The Organisation for Economic Cooperation and Development (OECD) was formed in 1961, ostensibly to promote economic and social well-being. It is made up of members of developed countries and is highly influential.
Initially, the OECD negotiated and set up double tax avoidance agreements between countries. But according to US academics Andrew Morriss and Lotta Moberg, its focus has shifted to restricting tax competition and increasing exchange of information about taxpayers between jurisdictions.
Essentially, the OECD is now a club of rich countries and their well-heeled representatives, and the reason for the shift in focus is simple self-interest. Wealthy, developed countries want none of their citizens or corporations to operate in low-tax jurisdictions and thereby deprive their countries of opportunities to tax them.
Thus, if a Carribbean island, say, offers lower tax rates, the OECD will attempt to thwart those who want to make use of the opportunity to escape high taxation.
Because the OECD seeks to sell the idea that ‘tax havens’ are taboo – and high tax is good, while low tax is bad – governments have a strong incentive to join the organisation.
What the OECD does not do is ascertain how taxes are spent. Whether citizens are abused or oppressed matters not; the goal is high taxes, pure and simple. But corruption and human rights problems are all too often a reality, and allowing governments guilty of these abuses to raise high taxes, simply strengthens them and entrenches injustices.
A second, more basic problem, which applies everywhere, is that if companies and citizens of means pay high taxes, governments have no incentive to be frugal.
Fortunately, there is growing discontent with the status quo and the power of tax-loving bureaucrats.
Many people of influence have realised that low-tax jurisdictions are not the ‘bad guys’, but a safety valve providing companies and individuals with respite from over-taxation, and curbing the greed of unjust regimes by providing an alternative.
Citizens are not meant to serve the government; it is the other way around. The more this sinks in, the more the opposition to high taxes, especially those raised by corrupt and unjust regimes, will increase.
Source: Morriss, A.P. & Moberg L. (2012). “Cartelizing taxes: Understanding the OECD’s campaign against ‘harmful tax competition’”. Columbia Journal of Tax Law. 4(1): 1-64.
Advocate Peter O’Halloran is a tax specialist.