Samizdata

Now, tax evaders aren’t necessarily a commendable category of people: surely there are a lot of criminals among them (if I don’t obey the law when it prohibits killing people, am I really expected to comply with its fiscal provisions?). But I find rather convincing the idea that all those activities that run the gamut between fiscal arbitrage and outright tax evasion have had somehow the effect of lowering overall fiscal burden. The mere possibility of an ever greater erosion of their tax basis may have slightly slowed down that incredible increase in taxation which we have experienced almost everywhere in the West.

From the Econlog blog.

I have written a fair bit on this site and elsewhere (I work in the financial/media world) about this subject, and there is no doubt in my mind that the idea that tax competition is harmful is almost always held by politicians and collectivist-minded commentators who want to create a sort of global tax cartel. Cartels are, we learn in our textbooks, harmful although they tend to fracture with time. (The OPEC cartel had a problem in the 80s and 90 sustaining high oil prices, which at one stage went below $10 a barrel). However futile the attempt, do not underestimate the harm that is being done in the process of trying to shut down offshore financial centres and the like. The possibility that people can and will take their money elsewhere is one of the few constraints that exist on otherwise rapacious governments. So naturally, governments try to stop this from happening – hence all this talk about shutting down tax “competition”.

When governments claim that tax dodgers are taking food from the mouths of poor babies, treat it with scorn. The money that goes offshore doesn’t disappear down some black hole, never to appear again: that money, if it is to earn a return and outpace inflation, is invested – ie, it is put to work, often far more effectively than would otherwise be the case.