The Organization for Economic Cooperation and Development is infamous for its anti-tax competition campaign. Acting on behalf of uncompetitive nations such as France and Germany, the Paris-based bureaucracy even has a blacklist of low-tax jurisdictions and wants those “tax havens” to be subjected to financial protectionism. Yet a top OECD tax official just confessed that tax competition is driving tax policy in the right direction by pressuring governments to lower tax rates, as noted in this Thomson Financial News report on the Forbes website:
Chistopher Heady, head of the OECD’s centre for tax policy and administration said…whilst corporate tax rates have fallen in Europe, revenues have not. ‘It is likely that corporate tax revenue will eventually start falling,’ he said at the Brussels Tax Forum. He said that combined with decreasing tax income from high earners…this could lead to a combination of taxes which would be more beneficial for GDP growth. ‘The pressures of tax competition may lead to a tax mix that is better for growth,’ he said.
The OECD logic is remarkable. The bureaucrats admit that tax competition is producing positive results. Heck, an earlier OECD report admitted that “the ability to choose the location of economic activity offsets shortcomings in government budgeting processes, limiting a tendency to spend and tax excessively.” Yet rather than celebrate tax competition as a liberalizing force, the bureaucracy wants to sanction and penalize jurisdictions with pro-growth tax systems.