Ever since the bureaucrats at the Organization for Economic Cooperation and Development launched their attack on so-called harmful tax competition back in the 1990s, I’ve warned that the goal has been to create a global tax cartel.
Sort of an “OPEC for politicians.”
Supporters of the initiative said I was exaggerating, and that the OECD, acting on behalf of the high-tax nations that dominate its membership, simply wanted to reduce tax evasion. Indeed, some advocates even said that the effort could lead to lower tax rates.
That was a nonsensical claim. I actually read the various reports issued by the Paris-based bureaucracy. It was abundantly clear that the effort was based on a pro-tax harmonization theory known as “capital export neutrality.”
And, as I documented in my first study on the topic back in 2000, the OECD basically admitted the goal of the project was to enable higher taxes and bigger government.
- Low-tax policies “unfairly erode the tax bases of other countries and distort the location of capital and services.”
- Tax competition is “re-shaping the desired level and mix of taxes and public spending.”
- Tax competition “may hamper the application of progressive tax rates and the achievement of redistributive goals.”
The OECD’s agenda was so radical that it even threatened low-tax jurisdiction with financial protectionism if they didn’t agree to help welfare states enforce their punitive tax laws.
At first, there was an effort to push back against the OECD’s tax imperialism – thanks in large part to the creation of CF&P, which helped low-tax jurisdictions fight back (I almost got thrown in a Mexican jail as part of the fight!).
But then Obama got to the White House and sided with Europe’s big welfare states. Lacking the ability to resist the world’s most powerful nations, low-tax jurisdictions around the world were forced to weaken their human rights laws on privacy so it would be easier for high-tax countries to track and tax flight capital.
Once that happened, was the OECD satisfied?
Hardly. Any victory for statism merely serves as a springboard for the next campaign to weaken tax competition and prop up big government.
Indeed, the bureaucrats are now trying to impose minimum corporate tax rates. Let’s look at some excerpts from a report in the U.K.-based Financial Times.
…large multinationals could soon face a global minimum level of corporate taxation under new proposals from the OECD… The Paris-based organization called…for the introduction of a safety net
to enable home countries to ensure their multinationals cannot escape taxation, even if other countries have offered them extremely low tax rates. …The proposals would…reduce incentives for countries to lower their tax rates… The OECD said: “A minimum tax rate on all income reduces the incentive for…tax competition among jurisdictions.”
Sadly, the Trump Administration is not fighting this pernicious effort.
Indeed, Trump’s Treasury Department is largely siding with the OECD, ostensibly because a one-size-fits-all approach is less bad than the tax increases that would be imposed by individual governments (but also because the U.S. has a bad worldwide tax system and our tax collectors also want to reach across borders to grab more money).
In any event, we can safely (and sadly) assume that this effort will lead to a net increase in the tax burden on businesses.
And that means bad news for workers, consumers, and shareholders.
Moreover, if this effort succeeds, then the OECD will move the goalposts once again and push for further forms of tax harmonization.
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Image credit: Vinícius Pimenta | Pexels License.
