nef (the new economics foundation) “a competitive tax system is a better tax system” john...

nef (the new economics foundation)

“A competitive tax system is a better tax system”

John Christensen, Tax Justice Network


The myth

“Having a competitive tax system is a good thing for the UK. Trying to tax the wealthy and corporations just stifles economic performance and puts off investors.”


In the wild

“We are building the most competitive tax system in the world.”– George Osborne, March 2013


In the wild

“Our objective for the UK tax system is both clear and ambitious: we want to establish the most competitive tax system in the G20.”

– David Gauke, September 2012


In the wild

“Every country sets its own tax rates, but I think in a world of global capital, in a world where we're competing with each other, in a world where we want to send a message that we want you to build businesses, grow businesses and invest, I think it's wrong to have completely uncompetitive top rates of tax.”

– David Cameron, June 2012


The reality

• Tax ‘competition’ leads to the upwards redistribution of wealth

• Tax ‘competition’ gives big business an unfair, unproductive advantage

• Tax ‘competition’ results in a dangerous race-to-the-bottom

• Taxes on the wealthy and on corporations don’t stifle economic performance

• Genuine investors are not put off by taxes


The reality: Tax ‘competition’ leads to the upwards redistribution of wealth

• To be ‘competitive’ governments lower corporation and business sales taxes

• They then find they have to increase taxes on less wealthy people to make up shortfalls

• This can take the form of income or employment taxes, but leads to regressive tax systems that ask more from low and middle income earners than from the wealthiest


The reality: Tax ‘competition’ leads to the upwards redistribution of wealth


The reality: Tax ‘competition’ gives big business an unfair, unproductive advantage

• Countries attract investors who don’t want to pay tax by:– Cutting tax rates– Offering tax loopholes and special incentives– Offering financial secrecy to facilitate tax evasion– Deliberately not enforcing taxes

• Only multinationals can afford lawyers and accountants to help them take advantage, driving smaller local competition to the wall


The reality: Tax ‘competition’ results in a dangerousrace-to-the-bottom

• Tax ‘competition’ is self defeating, because as soon as one country makes their taxes more ‘competitive’, the other countries do the same

• This cycle continues and more and more regressive and complex tax systems develop

• A January 2013 US study found that Kansas and Missouri spent at least $192 million in tax subsidies to poach jobs from each other, with only a few hundred jobs switching states


In reality: Taxes on the wealthy and on corporationsdon’t stifle economic performance


In reality: Taxes on the wealthy and on corporationsdon’t stifle economic performance

• Studies focusing on measures other than economic growth find even stronger results– A report by Canada’s Center for Policy Alternatives states:

“High-tax countries have been more successful in achieving their social objectives than low-tax countries. They have done so with no economic penalty.”

• Good economic performance can be compatible with high taxes on the wealthy and on corporations


In reality: Genuine investors are not put off by taxes

• ‘Don’t tax us too much or we’ll leave for Switzerland’ they say. But the evidence shows, when their bluff is called, their threats are almost always empty

• Genuine investors want good infrastructure, a healthy and educated workforce, and the rule of law – all of which mean tax


In reality: Genuine investors are not put off by taxes

Don’t just take our word for it…

“I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain.”- Warren Buffett


In reality: Leading commentators dismiss thenotion of ‘tax competition’

Don’t just take our word for it…

“High-income countries tend to offer financial incentives – outright bribes, in other words. Developing countries tend to provide fiscal incentives – tax reductions, tax holidays, accelerated depreciation, investment allowances, duty drawbacks and so forth…There is, in fact, good reason to believe that the competition across the globe in offering such incentives is wasteful and foolish.” - Martin Wolf


In summary

• Tax ‘competition’ represents a dangerous race-to-the-bottom

• It leads to wealth being redistributed upwards and favours big business over small competitors

• Taxing corporations and the wealthy doesn’t stifle economic performance

• Genuine investors don’t leave due to taxes

nef (the new economics foundation) “a competitive tax system is a better tax system” john...

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