Tag: tax competition

Prime Minister of Finland Commits Gaffe, Admits that Anti-Tax Competition Schemes Are Designed to Enable Higher Tax Burdens

Most politicians and other advocates of tax harmonization are clever enough to pretend that they do not want higher tax rates. Instead, they assert that their proposals are merely ways of reducing evasion and making tax systems more efficient. So it is rather surprising that the Prime Minister of Finland has a column in the Financial Times, where he admits that various governments should conspire to simultaneously raise tax rates in order to finance big government:

The overall tax rate will have to rise as well over the longer term. In some areas that can be done without much consultation between the countries. For example, property taxes or inheritance taxes can largely be determined at the national level without adverse economic consequences. But such taxes will not raise significant amounts of revenue. Only changes in value added tax, various excise taxes or taxes on earned and capital income can make a real difference. However, raising such taxes can have detrimental effects on economic activity. This is especially so when a country acts on its own: capital and people can respond by migrating to jurisdictions with lower rates. Deeper co-operation is therefore necessary if tax revenues are to be increased in a way that truly helps fiscal consolidation. …It is important that different countries do not find themselves with very different tax solutions. We should avoid tax competition and the damage this would cause to Europe’s economic growth. …member countries could agree, for example, to change the levels of certain taxes in parallel. Parallel measures would help all of Europe: tax competition risk would be reduced and the public finances of individual countries would improve. Such co-ordinated tax changes could set also an important global example. In particular, it might encourage the US – with lower tax levels in most areas – to do what has to be done to address its spiralling budget deficit.

In the column, Prime Minister Vanhanen even suggests that the United States might be tempted to join the tax cartel. This has always been a goal of the Europeans since an OPEC for politicians without the United States will not work any better than the real OPEC without Saudi Arabia. One of my first videos – back in late 2007 – was on this topic, and it is embedded below for those who did not have a chance to view it.

Agony of Defeat

Oh, what a burn. My tax debate with French economist Thomas Piketty was a dead heat, 50-50, for the past four days. Then just as the contest was closing, he pulled ahead to seize victory, 51-49.

The Economist editor described the tightly fought battle:

Chris Edwards got over a strong initial disadvantage to narrow what was originally a strong lead for Mr Piketty to a dead heat, but eventually Mr Piketty has prevailed: but only just—even hours before closing, the vote was split exactly down the middle. One could not have asked for a closer contest: this has been the most closely-fought of our 21 online debates, although it began with a fairly substantial lead for the proposition.

Certainly, the debate revealed high levels of interest in taxation and relative income levels. There were more than 1,100 reader comments posted, making it the “most commented” story on the Economist site for the last 10 days or so. My thanks to all the supportive voters and commenters.

Piketty won the website voting battle, but I don’t think he’ll win the war. Global tax competition has led to large cuts in top tax rates in recent decades, and will continue to exert downward pressure for years to come. However, these are dangerous times as governments press to end financial privacy, to create international tax cartels, and to substitute competition with multinational government power in various other ways.

Tax Havens Should be Emulated, Not Prosecuted

My March 23 Capitol Hill speech defending tax havens against fiscal protectionism is now a two-part Youtube series, complete with the powerpoint slides from my presentation. Unfortunately, we are fighting a defensive battle and the other side is making progress. If you have any suggestions for making stronger arguments for tax competition, fiscal sovereignty, and financial privacy, please don’t hesitate to contact me.