TaxPersonal TaxFor and against: Harmonisation will ease burden

For and against: Harmonisation will ease burden

The OECD's role in trying to regulate the tax jurisdictions of the world will continue to be a controversial one for as long the body involves itself.

Nothing is more likely to raise rancour among otherwise friendly states than the possibility of a government not being able to levy its own taxes. Is it any wonder that so much horror is expressed about the possible harmonisation of taxes across the European Union?

But even so-called free markets are regulated to some degree, even in the US, and so it seems logically in a world under the yoke of globalisation that the market that has sprung up among tax jurisdictions should also be subject to some rules.

The US is not a libertarian state. It does regulate markets, indeed the Securities and Exchange Commission has attempted to impose its rules with quite a heavy hand.

There should therefore be no principled reason why the US should be opposed to regulation – only the degree. A policeman can be accepted – what is in question is the scope of his powers.

It is however perhaps a mistake to argue that the third world’s development could be arrested by the OECD’s proposed rules.

One of the underlying drivers for the OECD is the constant leak of money away from domestic regimes into tax havens. As a result home countries lose millions that could go into improving public services. Third world countries suffer this disproportionately more than developed countries.

Some estimates put the loss from developing countries to tax havens as high as $50bn (Pounds 35bn). That’s money that could be well spent elsewhere.

The OECD has repeatedly said it is not opposed to fair tax competition.

It is not in the business of creating a controlled international economy and has indeed expressed no interest in seeing the Cayman Islands and Bermuda raise its current zero rate for income tax. But what it is does not like, just as most states do not like in their domestic markets, is unfair competition.

It perhaps remains an open question whether the ‘global market’ place can be regulated. It may be that it is anarchic and therefore impossible to impose rules. But there is no doubting that the OECD’s heart is well and truly in the right place.

  • Gavin Hinks is deputy news editor of Accountancy Age.

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