I take exception to this statement.

Reason 1: There is no such thing as “wasted” T.P.

Reason 2: A majority of European countries use bidets that decrease T.P. consumption, however, increases water consumption.

No: holding governments and elected officials accountable in our country went out with square wheels. Witness the re-election of everyone from Marion Berry (after smoking and dealing crack on video tape) to virtually every crooked re-elected member of Congress over modern history — the list reads like a who’s-who in not being responsible. Even Sandford — desipte going AWOL from his position as state CEO and father — still enjoys majority support among his voters. So, while Tim’s assertions might be desirable in that “wouldn’t it be nice if….” fairy tale world, the sad reality is that governments for the most part run absolutely unbridled and unchecked. They act in their own self-interest and more to the point, the interest of their own self-perpetuation in spite of — and not because of — the people that they purportedly serve. Just when that got reversed
from a government of the people, by the people and for the people is a bit fuzzy.

Ann’s arguments are hyper-valid because they at least bridge the gap between idealism and reality and no amount of wishing for people to wake up and take an active part in holding elected officials responsible will make it so. Not ever.
We’re past that. A sad but progressively accurate characterization of our current and most likely foreseeable future reality.

The fact is that our government wastes more on toilet paper [read, useless 'brdige to nowhere' like projects] every year than 50% of the countries in the world have in GDP; so chasing tax cheats and evaders is a futile exercise when measured against a governemnt that spends money so recklessly. But drawning a line in the sand on tax evation might well be the first — or last — act of decency left to those that have themselves thrown $4 or $5 trillion away of late (Iran, Wall Street, GM, AIG etc, ad infinitum.) You have to give at least one thing to Ann: she tries; which is a hell of a lot more than we did as our country was spiriling downward in a frightening paralell to ancient Rome. Keep fighting Ann !

The above is an argument against the idea that tax competition is beneficial and not that tax competition doesn’t exist. The arguments for the latter are discussed at length in the original post and below.

You argue: “Yes, there are economies of scale but that’s all. A larger country has more people paying tax, does it not, to cover the costs of that larger population?”

Due to space limitations I did not go into the particulars of this argument. But here they are now:

Industrial country governments provide a much wider range of public goods than offshore financial centers. Some public goods are not provided at all in the case of tax havens (a standing military, for example). This occurs for two reasons. Firstly, some of the islands are too small to require a military (e.g. Mauritius, Costa Rica, Cayman Islands). Second, many of the tax havens are dependency of larger developed countries (Anguilla, Jersey and Isle of Man are provided by UK, Netherlands Antilles are a dependency of the Netherlands, and Niue’s defense is the responsibility of New Zealand).

Also developed governments provide a greater depth of public goods (i.e. per capita expenditures on services are higher) because their economies are diversified. Take roadways, for example. The United Kingdom provides has one roadway per 153 citizens (or 1 road per .6 square kilometer of land). Mauritius has one roadway for every 198 residents (1 per 8 sq. km.). And Costa Rica has 493 citizens per roadway (1 road for every 5 sq. km.). As an industrial country which provides a wide range of exports and has a large, diversified domestic economy, the UK has a greater need for roadways, both per person and per square kilometer of land. Costa Rica, has few exports and a relatively homogeneous domestic economy. It does not have a need for such a depth and variety of infrastructure.

More importantly, however, given low taxes and the ensuing large quantities of foreign deposits in tax havens, these jurisdictions are able to make healthy income (for their small populations) on service fees. A large economy cannot survive on this type of income because it requires a disproportionally large quantity of deposits. They must use an income tax instead.

You argue: “Incentives and the like, business and individual decision making, they’re usually referred to as micro, not macro.”

Decisions by “Industrial countries” and “tax havens” are made by governments, not individuals. This is macroeconomics. “Business” and “individual” decision making lies within microeconomics. So “tax competition between industrial countries and tax havens” refers to macroeconomics.

You argue: “But if there is no evidence of tax competition then what on earth is everyone complaining about? If people do not move themselves, their money or their businesses about in order to benefit from a better for them tax regime then no one would possibly be trying to close those places down, would they?

Richard Murphy’s often quoted $11 trillion in assets hidden away is proof perfect that tax competition happens: to exactly the tune of $11 trillion actually.”

No. You are confusing the movement of capital with competition (which again shows your lack of discernment between micro and macro economics). There is no compelling evidence that as a result of this movement of funds, taxes are any lower in “high tax jurisdictions.” Again, government is a not business and does not set taxes based on the tax rates of other jurisdictions (like a gas station might set the price of a gallon of gas). Tax rates are much more complicated, based on a set of macroeconomic realities, not competition between centers.

Also. If such a competition took place, economic theory tells us that tax rates would be arbitraged to zero or very near it, as that is the tax rate in many tax havens. Two things. 1) This has not occurred, so tax competition is probably not taking place. 2) Such a situation would have disastrous consequences for the developed world. Governments would no longer be able to provide defense, education, health care, police, a postal service, (the list goes on and on).

This is probably not a world we should strive for.

A very confused argument by you

Fact is that people like the Center fro Freedom and Prosperity do make this argument

Fact is it’s wrong

Fact is it does sem to have an affect on major states

Fact is it shouldn’t because this is the result of their reaction to the hype, not the reality of what happens

So everything Anne says is right

And nothing you say is

Which is about normal

Best

Richard

False. This is probably tax haven proponents’ most prized argument. That’s sad, because it’s a complete fantasy.

First, governments should not be in the business of “competing” with tax havens for the lowest common denominator. Legislators need to set fiscal policy (expenditures including military, health, and education) based on their tax revenue and the needs of their people. Governments should be held accountable by their people, not held hostage by tax havens.”

That is a statement of what you think ought to happen. It is not a statement of what does happen. It is entirely possible for your desires above to be correct (not that I think they are but that is another matter) and that still there is tax competition.

“Second, competition with tax havens is a fundamentally unfair game. These small countries often have tiny populations, so their governments do not need much tax revenue as they do not have many expenditures. Governments of larger countries–like the US and UK–have vast populations, and therefore require large expenditures on public goods like a military, numerous schools, and a huge public transportation infrastructure.”

That’s close to nonsense. Yes, there are economies of scale but that’s all. A larger country has more people paying tax, does it not, to cover the costs of that larger population?

“Third, there isn’t a scrap of compelling evidence that “tax competition” between industrial countries and tax havens even happens at all. What a grossly oversimplified view of macroeconomics.”

Incentives and the like, business and individual decision making, they’re usually referred to as micro, not macro. But if there is no evidence of tax competition then what on earth is everyone complaining about? If people do not move themselves, their money or their businesses about in order to benefit from a better for them tax regime then no one would possibly be trying to close those places down, would they?

Richard Murphy’s often quoted $11 trillion in assets hidden away is proof perfect that tax competition happens: to exactly the tune of $11 trillion actually.

People could not tax evade in ‘tax havens’ without secrecy. Secrecy facilitates this. hence the better term – a secrecy jurisdiction.

Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

To understand how they work I quote this which was on my blog last week (http://www.taxresearch.org.uk/Blog/2009/08/28/tax-competition-is-criminal/) :

Let me offer an explanation from a strong supporter of tax competition, Richard Teather, a UK chartered accountant and lecturer at Bournemouth University, who when speaking of the OECD anti-tax haven initiative says (page 81):

“This is attacking a classic use of a tax haven, as explained in the previous chapter, in which a person resident in (or otherwise subject to the taxation system of) a highly taxed country places his capital in a tax haven where it can earn untaxed income. While there are many cases where the home country does not tax foreign source income (such as the UK’s non-domicile exemption discussed above), most Western countries have a worldwide taxation system that seeks to tax the worldwide income of its residents (or all of its citizens in the case of the USA). This tax haven income therefore does not cease (legally) to become liable to tax merely by being earned offshore: it is still liable to tax and the investor has a duty to report it to his home tax authority. In practice, however, if the investor does not report his income, then the home country can have great difficulties in discovering and taxing it, particularly if the haven country has strong banking secrecy laws.

While I am not seeking to condone dishonesty or criminal activity, from an economic perspective this is merely another example of tax competition: indeed, it is often necessary behaviour in order to take advantage of tax havens. Without the willingness of some to engage in this sort of activity, tax competition would be much less effective and therefore reduce the benefits that flow from it for the rest of us.”

As Teather makes clear criminality is often necessary behaviour in order to take advantage of tax havens. and he then argues the benefits flow to all of us.

This is the reality of tax havens.

It’s really not attractive, is it?

Richard
http://www.taxresearch.org.uk/blog