Tag: oecd

Senate Finance Hearing on Debt

I testified to the Senate Finance Committee today regarding federal spending and debt.

Here are some of the points I made:

  • Last night, President Obama called for a “balanced solution” to our fiscal problems, including tax increases and spending cuts. However, CBO projections do not indicate that we face a “balanced” problem. Instead, projections show that the deficit problem is caused all on the spending side of the budget.
  • The United States has sadly become a big-government country. Until recently, government spending in this country was about 10 percentage points less than the average of OECD countries. That smaller-government advantage has now shrunken to just 4 percentage points.
  • In recent years, policymakers have given us the largest deficit-spending “stimulus” since World War II, yet we are suffering from the slowest economic recovery since World War II.
  • Rising government spending suppresses GDP because the government’s “leaky bucket” gets leakier and leakier as spending increases.
  • Leaders in Congress are talking about cutting spending by $3 trillion over 10 years, or roughly $300 billion per year. The result would be that spending would rise from $3.6 trillion this year to $5.4 trillion in 2021, rather than the currently projected $5.7 trillion. That would be only a 5 percent cut. Interest savings would reduce spending a little more—but, come on Congress, you can do better than that!

With the Support of the Obama Administration, Paris-Based OECD Now Wants De Facto World Tax Organization as Part of Its Anti-Tax Competition Campaign

I’ve been battling the Organization for Economic Cooperation for years, ever since the Paris-based bureaucracy unveiled its “harmful tax competition” project in the late 1990s. Controlled by Europe’s high-tax welfare states, the OECD wants to prop up the fiscal systems of nations such as Greece and France by hindering the flow of jobs and capital to low-tax jurisdictions.

Guided by a radical theory know as Capital Export Neutrality, the OECD wants to impose global tax rules that would prevent taxpayers from ever having the ability to benefit from better tax law in other jurisdictions. This is why, for instance, the international bureaucrats are anxious to undermine national tax laws – such as America’s favorable treatment of bank deposits from overseas – that enable people to escape onerous tax regimes.

Bolstered by support from the Obama Administration, the OECD now is taking its campaign to the next level. At its Global Tax Forum in Bermuda, which ends later today, the bureaucrats unveiled a new scheme that effectively would result in the creation of something akin to a World Tax Organization.

The vehicle for this effort is a Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This may sound dry and technical, but the OECD wants all nations to participate in this pact, which has existed for a couple of decades but was radically expanded last year to give high-tax governments sweeping new powers to impose bad tax law on income generated in low-tax jurisdictions.

But the real smoking gun is that the OECD has put itself in charge of the “co-ordinating body” that will have enormous powers to interpret the agreement, modify the pact, and resolve disputes – thus giving itself the ability to serve as judge, jury, and executioner.

This is a profoundly dangerous development with all sorts of very troubling implications. Since I’m in Bermuda trying to destabilize this effort, I don’t have time for extensive analysis, but here’s a press release from the Center for Freedom and Prosperity and here are some of my immediate concerns.

  1. Higher tax burdens. If high-tax governments succeed is imposing this Multilateral Convention (insert “World Tax Organization” whenever you see that term), tax competition will be undermined and politicians will respond by increasing tax burdens. This is why nations such as France have been pushing this scheme, of course, and why left-wing academics have long dreamed of this type of arrangement.
  2. Risk to human rights. Amazingly, the Multilateral Convention is open to repressive regimes, which then would have access to all sorts of sensitive and confidential taxpayer information. Already, the thuggish dictatorship of Azerbaijan has signed up, as well as the unstable nation of Moldova and the corrupt government of Mexico. The implications are grim, including the sale of private data to criminal gangs, the loss of sensitive information to hackers, and the direct misuse of American tax returns.
  3. Loss of sovereignty. For all intents and purposes, the Multilateral Convention outlaws certain pro-growth tax policies and discourages others. Equally worrisome, it creates a system allowing foreign tax collectors to cross borders. The Obama Administration has specifically acquiesced to this provision, so perhaps we will soon see corrupt Mexican tax authorities harassing businesses and individuals on American soil.
  4. Outlawing tax avoidance. The OECD historically has tried to portray its efforts as a fight against tax evasion, but the Multilateral Convention explicitly talks about “combating tax avoidance.” This should not be a surprise since the Capital Export Neutrality ideology is based on the notion that taxpayers should have zero ability to lower their tax burdens. This means we can fully expect an assault on all forms of tax planning, with American companies almost sure to be among the first to be in the OECD’s crosshairs.

The final insult to injury is that American taxpayers are the biggest funders of the OECD, providing nearly one-fourth of the bureaucracy’s bloated budget. So our tax dollars are being used by OECD bureaucrats (who receive tax-free salaries!) to dream up new ways of increasing our tax burdens. In case you need any additional reasons to despise this bureaucracy, here’s a video detailing its anti-free market activities.

 

And since I’m recycling some videos, here’s one explaining why tax competition is so important.

New Paper Explains Why Low-Tax Jurisdictions Should Resist OECD Attacks against Tax Competition and Fiscal Sovereignty

One of the biggest threats against global prosperity is the anti-tax competition project of a Paris-based international bureaucracy known as the Organization for Economic Cooperation and Development. The OECD, acting at the behest of the European welfare states that dominate its membership, wants the power to tell nations (including the United States!) what is acceptable tax policy.

I’ve previously explained why the OECD is a problematic institution - especially since American taxpayers are forced to squander about $100 million per year to support the parasitic bureaucracy.

For all intents and purposes, high-tax nations want to create a global tax cartel, sort of an “OPEC for politicians.” This issue is increasingly important since politicians from those countries realize that all their overspending has created a fiscal crisis and they are desperate to figure out new ways of imposing higher tax rates. I don’t exaggerate when I say that stopping this sinister scheme is absolutely necessary for the future of liberty.

Along with Brian Garst of the Center for Freedom and Prosperity, I just wrote a paper about these issues. The timing is especially important because of an upcoming “Global Forum” where the OECD will try to advance its mission to prop up uncompetitive welfare states. Here’s the executive summary, but I encourage you to peruse the entire paper for lots of additional important info.

The Paris-based Organization for Economic Cooperation and Development has an ongoing anti-tax competition project. This effort is designed to prop up inefficient welfare states in the industrialized world, thus enabling those governments to impose heavier tax burdens without having to fear that labor and capital will migrate to jurisdictions with better tax law. This project received a boost a few years ago when the Obama Administration joined forces with countries such as France and Germany, which resulted in all low-tax jurisdictions agreeing to erode their human rights policies regarding financial privacy. The tide is now turning against high-tax nations – particularly as more people understand that ever-increasing fiscal burdens inevitably lead to Greek-style fiscal collapse. Political changes in the United States further complicate the OECD’s ability to impose bad policy. Because of these developments, low-tax jurisdictions should be especially resistant to new anti-tax competition initiatives at the Bermuda Global Forum.

To understand why this issue is so important, here’s a video I narrated for the Center for Freedom and Prosperity.

 

And here’s a shorter video on the same subject, narrated by Natasha Montague from Americans for Tax Reform.

Last but not least, here’s a video where I explain why the OECD is a big waste of money for American taxpayers.

New Video Explains that Tax Competition Is a Powerful Mechanism to Restrain the Greed of the Political Class

Here’s a new mini-documentary from the Center for Freedom and Prosperity, narrated by Natasha Montague of Americans for Tax Reform, that explains why the process of tax competition is a critical constraint on the propensity of governments to over-tax and over-spend.

The issue is very simple. When labor and capital have the ability to escape bad policy by moving across borders, politicians are more likely to realize that it is foolish to impose high tax rates. And they oftentimes compete for jobs and investment by lowering tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax systems.

Another great feature of the video is the series of quotes from winners of the Nobel Prize. These economists all recognize competition between governments is just as desirable as competition between banks, pet stores, and supermarkets.

The video also discusses how politicians are attacking tax competition. It mentions a privacy-eroding scheme concocted by governors to tax out-of-state purchases (how dare consumers buy online and avoid state sales tax!).

And it also discusses a very destructive tax harmonization effort by a Paris-based bureaucracy (the Organization for Economic Cooperation and Development, subsidized with American tax dollars!), which would undermine fiscal sovereignty by punishing jurisdictions that adopt pro-growth tax systems that attract labor and capital.

The issues discussed in this video generally don’t get a lot of attention, but they are critical for the long-run battle to restrain government. Please share widely.

P.S. This speech by Florida’s new Governor is a good example of how tax competition encourages policy makers to do the right thing.

Rep. Hanna’s Corporate Tax Cut

Rep. Richard Hanna is one of the many new members of Congress with a no-nonsense business background. He is determined to move the GOP in the direction of major tax and spending reforms. When I chatted to the congressman, he told me that he had already read my Global Tax Revolution, so he will be well-armed in tackling business tax reform!

Hanna is off to a good start with his “American Competitiveness Act,” which would chop the federal corporate tax rate from 35 percent to 25 percent. He notes that “the average rate in the Organization for Economic Cooperation and Development countries is just over 25 percent, meaning the effective U.S. corporate tax burden, when state and local taxes are considered, can be 50 percent higher than some of our developed competitors, rendering our companies and workers less competitive.”

In his State of the Union address, President Obama said that he is willing to cut the corporate tax rate. So corporate tax reform could be the 2011 version of the Clinton-GOP welfare reforms of 1996. That is, a major pro-market success made possible by a liberal president moving to the pragmatic center.

Upcoming: On February 23, Cato will release new estimates of corporate “effective” tax rates by tax scholars Jack Mintz and Duanjie Chen. The study will shed further light on the dangerous uncompetitiveness of the U.S. corporate tax system.

OECD: ‘Cyberwar’ Overhyped

(HT: Schneier) Here’s a refreshingly careful report on cybersecurity from the Organization for Economic Cooperation and Development’s “Future Global Shocks” project. Notably: “The authors have concluded that very few single cyber-related events have the capacity to cause a global shock.” There will be no cyber-“The Day After.”

Here are a few cherry-picked top lines:

Catastrophic single cyber-related events could include: successful attack on one of the underlying technical protocols upon which the Internet depends, such as the Border Gateway Protocol which determines routing between Internet Service Providers and a very large-scale solar flare which physically destroys key communications components such as satellites, cellular base stations and switches. For the remainder of likely breaches of cybsersecurity such as malware, distributed denial of service, espionage, and the actions of criminals, recreational hackers and hacktivists, most events will be both relatively localised and short-term in impact.

The vast majority of attacks about which concern has been expressed apply only to Internet-connected computers. As a result, systems which are stand-alone or communicate over proprietary networks or are air-gapped from the Internet are safe from these. However these systems are still vulnerable to management carelessness and insider threats.

Analysis of cybsersecurity issues has been weakened by the lack of agreement on terminology and the use of exaggerated language. An “attack” or an “incident” can include anything from an easily-identified “phishing” attempt to obtain password details, a readily detected virus or a failed log-in to a highly sophisticated multi-stranded stealth onslaught. Rolling all these activities into a single statistic leads to grossly misleading conclusions. There is even greater confusion in the ways in which losses are estimated. Cyberespionage is not a “few keystrokes away from cyberwar”, it is one technical method of spying. A true cyberwar is an event with the characteristics of conventional war but fought exclusively in cyberspace.

The hyping of “cyber” threats—bordering on hucksterism—should stop. Many different actors have a good deal of work to do on securing computers, networks, and data. But there is no crisis, and the likelihood of any cybersecurity failure causing a crisis is extremely small.

The OECD Privacy Guidelines at 30

If you blinked, you missed it. Heaven knows, I did. The OECD privacy guidelines celebrated their 30th birthday on Thursday last week. They were introduced as a Recommendation by the Council of the Organization for Economic Cooperation and Development on September 23, 1980, and were meant to harmonize global privacy regulation.

Should we fete the guidelines on their birthday, crediting how they have solved our privacy problems? Not so much. When they came out, people felt insecure about their privacy, and demand for national privacy legislation was rising, risking the creation of tensions among national privacy regimes. Today, people feel insecure about their privacy, and demand for national privacy legislation is rising, risking the creation of tensions among national privacy regimes. Which is to say, not much has been solved.

In 2002—and I’m still at this? Kill me now—I summarized the OECD Guidelines and critiqued them as follows on the “OECD Guidelines” Privacilla page.

The Guidelines, and the concept of “fair information practices” generally, fail to address privacy coherently and completely because they do not recognize a rather fundamental premise: the vast difference in rights, powers, and incentives between governments and the private sector. Governments have heavy incentives to use and sometimes misuse information. They may appropriately be controlled by “fair information practices.”

Private sector entities tend to have a balance of incentives, and they are subject to both legal and market-punishments when they misuse information. Saddling them with additional, top-down regulation in the form of “fair information practices” would raise the cost of goods and services to consumers without materially improving their privacy.

Not much has changed in my thinking, though today I would be more careful to emphasize that many FIPs are good practices. It’s just that they are good in some circumstances and not in others, some FIPs are in tension with other FIPs, and so on.

The OECD Guidelines and the many versions of FIPs are a sort of privacy bible to many people. But nobody actually lives by the book, and we wouldn’t want them to. Happy birthday anyway, OECD guidelines.