Thursday, April 12, 2007

Tax competition

Listening to the BBC World Service's World Business Review on Sunday morning might not seem too relevant for us Left-leaning types. In fact, the way corporate taxes have been forced down in recent years is a major engine is a major engine for distributing wealth and income towards the rich and away from the poor, especially those in the developing world. You still have until Saturday to listen to the discussion. This is what could be found on the BBC website.
Only two things in life are certain: death and taxes. Unlike death, taxes can change. More and more countries are using tax as a way of attracting foreign investment and making themselves more appealing to businesses from abroad.
As a result, corporate or company tax rates in the developed world have fallen by about twenty percent over the last twenty years. The trouble is, someone else has to make up the difference...the ordinary tax payer... and usually through bigger taxes on the things he or she buys.
Critics say this adjustment towards direct taxation can hit the poorest in society the hardest...others say lower corporation tax is compensated for in other important ways.
Join Rodney Smith and guests: the Director of the Tax Justice Network, John Christiansen, Krysztof Bobinski, head of the Unia and Polska thinktank in Warsaw, and Professor Michael Devereux from the University of Oxford...in World Business Review.
Some additional notes I made: Ireland built itself up as a "tiger celtic economy" attracting companies like Microsoft to book profits there. Ironically, it is now itself facing tax competition from Eastern Europe... Quite why governments are in favour of tax competition is not at all clear... You end up with a "race to the bottom".
Most of this came from John Christiansen, I think. For further information, see the Tax Justice Network website.

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