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Archive for the ‘International bureaucracy’ Category

It’s time to criticize my least-favorite international bureaucracy.

Regular readers probably know that I’m not talking about the United Nations, International Monetary Fund, or World Bank.

Those institutions all deserve mockery, but I think the Paris-based Organization for Economic Cooperation and Development is – on a per-dollar basis – the bureaucracy that is most destructive to human progress and economic prosperity.

One example of the organization’s perfidy is the OECD’s so-called Base Erosion and Profit Shifting (BEPS) initiative, which is basically a scheme to extract more money from companies (which means, of course, that the real cost is borne by workers, consumers, and shareholders).

I’ve written (several times) about the big-picture implications of this plan, but let’s focus today on some very troubling specifics of BEPS.

Doug Holtz-Eakin, in a column for the Wall Street Journal, explains why we should be very worried about a seemingly arcane development in BEPS’ tax treatment of multinationals. He starts with a very important analogy.

Suppose a group of friends agree to organize a new football league. It would make sense for them to write rules governing the gameplay, the finances of the league, and the process for drafting and trading players. But what about a rule that requires each team to hand over its playbook to the league? No team would want to do that. The playbook is a crucial internal-strategy document, laying out how the team intends to compete. Yet this is what the Organization for Economic Cooperation and Development wants: to force successful global companies, including U.S. multinationals, to hand over their “playbooks” to foreign governments.

Here’s specifically what’s troubling about BEPS.

…beginning next year the BEPS rules require U.S.-headquartered companies that have foreign subsidiaries to maintain a “master file” that provides an overview of the company’s business, the global allocation of its activities and income, and its overall transfer pricing policies—a complete picture of its global operations, profit drivers, supply chains, intangibles and financing. In effect, the master file is a U.S. multinational’s playbook.

And, notwithstanding assurances from politicians and bureaucrats, the means that sensitive and proprietary information about U.S. firms will wind up in the wrong hands.

Nothing could be more valuable to a U.S. company’s competitors than the information in its master file. But the master file isn’t subject to any confidentiality safeguards beyond those a foreign government decides to provide. A foreign government could hand the information over to any competitor or use it to develop a new one. And the file could be hacked.

Doug recommends in his column that Congress take steps to protect American companies and Andy Quinlan of the Center for Freedom and Prosperity has the same perspective.

Here’s some of what Andy wrote for The Hill.

It is…time for Congress to take a more assertive role in the ongoing efforts to rewrite global tax rules. …(BEPS) proposals drafted by the Organization for Economic Cooperation and Development…threaten the competitiveness of U.S.-based companies and the overall American economy. …We know the Paris-based OECD’s aim is to raid businesses – in particular American businesses – for more tax revenue… The fishing expeditions are being undertaken in part so that bureaucrats can later devise new and creative ways to suck even more wealth out of the private sector. …American companies forced to hand proprietary data to governments – like China’s – that are known to engage in corporate espionage and advantage their state-owned enterprises will be forced to choose between forgoing participation to vital markets or allowing competitors easy access to the knowledge and techniques which fuel their success.

You would think that the business community would be very alarmed about BEPS. And many companies are increasingly worried.

But their involvement may be a too-little-too-late story. That’s because the business group that is supposed to monitor the OECD hasn’t done a good job.

Part of the problem, as Andy explains, is that the head of the group is from a company that is notorious for favoring cronyism over free markets.

The Business and Industry Advisory Committee…has been successfully co-opted by the OECD bureaucracy. At every stage in the process, those positioned to speak on behalf of the business community told any who wished to push back against the boneheaded premise of the OECD’s work to sit down, be quiet, and let them seek to placate hungry tax collectors with soothing words of reassurance about their noble intentions and polite requests for minor accommodations. That go-along-to-get-along strategy has proven a monumental failure. Much of the blame rests with BIAC’s chair, Will Morris. Also the top tax official at General Electric – whose CEO Jeffrey Immelt served as Obama’s “job czar” and is a dependable administration ally – and a former IRS and Treasury Department official, Morris is exactly the kind of business representative tax collectors love.

Ugh, how distasteful. But hardly a surprise given that GE is a big supporter of the corrupt Export-Import Bank.

I’m not saying that GE wants to pay more tax, but I wouldn’t be surprised if the top brass at the company decided to acquiesce to BEPS as an implicit quid pro quo for all the subsidies and handouts that the firm receives.

In any event, I’m sure the bureaucrats at the OECD are happy that BIAC didn’t cause any problems, so GE probably did earn some brownie points.

And what about the companies that don’t feed at the public trough? Weren’t they poorly served by BIAC’s ineffectiveness?

Yes, but the cronyists at GE presumably don’t care.

But enough speculation about why BIAC failed to represent the business community. Let’s return to analysis of BEPS.

Jason Fichtner and Adam Michel of the Mercatus Center explain for U.S. News & World Report that the OECD is pushing for one-size-fits-all global tax rules.

The OECD proposal aims to centralize global tax rules and increase effective tax rates on international firms. U.S. technology firms such as Google, Facebook, Amazon and Apple will likely be harmed the most. …the OECD as a special interest group for tax collectors. Over the past 25 years, they have built an international tax cartel in an effort to keep global tax rates artificially high. The group persistently advocates for increased revenue collection and more centralized control. The OECD has waged a two-decade campaign against low tax rates by blacklisting sovereign countries that don’t comply with OECD directives.

Like the others, Fichtner and Michel worry about the negative consequences of the BEPS plan.

The centralization of tax information through a new international country-by-country reporting requirement will pressure some countries to artificially expand their tax base.  A country such as China could increase tax revenue by altering its definition of so-called value creation… Revenue-hungry states will be able to disproportionately extract tax revenue from global companies using the newly centralized tax information. …while a World Bank working paper suggests there is a significant threat to privacy and trade secrets. Country-by-country reporting will complicate international taxation and harm the global economy.

Instead of BEPS, they urge pro-growth reforms of America’s self-destructive corporate tax system.

…the United States should focus on fixing our domestic corporate tax code and lower the corporate tax rate. The U.S. [has] the single highest combined corporate tax rate in the OECD. …Lower tax rates will reduce incentives for U.S. businesses to shift assets overseas, grow the economy and increase investment, output and real wages. Lowering tax rates is the most effective way policymakers can encourage innovation and growth.  The United States should not engage in any coordinated attempt to increase global taxes on economic activity. …The United States would be better off rejecting the proposal to raise taxes on the global economy, and instead focus on fixing our domestic tax code by substantially lowering our corporate tax rate.

By the way, don’t forget that BEPS is just one of the bad anti-tax competition schemes being advanced by the bureaucrats in Paris.

David Burton of the Heritage Foundation has just produced a new study on the OECD’s Multilateral Convention, which would result in an Orwellian nightmare of massive data collection and promiscuous data sharing.

Read the whole thing if you want to be depressed, but this excerpt from his abstract tells you everything you need to know.

The Protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters will lead to substantially more transnational identity theft, crime, industrial espionage, financial fraud, and the suppression of political opponents and religious or ethnic minorities by authoritarian and corrupt governments. It puts Americans’ private financial information at risk. The risk is highest for American businesses involved in international commerce. The Protocol is part of a contemplated new and extraordinarily complex international tax information sharing regime involving two international agreements and two Organization for Economic Co-operation and Development (OECD) intergovernmental initiatives. It will result in the automatic sharing of bulk taxpayer information among governments worldwide, including many that are hostile to the United States, corrupt, or have inadequate data safeguards.

I wrote about this topic last year, citing some of David’s other work, as well as analysis by my colleague Richard Rahn.

The bottom line is that the OECD wants this Multilateral Convention to become a World Tax Organization, with the Paris-based bureaucracy serving as judge, jury, and executioner.

That’s bad for America. Indeed, it’s bad for all nations (though it is in the interest of politicians from high-tax nations).

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The Organization for Economic Cooperation and Development is a Paris-based international bureaucracy. It used to engage in relatively benign activities such as data collection, but now focuses on promoting policies to expand the size and scope of government.

That’s troubling, particularly since the biggest share of the OECD’s budget comes from American taxpayers. So we’re subsidizing a bureaucracy that uses our money to advocate policies that will result in even more of our money being redistributed by governments.

Adding insult to injury, the OECD’s shift to left-wing advocacy has been accompanied by a lowering of intellectual standards. Here are some recent examples of the bureaucracy’s sloppy and/or dishonest output.

Deceptively manipulating data to make preposterous claims that differing income levels somehow dampen economic growth.

Falsely asserting that there is more poverty in the United States than in poor nations such as Greece, Portugal, Turkey, and Hungary.

Cooperating with leftist ideologues from the AFL-CIO and Occupy movement to advance Obama’s ideologically driven fiscal policies.

Peddling dishonest gender wage data, numbers so misleading that they’ve been disavowed by a member of Obama’s Council of Economic Advisers.

Given this list of embarrassing errors, you probably won’t be surprised by the OECD’s latest foray into ideology-over-accuracy analysis.

As part of its project to impose higher taxes on companies, here’s what the OECD is claiming in a recent release.

Corporate tax revenues have been falling across OECD countries since the global economic crisis, putting greater pressure on individual taxpayers… “Corporate taxpayers continue finding ways to pay less, while individuals end up footing the bill,” said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. “The great majority of all tax rises seen since the crisis have fallen on individuals through higher social security contributions, value added taxes and income taxes. This underlines the urgency of  efforts to ensure that corporations pay their fair share.” These efforts are focused on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

And what evidence does the OECD have to justify this assertion?

Here’s what the bureaucracy wrote.

Average revenues from corporate incomes and gains fell from 3.6% to 2.8% of gross domestic product (GDP) over the 2007-14 period. Revenues from individual income tax grew from 8.8% to 8.9% and VAT revenues grew from 6.5% to 6.8% over the same period.

Those are relatively small shifts in tax receipts as a share of GDP, so one certainly could say that the OECD bureaucrats are trying to make a mountain out of a molehill.

But that would mean that they’re merely guilty of exaggeration.

The much bigger problem is that the OECD is disingenuously cherry-picking data, the kind of methodological mendacity you might expect from an intern in the basement of the White House, but not from supposed professionals.

If you go to the OECD’s website and click on the page where the corporate tax data is found, you’ll actually discover that corporate tax receipts have been slowly climbing as a share of GDP.

Yes, receipts are slightly lower than they were at the peak of the financial bubble.

However, honest analysts would never claim that those numbers were either sustainable or appropriate to use as a bennchmark.

Sadly, “honest” and “OECD” are words that don’t really belong together any more.

The bureaucrats in Paris also are being mendacious in their portrayal of what’s happening with individual income tax revenues.

Monsieur Saint-Amans wants us to think that falling corporate tax receipts are being offset by a rising burden on individuals, but check out this table from the OECD’s Revenue Statistics. As you can see, he wants us to look at one tree (what’s happened in the past few years) and ignore the forest (the fact that the burden of the personal income tax today is lower than it was in 1980, 1990, or 2000).

By the way, the real story is that the OECD wants higher tax burdens, period. Anytime, anywhere, and on everybody.

It’s attack on low-tax jurisdictions is designed to enable higher income tax burdens on individuals.

Its “base erosion and profit shifting” project is designed to facilitate higher income tax burdens on companies.

And the bureaucrats reflexively advocate higher value-added tax burdens.

All of what you might expect from an organization filled with overpaid officials who realize their cosseted lifestyle is dependent on producing output that will generate continuing subsidies from statist politicians such as Obama and Hollande.

P.S. If you want an amazing example of the OECD’s ideology-over-analysis approach, here’s what the bureaucrats recently wrote about achieving more growth in Asia.

Increasing tax revenues and ensuring sustainable domestic resource mobilisation will be critical as emerging Asian economies seek to boost the provision of public goods and services and improve economic growth and living standards. …Comparable and consistent tax statistics facilitate transparent policy dialogue and provide policy makers with an important tool to assess alternative tax reforms. …Continued reforms will be necessary to help these tax administrations raise additional tax revenues in the future.

Yup, you read correctly (at least if you understand that “domestic resource mobilisation” is OECD-speak for higher taxes). The bureaucrats think generating more tax revenue to finance bigger government actually is a recipe for more prosperity.

For all intents and purposes, they’re advising nations in the region to copy France and Italy instead of seeking to be more like Hong Kong and Singapore.

Though, to be fair, the OECD isn’t just trying to impose bad policy on Asia. The bureaucrats in Paris have an equal-opportunity mindset when advocating statism since that’s the exact same prescription the OECD gave for Latin America.

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Most normal Americans have never heard of the “Base Erosion and Profit Shifting” project being pushed by the tax-loving bureaucrats at the Paris-based Organization for Economic Cooperation and Development.

But in the world of tax policy, BEPS is suddenly attracting a lot of attention, mostly because the business community has figured out it’s a scheme that would require them to pay more money to greedy governments.

I’m happy that BEPS is finally getting some hostile attention, but I wonder why it took so long. I started criticizing the project from the moment it was announced. Given the OECD’s dismal track record of promoting statist policy, there was zero chance that this project would result in good policy proposals.

Though I will say that the Wall Street Journal quickly recognized that the BEPS scheme was a ruse for tax increases on the business community.

And the editors of the paper have continued their criticisms as BEPS has morphed from bad concept to specific policy. Here are some passages from an editorial earlier this week.

…the Organization for Economic Cooperation and Development this week released its final proposals for combatting “base erosion and profit shifting,” or BEPS. …The OECD claims governments lose anywhere between $100 billion and $240 billion in revenue each year to such legal strategies, and it has spent two years concocting complex rules and new compliance burdens to stop it. Perhaps the worst of the OECD’s ideas is…country-by-country reports to every jurisdiction in which a company operates would detail operations in that area, and where it has paid tax on any relevant profits.

The WSJ is particularly concerned about proposals to require sharing of information with irresponsible and corrupt governments.

Ostensibly this…data would be kept confidential. Fat chance about that, especially if a high-taxing government thinks it has spotted an opportunity to grab more revenue or indulge some political grandstanding. A related proposal would require companies to hand over their so-called master files to governments. Those files, which detail global operations and intra-company transfers, are essentially guides to proprietary business strategies. Passing them to the authorities, and especially governments that run state-owned enterprises competing with multinational firms, is an invitation to mischief.

The OECD’s proposals also will mean higher compliance costs.

Companies could also be forced to spend years in courts and arbitration challenging potential new instances of the double taxation the current global tax system was developed to avoid. …Underlying all of this is the belief that the fiscal problems of the world result from insufficient tax collection, when the real culprit is anemic growth.

The final point in the above passage deserves special attention. Economic growth in many industrialized nations is relatively anemic because of bad government policy. And since people are earning less income and businesses are earning fewer profits, this means less revenue for government.

But rather than fix the policies that are causing sub-par growth, the politicians want to impose higher tax rates.

Needless to say, this will simply lead to less taxable income, making it even harder to collect revenue (this is the core insight of the Laffer Curve).

It’s also worth citing what the Wall Street Journal wrote over the summer on the BEPS issue. The editors started with an important observation about companies being able to invest in high-tax nations because they can protect some of their profits.

The global war on low tax rates entered a new stage… Hang onto your wallets—and your proprietary corporate data. …Governments have noticed that companies try to protect themselves from rapacious tax policies. …This is all legal for now, and a good thing too. Shielding profits from growth-killing taxes helps make investment and job creation in high-tax jurisdictions more economical.

And the editorial also warns about the dangers of giving dodgy governments access to more information, particularly when some of them will be incapable of protecting data from hackers.

The compliance burden these rules would impose counts as a new tax in itself. Despite some attempts to allow companies to file only one global disclosure in the jurisdiction of the corporate headquarters, in practice firms are likely to have to submit multiple, overlapping documents around the world. Sensitive corporate financial information would then be shared among global tax collectors. If you believe the OECD’s claim that all this will be kept confidential, have a chat with any of the millions of federal employees whose personnel files Uncle Sam allowed China to hack.

By the way, I don’t doubt for one second that companies push the envelope as they try to protect their shareholders’ money from government.

But less money for government is a good outcome. Particularly when politicians are imposing taxes – like the corporate income tax – that hurt workers by impeding capital investment.

The main thing to understand, at least from an American perspective, is that businesses have a big incentive to shift money out of the United States because politicians have saddled our economy with the world’s highest corporate tax rate, combined with the globe’s most punitive worldwide tax system.

Dealing with those problems is the right approach, not some money grab from an international bureaucracy. I shared these ideas in this brief presentation I made to an audience on Capitol Hill.

For what it’s worth, the chart I shared is all the evidence you could ever want that governments aren’t suffering from a lack of corporate tax revenue.

Moreover, while I don’t like OECD schemes to enable higher tax burdens, the BEPS project won’t equally affect all businesses.

Let’s look at how the project specifically disadvantages American companies (above and beyond the self-imposed damage from Washington).

Aparna Mathur of the American Enterprise Institute explains how BEPS will make a bad system even worse for US-based multinationals.

The U.S. has much to lose from a shift to this system. …the U.S. today has the highest corporate tax rate in the OECD. Under BEPS, this would affect the real decisions of firms to locate jobs and capital investment in the U.S.. In a recent report Michael Mandel points out that the BEPS principles will give multinationals a strong incentive to move high-paying creative and research jobs out of the U.S. since that is the easiest way to take advantage of low tax rates. …The current U.S. system of corporate taxation has many flaws. …the changes envisaged under the OECD’s BEPS project would make matters even worse.

This doesn’t sound good.

Some people have complained about corporate inversions, but it doesn’t hurt America when a company technically redomiciles in a nation with better tax law. After all, the jobs, factories, and headquarters generally remain in the United States.

But the way BEPS is structured, companies will have to move economic activity out of America.

Last but not least, Veronique de Rugy of the Mercatus Center identifies some major systematic flaws in the BEPS project. She starts by pointing out what the OECD wants.

Europe’s largest welfare states…are leading the charge through the Organisation for Economic Co-operation and Development to raise corporate tax rates globally. …The underlying assumption behind the base erosion and profit shifting, or BEPS, project is that governments aren’t seizing enough revenue from multinational companies. …Its solution is to force those companies that wisely structured their operations to benefit from low-tax jurisdictions to declare more income in high-tax nations.

And then she explains what will be the inevitable result of higher tax burdens.

Far from filling government coffers in order to continue funding massive redistributive welfare regimes, BEPS will strangle global economic output and erode tax bases even further. …Corporations provide an easy political target for tax-hungry politicians, but the burden of corporate taxes falls on ordinary citizens. Employees, shareholders, and investors will bear the brunt of the OECD’s corporate tax grab, all because European politicians refuse to accept responsibility for building bigger governments than their economies can sustain.

So what is the Obama White House doing to protect American companies from this global tax grab?

The good news is that some folks from the Treasury Department have complained that the project is targeting U.S. multinationals.

The bad news is that the minor grousing from the United States hasn’t had an impact. Not that we should be surprised. Because of a shared belief in statism, the Obama Administration has worked to expand the OECD’s power to push bad tax policy around the world.

P.S. Since today’s topic is arcane yet important international tax issues, allow me to share an update on the horribly misguided FATCA law. As is so often the case, the op-ed page of the Wall Street Journal is the source of great wisdom.

Or, in this case, maybe it would be best to write “the source of great sadness and frustration.”

America is the only country that taxes citizens on their global earnings, and in 2010 Washington exacerbated that by passing the Foreign Account Tax Compliance Act, or Fatca. As this law comes into force, it is doing immense harm to…the 8.7 million U.S. citizens living abroad, who have essentially been declared guilty of financial crimes unless they can prove otherwise. …American leadership overseas, from volunteer organizations to the business world, has diminished. No one wants an American involved when their citizenship attracts a maze of rules, regulations, potential fines and criminal penalties. …It’s painful to witness the anguish of patriotic Americans as they contemplate giving up their U.S. citizenship, as record numbers have been doing. In 2014, 3,417 renounced their citizenship, a 266% increase over 2012, before Fatca came fully into effect.

Interestingly, the way to solve the FATCA problem is the same way to deal with the corporate inversion issue.

Simply shift to a territorial system.

The best solution is for the U.S. to join the rest of the world in taxing based on residency rather than citizenship. …Doing so would advance American fairness, mobility and economic competitiveness.

Sadly, only a handful of lawmakers, most notably Senator Rand Paul, are making noise on this issue.

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What’s the best way to generate growth and prosperity for the developing world?

Looking at the incredible economic rise of jurisdictions such as Hong Kong and Singapore, it’s easy to answer that question. Simply put in place the rule of law, accompanied by free markets and small government.

But that answer, while unquestionably accurate, would mean less power and control for politicians and bureaucrats.

So you probably won’t be surprised to learn that when politicians and bureaucrats recently met to discuss this question, they decided that development could be best achieved with a policy of higher taxes and bigger government.

I’m not joking.

Reuters has a report on a new cartel-like agreement among governments to extract more money from the economy’s productive sector. Here are some key passages from the story.

Rich and poor countries agreed on Thursday to overhaul global finance for development, unlocking money for an ambitious agenda… The United Nations announced the deal on its website… Development experts estimate that it will cost over $3 trillion each year to finance the 17 new development goals… Central to the agreement is a framework for countries to generate more domestic tax revenues in order to finance their development agenda… Under the agreement, the UN Committee of Experts on International Cooperation in Tax Matters will be strengthened, the press release said.

Though there’s not total agreement within this crooks’ cartel. There’s a fight over which international bureaucracy will have the biggest role. Should it be the Organization for Economic Cooperation and Development, which is perceived as representing the interests of revenue-hungry politicians from the developed world?

Or should it be the United Nations, which is perceived as representing the interests of revenue-hungry politicians from the developing world?

Think of this battle as being somewhat akin to the fight between various socialist sects (Mensheviks, Trotskyites, Stalinists, etc) as the Soviet Union came to power.

Bloomberg has a story on this squabble.

Responsibility for tax standards should be moved to the UN from the Organization for Economic Co-operation and Development, a group of 34 rich countries, according to a position paper endorsed by 142 civil-society groups. …Tove Maria Ryding from the European Network on Debt and Development, [said] “Our global tax decision-making system is anything but democratic, excluding more than half of the world’s nations.”

I’m tempted to laugh about the notion that there’s anything remotely democratic about either the UN or OECD. Both international organizations are filled with unelected (and tax-free) bureaucrats.

But more importantly, it’s bad news for either organization to have any power over the global economy. Both bureaucracies want to replace tax competition with tax harmonization, precisely because of a desire to enable big expansion is the size and power of governments.

This greed for more revenue already has produced some bad policies, including an incredibly risky scheme to collect and share private financial information, as well as a global pact that could be the genesis of a world tax organization.

And there are more troubling developments.

Here are some excerpts from another Bloomberg report.

Step aside, Doctors Without Borders. …A team called Tax Inspectors Without Borders will be…established next week by the United Nations and the Organization for Economic Cooperation and Development. …Tax Inspectors Without Borders would take on projects or audits either by flying in to hold workshops…or embedding themselves full time in a tax agency for several months… “There is a lot of enthusiasm from developing countries” for this initiative, said John Christensen, the U.K.-based director of the nonprofit Tax Justice Network.

Gee, what a surprise. Politicians and bureaucrats have “a lot of enthusiasm” for policies that will increase their power and money.

But at the risk of repeating myself, the more serious point to make is that bigger government in the developing world is not a recipe for economic development.

The western world became rich when government was very small. As noted above, Hong Kong and Singapore more recently became rich with small government.

But can anyone name a country that became rich with big government?

I’ve posed that question over and over again to my leftist friends and they never have a good answer.

If we want the third world to converge with rich nations, they need to follow the policies that enabled rich nations to become rich in the first place.

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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.

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What’s the worst international bureaucracy?

But I think the Paris-based Organization for Economic Cooperation and Development has them all beat, particularly if we grade on a per-dollar-spent basis.

Just consider the OECD’s work on inequality. The bureaucrats recently published a study that claimed inequality somehow undermined growth.

In a column for the Wall Street Journal, Matthew Schoenfeld of Dreihaus Capital Management explains why the study is deeply flawed. He starts with a summary of what the OECD would like folks to believe.

The Organization for Economic Cooperation and Development recently published a report, “In It Together: Why Less Inequality Benefits All,” that claimed rising income inequality from 1990-2010 depressed cumulative growth across its member countries by 4.7%. The OECD’s suggested solution: government-led redistribution, funded via tax increases on “wealthier individuals” and “multinational corporations.”

But Schoenfeld explains the OECD’s research is riddled with misleading use of statistics.

From 2011-13, according to the World Bank, the five most unequal countries grew nearly five times faster (3.9% cumulative annual average) than the others (0.84%). By using a 2010 cutoff, the OECD has skewed its findings. Consider Greece. From 1999-2012, its Gini coefficient “improved” by 6% to .34 from .36—more than any other OECD country. …Greece’s redistributive social transfer spending also grew most quickly among OECD peers from 2000-12. But Greece’s economy has shrunk by more than 20% since 2010.

Here’s another example.

…the income-tax rate is a subpar proxy for redistribution policy. …A more representative proxy for redistribution is government expenditure as a percentage of GDP, which encompasses all government spending on the provision of goods, services, subsidies, and social benefits. From 1995-2012, OECD member countries that increased government expenditures as a percentage of GDP grew 30% slower than member countries that trimmed government expenditure as a percentage of the economy over that span—average annual growth of 1.9% compared with 2.5%.

Gee, who would have guessed that bigger government leads to less growth? I’m shocked, shocked.

And who would have guessed that the OECD produces research with dodgy numbers? Knock me over with a feather!

Though I must say that the sloppiness in this inequality study is trivial compared to the junk-riddled methodology of the OECD’s poverty study, which actually purported to show that there’s more deprivation in America than there is in poor nations such as Greece, Turkey, and Portugal.

Which gives me an opening to highlight what I wrote about this OECD study. I suggested that “the bureaucracy’s ‘research’ now is more akin to talking points from the Obama White House” and highlighted some utterly preposterous conclusions of the study.

We’re supposed to believe that Spain, France, and Ireland have enjoyed better growth. I guess France’s stagnation is just a figment of our collective imaginations. And those bailouts for Spain and Ireland must have been a bad dream or something like that.

Some folks may question whether the OECD is really a leftist bureaucracy. Or at least they may wonder whether I go overboard in my criticisms.

For what it’s worth, I do give the crowd in Paris some praise when good research is produced.

But imagine that the OECD is a student who gets a B on one test and fails every other exam. At some point, isn’t it safe to assume we have a remedial pupil?

And here’s some very strong proof. It turns out that the OECD is even further to the left than the Obama Administration.

I’m not joking. Check out these excerpts from an item in Politico’s Morning Tax.

…the U.S. is definitely not on the same page as its allies. The split was apparent at last week’s OECD conference in Washington to discuss the Base Erosion and Profit Shifting (BEPS) plan… Robert Stack, deputy assistant secretary for international affairs at Treasury, suggested that the OECD’s Base Erosion and Profit Shifting (BEPS) project was being driven less by a desire for sound policy than by foreign countries’ domestic politics and a desire for more revenue.

I wrote just last week that the BEPS plan is a naked revenue grab by high-tax nations and I find it remarkable that a senior official at the Obama Treasury Department agrees with me.

P.S. This isn’t the first time the Obama Administration has been to the right of the OECD.

P.P.S. Speaking of remedial students, I wrote back in 2011 that ending the flow of American tax dollars to the OECD (the biggest share of the bureaucracy’s budget comes from the United States) should be a test of whether Republicans are serious about cutting back on wasteful government spending.

At what point do I change the GOP grade from “incomplete” to “F”?

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When writing about the Organization for Economic Cooperation and Development, an international bureaucracy based in Paris, my life would be simpler if I created some sort of automatic fill-in-the-blanks system.

Something like this.

The OECD, subsidized by $____ million from American taxpayers, has just produced a new _________ that advocates more power for governments over the _________ sector of the economy.

But this may not be sufficiently descriptive.

So maybe I should create a multiple choice exercise. Sort of like when students take tests and get asked to circle the most appropriate answer.

The bureaucrats at the Paris-based OECD, working in cooperation with union bosses/class-warfare advocates/other tax-free international bureaucrats/politicians, have released a new report/study/paper urging more power/control/authority for governments in order to increase regulation/taxes/spending/redistribution/intervention.

You may think I’m trying to be funny, but this is totally serious.

How else would you describe a bureaucracy that consorts and cooperates with leftist groups like Occupy Wall Street and the AFL-CIO and routinely published propaganda in favor of Obama’s agenda on issues such as global warming, government-run healthcare, so-called stimulus, and class-warfare taxation.

And never forget that American taxpayers finance the biggest chunk of this bureaucracy’s budget.

Adding insult to injury, the bureaucrats at the OECD get tax-free salaries, which makes their relentless support for higher taxes on the rest of us even more obnoxious.

Now we have some new examples of the OECD’s statist mischief.

Here’s some of what the Center for Freedom and Prosperity recently uncovered.

At its sixth annual conference, the George Soros-founded Institute for New Economic Thinking will feature prominent left-wing economists Thomas Piketty, Joseph Stiglitz, and self-described Marxist and Greek Finance Minister, Yanis Varoufakis. By itself that wouldn’t be remarkable, but the meeting will come with the implicit endorsement of the U.S. taxpayer thanks to the sponsorship of the Organization for Economic Cooperation and Development (OECD), which gets over 20 percent of its funding from the United States.

So why is the OECD subsidizing a left-wing gabfest and giving publicity to way-out-of-the-mainstream characters like Piketty?

Part of the answer, one suspects, is that the bureaucracy has a bloated budget.

But the bigger reason is presumably that the bureaucrats want to push a statist ideological agenda.

…tax collectors have hijacked the OECD… Over the last decade and a half, they have threatened and cajoled low-tax jurisdictions into counter-productive reforms that make their economies less attractive to those suffering under the excessive taxes required to fund European welfare states. …They have essentially turned the OECD into a global tax cartel, or an OPEC for politicians.

None of this is a surprise because it’s part of a bigger pattern.

The OECD gets its money from governments. Most of those governments are European welfare states. The bureaucrats at the OECD get very generous tax-free salaries.

So of course they’re going to pump out whatever propaganda is needed to please their political (and pay) masters.

Here are some other recent examples, both of which were disseminated by the OECD’s Washington Center, which mostly exists to make sure that Congress and the White House maintain the gravy train of handouts to Paris.

Our first example of economic malpractice is this nonsense about a so-called gender wage gap. Note that the OECD is forced to admit the numbers are “unadjusted.”

That’s because lots of research shows that the wage gap disappears once you adjust for factors such as hours worked, types of professions, and work history.

By the way, just in case you think I’m only citing pro-market sources, it’s very much worth noting that even one of President Obama’s economic advisers confessed that the left’s gender-gap numbers are bogus.

Now let’s look at another chart.

I’ve previously explained that what matters most for the poor is economic growth.

Yet statists prefer to focus on the rich-v-poor gap because they want to mislead folks into thinking the economy is a fixed pie (as depicted here) and the income of the rich is at the expense of the poor.

And that’s the purpose of this OECD chart.

This very much reminds me of the OECD’s laughably dishonest research on poverty, which purports to show that there is more poverty in the United States than there is in economically distressed nations such as Greece, Turkey, Hungary, and Portugal.

As you can see from this video, statism is now the OECD’s chief product.

Which is why Republicans in Congress, if they actually on the side of taxpayers, should defund this destructive bureaucracy.

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