Posted on 09/20/2011 8:44:43 AM PDT by SeekAndFind
Being the world’s self-appointed defender of so-called tax havens has led to some rather bizarre episodes.
For instance, the bureaucrats at the Organization for Economic Cooperation and Development threatened to have me thrown in a Mexican jail for the horrible crime of standing in the public lobby of a hotel and giving advice to low-tax jurisdictions.
On a more amusing note, my efforts to defend tax havens made me the beneficiary of grade inflation and I was listed as the 244th most important person in the world of global finance — even higher than George Soros and Paul Krugman.
But if that makes it seem as if the battle is full of drama and (exaggerated) glory, that would be a gross exaggeration. More than 99 percent of my time on this issue is consumed by the difficult task of trying to convince policymakers that tax competition, fiscal sovereignty, and financial privacy should be celebrated rather than persecuted.
Sort of like convincing thieves that it’s a good idea for houses to have alarm systems.
And it means I’m also condemned to the never-ending chore of debunking left-wing attacks on tax havens. The big-government crowd viscerally despises these jurisdictions because tax competition threatens the ability of politicians to engage in class warfare/redistribution policies.
Here’s a typical example. Paul Vallely has a column, entitled “There is no moral case for tax havens,” in the UK-based Independent.
To determine whether tax havens are immoral, let’s peruse Mr. Vallely’s column. It begins with an attack on Ugland House in the Cayman Islands.
There is a building in the Cayman Islands that is home to 12,000 corporations. It must be a very big building. Or a very big tax scam.
As I’ve already explained in a post about a certain senator from North Dakota, a company’s home is merely the place where it is chartered for legal purposes. A firm’s legal domicile has nothing to do with where it does business or where it is headquartered.
In other words, there is nothing nefarious about Ugland House, just as there is nothing wrong with the small building in Delaware that is home to more than 200,000 companies. President Obama, by the way, demagogued about Ugland House during the 2008 campaign.
Let’s see what else Vallely has to say:
Are there any legitimate reasons why anyone would want to have a secret bank account – and pay a premium to maintain their anonymity – or move their money to one of the pink dots on the map which are the final remnants of the British empire: the Caymans, Bermuda, the Turks and Caicos and the British Virgin Islands?
Actually, there are lots of people who have very compelling reasons to keep their money in havens, and only a tiny minority of them are escaping onerous tax burdens.What about:
As this video explains, there are billions of people around the world who are subject to state-sanctioned (or at least state-permitted) religious, ethnic, racial, political, sexual, and economic persecution. These people are especially likely to be targeted if they have any money, so the ability to invest their assets offshore and keep that information hidden from venal governments can, in some cases, be a life-or-death matter.
And let’s not forget the residents of failed states, where crime, expropriation, kidnapping, corruption, extortion, and economic mismanagement are ubiquitous. These people also need havens where they can safely and confidentially invest their money.
Vallely is apparently unaware of these practical, real-world concerns. Instead, he is content with sweeping proclamations:
The moral case against is clear enough. Tax havens epitomise unfairness, cheating and injustice.
But if he is against unfairness, cheating, and injustice, why does he want to empower the institution — government — that is the largest source of oppression in the world?
To be fair, Vallely does attempt to address the other side of the argument.
Apologists insist that tax havens protect individual liberty. They promote the accumulation of capital, fair competition between nations and better tax law elsewhere in the world. They also foster economic growth.
…Yet even if all that were true – and it is not – does it outweigh the ethical harm they do? The numbered bank accounts of tax havens are notoriously sanctuaries for the spoils of theft, fraud, bribery, terrorism, drug-dealing, illegal betting, money-laundering and plunder by Arab despots such as Gaddafi, Mubarak and Ben Ali, all of whom had Swiss accounts frozen.
He can’t resist trying to discredit the economic argument by resorting to more demagoguery, asserting that tax havens are shadowy regimes. Not surprisingly, Vallely offers no supporting data. Moreover, you won’t be surprised to learn that the real-world evidence directly contradicts what he wrote: the most comprehensive analysis of dirty money finds 28 problem jurisdictions, and only one could be considered a tax haven.
Last but not least, the author addresses the issue that really motivates the left: the potential loss of access to other people’s money, funds that they want the government to confiscate and redistribute.
Christian Aid reckons that tax dodging costs developing countries at least $160bn a year — far more than they receive in aid. The US research centre Integrity estimated that more than $1.2trn drained out of poor countries illicitly in 2008 alone. …Some say an attack on tax havens is an attack on wealth creation. It is no such thing. It is a demand for the good functioning of capitalism, balancing the demands of efficiency and of justice, and placing a value on social harmony.
There are several problems with this passage, including Vallely’s confusion of tax evasion with tax avoidance. But the key point is that the burden of government spending in most nations is now at record levels, undermining prosperity and reducing growth. Why add more fuel to the fire by giving politicians even more money to waste?
Consider some real-world evidence: The Wall Street Journal has an article on the Canton of Zug, Switzerland’s tax haven within a tax haven. This hopefully won’t surprise anyone, but low-tax policies have been very beneficial for Zug:
Developed nations from Japan to America are desperate for growth, but this tiny lake-filled Swiss canton is wrestling with a different problem: too much of it. Zug’s history of rock-bottom tax rates, for individuals and corporations alike, has brought it an A-list of multinational businesses. Luxury shops abound, government coffers are flush, and there are so many jobs that employers sometimes have a hard time finding people to fill them.
Here’s some more evidence of how better fiscal policy promotes prosperity. This is economic data, to be sure, but isn’t the choice between growth and stagnation also a moral issue?
Zug long was a poor farming region, but in 1947 its leaders began to trim tax rates in an effort to attract companies and the well-heeled. In Switzerland, two-thirds of total taxes, including individual and corporate income taxes, are levied by the cantons, not the central government. The cantons also wield other powers that enable them compete for business, such as the authority to make residency and building permits easy to get.
…[B]usinesses moved in, many establishing regional headquarters. Over the past decade, the number of companies with operations of some sort in the canton jumped to 30,000 from 19,000. The number of jobs in Zug rose 20% in six years, driven by the economic boom and foreign companies’ efforts to minimize their taxes. At a time when the unemployment rate in the European Union (to which Switzerland doesn’t belong) is 9.4%, Zug’s is 1.9%.
It turns out that Zug is growing so fast that lawmakers actually want to discourage more investment. What a nice problem to have.
Describing Zug’s development as “astonishing,” Matthias Michel, the head of the canton government, said, “We are too small for the success we have had.”
…Zug has largely stopped trying to lure more multinationals, according to Mr. Michel.
It’s worth pointing out that the residents of Zug are not some sort of anomaly. The rest of Switzerland is filled with people who recognize the value of limited government:
[T]he Swiss are mostly holding fast to their fiscal beliefs. Last November, in a national referendum, they overwhelmingly rejected a proposal that would have established a minimum 22% tax rate on incomes over 250,000 francs, or about $315,000.
Sadly, even though the world is filled with evidence that smaller government is good for prosperity (and even more evidence that big government is bad for growth), statism is not abating.
Indeed, the anti-tax haven campaign continues to gain steam. At a recent OECD meeting, high-tax nations (with the support of the Obama administration) put in place a bureaucratic monstrosity that is likely to become a world tax organization.
This global tax cartel will be akin to an OPEC for politicians, and the impact on taxpayers will be quite similar to the impact of the real OPEC on motorists.
If that’s a moral outcome, then I want to be amoral.
The above was in response to a column which argues that TAX HAVENS are IMMORAL.
Read the column here :
Income taxes are immoral.
RE: Income taxes are immoral.
How does government get its revenue to function then?
Yes, income taxes, and many other taxes are IMMORAL. So, tax havens are moral responses to an immoral situation/government.
According to Harry Reid income taxes are voluntary. Is it immoral not to volunteer.
http://www.youtube.com/watch?v=H6q0slMhDw8
How did we manage until 1913?
There are not two equal sides to every question.
Separate sovereign nations are moral. Since they are sovereign, they often have different tax structures.
No long drawn out screed which seeks to sidestep or obscure this has any merit, nor does its author.
What HE said. Ditto.
Excise, import, consumption taxes - all would raise money to run the constitutional necessary functions of government, without giving the government the ability to manipulate society and pick winners and losers.
RE: Most taxes and fees are immoral
OK, let’s say they are... how does government get its revenue in order to function then?
WHAT SHOULD TAKE THE PLACE OF TAXES?
I know of a graduate student in MIT from Taiwan who inherited money back home BEFORE he came to America and has the inherited money deposited in a Taiwanese bank earning interest. Quite substantial amount too.
After getting his graduate degree, He worked for a Silicon Valley company after graduation and became a permanent resident two years ago ( a green card holder ). He pays taxes on his income from his salary here in the US.
He is now in a dilemma — because according to our tax code, he has to declare income FROM ALL SOURCES.
Is it immoral and criminal of him if he did not declare the interest income he gets from the money deposited in a bank account in Taiwan under his Chinese name? ( THAT WAS EARNED BY HIS PARENTS AND NEVER ENTERED THE US AT ALL ).
This is a very important question because MANY hard working LEGAL immigrants, who never depend on government largesse are asking themselves the same question.... many have money deposited back home BEFORE they came to the US. Does Uncle Sam have a moral claim to that money?
See: “Taxes for Revenue are Obsolete” by Beardsley Ruml
You forgot to provide the link :
http://hiwaay.net/~becraft/RUMLTAXES.html
And for the benefit of those who don’t know.... this article was published 65 years ago.
“How does government get its revenue to function then?”
How did they do it before the imposition of the income tax?
So ... you’re saying that it’s perfectly moral for these sovereign countries - the so-called tax havens - to have different tax structures from the US.
Glad we agree!
Other countries compete on taxes. In a perfect world the US would make its tax regime attractive enough to keep its taxpayers. But instead the tax code keeps getting more abstruse and more onerous, and the IRS are equipped with their own SWAT teams.
Way to go, land of the free.
Only problem is, the supreme courts of old saw “income taxes” AS excise taxes and the IRS still does today.
I didn’t actually forget, I find people get more out of learning when they are interested enough to actually track down the information once given a direction. And yes it is a very old article by then Fed Chairman, but still very relevant, as are numerous others.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.