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  3. Journal of Economic Perspectives
  4. Fall 2014
  5. Taxing across Borders: Tracking Personal Wealth and Corporate Profits

Taxing across Borders: Tracking Personal Wealth and Corporate Profits

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Abstract

This article attempts to estimate the magnitude of corporate tax avoidance and personal tax evasion through offshore tax havens. US corporations book 20 percent of their profits in tax havens, a tenfold increase since the 1980; their effective tax rate has declined from 30 to 20 percent over the last 15 years, and about two-thirds of this decline can be attributed to increased international tax avoidance. Globally, 8 percent of the world's personal financial wealth is held offshore, costing more than $200 billion to governments every year. Despite ambitious policy initiatives, profit shifting to tax havens and offshore wealth are rising. I discuss the recent proposals made to address these issues, and I argue that the main objective should be to create a world financial registry.

Citation

Zucman, Gabriel. 2014. "Taxing across Borders: Tracking Personal Wealth and Corporate Profits." Journal of Economic Perspectives, 28 (4): 121-48. DOI: 10.1257/jep.28.4.121

Additional Materials

JEL Classification

  • D31 Personal Income, Wealth, and Their Distributions
  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H26 Tax Evasion and Avoidance
  • L25 Firm Performance: Size, Diversification, and Scope

Naive and dangerous

  • Posted by TERENCE M DWYER
  • Posted on 1/1/2015 8:59:52 AM
The optimal rate of tax on labour and capital income is zero. A shift by OECD countries to land value taxation would facilitate such a shift. Tax havens can help force such a beneficial shift. No country is under the slightest legal or moral duty to collect revenue for another. What is proposed is massive breach of the quid pro quo for allegiance. Why should taxpayers be happy with a sovereign who is willing to betray their private financial information to other states where it may fall into the hands of criminals? If Western countries taxed their land values as well as the OPEC states collect oil rents, then they would be tax competitive and have no need to betray their citizens' basic privacy rights.

The proposal is also legally naïve in that it assumes "ownership" always exists. Such proposals will only lead to greater demand for the services of skilled lawyers and as both an economist and a lawyer I see no reason why taxpayers should not be assisted in finding new and lawful ways to escape the "vexatious inquisition" - to quote Adam Smith - proposed by people such as this writer.

Dr Terry Dwyer
Dwyer Lawyers
www.dwyerlawyers.com.au
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