with two G and three G four g white? Why such a flash point five is really a step change in terms of telecoms infrastructure? And it's really a question of who controls trolls the telecoms infrastructure of the future and in other generations of of this sort of equipment. China hasn't been out of out ahead and the problem. Is that the the rest of the market. Hasn't really caught up with China on five G. U. hasn't been a a a Western alternative. That is as cheapen as is good. And that's made it very difficult for those who want to press ahead with. What is crucial technology for competitiveness? In if you like the new digital economy amy to avoid the Chinese option because the other simply aunt is good and onto cheap and it will be a little bit of time before competitors catch up. So there's is an economic case for the decision. But what about the security case that America's been making I think Britain had several reasons for this one was the merits of the case Did they actually. He considered that. It was as greater risk as the Americans were claiming. And I think the answer to that among those Who looked at it very closely in the intelligence service service and elsewhere was no? They could manage this risk. Secondly there is the China factor as well. Britain is very keen on not burning. Its bridges with China. UNHURT has a big trading ambitions with China and this could have been taken by China. Had it been snubbed. As a way to was an excuse to take reprisals against Britain and then I think there's a certain interest in Britain and not just to be seen to be bowing to pressure from America's especially as a time when the socal special relationship has taken on such importance as Britain leaves the European Union. Will you might view the the decision yesterday. As a kind of a third way rather than bowing to China entirely to America entirely it says well we can use some of the kit in some of the network and that's in a sense keeps both parties. Happy I think that was the effort and it may well have worked to an extent Burst Johnson. The prime minister called president trump and seems to FA- now anyway of smooth things things over but there is a lot of unease in the American administration on Capitol Hill and indeed among quite a few conservatives in Mister Johnson's own party and so do you think that taking this middle ground will will affect the special relationship. Between Britain and America. I mean America has has threatened before that it might restrict some of its intelligence sharing for example well I think that's unlikely to happen. Because the intelligence sharing is absolutely crucial actually for both countries and both benefit from it so unless there were real concerns that China was able to eavesdrop in these networks. That are actually outside the kit that China is supplying and I think the intelligence sharing will go on but it could have some sort of backlash against the trade deal that Britain and America are going to be trying to negotiate. There's a lot of unease among congressmen and senators. So getting this through. The American Congress eventually might be harder now than it was before so if some of that tension remains then how do you expect this decision to to play out in shorter in the medium-term what in the short term it's going to be March chewed over. This is brexit week. An will feature a lot of focus on the special relationship in fact. Mike Pompeo the American Secretary of State is is in London now and due to meet Dominic Robb his opposite numbers whereas Boris Johnson. Tomorrow Mr Trump Harems dorab going to have a public conversation about the future of the special relationship and you can expect hallway to feature heavily in that but beyond that in the in the longer term. I think it will be seen as as a key moment. In the relationship. Between Britain no longer has the comfort in numbers that comes from the a European Union but is more on its own and how it deals with the United States and this suggested it's prepared to take headed look at its own national interests and not just just put America first just for the sake of it and what about more widely there are other countries in particular in the that have not yet made their decision as to how How much to allow while way into its five G. networks as their rolled out to use opposed? Britain's decision will influence them. I think it is like you make it easier for other countries now to also go with. Wow we're at least up to a point Not Having Outright Ban as Japan as well as Australia have done so I think that's another thing thing that will rankle with the Americans that Britain of all countries their most trusted ally is allowing this perhaps domino effect that it wouldn't really like to see. And what do you suppose. While way itself and Chinese officials will have made of it having lobbied themselves for For decision in this direction. Listen I think they'll be pleased. They'll they'll be a bit concerned about the restrictions on the the market share and indeed overtime. It's possible that as a bit of a backlash flash from that among conservatives in parliament trying to ratchet down in future but broadly the avoidance of an outright ban. I think we'll be Z.. By them as a as a victory and you'll thank you very much for joining us. Thank you. Africa is a stressful place to be a tax collector sleepless nights because you're always thinking wherever on Kuba Dabo is the top revenue official in the Gambia. Where as with much of the continent attitudes to taxation are ambivalent tuition is that the people should come? I supposed to be the taxes but on the African context difficult politicians across Africa are asking ever-more of people. Like Mr Darko. With good reason. The biggest hole in public coffers is not money squandered or stolen but the revenue it's never collected in the first place the governments in Africa to put it simply just not putting enough tax lien Taylor reports on Africa for the Economist. And it's based in Uganda In Nigeria which is some of the lowest tax rates the country which has three hundred times as many people as Luxembourg it collects less taxed taxed in Luxembourg another example Ethiopia. The tax revenues collected Equally citizen would just get around. Eighty dollars was a year at market exchange rates so so basically governments have very money to provide the services that citizens need in demand. And if you go to the Democratic Republic of Congo for example the government spends so little person on healthcare each year that money would buy a copy of the economist. And so how has it become a problem of this size continental-scale tax problem so since the nineteen eighties. Really Economic Policy in Africa has been quite heavily influenced twins by the IMF World Bank and part of that agenda his being slashing trade taxes which used to be one of the largest source of income for African governments. It's the same time as reductions in top rights of Personal Income Tax Corporation tax. That has been new kinds of taxes. AXES VAT is increasingly popular across the continent. But the result is being a huge surge in an overall tax take and in fact over half of tax revenues In Africa map comes from taxes on goods and services things like the cost is those taxes are regressive and the poor and they're paying Moore's abortion of their income and they are often quite unpopular as well but what kind of rates of tax are we talking about here. These are what we would expect for the size of of these economies so although tax rates like had been falling least direct. Taxation is still higher than any other parts of the world but the problem you have is it as so many loopholes calls within that the loss of people and governments Actually pain one thing was crazy poses tax treaties share treaty. He signed between governments their originally intended for the noble purpose of eliminating double taxation but in practice often happens. Is there a way full for multinational corporations to limit taxation of cross-border income. Things like royalties says phase in Soham some analysis by the IMF suggests the African countries signed tax treaties with Mauritius Doug an extra investment but lose our by about fifteen percent of the corporate tax revenue on average at a second. Problem is the government's grown very generous exemptions party to try and lure investment some of those exemptions essense the policies bill lots of them not really any evidence basis suggests that they're achieving. Will they set out to do and estimates are up to forty percent of revenues in some cases aces. The government's could be collecting their forbearing through these kinds of exemptions so if the tax rates are falling and a lot of people are finding ways to get around the anyway who's paying the tax that he's coming in so the complaint that comes from big business is that they are the ones who are fitting. The bill does some evidence. That's right the the African Tax Administration Forum which is a club of tax collectors. They estimate among the member countries about six percent tax paying firms a pay almost eighty percent of total tax proceeds. But it's a bit more complicated than that. Because for example some analysis of effective tax rates in jobs suggests that actually the smallest firms paying the highest effective rights in fact when you talk to ordinary people in many countries as they say look. This system is rigged survey results. Show the IVA. Half of Africans considerate very likely rich. People could use a personal connections so pay a bribe. In order to dodge taxes there was a study published by the International Center for Tax Development. They work with Ugandan tax collectors to examine Zaman records for seventy one government officials in two thousand fifteen fourteen and they found that just one if officials have paid any individual taxes. And so although it's true that the big firms are paying a significant proportion of the bill is also the case that wealthy individuals and nausea corporations are escaping much. They should probably be paying so it seems like there's a lot of of contributing factors here not not least the sort of good old fashioned tax avoidance business but. I mean how how to fix it if it's continental scale problem. What's the continental-scale fix? Well of course. It's a continental scour problem but in fifty four different countries so it'll be very different from country to country but broadly speaking the first thing is a package of quite boring technocratic performances things like strengthening new it systems uh-huh making sure tax payers have vacation numbers creating special units to focus on sets in classes tax payers like wealthy individuals will big business so so in Uganda. For example the Tax Authority has has done that they focus more on those wealthy individuals who went paying that tax when a list of one hundred in seventeen very rich people and started meeting them they found the beginning. Only thirteen percent of those were filing tax returns by the end. Seventy eight percent of them were in fact. Fat One pastor started preaching his congregation about the importance of paying tax so those kind of tax administration reforms of the first part of the pitch at a second pies to reassess tax policies are going back to tax treaties. Some countries have started renegotiating them. Some countries have also started thinking afresh about some of the exemptions. Ah Giving to foreign investors and so if these countries did that and Did the the the boring stuff and the obvious stuff and the bureaucratic stuff. How how much more money money could they collect? That's a very difficult question tonight for sure but but one way of thinking about. It is the IMF approach which is to look at things such as how rich countries resolve to trade governance inequality Friday these variables into a modal. Then try estimate how much those countries it could be collecting when you do that. The IMF estimates that most sub Saharan African countries could increase revenues by about three to five percent of GDP. You pay that much. But that's more than that. Currently receiving in for a night and there there is examples of countries which have started to share increases the revenues to GDP ratio is the challenges to sustain of the lung. Liam thank you very much for joining us As much as I'd like to take all the credit for how the intelligence sounds it's not just comedian. Three guests behind a microphone every weekday. The show's producers. Make things happen behind the scenes the other produces an. I helped make stories stories. And edit them off fluids are sound engineer ensures that I sound great I make sure the towns and the beautiful crystal. They highs come through in the mix and of of course our editors keeps the show from going off the editorial rails. I make sure the right story is going to show every day having a capable team around you can really help get the job done. Philip coggan economists fertile. Be Call Him on work in management but many companies grapple with the question of the optimal size of a team. What is it and how do you go about answering that question? I think a lot of trial and error goes into it but over time we've evolved various forms of team that point to certain sizes being useful over very long time for example. We seem to have decided that very large organizations can be difficult to handle and the explanation for this. May they will be that. There's only a certain number of relationships that we can usually cope with and once the team gets too large. You didn't recognize everybody. You have to have a much more formal structure and you kind lose the camaraderie that exists with a small thing. But if you have two small team than the problem is you. Don't have the expertise needed to do the job so you need to sort of goldilocks. goldilocks position between two small team without expertise in to dodger team which difficult control. And what what that number. How do you find? It does a range of numbers suggested by Professor Robin Dunbar of Oxford University. and He's been studying human society and also primate society. Those numbers are five fifteen gene fifty and one hundred and fifty from the point of view. Very close friends the kind of people. You'd have a shoulder to cry on then. You took him out five abroad group of good friends. He might be going for drink with on a regular basis. You took him fifteen reasonable friends. Christmas called someone you might see once a year or something fifty and then acquaintances one hundred fifty and when when you talk about in the culprit sense if you have a meeting where you need to decide something you don't want fifteen people really you need five but if you have a meeting where you want brainstorm talking about ideas and five may be limited and you're talking about fifty and so how is it. That Robin Dunbar came up with these numbers. Well he studied historical sizes of teams teams and companies. So if you go back to military forces which have had some thousands of years to work this out by trial and error one of the earliest examples specimen is the Roman Centurion Hundred People Eighty soldiers twenty support staff and even now on units tend into the hundred twenty or one hundred eighty level depending depending on whether you'll the UK the US but if you look at elite special forces the people you'll going out on patrol with you know you have to trust each person intimately with your life. Then they tend to be round the five level so again. It depends what you need if you need a sizeable team. The hundred and fifty five when you need a really small group uh-huh and so all of this translates quite neatly to to the business case yes startups have this wonderful sort of camaraderie. When they begin you start with very few people to five or so and then you can build it up and maintain that camaraderie? Because you know everybody. Is they come into the team. But as the company grows you start to lose it you start not to know all the names of people and there was a nice example coming from net flicks where they talked about the stand on a chair number if the boss stands on a chair yeah can progress the crowd stoff and people stop being able to hear them because that to fall back then you've reached a size where perhaps it's too big and you kind of lose at initial cameraderie and as interesting example dumbo found from religious foundations. The Hutter writes they split up that groups once they pasta one hundred fifty and their rationale rationale was. It's possible to govern group of blow that number with peer pressure. Once you get above it then you need kind of equipment police force and if you think about it in company Thames that's what what happens you start getting. HR staff you start getting divisions you start getting middle manages once you get above a certain level and some things again from that but some things I lost as well wait wait a minute. How does this figuring? When you're a columnist you are a law unto yourself not entirely? No Man is economic island and I have people who edits my copy and and take out all the jokes that don't work and some of the people who fact check copy and make sure I didn't say something stupid my colleagues who suggest ideas to me in meetings which Joe extremely useful so I could not be a columnist on my own. I require the team the economist to help me not to mention the colleagues. Do Turn these things into an audio form absolutely Filipacchi very much time. Thank you Jason That's all for this episode of the intelligence but speaking of talented and supportive teams. Let me take take this opportunity to thank mine because today marks a year since the intelligence launched happy anniversary then to our editor Marguerite how senior Producers Prison Chris Mb and Hannah Marino Producers Stevie Hurts and William Warren our social audiences producer. Laura Clark and our unfloppable sound engineer Daniel Lloyd Evans. We'll see you back here tomorrow.