Friday, April 15, 2011

The Tax Haven Explosion

Nick Shaxson is currently in Washington supporting the US launch of Treasure Islands. Here is a clip from an interview broadcast by Democracy Now:


Blogger Physiocrat said...

Interesting revelations but the speakers are still mis-diagnosing. Loss of tax revenue through tax havens is an effect, not a cause. It is so disappointing that the speakers appear not to have perceived this.

In first world countries, most of the troubles is a direct consequence of rotten tax systems in those countries. In fact, that is the root of the trouble everywhere. Corrupt leaders of third world countries will continue in their evil ways until their citizens rise up against them.

Most of the huge revenue flows referred to in the talk, confusingly described as "capital", consist largely of economic rent of land. They have arisen due to the huge increase in productivity caused by technological advance over the past 50 years, but which have left most workers little better off in real terms. This is because that extra production has been creamed off as rent. It is all exactly as Ricardo's Law of Rent would predict.

The saddest thing is that those who desire reform and an end to this unjust state of affairs seem not to be aware of the underlying economic process, nor of the solution which is obvious once the mechanism is understood. Until they do, things can only get worse. Depressing thought.

2:53 pm  
Anonymous TJN said...


It would be refreshing to have a new set of arguments from you. Land value taxes are something we have always supported - but only as part of a comprehensive tax system. To argue that land value tax should be the only tax is simply not workable.

This is also a favourite of the tax havens: to argue that it's either one thing or another, along the lines of 'you shouldn't be looking at tax havens, you should be looking at corruption in developing countries, or bad tax systems in developing countries, or whatever." As anyone can see, it isn't a question of either-or. People have been trying to fight corruption, bad tax systems, whatever, in such countries for decades. Nobody has been tackling the things that help make the system rotten in the first place: the fact that an unaccountable elite is granted financial impunity by an offshore system that allows them to hold their wealth and income in secret, offshore. When you understand that you will understand that a comprehensive approach, rather than an either-or approach, is the way forwards. The time has come at last to look at the other side of the picture. This is it.

6:56 am  
Anonymous Dr Adrian Wrigley said...

TJN: "Land value taxes are something we have always supported - but only as part of a comprehensive tax system. To argue that land value tax should be the only tax is simply not workable."

The obvious rate of Land Value Tax (LVT) is 100%. This has been advocated by many over the centuries. Is this what TJN supports? Or is this what it declares to be "not workable"?

With 100% LVT, any government but the very worst would be running big surpluses (Hong Kong has had chronic surpluses through collecting land rents).

How could TJN justify collecting things like Income Tax, VAT or Corporation Tax while running such huge surpluses? It doesn't even make sense when the net yield from such taxes would be negative (reducing LVT by more that the amount collected)!

Full LVT may be "simply not workable" as you say. Taxes with negative net yields might be a good idea (to ensure the "comprehensive" system you call for). But I have seen neither viewpoint justified on this blog. In fact, your blog seems to convincingly show that (for example) Corporation Tax is simply not workable as transfer pricing, off-shoring and havens are exploited by the rulers and their backers. Shouldn't this be removed from your "comprehensive" system?

Think of the economy as like a car. The only place you need friction is between the tyres and the road! A "comprehensive" system of deliberate engine friction, gearbox friction, transmission friction would be engineering lunacy. So it is with tax frictions in the economy.

4:07 pm  
Anonymous Neale Upstone said...


Also, why keep the burden of bureaucracy and enforcement costs. Surely it's time we all got a break from filling in tax returns, and all these tax dodges.

I was recently offered money for a company with accrued losses, not entirely, but substantially because the price offered would mostly if not entirely get covered by tax savings on R&D credits.

What a crazy system. We subsidise lunacy, and penalise work and true entrepreneurship.

2:03 pm  

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