It's not so long ago that the Economist was a died in the wool believer in tax havens. As a bastion of free market thinking it thought tax havens played a key roll in the free flow of capital.
And now the world has changed. And nothing is better indication of that than the change in the opinion of the Economist. This is from its latest editorial (and I've omitted all the sections on information exchange, which it also now supports):
Tax policy is, for the most part, a jealously guarded national competence in the EU. The authority to tax citizens is seen as a central attribute of sovereignty. Critics say a refusal to pool powers at EU level risks creating a “race to the bottom”, with each country trying to outdo its neighbour. Yet if so, the danger in harmonisation must be of more oppressive taxation. Smaller, poorer countries on Europe's periphery have every right to levy low rates of tax. Britain should not have to sign up to a financial-transactions tax it dislikes. If France insists on taxing its rich citizens at a rate of 75%, it can blame only itself when they leave.
Yet co-operation in an age of mobile capital is necessary to ensure that international companies pay their taxes. A tougher policy of naming and shaming tax havens is a start. More transparency on where companies earn money, employ staff and pay tax is desirable. Renegotiating double-taxation agreements could close some loopholes. But all this is best done globally. Agreement within the EU would help, but is held back by a mutual suspicion. At one end stand European institutions seeking to build their empires. At the other stands Britain, with its innate aversion to any arrangement that has a European label.
Countries need to find a middle way. Not all tax competition is “harmful”, even if in some forms it may be. Elaborate tax schemes can give big multinationals an unfair advantage over smaller domestic firms. Joint action should not be an excuse to force up Ireland's 12.5% rate of corporate tax. But inaction that allows firms to engineer a rate more like 2.5% for themselves is inexcusable. In such a world, sovereignty comes at a cost that too often goes unrecognised.
Now there are minor issues I would still raise with that argument, especially on tax competition, but they're now issues of nuance, not substance. And the message is fundamentally right. It is only by cooperation now that any hope of beating tax abuse exists, and with it any chance of ensuring capital contributes to the cost of society.
That's the challenge for the G8. I hope it can rise to it.
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Let’s hope so indeed!
BTW, I think you mean “dyed in the wool” and “played a key role”…… (Spellcheck strikes again!)
On the subject of cooperation and change, I watched “The Spirit of ’45” last night. I realised I was lucky to live through that era, as I was born in 1950 to working-class parents so got all the benefits.
Looking at the reverses to ‘socialist’ policies that have happened since Thatcher/Reagan, you can’t help but think what the heck is happening here? Is it a cyclic historical thing?
Over a period of time the rich (represented today by the big three parties, neo-liberals all) stupidly strangle and starve the very people that actually make their wealth, until the 99% can’t take it any more and take power back. Then they get complacent over time and let the rich slowly strangle them again.
It was clear from the documentary that the 99% realised that as they could all work together to fight a war, they could all work together to make a better world for themselves, i.e. it took a war for them to wake up.
You have to wonder, what will it take to wake up this time?
I need to see it
You make a good point, Brian. There may well be cyclicity here. I think Nietzsche rather depressingly called it ‘The Eternal Recurrence of the Same.’ I think there is a scene in the film of a crowd heckling Churchill just after the war – despite his leadership in the war coalition he was seen as representing the old order. I’m not sure that the 99% will wake up this time as people are demoralized, slumped in front of propaganda spouting TVs, and too lethargic and indifferent, or so it seems.
Gooo dpoint Simon, I was discussing something along those lines with 2 fellow civil servants last night. This is why Gordon Brown letting the bankers off the hook was such a mistake. A proper progressive response would either have been to let the banks collapse, and then turn round and say, ‘look at the chaos caused by free market capitalism’, or to have taken the opportunity to take the financial system out of the control of the 1%, and into government control for the benefit of society and the economy as a whole.
Simon
the former history teacher in me forces me to point out ‘bread and circuses’ were used in the Roman Empire almost two thousand years ago. Keep them from starving but distract them.
‘Divide and rule’ is also a policy with a long history.
As you say people need to wake up. Richard’s post today on the nature of money deserves to be more widely read. Then more of may see a practical way to change.
I now work in mental health and there is a saying (Eric Berne) that people will change when they are bored, in crisis or can see another way. We are certainly in a crisis but many don’t know there is a way out apart from suffering. It’s a repeat of what happened in the thirties.
Cicero (the Roman politician) said that those who forget their history are condemned to repeat it. Let’s hope not and do what we can.
Many congratulations on being one of the leading lights in changing awareness about tax. The change in stance of the Economist does seem remarkable and must be due to your work and others’ in winning the moral and intellectual argument. Further, it does appear as if our institutions are on the brink of radical change – but no-one has a clear idea of what is to come. In this regard, it is easy to be sympathetic to the comments above. We must be vigilant, however. I am especially struck by one phrase used repeatedly above. It is not so long since the young, brown-shirted men of the Hitler Youth stomped around German towns, terrorising some in their community by shouting:’Wachet auf!’ (Wake up)
Let’s hope none of us don brown or black shirts! ‘Wachet auf’ is also a Bach chorale sung at Christmas with a more spiritual meaning!