Cartelizing Taxes: Understanding OECD’s Campaign Against ‘Harmful Tax Competition’:
Formed in 1961 to promote global economic and social well-being, the Organization for Economic Cooperation and Development (OECD) has become the collective voice of rich countries on international tax issues. After an initial focus on improving commerce through addressing double taxation issues, the organization shifted to a focus on restricting tax competition and increasing automatic exchanges of tax information. In this paper we analyze the reasons for this shift in policy focus. After describing the history of the OECD’s work on taxation, we examine the OECD’s project against “harmful tax competition” as it has played out since its launch in the 1990s. We analyze the mechanisms behind the project from a public choice perspective. While typical economic models portray tax competition as a prisoner’s dilemma between governments, a more powerful perspective is of the incentives of politicians and bureaucrats. We conclude that the project against tax competition is an example of the interplay between the interests of politicians and international bureaucrats, which illustrates the role international organizations play in competition among interest groups. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1950627
Cf. Joining the Chorus for Tax Cooperation:
[...] But international organizations aren’t the only ones that are destroying jobs and economic opportunity in the name of tax fairness. The U.S. Treasury and Internal Revenue Service are considering regulations that could cost Americans millions of jobs. One of the regulations being developed stems from the Foreign Account Tax Compliance Act (FATCA), which was passed by Congress in 2010. FATCA would impose a 30 percent tax on the investment in the United States of any foreign financial institution, including a bank, if it had any unreported U.S. citizen or green card holder contributing to the pool of money invested. Furthermore, the foreign financial institution’s officers could be subject to civil and criminal charges for making such an investment. In an era of common dual citizenships, it is impossible for a foreign financial institution to know for certain whether any of its clients is a U.S. taxpayer (i.e., citizen, green card holder, etc.). Thus, foreign financial institutions in Switzerland, Taiwan and elsewhere are pulling their investments out of the United States right at the time when the U.S. needs all of the job-creating foreign investment it can get.
Sen. Carl Levin, Michigan Democrat, and the other economic-know-nothings who proposed these measures claim — without any basis in fact — that the United States is losing $100 billion annually because of foreign account tax avoidance or evasion. Private foreign investment in the U.S. is about $14 trillion. So $100 billion is less than 1 percent of the private foreign investment, yet the mental midgets in Congress and the administration are willing to risk trillions of dollars in job-creating foreign investment in exchange for a phony $100 billion. Well over 10 million American jobs are at risk because of this foolishness.
It gets worse. The Treasury and IRS have yet to do a cost-benefit study of FATCA, but final regulations are being developed. In the private sector, executives who so failed at their fiduciary responsibilities would be fired, perhaps fined or even sent to jail. But members of Congress and the executive branch are most unlikely to pay any penalty for risking perhaps 20 to 40 jobs for each job they might, theoretically, save. By the way, many of the senators and congressmen who brought you FATCA are the same ones who want to continue to fund the OECD. Mr. President, if you really care about jobs in the way you say you do, why are you not calling for the repeal of FATCA and reining in Mr. Levin, his colleagues and your own Treasury secretary, who are in the process of endangering far more existing jobs than any of your questionable jobs proposals could possibly create? http://www.cato.org/pub_display.php?pub_id=13832
