There’s a lot of talk about “cracking down on tax havens” at the moment, as high-tax Western countries want to crank up taxes to spend their way out of the recession, and want to stop people who disagree with their policies from moving their money somewhere else.
But what is a tax haven? Not a dodgy regime of crooks as some might imply – no-one would invest their money there as it wouldn’t be safe. A tax haven is essentially a stable country with low taxes. According to the OECD, the UK, the USA, Germany, Switzerland, and Austria are all tax havens, as they offer low tax rates to foreign investors to encourage people to invest in the country. Sounds a sensible idea to me.
A government is basically a service provider. One government offers to provide state services (such as law enforcement) for a certain price. Another may offer the same services for less. This results in competition, driving down overall tax rates, just as competition between supermarkets drives down the cost of food.
But certain high-tax nations now want to gang up on a few low-tax countries to force them to give up the personal details of people investing money in them. Rather than making themselves more competitive so people choose to keep their money there, they want to steal business back from other countries that are offering a better deal.
Let’s illustrate this with supermarkets. Fruit and vegetables are generally cheaper from specialist growers markets than from the supermarkets. But what if Foodstuffs and Progressive (the owners of virtually all NZ supermarkets) banded together and told your local greengrocer that they had to give them the personal details of all their customers or they would undertake “protectionist policies” to drive the greengrocer out of business?
Such behaviour would be immediately stamped on as “anti-competitive”, and a breach of privacy. But when governments do the same thing, are we supposed to think it is ok? That’s a big double standard.
What right does any government have to pressure another into changing their tax laws, or giving up the personal details of individuals?
Furthermore, not all foreign investors do so to avoid taxes. It can be very important for investors to have their personal information protected. Jews invested large quantities of money in Switzerland during the 1930’s to protect it from the Nazis – what if their personal details had been given up? There are plenty of oppressive regimes at the moment that you wouldn’t want to keep any money in – Zimbabwe for example. But you certainly wouldn’t want Mugabe knowing you had money stashed away in Liechtenstein…
We must not destroy vital personal privacy laws just to satisfy a short-term greed for tax revenue.
No, if we want to ride out this recession, we need more people investing money in New Zealand. And if there is a crack-down on other tax havens, there will be wealthy people looking for somewhere else to invest. Why don’t we draw that money here?
So lets slash taxes, guarantee personal privacy, and make New Zealand a tax haven.
To have your preconceptions about tax havens blown away, I’d recommend this excellent short video series by the Centre for Freedom and Prosperity:
The Economic Case for Tax Havens
The Moral Case for Tax Havens
Tax Havens: Myths vs Facts