Sunday, 10 April 2016

What is so terrible about this Mossack Fonseca thing?

I can't help thinking not much. One has to keep in mind there is a difference between tax avoidance and tax evasion. Eamonn Butler at the Adam Smith Institute blog makes the point,
The two are different, of course. Theft, fraud, tax evasion and money-laundering are rightly illegal: any firm or country that helps mafia bosses or dictators conceal stolen millions should be exposed and punished. But if you work within the rules and find ways to cut your tax bill, or invest your money in some place where it won’t be taxed within an inch of its life, that is legal and should remain so. Indeed, low-tax jurisdictions act as a safety valve that makes it harder for politicians to oppress their citizens with crippling taxes.

But it is too easy for those politicians to lump together the illegal evasion with the legal avoidance and say that both should be swept away.
And not just politicians, many commentators and journalists who are losing their collective minds over this whole issue make the same mistake.

Butler continues,
That is why politicians hate them. They know that if other places have lower taxes, people will move their money (or their businesses, or even themselves) abroad – so their citizens can no longer be taxed with impunity. It’s pure tax protectionism: governments don’t produce widgets, so they are all in favour of free trade in widgets; but they do produce taxes, so they want to keep out the competition.
So its competition for thee but not for me! Not that anti-competitive behaviour by governments in that unusual.

And if governments are so worried about tax havens then their is an obvious solution, lower their taxes.
Low taxes encourage enterprise, investment, growth and freedom. So low-tax jurisdictions don’t need to flout the rules, and it is insulting to suggest that they do: in fact, many have financial sectors that are better regulated than ours. Rather than try to bully them out of existence, the big countries should ditch their tax protectionism, square up to the competition, lower and simplify their own taxes.
What's the bit they won't?

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