The charge sheet against tax havens

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The recent Norwegian report on tax havens is impressive in paying out the charge sheet against tax havens / secrecy jurisdictions:

Tax havens increase the risk premium in international financial markets
(they) enhance counterparty risk and information asymmetry between different players, which undermines the working of the international financial markets and contributes to higher costs and risk premiums for all countries.

Tax havens damage institutional quality and growth in developing countries.
They can contribute to weakening the quality of institutions and the political system in developing countries. This is because tax havens encourage the self-interest that politicians and bureaucrats in such countries have in weakening these institutions.

Tax havens undermine the working of the tax system and public finances
This has made it difficult for other countries to maintain their capital taxes, and has thereby contributed to lower taxes on capital. Developing countries have a narrower tax base than rich countries, and also obtain the largest proportion of their tax receipts from capital. Accordingly, lower capital taxes mean either a decline in revenue and / or higher taxes on a narrower base.


Tax havens reduce the efficiency of resource allocation in developing countries
This can lead to a redistribution of resources by the private sector away from activities which yield the highest pre-tax return to ones which give the best return after tax. Such behaviour reduces overall value creation.


Tax havens make economic crime more profitable
S
ecrecy legislation provides a hiding place for players who want to conceal the proceeds of economic crime. Tax havens thereby lower the threshold for such criminal behaviour.

This is a government sponsored report confirming what we have said, time and again about these places is right.

Good for Norway.

Hat tip for extracting this to John Christensen