Superb Defense of Tax Sovereignty in New York Times
My friend Pierre Bessard of Switzlerand’s Liberales Institut has a column in today’s New York Times defending financial privacy from the predations of both international bureaucracies and American tax collectors. Pierre sagely notes that the Swiss system respects the privacy of citizens, unlike the “Orwellian” systems in places like America. This approach results in a very high level of tax compliance in Switzerland, and also provides a refuge for oppressed people around the world:
…for us here in Switzerland, our financial privacy laws are a foundation for individual dignity and basic property rights. Unfortunately, the confidentiality that is the hallmark of Swiss banking is coming under increasing pressure. … We think government exists to serve us, not the other way around. We understand that we have to pay taxes — and we do, with numerous studies showing that the Swiss are extraordinarily honest about paying what we owe — but we do not think it is the government’s role to intrude on our privacy and wrench them from us. …Today, Swiss citizens continue to vote on any tax increases in referendums (and sometimes even accept them). These healthy curbs on government contrast with the Orwellian concept of the “transparent citizen” whose every act is known to government. We see our system as a social pact between citizens and the state. Swiss privacy laws help preserve basic property rights. Bank secrecy was introduced in 1934, most notably to protect the identities and assets of Jews in Nazi Germany.
I make many of the same points in a three-part video series produced by the Center for Freedom and Prosperity. With so-called tax havens under increasing pressure, this is a good time to review The Economic Case for Tax Havens, The Moral Case for Tax Havens, and Tax Havens: Myths v Facts.
Filed under: International Economics and Development; Tax and Budget Policy
President Obama’s Dishonest Demagoguery
Politicians exaggerate as a routine matter and have well-deserved reputations for stretching the truth. But when they repeatedly make assertions that they (or their aides) know to be false, they surely deserve to be criticized. That is the purpose of my new video. Entitled “President Obama’s Dishonest Demagoguery on So-Called Tax Havens,” the four-minute presentation looks at the two sound bites that the President uses to demonize low-tax jurisdictions.
Filed under: International Economics and Development; Tax and Budget Policy
Tax Oppression Index Ranks America in Bottom Half of Industrialized Nations
A thorough new study of 30 nations from the Institut Constant de Rebecque in Switzerland reveals serious shortcomings in America’s tax system.
The report, entitled “Tax burden and individual rights in the OECD: An International Comparison,” creates a Tax Oppression Index based on three key variables: the overall tax burden, public governance, and taxpayer rights. The good news is that the United States has a comparatively low aggregate tax burden, though America’s score on this measure would be much better in the absence of a punitively high corporate tax rate. The bad news is that corruption and inefficiency in Washington drag down America’s score for public governance. The ugly news is that America has a very low rating for protecting taxpayer rights — largely because politicians have tilted the playing field to favor the IRS, including the fact that taxpayers lose the presumption of innocence provided in the Constitution.
Here is a brief description of the study:
The OECD’s campaign against “harmful tax competition” and “tax havens” has overshadowed the essential issue, namely the important roles that both tax competition and “tax havens” play for capital preservation and formation, leading to higher prosperity and better protection of individual rights throughout the OECD.
The tax oppression index is based on 18 representative criteria measuring fiscal attractiveness, public governance and financial privacy in the 30 member states of the OECD. Switzerland appears as the country with the lowest tax oppression — due to a relatively low tax burden and a more [classical] liberal institutional order, including its citizens’ right to veto legislation, political decentralization, and protection of financial privacy. Germany and France, on the other hand, whose governments have supported the OECD’s efforts, are among the most questionable states in terms of safeguarding their residents’ individual rights.
…The tax oppression index evaluates the 30 OECD member states on three complementary dimensions quantified by 18 representative criteria, on the basis of OECD and World Bank data. The index enables relevant conclusions about the tax burden and individual rights among those countries.
Switzerland earns the top ranking in the report, followed by Luxembourg, Austria, Canada, and Slovakia. Italy and Turkey have the worst systems, followed by Poland, Mexico, and Germany. The United States is tied for 19th, behind the welfare states of Scandinavia. With Obama promising to raise tax rates and increase the power of the IRS, it may just be a matter of time before the United States is competing for the world’s most oppressive tax regime.
Filed under: International Economics and Development; Tax and Budget Policy
Obama Taking on ‘Tax Havens’
Jeff Zeleny at the New York Times Caucus Blog reports, “President Obama will present a set of proposals on Monday aimed at changing international tax policy, calling for the elimination of benefits for companies and wealthy individuals that harbor their cash in offshore accounts.”
Cato scholars have long made arguments in defense of tax havens. In The Wall Street Journal, Senior Fellow Richard Rahn outlined the policy the federal government should be taking instead:
The correct policy for the United States to follow is to reduce its corporate tax rate to make it internationally competitive, and to move toward a tax system that does not punish savings and productive investment so severely. We know from the experiences of many countries that reducing tax rates and simplifying the tax code improve both tax compliance and economic growth. Tax protectionism should be rejected because it is at least as destructive to economic growth and job creation as are tariffs on goods and services.
Cato scholar Daniel J. Mitchell narrated a three part video series on the subject, presenting the economic and moral cases for tax havens, and a final video that punctured myths associated with the practice.
Mitchell spoke on Capitol Hill last month about the role of tax havens and in Foreign Policy magazine, Mitchell explained why tax havens are a blessing.
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