The Adam Smith Institute in London has released my paper entitled “The Economics of Tax Competition.” If you want to understand why it is very important to prevent international bureaucracies from crippling national tax sovereignty in order to create an “OPEC for politicians,” you should spend 20 minutes reading this report. If you went to a government school and don’t like reading, this three-part video series covers the same material. Here’s an excerpt from the introductory section:
Tax competition exists when people can reduce tax burdens by shifting capital and/or labour from high-tax jurisdictions to low-tax jurisdictions. This migration disciplines profligate governments and rewards nations that lower tax rates and engage in pro-growth tax reform. …from an economic perspective, economic performance is enhanced because of lower tax rates on work, saving, and investment. …The thought of losing sources of tax revenue worries government officials from high tax nations, who vociferously condemn tax competition (particularly the role of so-called tax havens) and would like to see it reduced or eliminated. Working through international bureaucracies like the European Commission (EC), the United Nations (UN), and the Organisation for Economic Co-operation and Development (OECD), high-tax governments are promoting various tax harmonization schemes to inhibit the flow of jobs and capital from high-tax jurisdictions to low-tax jurisdictions. These proposals are fundamentally inconsistent with good tax policy. Tax harmonization means higher tax rates, but it also means discriminatory and destructive double taxation of income that is saved and invested. …Tax competition should be celebrated, not persecuted. It is a powerful force for economic liberalization that has helped promote good tax policy in countries around the world.