International financial centres branded as tax havens by critics
perform the valuable role of encouraging states to keep tax rates
down and hence boost jobs and economic growth, according to a
study by a
US think tank.
The book, Global Tax Revolution, written by Chris Edwards and Daniel Mitchell of the Cato Institute, chronicles tax reforms around the world in recent decades. They describe the dramatic business tax cuts of Ireland, the flight of business people from high-tax France, and the introduction of simple “flat taxes” in more than two dozen nations such as Estonia, for example.
Like other aspects of globalization, tax competition is
generating intense political opposition. Numerous governments and
international organizations are fighting to stem tax leakage. In
UK, the government recently imposed an annual tax on non-domiciled residents.
Meanwhile, in the tiny Alpine state of
Liechtenstein, bank data that was stolen from the principality has been used to prompt a series of tax investigations by governments such as those of the
Germany. In the
US, as reported by WealthBriefing, tax evasion has become an issue in the current presidential election campaign.
Critics claim tax havens – of which there are estimated to be about 40 according to the OECD – curb the legitimate ability of governments to raise taxes. On the other hand, Mr Edwards and Mr Mitchell say tax competition is helping to advance prosperity, expand human rights, and rein in bloated governments.