Right wingers seem to think that criticisms of tax havens are an attack on so called 'free market' principles because they are one of the pillars of capitalism. This profound confusion on their part needs to be addressed. Tax havens are pillars of modern captialism: they are one of the main ones on which it is built, as I argue in 'Dirty Secrets'. But let's not pretend for a minute that they have any proper role to play in free markets.
Free markets, if they were to exist are dependent upon everyone having equal access to capital, the market and information. Unless that happens economic theory is quite explicit about the fact that, first of all, free markets do not exist and, second, abuse of markets is taking place.
And let me be clear: tax havens exist to make sure that there is unequal access to capital because the rich hide theirs away from view in these places.
And tax havens also exist to make sure competitors do not get access to markets, especially through the use of intellectual property rights which are so widely owned and controlled from thse places with the sole aim of suppressing fair competition.
And third, tax havens exist to ensure that markets do not have the information they need. We call them secrecy jurisdictions for a reason: it's precisely because they exist to foil free markets.
There is, quite literally, not a person on earth who can defend tax havens because they promote free markets. That's because their sole reason for existence is to undermine free markets, including distorting the level playing on tax which is another condition of free market existence.
But in that case the question as to why the right wing commentariat defend tax havens has to be asked. There are three answers.
First, they don't like free markets: they instead like market exploitation. That is what modern capitalism is, after all, all about.
Second, they don't like democracy, and tax havens do, of course, attack it by undermining the role of elected governments.
And third, they don't like government services, so they try to undermine the related flows of tax.
These are the reasons why the right like tax havens. And they have to be called out for that.
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Richard
What’s your response to Diego Zuluaga? See attached article from the Institute of Economic affairs website….
https://iea.org.uk/it-is-fashionable-to-condemn-international-financial-centres-but-before-you-condemn-them-take-a-look-at-what-they-actually-do/
They don’t like markets
They don’t like democracy
They don’t like public services
What we know is that in their case all three are true
They are the enemies of economic and democratic freedom
Hi Richard,
I thought you might like the single comment that has been left on the article referenced above which defended secrecy jurisdictions:
“Bollocks from beginning to end. Money / Finance only has utility when it flows. Otherwise it is power and the more of it you have the more power you have. And now we know the ratios it is a system well past its sell by date.”
Not as elegant as your response, but it made me smile!
“Don’t like Markets. Don’t like democracy and don’t like governments.”
Very well put. Indeed it is almost as if these so-called ‘capitalists’ don’t actually like capitalism as they continually work to subvert it.
As I say in Dirty Secrets…..
>> ‘capitalists’ don’t actually like capitalism .
Oh, they love capitalism, and playing the game to get hold of as much capital as they can, and if this means they change the rules of free-market, so they are no longer free but tilted massively in their favour, then so be it… Its the free market they hate and are doing everything they can to prevent the smaller guy from competing.
I kind of like free-markets, the idea that market forces and competition will push down prices, and the better solution will naturally rise to the top.
The opposite appears to be happening with Tory government approved exclusive deals going on that remove competition granting only those who’ve made the most political donations to that lucrative pie. Corruption at the highest level.
Depends on what you mean by “free”.
Competition only exists where regulation enforces it. The history of US anti-trust legislation dating back to 1890 presents one of the best case studies. Without those laws the likes of Rockefeller and JP Morgan would have transformed the bulk of US industry into a handful of monopolies and oligopolies.
Unregulated capitalism doesn’t atomise it concentrates. The big guys buy out the the competition. Competition is not its natural tendency, monopoly is.
Great post, Richard. I’d add a fourth possible reason: many right-wing commentators are beneficiaries of tax havens – either because they have wealth deposited in such havens themselves, or because they are funded by individuals, companies or other entities who use tax havens to hide their wealth.
Sorry: I should always state the obvious!
Quite. The Daily Fail doesn’t -it says – like tax havens either, but never declares its holding company is domiciled in one
What about the Guardian then, with it’s various offshore and tax avoiding schemes?
Some time ago it made serious errors of judgement in its joint ventures
As far as I know it has not repeated them
As far as I know GMG still invest offshore, and has set it’s US operations up to be tax exempt (in 2017 no less) .
But what it really seems to be is that it’s one rule for the left and one rule for those the left don’t like.
Appreciate your point about right wingers, but it seems to me there is a much more insidious smoke and mirrors approach that the Tory party parliamentary party is taking (as opposed to the right wing idealogues at the IEA etc) and that is to suggest that they have done a lot to combat tax avoidance.
Eg. just from the Guardian news feed within the last hour:
“The former chancellor George Osborne has used his new role as editor of the Evening Standard to defend the record of the government he was part of on tackling tax avoidance.”
“Stride refuses to discuss Ashcroft but he says the Tories have put an end to non-dom status.
Stride says the government has been “at the forefront” of clamping down on international tax avoidance.
Stride says the tax gap is at a historic low of 6% whereas it was 8% under Labour, a difference of £11.2bn.
Stride says the government has brought in £160bn in tax avoidance since 2010 (a figure he has highlighted at least three times).
Stride argues the Tories have a “far stronger record” on tax avoidance than the Conservatives.[presumably a typo]”
One suggestion for Labour is that if they are genuine about ending tax avoidance, they need to develop it into a cross party issue because otherwise it just becomes a case of Tories v Labour, with Tories just doing anything to claim that they have done something, however counter productive that ends up being.
Ashcroft Cameron and Osborne dont talk to each other, he wanted a job they didnt give it to him, he wrote a nasty book about Cameron, Its a big book but bad blood. I would be surprised it Osborne gave him the time of day, until its really bad for Ashcroft. ie controlling the trusts or not.
100%… Exactly.
Im getting fed up of those lefties going on about how the tax reclaimed from tax havens might be used to fix the NHS etc, and how free markets are all wrong, and we should go for warm and cuddly socialism help thy neighbough etc etc. Gah!
Tax havens are ANTI free-market. The unclaimed tax from money sitting in a tax haven is the same as government welfare for the rich. It removes competition as smaller companies can not compete without the ‘subsidy’s that are paid to the companies that are able to use these havens.
Everything about the setup is almost ‘communist’…. closed markets, back room deals, secret rules… The same thing the Tories tell us they are vehemently opposed to, they are actually supporting.
Agreed
‘Free market’ as defined by libertarian/neo-libs means:-
A world where imperfect information rules and can be exploited by those who purposefully create and manipulate it to their own personal advantage.
[…] Cross-posted from Tax Research UK […]
Well take the example of Bermuda, which is very much in the news. They would say, and I would agree, that it is not a tax haven. It is simply taxed differently. Being an island they tax imports heavily and they also tax visiting tourists and there is a substantial land tax. They also have a payroll tax but they have never had an income tax or tax on corporate profits because they reckoned that it was impossible to enforce taxes on income from a small island when many of the relevant income producing assets were likely to be elsewhere. So they have always had a zero tax rate on income for companies and individuals, and the only reason anyone else thinks it is a tax haven is because other countries have raised their income tax rates. There is no reason why Bermuda should be obliged to do the same.
Alex
Try this http://www.financialsecrecyindex.com/PDF/Bermuda.pdf
It’s a tax haven
Why make a fool of yourself denying it?
And why claim to be someone you are not?
Richard
Thanks Richard, as I’ve been following you for years, nothing new here for me. However according to Piketty, capitalism does best in social democracies where government taxation are around 35-40% of GNP. What this means is that taxation creates the optimal infrastructure for capitalism