Fred Foldvary's Editorial
A Global Government to Steal Your Money:
OECD tries to eliminate tax competition
A Global Government to Steal Your Money:
OECD tries to eliminate tax competition
There are in the world today about 200 countries and semi-independent territories, each with its own tax system. This anarchism of countries is increasingly making it more difficult for a country's government to impose harmful taxation, since capital is becoming ever more mobile. Financial capital can now be moved electronically, and the global marketplace has put competitive pressure on economies to avoid gross inefficiencies.
by Fred E. Foldvary, Senior EditorThe governments of large industrial countries are facing a tax problem. They have been imposing high taxes on incomes and sales, and get away with it when workers and enterprises find it too costly to move away to avoid the tax. But new technology and the increasingly global economy are reducing the cost of exit.
Some smaller countries have lower taxes, making them "tax havens" attractive to business. So the chiefs of the big countries such as the United States have a choice. Either they can lower taxes to the ground, shifting taxes to land rent, or they can force the small tax havens to switch to punitive taxation.
Shifting taxes to rent would make the economy more productive, raising wages and much reducing the colossal waste of resources. But shifting taxes to rent would lower the price of land, and the big real-estate owners oppose this, with political dollars. So the US, European, and other big-tax governments seek to eliminate the tax havens. They are doing this via the Organization of Economic Cooperation and Development, an economic club based in Paris to which 30 industrialized nations belong. The OECD has been moving to stop what it calls "harmful tax competition." The Clinton administration supported this OECD effort.
Such tax competition is harmful only to the special interests that benefit from artificially high rents and land values, to the expense of the vast majority of workers, investors, and owners of enterprises, who must pay ever higher rents and land prices as well as high taxes. We are being double charged for goods and services, first through high rent and secondly through high taxes.
The chiefs of this OECD policy intend to eliminate tax competition throughout the world, including in the developing economies. A global ban on low taxes and against shifting taxes to rent would make beneficial tax reform impossible in any country. That would hamper economic development and preserve poverty in much of the world.
The OECD report "Towards Global Tax Co-operation" calls on member countries to pressure low-tax nations and territories to change from low to high taxes, and also to repeal their privacy laws (see OECD Global Tax ).
In July 2000 the OECD released a blacklist of 35 alleged tax havens, including 15 Caribbean colonies and countries. Of the 35 low-tax jurisdictions, 26 are in the British Commonwealth of Nations. Included are the tiny countries of Monaco and Liechtenstein. The OECD declared those countries which do not commit themselves to making changes will face sanctions. In a meeting of about 40 government leaders in January 2001, representatives of some small countries agreed to negotiate about taxes and privacy.
For countries that do not adopt punitive taxes, the report recommends that OECD member states adopt trade barriers against the tax havens. A policy of taxing income and sales requires monitoring everybody's financial business, so the OECD's plan seeks to give governments unlimited access to personal financial information to make it easier to tax economic activity in all countries.
One territory listed by the OECD as a tax haven is Jersey, a semi- independent island in the United Kingdom in the Channel Islands between France and the UK. An official of the Jersey government stated, "we cannot allow our economy to be wrecked by putting it in a position where we are no longer competitive with other major financial centres such as Luxembourg and Switzerland, both of whom are OECD members."
Congress and the new Bush administration should oppose this movement by the OECD to impose a global tax cartel. Ultimately a world government will not succeed in imposing high tax penalties on workers and enterprises without imposing totalitarian spying and controls on the whole global population. The OECD tax imperialism needs to be stopped now before it becomes an entrenched monster.
For more on this very important topic, see: Dr. Mason Gaffney on Tax Competition
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Copyright 2001 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
