CF&P Strategic Memorandum, September 9. 2009.
Dan Mitchell runs the Center for Freedom and Prosperity
I admire some things about Dan. His enthusiasm for saying how business works when he has never run one. His dedication, however misplaced. His weird presenting style which always amuses me.
But he has his back to the wall:
This has not been a good year for supporters of tax competition, fiscal sovereignty, and financial privacy. The election of a pro-tax ideologue in the United States substantially strengthened the forces pushing for a global tax cartel. All jurisdictions have now been bullied into agreeing that privacy laws no longer should protect foreign investors. This weakens tax competition, but the real issue now is whether this liberalizing process will be completely eradicated. The OECD's campaign against "tax avoidance" should be a wake-up call.
For Dan it is: for all it's faults (and it has many) the OECD is telling the world we're moving in the right direction. And Dan is losing. Sanity will, eventually, prevail.
So you might have to get a real job Dan. And that might be really painful. Reality doesn't work the way your models says it does.
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I am still waiting to hear what is wrong with tax competition. Scottish prawns go to Thailand to be shelled, even though there are lots of unemployed people where the prawns are caught. A major reason is that labour costs in Thailand are much lower, but nearly half of labour costs in Britain consist of tax. So tax competition means that work goes offshore.
Tax competition only becomes a problem when politicians and economists refuse to learn the lessons it could teach. It does not have to mean that governments must reduce their spending to the point that the public realm is in a state of squalor, though that seems to be the situation already in Britain.
If taxation is shifted away from labour and on to the rental value of land, labour costs are reduced, the government’s massive bill for benefits is reduced, real wages stay the same and the government has plenty of money to pay for the kind of public services that are part of a civilised society.
Henry
Competition requires the option of failure
How keen are you on failed states?
Richard
a lack of competition also may harm a country in a long run. the soviet union is a clear example of that.
I am not keen on failed states but they have been around since time immemorial for all sorts of reasons including war, colonialism, corruption, ignorance, bad religion, tyrannical leaders, etc etc etc. It isn’t something that can be stopped.
But even the best of states are failing because of badly constructed tax systems. In fact, every country in the world is. If you look carefully you will see that Sweden, for example, with many natural advantages, which has avoided wars for centuries and has a tradition of honest government, is not doing particularly well at the moment. Part of its trouble is its its tax system, which is having all sorts of harmful side effects, including persistent and rising unemployment. Small businesses, which are often the means by which immigrants with poor language skills can get into the economy, have constant trouble with tax authorities have really got their teeth into services like restaurants. The are regular reports of restaurant owners ending up in prison for tax fraud. But in truth many are marginal and can barely survive if they pay all the taxes they are expected to. This is taxation way beyond ability-to-pay. And what do the Social Democrats propose? Higher taxes on labour. If you look below the surface you will discern that every one of the developed countries with the exception of Norway is undergoing an economic train crash in slow motion. Due to the high taxation of labour, economic activity is leaching away to low labour-cost countries. If you want to think of it that way, this is another means of tax avoidance, and one that cannot be stopped except be reconstruction of the tax system.
What counts is not HOW MUCH money is taken but HOW it is taken.
It is open to any country to stem losses to tax havens by redesigning its tax system. The people in democratic countries need to wake up to what is happening and exert pressure on their politicians to adopt tax systems that work without harming the economy – or elect politician who will. In third world, resource-rich countries, this will upset multinationals who want to get their hands on the country’s rental stream and systematically steal it. I would suggest that it is not loss of tax revenue that is impoverishing, but rather the theft of a country’s rental income stream. That should be of more concern since that means the loss of claims on wealth in the victim country, on a gigantic scale. Now that really is a cause of persistent poverty. And incidentally, keep an eye on those African countries which have been allowing the sale of land on a large scale to foreigners. This will lock out their own people from access to the means of production. In due course, in the absence of substantial land value taxation, it will create a Latifundia situation with the people little better than slaves.
Christian Aid ought to know better. Get them to study Psalm 24 (Protestant numbering), followed by Leviticus 25 – all of it, not just the bit about debt relief.