Does this belief in a ‘competitive’ tax system have any evidential basis?
nef (the new economics foundation) has produced another of its useful mythbusters. The evidence shows what happens when you pursue a competitive’ tax policy:
- Only big, multinational companies can afford to shift operations to take advantage of different tax regimes, so that when governments lower business taxes, local businesses face unfair competition.
- A race to the bottom means that, as countries respond to one another’s policies, everyone ends up where they started, except more impoverished and with greater inequalities of wealth.
- There is no evidence that differences in the tax take have any impact on GDP growth.
- Genuine investors are not deterred by tax regimes. They are attracted by a good infrastructure, a healthy and educated workforce, and the rule of law – all of which rely on tax.