Europe is suffering from economic stagnation caused in part by excessive fiscal burdens.
So what are European policy makers doing to address this problem?
If you think the answer might have something to do with a shift to responsible fiscal policy, you obviously have no familiarity with Europe’s political elite. But if you have paid attention to their behavior, you won’t be surprised to learn that they’re lashing out at jurisdictions with better policy.
Here are a few blurbs from a story in the Economic Times.
The European Union published its first list of international tax havens on Wednesday… “We are today publishing the top 30 non-cooperative jurisdictions consisting of those countries or territories that feature on at least 10 member states’ blacklists,” EU Economic Affairs Commissioner Pierre Moscovici told a news conference.
This is a misguided exercise for several reasons, but here are the ones that merit some discussion.
1. I can’t resist starting with a philosophical point. Low-tax jurisdictions and so-called tax havens should be emulated rather than persecuted. Their modest fiscal burdens are strongly correlated with high levels of prosperity. It’s high-tax nations that should be blacklisted and shamed for their destructive policies.
2. This new EU blacklist is particularly nonsensical because there’s no rational (even from a leftist perspective) methodology. Jurisdictions get added to the blacklist if 10 or more EU nations don’t like their tax laws. Some nations, as cited in official EU documents, even use “the level of taxation for blacklisting purposes.”
3. As has always been the case with anti-tax competition campaigns, the entire exercise reeks of hypocrisy. Big European nations such as Luxembourg and Switzerland were left off the blacklist, and the United States also was omitted (though the EU figured it was okay to pick on the U.S. Virgin Islands for inexplicable reasons).
By the way, I’m not the only person to notice the hypocrisy. Here are some excerpts from a report in the U.K.-based Guardian.
A blacklist of the world’s 30 worst-offending tax havens, published on Wednesday by the European commission, includes the tiny Polynesian island of Niue, where 1,400 people live in semi-subsistence — but does not include Luxembourg, the EU’s wealthy tax avoidance hub. …the new register does not include countries such as the Netherlands, Ireland.
And Radio New Zealand made a similar point it its report.
Anthony van Fossen, an adjunct research fellow at Australia’s Griffith University, says the list seems to be picking on smaller, easy-to-target tax havens and ignoring major ones like Singapore, Switzerland and Luxembourg. “The list is very strange in that some major havens are ignored, particularly the havens in the European Union itself, and many minor havens, including some in the Pacific Islands are highlighted.”
The more one investigates this new EU project, the more irrational it appears.
Some of the larger and more sensible European nations, including Sweden, Germany, Denmark, and the United Kingdom, didn’t even participate. Or, if they did, they decided that every jurisdiction in the world has “tax good governance.”
But other nations put together incomprehensible lists, featuring some well-known low-tax jurisdictions, but also places that have never before been considered “tax havens.” Is Botswana really a hiding spot for French taxpayers? Do Finnish taxpayers actually protect their money in Tajikistan? Is Bolivia actually a haven for the Portuguese? Do the Belgians put their funds in St. Barthelemy, which is part of France? And do Greeks put their money in Bosnia?!?
As you can see from this map, the Greeks also listed nations such as Saudi Arabia and Paraguay. No wonder the nation is such a mess. It’s governed by brain-dead government officials.
I’ve saved the best evidence for the end. If you really want to grasp the level of irrationality in the EU blacklist, it’s even been criticized by the tax-loving (but not tax-paying) bureaucrats at the OECD. Here are some details from a report out of Cayman.
‘As the OECD and the Global Forum we would like to confirm that the only agreeable assessment of countries as regards their cooperation is made by the Global Forum and that a number of countries identified in the EU exercise are either fully or largely compliant and have committed to AEOI, sometimes even as early adopters’, the email states. …‘We have already expressed our concerns (to the EU Commission) and stand ready to further clarify to the media the position of the affected jurisdictions with regard to their compliance with the Global Forum standards’, Mr Saint-Amans and Ms Bhatia wrote.
Needless to say, being compliant with the OECD is nothing to celebrate. It means a jurisdiction has been bullied into surrendering its fiscal sovereignty and agreeing to serve as a deputy tax collector for high-tax governments.
But having taken that unfortunate step, it makes no sense for these low-tax jurisdictions to now be persecuted by the EU.
P.S. Let’s add to our collection of libertarian humor (see here and here for prior examples).
This image targets the Libertarian Party, but I’ve certainly dealt many times with folks that assert that all libertarians should “grow up” and accept big government.
For what it’s worth, if growing up means acquiescing to disgusting government overreach, I prefer to remain a child.
International Liberty 
[…] Union because the bureaucrats and politicians in Brussels push for dirigiste policies such as tax harmonization and climate […]
[…] First, I don’t think there’s any hope for achieving any decentralization. Indeed, the more sensible people in Europe will face endless battles to stop bad ideas. […]
[…] First, I don’t think there’s any hope for achieving any decentralization. Indeed, the more sensible people in Europe will face endless battles to stop bad ideas. […]
[…] the bureaucrats keep pushing for more bad policy. Policies to penalize on tax competition. Policies to penalize low-tax jurisdictions. Policies to penalize American companies. Policies to penalize European […]
How much is the fair legal share that must be paid in exchange for being a citizen?
Most ideological differences (often even radical differences) stem from differences in quantitative opinion and assessment rather than fundamental philosophical differences.
So in France (and more or less most of Europe), where the state consumes about 60% of GDP/economic activity, a near permanent majority of voters seem to think that people should work from 8:00am to 11:36am for their families and themselves, and then from 11:36am to 5:00pm for their mandatory communal fair legal share of being a citizen. It does not matter whether this contribution happens at the front end through taxes on your salary and your employer, or the back end with VAT and other consumption taxes, wealth taxes, excise taxes etc. One way or another, every day, you end up working about 3 hours for your family and yourself and 5 hours for your communal obligation, … day in, … day out, … in perpetuity.
If you don’t agree with this much mandatory communal contribution (perhaps you think that it flattens the effort reward curves and leads to compounding growth deficit and systemic national decline) … it does not matter. You have to do it anyway or assets start being forcibly confiscated, find yourself forcibly dragged into confinement etc.
On the other hand a person that believes in the morality, but perhaps even more importantly the utility, of greater individual freedom, might think that an hour a day of this obligatory contribution may be enough for essential communal functions, and a compounding growth trendline that surpasses world average, making your society ever more prosperous. So that you work from 8:00am to 4:00pm for your family and yourself, and then from 4:00pm to 5:00pm for your communal fair legal share of being a citizen. In addition, you can still freely join smaller voluntary groups that offer more contributions and more group (i.e. social) insurances. The more localized the mandates to communal contributions, the more choices there are across the ideological spectrum, the more freedom there is. This is in stark contrast with harmonizing and homogenizing cartels like the EU, the OECD, and the fast acending US federal government.
Of course, if greater freedom from mandatory communalism indeed leads to higher perpetually compounding growth, the statists must suppress this freedom, lest the success will stand out in contrast to the failure of 60% mandatory communalism. This is the main fuel that propels these trans-national ultra-bureaucracies. The high growth free economies must be reigned in, lest their ever diverging prosperity makes more obvious the compounding failures of the low growth communitarian laggards.
johnknubel said, “paying ones fair legal share of taxes due in exchange for being a citizen . . .” Aren’t these payments rather in exchange for not being thrown into a cage?
[…] via Deconstructing the European Union’s Convoluted New Attack on “Tax Havens” | International Libe…. […]
Those who, for whatever reason, give Europe some hope, are essentially claiming that a country, continent, jurisdiction, can be on a 1-2% growth trendline in a world that is growing by 4% on average… and nothing will happen!
That is a mathematical impossibility.
So basic this is that it’s an insult to basic intelligence to call it mathematics. It’s just simple arithmetic.
I need to remind that …
That “European elite” and those “brain-dead government officials” are backed by the European people. They are not a loony fragile oddity.
It would be relatively easy to get rid of these people. But their voters would remain, and elect more of the same. Different clothes, different flags, different slogans, but adherence to the seemingly inexhaustible attraction of coercive collectivism. That is Europe; 1-2% is its growth trendline; and hence its citizen’s prosperity ranking in the world is declining at a precipitous rate in this early 21st century. That is the road descended by the European voter-lemming.
At a 2-3% annual growth deficit compounding year after year, not much is sustainable. The decline will dismantle everything. My short term prediction is that decline will bring discord in Europe. That will be the first shoe to drop for the Old Continent. And that will be a good thing. At least the intimidation loving cartel of coercive collectivism, the EU, will experience some serious disintegration forces. Discord is already happening with Greece, since Greeks are at the vanguard of this massive decline wave. But European discord will advance into its more meaty chapters once decline in some of the other bigger European countries matures some more.
Germany, a country which being on a 2% growth trendline in a world that is growing by 4% is itself in decline, cannot save anyone for long, especially some of the bigger European dinosaurs of coercive collectivism.
On the road that they are, Americans will soon start voting like the Europeans. Growth will follow the same fate (actually American growth seems to already have stagnated to European levels, something that is surprising even to me, since I think that Mr. Obama only covered about 1/3 of the distance that separated the US from Europe when our Euro-style president took office) so American decline is also well under way.
P.S. In my fantasies, a new article was added to the OECD charter, whereby its governing body members were taxed at the rate of the highest taxing country within the organization. Sort of the way the US taxes foreign income.
P.P.S. The libertarian joke at some intellectual level correlates with the fact that Americans are most often characterized internationally as “nice people overall, but who never grow up”. Funny how children can generate such prosperity. Not to worry though, HopNChange is making us all more “mature” by the day. Better days are ahead…
Curious that, of all the words used in describing the bloc’s disposition towards these nations and territories, the first used was “non-cooperative”. They declined to join the kleptocracy, thus they must be shunned.
Do you recall the real estate and other limited partnerships so popular in the 1960s and 1970s and that were called ‘tax shelters’ and were eradicated in 1986? Something smells rotten about the whole idea of sending $ offshore to escape paying ones fair legal share of taxes due in exchange for being a citizen – they warp the distribution of capital and undermine our hard and soft power – international tax treaty anyone?
[…] By Dan Mitchell […]