Who are you kidding?
I’m told I was in Le Monde this weekend, being quoted about Bono. But what added a touch of irony was that on the opposite page was an advert for the new ‘tax heaven’ (paradis fiscaux) of Macedonia. I can’t find an on-line version of the ad, so I’ve made it available here and I’m sure they won’t mind; it’s simply a synopsis of their web site.
Ignore for a minute some of the absurd factual claims in the ad. Just look at the CIA fact book to see they don’t stack. Concentrate on the tax instead. It’s a fiscal heaven, they say. But then look on the web site for discussion of labour costs and note that they say:
An educated and qualified labor force is available to investors in Macedonia. The average gross monthly salary is 370 Euros, out of which 220 Euros are net salary, and the remaining 150 Euros are for payroll taxes.
Which looks like an effective tax rate of over 40% on annual income of £3,100 in Macedonia. When the investor will be paying nothing what sort of labour relations is that going to create?
The reality is that this is no low tax state. This is a desperate state. So why invest? No doubt that’s what Macedonia asked of itself before making such an absurd investment proposition. And I suspect anyone with any sense has failed to find an answer. The reason’s simple. Tax competition is the badge of a failed state. That’s what Macedonia is promoting. I feel really sorry that someone sold them such a bad deal.
I think the answer is simpler than just saying ‘tax competition is the badge of a failed state’.
Lets look at what Macedonia is promoting, a country where the investor pays zero tax and the employed masses pay tax, well that could be said of the UK also.
A country where they are promoting themselves as a ‘tax haven’, well again take your pick Richard out of any of the countries you regularly name on here.
I think the sad fact is that Macedonia has looked out over the world and seen how other ‘rich’ nations are doing it and thought, ah, a tax haven must be the norm, we’ll do that.
Actually Tim, yes it is. See this http://visar.csustan.edu/aaba/KillianNairobi.pdf
And Ireland grew on the back of EU subsidies. I know. I was there. The Celtic Tiger is a myth.
Richard
Jason
I see your logic - but I think you might be overstating it a bit. The UK does rqeuire corproations to pay tax (although does not always succeed at getting them to do so) and certainly does not give tax holidays.
On the other hand - see Closing the Floodagtes and you’ll see I have some sympathy with what you say
Richard
Richard,
I found the KN report confusing. They criticize Ireland for its tax policies that promote R&D, now that basic manufacturing has gone to lower wage locations, then encourage developing countries to do the same!
Now, if you and the authors of the KillianNairobi (KN) article are arguing that a country should not give special tax breaks to foreign MNC, at the expense of higher taxes on local business and individuals, then I agree. Government should not be picking winners or subsidizing losers. Cowperthwaite had the right idea.
The purpose of tax competition, IMHO, should be to force governments to reduce the scope of what they do to that which is truly essential, and to run those services more efficiently, so that ALL taxes can be lowered. (I say all taxes, though I find the arguments in favour of a land value tax persuasive - I don’t view the huge property price rises in the UK and Ireland over the last 10-15 years to be a good thing for the economy of either country).