Regular readers know that I’m a big fan of tax competition because politicians are less likely to misbehave if the potential victims of plunder have the ability to escape across borders.
Here is an excerpt from a superb article by Allister Heath, one of the U.K.’s best writers on economic and business issues.
In a modern, global and open world, states have to compete for people. Weirdly, that is something that a large number of commentators have failed to recognise… They assume implicitly that governments remain quasi-monopolies, as was the case throughout most of human history, with citizens mere subjects forced to put up with poor public services, high taxes, crime, misgovernment and a poor quality of life. Yet the reality is that there is now more competition than ever between governments for human capital, with people – especially the highly skilled and the successful – more footloose and mobile than ever before. This is true both within the EU, where freedom of movement reins, and globally.
…[C]ompetition between governments is as good for individuals as competition between firms is for consumers. It keeps down tax rates, especially on labour and capital, which is good for growth and job creation; states need to produce better services at the cheapest possible cost. And if governments become too irritating or incompetent, it allows an exit strategy. It is strange how pundits who claim to want greater competition in the domestic economy – for example, in banking – are so afraid of competition for people between states, decrying it as a race to the bottom. Yet monopolies are always bad, in every sphere of human endeavour, breeding complacency, curtailing innovation and throttling progress.
…Globalisation is not just about buying cheap Chinese goods: it also limits the state’s powers to over-tax or over-control its citizens.
For those who haven’t seen them before, here are a couple of my videos that elaborate on these critical issues.
First, here’s a video on tax competition, which includes some well-deserved criticism of international bureaucracies and high-tax nations that are seeking to create global tax cartels.
Here’s a video that makes a powerful economic case for tax havens.
But this is not just an economic issue. Here’s a video that addresses the moral issues and explains why tax havens play a critical role in protecting people subject to persecution by venal governments – as well as people living in nations plagued by crime and instability.
And last but not least, this video punctures some of the myths promoted by the anti-tax haven advocates of global tax cartels.
By the way, since the main purpose of this post is to draw your attention to the superb analysis of a British writer, I may as well close by drawing your attention to a couple of speeches by Dan Hannan, a British member of the European Parliament. In a remarkably limited time, he explains what this battle is all about.