Catching capital

Description

"Rich people stash away trillions of dollars in tax havens like Switzerland, the Cayman Islands, or Singapore. Multinational corporations shift their profits to low-tax jurisdictions like Ireland or Panama to avoid paying tax. Recent stories in the media about Apple, Google, Starbucks, and Fiat are just the tip of the iceberg. There is hardly any multinational today that respects not just the letter but also the spirit of tax laws. All this becomes possible due to tax competition, with countries strategically designing fiscal policy to attract capital from abroad. The loopholes in national tax regimes that tax competition generates and exploits draw into question political economic life as we presently know it. They undermine the fiscal autonomy of political communities and contribute to rising inequalities in income and wealth. Building on a careful analysis of the ethical challenges raised by a world of tax competition, this book puts forward a normative and institutional framework to regulate the practice. In short, individuals and corporations should pay tax in the jurisdictions of which they are members, where this membership can come in degrees. Moreover, the strategic tax setting of states should be limited in important ways. An International Tax Organisation (ITO) should be created to enforce the principles of tax justice. The author defends this call for reform against two important objections. First, Dietsch refutes the suggestion that regulating tax competition is inefficient. Second, he argues that regulation of this sort, rather than representing a constraint on national sovereignty, in fact turns out to be a requirement of sovereignty in a global economy. The book closes with a series of reflections on the obligations that the beneficiaries of tax competition have towards the losers both prior to any institutional reform as well as in its aftermath"-- "Tax competition between states is what Peter Dietsch refers to in his title as "catching capital." In particular, he sees several forms of tax competition -- for portfolio capital, meaning holdings by wealthy private individuals; for the profits of multinational corporations; and for foreign direct investment, where actual economic activity is attracted. Peter Dietsch's book examines two central questions that stem from this situation. Is there anything ethically wrong about tax competition? And if there is, what should be done about it? Under the current system a lot of capital simply slips through the net; the loopholes caused by current tax competition mean that states do not capture the taxes they are entitled to. And as Thomas Piketty has argued, the vast increase in economic inequality stems in part from the ability of the rich to hide their wealth in this way. Given these moral issues, Dietsch argues that there is a pressing need for the global community to structure international fiscal policy to plug these loopholes. But how should it do so? Will the fiscal sovereignty of states be compromised? Can we regulate tax competition without being forced to harmonize all tax rates? How do we strike a balance between the autonomy of one state and the problems it creates for others? Should winners of tax competition compensate the losers? Finally, is regulating tax competition simply inefficient from an economic perspective? in answering these questions, Peter Dietsch advances and defends his own new global regulatory framework for tax competition"--

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