Center for Freedom and Prosperity Condemns New OECD Assault on Tax Competition and Fiscal Sovereignty

Center for Freedom and Prosperity Foundation

For Immediate Release
Wednesday, February 20, 2013
202-285-0244

www.freedomandprosperity.org

Center for Freedom and Prosperity Condemns New OECD Assault on Tax Competition and Fiscal Sovereignty

Washington, D.C., Wednesday, February 20, 2013) 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.

OECD mission creep, as meticulously documented in a study by Dr. Andrew P. Morriss of the University of Alabama and Lotta Moberg of George Mason University, has become a serious threat to the global economy. Whereas the organization primarily sought decades ago to solve problems of double taxation in order to promote international commerce, today it is focused on enabling bad tax policies by the high-tax nations that dominate the Paris-based bureaucracy.

The organization’s transformation began in earnest with a 1998 report on “Harmful Tax Competition,” a misguided call-to-arms against fiscal sovereignty that provoked considerable push-back thanks to the efforts of CF&P. The new report deserves equally strong opposition from free market and taxpayer advocacy groups.

Andrew Quinlan, President of the Center for Freedom & Prosperity, said of the report, “For years we have sounded the alarm that the OECD has been hijacked by high-tax nations. This new scheme makes a mockery of the organization’s original mission to promote international economic activity, and instead advances the interests of tax collectors at the expense of workers and taxpayers.” He concluded, “At a time when federal spending is under increased scrutiny, it should be a no-brainer to spare taxpayers the $100 million annual subsidy to such a counter-productive and destructive organization.”

Dan Mitchell, Senior Fellow at the Cato Institute, added, “Ironically, OECD economists have written that the corporate income tax is the most destructive form of taxation. Yet the bureaucracy is now pursuing a statist agenda that will penalize nations with relatively non-destructive business tax systems – such as Luxembourg, Singapore, Ireland, Switzerland, and the Netherlands – to help prop up failing welfare states such as France.”

The Center for Freedom & Prosperity has long fought OECD efforts to undermine tax competition. The Coalition for Tax Competition, a group coordinated by CF&P, has cited the $100 million annual taxpayer subsidy to the OECD as “the height of folly.”

CTC Letter to Congress on OECD Funding:http://freedomandprosperity.org/files/OECD/CTC OECD defunding letter 2011.pdf

Morris and Moberg study: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1950627

CF&P Libertas entitled “OECD Subsidies Are Against U.S. Interests”: http://freedomandprosperity.org/2012/publications/oecd-subsidies-are-against-u-s-interests/

For additional comments:
Andrew Quinlan can be reached at 202-285-0244, andy@freedomandprosperity.org
Dan Mitchell can be reached at 202-218-4615, dmitchell@cato.org

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