Yet another myth busted: “A competitive tax system is a better tax system”

You’ve heard the arguments: Having a ‘competitive’ tax system is a good thing for the UK. Trying to tax the wealthy and corporations just stifles economic performance and puts off investors. If business and wealthy people are taxed too much, they will desert Britain for countries with a more ‘competitive’ tax system.

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.

 Oh dear. Another of those tired old right-wing tropes bites the dust.