The FT reports this morning that:
The UK has lost its top slot in a league table of multinational companies’ favourite tax regimes, in spite of George Osborne’s flagship policy of cutting taxes to attract business to Britain.
The UK’s popularity increased slightly but it was leapfrogged by Ireland, which is expected to be less affected than some rival countries by the international crackdown on tax avoidance, according to a survey by KPMG, professional services group.
All of which only proves the sheer futility of engaging in tax competition. Any supposed ‘victory’ is short lived and the cost high.
Umm, the cost and the victory belong to whom?
When we observe competition in the oil industry we do not think that Exxon, Chevron and Total benefit from said competition. Quite the contrary, we think that they are constrained in their actions by the effect of that competition. Competition costs those producers, most certainly. It is consumers who save and consumers to whom competition provides the victory.
The same is, of course, true of governance. Governments are the producers of government. When there is competition between governments this does, of course, limit their potential actions. We can even describe this as a cost to those governments. But who are the victors? That’s us, the consumers of governance and the people who have to pay for it through taxation.
If Exxon were a monopoly then we’d all be paying rather more for oil. If government were a true monopoly, rather than one that is only a monopoly if we don’t vote it out or leave the jurisdiction, then we’d all be paying rather more for government than we do now.
Tax competition is just great precisely because it does allow us taxpayers “victory” by reducing the cost to us of government.