NCPA - National Center for Policy Analysis

THE GLOBAL TAX REVOLUTION

March 31, 2009

Few policymakers today want to regulate trade and capital flows as countries did in the 1950s, but dangerous movements are afoot to control and limit tax competition.  Policymakers in international organizations such as the Organization for Economic Co-operation and Development (OECD), the European Commission and the United Nations (UN) want to turn back the clock and create an OPEC for taxes to insulate governments from tax competition, say authors Chris Edwards and Daniel Mitchell, in their new book, "Global Tax Revolution."

The good news is that the United States is uniquely situated to protect and advance global tax competition.   Edwards and Mitchell recommend U.S. policymakers:

  • Use American influence inside the OECD to kill the anti-tax competition project; the United States is the biggest funder of the OECD, providing nearly one-fourth the organization's budget, meaning that we have the ability to block further attacks by the organization on lower-tax jurisdictions.
  • Reject European Union invitations to participate in cartel-like tax initiatives, such as the savings tax directive.
  • Block possible UN schemes for global taxes, global tax regulations and a global tax organization; fortunately, the United Nations has not made much progress toward those ends, but these ideas are often discussed and may come to fruition unless tax-payers remain vigilant.
  • Oppose efforts to change U.S. tax policies in anti-competitive ways or to expand the reach of the U.S. worldwide tax system; also, efforts to by U.S. policymakers to blacklist low-tax nations and jurisdictions should be rejected.

One way to help ensure that American policies stay on the side of international tax competition is for us to proceed with domestic tax reform.  With America's current tax system, politicians often fret about companies moving profits to the Cayman Islands and the like, and they are susceptible to siding with high-tax countries on tax policy matters.  However, if we proceed with major tax reforms and make the United States a magnet for investment and jobs, it will be much easier for policymakers and the public to understand the benefits of open tax competition, explain Edwards and Mitchell.

Source: Chris Edwards and Daniel Mitchell, "Global Tax Revolution: The Rise of Tax Competition and the Battle to Defend It," Cato Institute, September 2008.

 

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