The OECD’s New Assault on Tax Competition Will Enable Higher Taxes and Bigger Government

Hardly anyone stands up for taxpayers. It’s the classic problem of concentrated interests and defused costs. Those who benefit from profligate government spending are strongly motivated to lobby for their pet handout. But every individual bit of waste only adds a tiny burden on any individual taxpayer, as the costs are spread out over the entire population. The result is the continual growth of government and every greater burdens on taxpayers.

The one saving grace has been tax competition. Thanks to globalization and the ability of labor and capital to migrate relatively easily, politicians are forced to consider the interests of taxpayers – not because they want to, but because businesses and individual will leave if rates become punitive. Increasingly, however, big spending politicians in high-tax nations are looking for an alternative to adopting  competitive, pro-growth tax rates, and that alternative is to undermine tax competition.

The OECD has for over a decade been used as a tool by tax collectors in high-tax nations to attack tax competition. CF&P today reported on their latest effort to rig international tax rules in their favor:

With the release of a new paper on “Addressing Base Erosion and Profit Shifting,” the Organization for Economic Cooperation and Development (OECD) seeks to undermine global commerce by giving high-tax nations the right to tax business income earned in low-tax jurisdictions. The Center for Freedom and Prosperity strongly opposes this new OECD scheme.

More specifically, the OECD report calls for a drastic rethinking of international tax norms based on the misguided notion that competing national tax policies create “gaps” that erode revenue – even though the report showed that corporate tax revenues have been climbing as a share of economic output.

The report is just the first salvo in a new war on tax competition from the OECD, just as its “Harmful Tax Competition” report from 1998 turned into a sustained effort to bully low-tax jurisdictions into adopting bad tax policies under the guise of promoting transparency. Expect much more from CF&P in opposition to this new effort in the weeks and months to come.

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon Sign up for our Email Newsletter
For Email Marketing you can trust