Catching Capital: The Ethics of Tax Competition - download pdf or read online

By Peter Dietsch

Wealthy humans stash away trillions of bucks in tax havens like Switzerland, the Cayman Islands, or Singapore. Multinational companies shift their gains to low-tax jurisdictions like eire or Panama to prevent paying tax. fresh tales within the media approximately Apple, Google, Starbucks, and Fiat are only the end of the iceberg. there's hardly ever any multinational at the present time that respects not only the letter but in addition the spirit of tax legislation. All this turns into attainable as a result of tax pageant, with nations strategically designing economic coverage to draw capital from overseas. The loopholes in nationwide tax regimes that tax festival generates and exploits draw into query political fiscal existence as we almost immediately understand it. They undermine the monetary autonomy of political groups and give a contribution to emerging inequalities in source of revenue and wealth.

Building on a cautious research of the moral demanding situations raised through a global of tax festival, this booklet places ahead a normative and institutional framework to control the perform. in brief, contributors and companies should still pay tax within the jurisdictions of which they're contributors, the place this club can are available levels. additionally, the strategic tax surroundings of states may be restricted in very important methods. a global Tax agency (ITO) may be created to implement the foundations of tax justice.

The writer defends this demand reform opposed to very important objections. First, Dietsch refutes the advice that regulating tax pageant is inefficient. moment, he argues that legislation of this type, instead of representing a constraint on nationwide sovereignty, actually seems to be a demand of sovereignty in a world financial system. The publication closes with a chain of reflections at the tasks that the beneficiaries of tax festival have in the direction of the losers either ahead of any institutional reform in addition to in its aftermath.

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27 Third and finally, governments use their fiscal policy to attract real investment from multinationals. This can be done either through a low corporate tax rate or by creating so-called preferential regimes for foreign corporations (‘ring-fencing’), which has the advantage of protecting the revenue stream from domestic firms. 28 Foreign direct investment obviously depends on a number of other factors, too, including the quality of infrastructure and of human capital. Yet, empirical studies confirm that fiscal policy plays an important role.

Htm>. 41. On this point, Bjorvatn and Cappelen make the interesting observation that tax competition, perhaps counterintuitively, poses more of a problem for states with an unequal pre-tax income distribution they want to correct for than for countries where the pre-tax income distribution is more egalitarian to start with. See Kjetil Bjorvatn and Alexander W. pdf>. pdf>. 48 FISCA L AU TONOM Y A N D TA X COM PETITION undercuts both elements of the autonomy prerogative. By putting downward pressure on rates for mobile capital, it dents revenues.

Not only does the efficiency objection to regulating tax competition fail, but I also show that efficiency arguments in the optimal tax literature are often applied clumsily, in a way that camouflages the problems posed by tax competition. Chapter 4 focuses on the concept of sovereignty in the fiscal context. Could current beneficiaries of tax competition claim that the demands tax cooperation puts on them represent an infringement of their sovereignty? I reject this possibility and conclude 26 I ntroduction that tax cooperation, and regulating tax competition in particular, rather than being a constraint on sovereignty, should be viewed as a requirement of sovereignty that is necessary for states to set effective fiscal policy.

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