Nick Shaxson\’s approach to evidence

He titles his piece:

The IMF says tax havens are a danger to society

Then says:

The IMF also asserts, without presenting any evidence, that tax havens and the ‘tax competition’ between jurisdictions that they lead, make for more efficient resource allocation in global markets.

The title and the body are somewhat different, no?

For the IMF is certainly not going to be saying that efficient resource allocation is a danger to society, is it now?

25 thoughts on “Nick Shaxson\’s approach to evidence”

  1. I’m rather underwhelmed by the finding that tax havens themselves tend to do rather well out of being tax havens. That’ s only an article in one IMF magazine, the authors could be interns (I don’t know) – anyway, I’d steer away from “The IMF says …”

  2. So Timothy, you being the guru an’ all. Where is the evidence that tax competition leads to more efficient resource allocation in global markets?

    The IMF can’t seem to cite it, what about all knowing you?

  3. Shaxson’s headline is clearly misleading. The IMF says no such thing. Nor would they, because as Shaxson himself says, they are generally quite friendly towards tax havens. The only “anti-social” feature they mention is the possibility that tax havens may have regulatory and accounting practices that “don’t meet international best practice”.

    “International best practice” is a fiction. It depends whose rules you use and how you apply them. IFRS 9 is a fine example of supposedly “international” rules that are so tortuous and opaque that no-one really knows how to apply them. Good luck to anyone trying to define what “international best practice” means and how tax havens fall short of it. I can think of better things to do with my time.

  4. I wouldn’t say the IMF are friendly toward tax havens

    “The first blacklist related to money laundering and tax havens was published by the IMF, in. 1999.”

    regulation.upf.edu/utrecht-08-papers/bunger.pdf –

  5. it is getting more and more clear that Arnald = Shaxson . And that Shaxson is an intellect-light version of the Murph-meister.

  6. he’s got a point – in what sense does tax competition lead to more efficient allocation? The only sense I can think of is that if territories that attract companies by offering lower tax rates are also the more efficient places for companies to locate in some sense – perhaps because they are poorer and it’s a way of attracting investment to poor countries. But where is the evidence that’s what tax competition achieves?

  7. The IMF aren’t maid-friendly to boot. Perhaps they are maid-men, they are certainly gangsters.

    At any rate, who gives a rat’s arse what thieving socialist scum think. It’s time the people of this planet wised up to who their enemies are and make every part of this planet a tax free zone.

  8. Luis enrique: if companies choose to locate in certain countries then it is probably not too far fetched that they are the most efficient countries for those companies to locate in, no?

  9. I suspect the mechanism is that high taxes mask true costs (especially if certain products are heavily subsidised, a feature of high tax jurisdictions) leading to misleading price information and therefore less efficient allocation of resources. Also, companies may not choose to carry out a certain valuable if the tax regime is too high: at the margin, this almost certainly occurs.

  10. Emil – no need for evidence then, whatever companies do is efficient by definition!

    Tim I’m not sure how taxes mask true costs. if a company is both taxed and subsidized in equal measure, what’s the difference? I’m sure high taxes may deter some activity – the question is, why does tax competition improve the allocation of companies across countries? Why is it more efficient – in any other sense than it is reducing its tax bill – for a company to locate in Ireland because it’s getting a tax break?

  11. the counterfactual is no tax competition, so imagine corporate taxes are the same everywhere, companies would choose to locate for reasons such as wages levels, skill of workers, supply of infrastructures, proximity to customers etc. etc. Now, why are allocations influence by tax savings better than that?

    Tim adds: Because the company doesn’t bear the tax burden, remember?

    For example: It may be efficient, in the absence of taxes, to employ people in country A to do something.

    But a substantial profits tax is imposed in country A. The shareholders (to the extent that capital is burdened with said profits tax, rather than the workers) get a post tax higher income by performing that activity in country B. We thus have something which pre tax is more effcient in country A, post tax in B.

    Now, is corporation taxes are the same everywhere then this goes away.

    But! Corporation tax is in itself an inefficient tax. Politically, it’s a great one, because everyone thinks the companies are paying it. But they’re not, are they? So, if we had the same C tax everywhere (and I think we can imagine how high it would be given that no one can escape it) then we are damaging future growth prospects by more than if we raised the same revenue from consumption or property taxes.

    Thus an “international corporation tax” would be a bad idea because it would a) be high and b) be damaging.

  12. Tim I’m not sure how taxes mask true costs.

    Look at fuel prices in the UK. The true cost of petrol is not £1 per litre, but this is the figure businesses base their investment and operational decisions on, because of the 400% taxation.

  13. Tim N, oh yes: I was thinking corporation taxes.

    Tim W – right so tax competition has caused relocation from A to B introducing inefficiency

    it may be true that corporation taxes are themselves inefficient, but that’s an argument about the right level of corporation tax, not an argument that tax competition improves the efficiency of allocation across countries.

    Tim adds: True, but if the correct level of corporation tax is zero then comeptition which gets it there is a good thing.

  14. Tim W
    But as the Crown Dependencies are showing, zero corp tax leaves the tax burden on the local population, who have absolutely no say in the matter.

    And your incidence theory needs inspection.

    Either way, IF there was a global rate, and no one I know is calling for that – it may be an intra-EU eventual objective, but that’s up to them, isn’t it? – then why set it at zero? Surely an agreed level would be more benficial for the global ‘well-being’ that you are fond about?

    Duh

    Tim adds: “zero corp tax leaves the tax burden on the local population, who have absolutely no say in the matter.

    And your incidence theory needs inspection.”

    Yet if the incidence statement is correct, then the incidence is always upon the people. Meaning that corporation tax incidence is never on the company, so why argue that corporation tax must be collected for companies must pay tax?

  15. Except that, in the absense of a Corp. tax-assuming compensation and dividends continue to be progressively taxed-tax revenue is increased.

  16. I no longer bother reading what Arnald says. My reply to all lefties like Arnald is thus:

    1979: You lost.

    Now go away and don’t come back until you’ve come up with something better than your malignant philosophy dreamt of. Knee-jerk nay-saying and four-letter name-calling (your tactics of choice, I note) doesn’t cut it. Run along, little boy.

  17. I no longer bother reading what Arnald says. My reply to all lefties like Arnald is thus:

    1989: You lost.

    Now go away and don’t come back until you’ve come up with something better than your malignant philosophy dreamt of. Knee-jerk nay-saying and four-letter name-calling (your tactics of choice, I note) doesn’t cut it. Run along, little boy.

  18. I no longer bother reading what Arnald says. My reply to all lefties like Arnald is thus:

    Soviet, North Korea, DDR, Viet Kong, Khmer Rouge, the Peoples Republic of China, Cuba, Chavez Venezuela

    Be ashamed

  19. “Why is it more efficient – in any other sense than it is reducing its tax bill – for a company to locate in Ireland because it’s getting a tax break?”

    Why should be not look at the tax bill when it is a very real cost for companies?

  20. Top spamming!
    Hey I use the tools given to me, that’s the market, yeah. I’ll swear when sworn at.

    And really, a list of totalitarian states is an argument?

    Good come back!

  21. “And really, a list of totalitarian states is an argument?”

    Yes, a list of states having tried what you are proposing is an argument – it is called empiry

  22. should probably step back and look at what we mean by tax competition, and then fine tune the counter factual.

    the fact that countries can set their own different tax rates keeps a limit on the top rates countries can set, because at some point no matter how unattractive the haven, companies (and people who can) will have to escape because they are able to escape. But countries can stand a considerable amount of tax variance, because all things being even considerably unequal, french companies would rather stay in france, etc.

    it follows that a single rate of tax is unnecessary, even if you view tax competition as bad, because you don’t need the restriction to be so tight.

    And so i view tax competition as effective at the margin, and very useful there.

    It seems likely these things inter-relate, too, and tax competition also serves as a limiter on labor laws and intellectual property rights, and vice versa, because it’s the sum of a dozen factors that (crucially) are of different weights for different companies, that push companies to locate or relocate.

    the counterfactual is not (I think) that tax rates are all the same, but that companies can’t move, and countries have lost that discipline that puts a limit on what they charge.

    Finally in the real world companies locate for many overlapping reasons. Don’t underestimate among them where senior managers (and their spouses) wish to live – the quality of food, housing and weekend activities.

  23. Since I live in a “Tax Haven” by the definitions mentioned above (although really a “Low Tax Jurisdiction”), I can confirm that I am happy that companies here pay 0% corporation tax or 10% for Land, Bank and Insurance companies.

    That seems about the right balance as it provides an incentive for the growth of non-Finance based businesses.

    Equally, I don’t mind sharing the burden of the unpaid corporation, since this equates to an averaged growth of about 5% every year for about the last 20.

    By the way, my tax is less than half what it was in the UK and the costs are about equivelent. I’m much happier paying Manx rates at 680 Manx Pounds per annum than UK Council Tax at 2,300 GBP per annum.

    How’s that for empirical evidence.

  24. John Galt
    the murph-meister and the Shaxtwat would say you are illegally evading UK taxes by not living in the UK. But you cannot argue against such dimwits

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