Liechtenstein. Heavenly tax havens

Tuesday, 12 August 2008 10:00 ALC Оффшоры
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acquisition of the German government data stolen from a Liechtenstein bank to strengthen long-standing debate about privacy, law enforcement and international relations. Most of the fallout follows predictable patterns. Some argue that Germany's richest citizens should be held responsible for non-tax legislation, while others indicate that it is unseemly for the country to spy on peaceful neighbors.

The conflict between Germany and Liechtenstein also sparked broad debate about tax competition and the role of the so-called tax havens. The Paris-based Organization for Economic Cooperation and Development, is trying to use a confused situation, to revive its initiative against tax competition. Willem Buiter, professor at the London School of Economics, uses push this issue even more radical agenda: the forcible annexation - in countries such as Austria and France, by some unknown power - in jurisdictions such as Liechtenstein, Andorra and Monaco.

At best, these crusades against tax havens misleading. At worst, they are efforts to create a tax cartel for the benefit of high-tax nations. This OPEC for politicians would mean higher tax rates for everyone and more power.

Wealthy tax evaders may not be sympathetic figures, especially for those of us who meekly comply with the law. But low-tax jurisdictions serve an important role in the global economy. Simply put, they keep other governments honest. Globalization facilitates labor and capital across national borders, forcing governments to improve tax policy to keep the goose with golden eggs from flying away.

Tax competition has become the first big question after Thatcher and Reagan tax cuts in 1980. In response to increasing the attractiveness of the UK and U.S. economies, every industrialized country has been forced to lower personal tax rates in order to maintain competitiveness. Middle and top tax rates in developed countries fell by more than 67% in 1980 to almost 40% today.

The same thing is happening to corporate tax rates. Back in 1980, corporate tax rates average around 50%. Today, led by the 12.5% corporate tax in Ireland, the average corporate rate in the industrialized countries is less than 27%. Both the World Bank explained in its recent "Paying Taxes" report, these lower rates create incentives for increased investment, which leads to faster growth, more jobs, higher incomes and the fact that Berlin seems to be most concerned about: better compliance .

Perhaps most surprising, is now a flat tax revolution across the globe. In 1980 there were only three flat-tax jurisdictions. Currently, proposed in 1994, reforms in Estonia, there are 25 governments with a simple and fair flat-tax regimes.

All these reforms have given great benefits - especially for countries that have been the most aggressive tax cutters, in particular, Ireland and Slovakia.

But tax rates are only part of the equation. Ideally, the tax system, income is also taxed only once. This means no death tax, no property tax and no double taxation, interest, dividends or capital gains. Politicians are often tempted to impose additional layers of tax on savings and investments, and because they think that such a policy would give them more money and because voters are sometimes sympathetic to the class war campaign to "tax the rich." However, in scientific literature reveals that more excess tax capital income causes significant economic losses, mainly because people have less incentive to set aside some earnings to finance growth tomorrow. High tax rates on savings and investment is also ineffective conduct of tax evasion.

Tax havens are particularly useful because they encourage the government to reduce the tax bias against savings and investment. From Sweden to Spain, politicians in Europe have been lowering the tax rate on capital gains. Death taxes have been killed. Wealth taxes were abolished. And many nations have lower tax rates on capital gains.

Governments to improve their tax systems, because they know that the punitive tax burden is the cause of capital flight. In other words, they finally realized that it is better to have a low tax rate and collect more tax revenue than it is to have confiscatory tax rates and collect less revenue.

But more importantly, the changes brought about by tax competition and tax havens are good for ordinary people. The world economy is much stronger than it was in 1970, partly because the tax laws is far less hostile to work, savings and investments. This means more jobs, higher incomes and prosperity. As Richard Teather of Bournemouth University said that in 2005 a book published by London's Institute of Economic Affairs, "tax shelters for all of us, regardless of whether or not we personally invest in them."

Liechtenstein tax code that rewards productive behavior, and is currently the third wealthiest jurisdiction in the world according to World Bank data. German tax law, by contrast, is estimated among the world's worst World Economic Forum's Global Competitiveness Report. Liechtenstein privacy laws that respect individual rights, but who also received a green light from the Financial Action Task Force and the U.S. tax service for being tough on dirty money. Perhaps most interesting, Liechtenstein assessment high on six indicators controls the World Bank, ahead of countries such as - you guessed it - Germany.

None of this should not be surprising. Researchers have found that tax havens has consistently considered the best governed, most stable, fastest growing and most prosperous places in the world. Facilitate a more effective policies in other countries, although perhaps the most important role. If Liechtenstein to act as deputy tax collector for other countries, taxpayers will be the world's biggest losers. Daniel J. Mitchell

Last Updated ( Sunday, 04 January 2009 23:08 )