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I'm Dan Mitchell of the Cato Institute,
here to narrate part two of the Center for Freedom and Prosperity's video series about tax havens.
As we discussed in part one of this series,
low-tax jurisdictions have a valuable role in the global economy.
They facilitate the efficient allocation of capital,
they courage saving and investment, and because of tax competition,
they encourage better policy in the rest of the world.
As noted in the New England Journal of International and Comparative Law,
tax competition serves a beneficial role.
It forces greater fiscal responsibility
and affords taxpayers the ability to enjoy more of what they earn.
This in turn draws savings, investment, and skilled labor into the economy.
But economic efficiency is not the only reason that tax havens should be preserved.
These low-tax jurisdictions also should be defended on a moral basis.
Most notably,
they offer a safe haven for people subject to persecution.
it's not very well understood that the vast majority of the world's population
lives in nations where governments fail to provide the basic protections of civilized society.
Indeed, in many cases governments are the problem,
as corrupt ruling elites use their power to exploit people.
Corruption often is rampant, expropriations common.
Crime is endemic and there is widespread persecution.
And not surprisingly people with money are common targets of oppression,
particularly if they are religious political, ethnic, racial, or *** minorities.
Tax havens help protect these people from venal incompetent governments
by providing a secure a place to hide their assets.
Imagine being a Jewish entrepreneur in the Middle East.
You'd be crazy keep your money in a local bank
when the government is controlled by anti-semites.
Indeed, one of the reasons why Switzerland has such an admirable human rights policy
of protecting financial privacy
is that they strengthened their laws in the 1930s
to help protect German Jews who wanted to guard their assets from the Nazis.
Many groups in the world face discrimination and hostility - often from government.
The ethnic Chinese, in nations such as Indonesia in the Philippines, often are resented by the local population.
The same is true for people of Indian descent in East Africa.
When you belong to a group that is unpopular,
and susceptible to being targeted by the government,
it makes sense to protect her family's interest
by putting your money someplace like Hong Kong,
where the politicians from your country can't find out about it.
And if they they can't find out about it,
they can't steal it.
In other words,
the financial privacy laws that make tax havens
so attractive to french families and Swedish entrepreneurs who want to escape oppressive taxation,
are the same laws that protect other people
from different forms of persecution.
Let's look at the example of political dissidents from places such as Russia,
or any of the 103 nations listed as not free, or only partly free, by Freedom House.
These people, or the civil society groups that they operate,
have a big incentive to keep their money where the political elite can't seize it.
Or imagine if you're a farmer Zimbabwe.
Would you want to leave your assets in a local bank,
where the nation's dictator can arbitrarily confiscate your money?
Of course not!
You're going to put your money in a jurisdiction that is honest and well run, such as the Cayman Islands
Or what about the Argentine family that wisely has little faith
in its government's ability to maintain the value of currency?
Would you want to leave your money in a local bank,
oblivious to the risk that your family's life savings could be wiped out overnight by devaluation?
Or what if you're an entrepreneur in Venezuela,
do you keep your assets in the nation aand report them on your tax return,
when there is corruption in the tax office,
and your personal data may be sold the kidnappers who then grab one of your kids?
If you have any sense whatsoever,
you place your money in a bank in Miami, since America as a tax haven -
at least if you're not a U.S. citizens or a U.S. resident.
We mentioned in part one, and also in our video on tax competition,
that international bureaucracies - such as the OECD, European Commission and United Nations -
are attacking tax savings as part of a campaign orchestrated by high-tax nations.
Uncompetitive governments don't like tax competition,
and they instead would prefer to create a global tax cartel -
sort of an OPEC for politicians.
With this in mind, it is remarkable that even the international bureaucracies
acknowledged the valuable role of tax havens and financial privacy.
The united nations, for instance, admitted in a 1998 report that,
for much of the 20th century,
governments around the world spied on their citizens to maintain political control.
Political freedom can depend on the ability to hide purely personal information from a government.
Too bad the U.N. bureaucrats are ignoring these warnings and pushing for global taxation.
But the United Nations is not the only hypocritical organization.
The leader of the OECD's anti-tax competition project, Jeffrey Owens,
recognized the role of tax havens as protectors of human rights.
As reported by the U.K. based Observer,
Owens stressed that tax havens are essential for individuals who live in unstable regimes.
Even a former Clinton-era Treasury Department official,
who was closely involved with the OECD's anti-tax competition campaign,
admitted, "how far do we want to go with this information exchange,
and the secrecy issues, the privacy issues, and so forth, which relates to the problems of corrupt governments,
of danger to your children and individuals?
That subject should be discussed."
Let's quickly touch on a few other moral issues and then wrap this up.
The campaign against tax havens interferes with the right of jurisdictions to pursue pro-growth policies,
which is especially discriminatory against poor nations.
Having no or low taxes is the main criteria for being listed as a tax haven by the OECD.
Yet most OECD nations did not having income taxes during the 1700s and 1800s,
which was a period of time when they climbed from agricultural poverty to middle-class prosperity.
We should all be offended that nations such as France and Germany became rich when they had no income tax,
and now they want to deny that opportunity to poor nations that want to follow the same development strategy
And speaking of discrimination,
it's also a bit unseemly that powerful, white governed nations in Europe
are targeting less powerful jurisdictions from places such as the Carribean.
Somebody needs to tell the bureaucrats in Paris that the era of colonialism is over.
Another issue is the OECD's hypocritical treatment of capital compared to labor.
The Paris based bureaucracy is upset
that investment funds are flowing to low-tax jurisdictions,
many of which are in the developing world.
But OECD nations are big beneficiaries of a brain drain from developing nations.
This flow of talent is very beneficial for labor inflow nations,
just as global financial flows are very beneficial for capital inflow nations.
Yet the OECD is not suggesting
that developing nations have the right to tax immigrant income earned in OECD nations,
so why should OECD nations be allowed to tax flight capital in non-OECD nations?
And speaking of hypocrisy,
what about the fact that the OECD doesn't blacklisted own members?
The United States, The United Kingdom, Austria, Belgium, Switzerland, Luxembourg...
these are all OECD member nations, and yet they weren't on the OECD's blacklist.
Only smaller, less powerful nations, were subject to this form of discrimination.
And of course the ultimate hypocrisy of all
is that the bureaucrats who work at the OECD, and the United Nations,
they all get tax-free salaries,
and yet they're running around the world trying to demand that other nations raise their taxes.
Time to conclude this video.
Politicians from high-tax nations and their flunkies at the international bureaucracies
often admit that the moral issues raised in this video are very pertinent.
But they then say that they are worried that tax havens enable some of their residents to avoid the tax net
But why is that the fault of jurisdictions with better tax policy?
If high-tax nations want better compliance,
shouldn't they fix their tax systems instead of trying to bully other nations
into surrendering their fiscal sovereignty and becoming vassal tax collectors?
On that cheerful note,
I'm Dan Mitchell the Cato Institute - on behalf of the Center for Freedom and Prosperity thanks for watching.
And as always, we rely on you to circulate these videos so we can spread the message of liberty.