UK bosses defend tax-havens
(CNS): Low-tax jurisdictions and tax havens play an important part in the global economy, says the UK Institute of Directors (IOD), which has warned the UK government that attacking such jurisdictions may not be particularly productive. Richard Baron, Head of Taxation at the Institute, said while there were some problem jurisdictions many of them oil the wheels of commerce and nations have a right to choose their own level of taxation. The IOD has argued that national sovereignty must be accepted.
“A state is perfectly entitled to set very low tax rates if it wants, although other states are equally entitled to respond with legislation that would eliminate tax savings for their own residents,” the institute, which has a membership of well over 50,000 directors and company chiefs, stated.
The Institute of Directors noted that the obvious response may be for co-operation between higher-tax states, and while some co-operation can be beneficial, some would damage the economy because it would amount to a cartel between states. “Even co-operation that merely lessens the pressure to reduce administrative burdens can be damaging,” the IOS stated.
Baron went on to explain that the places described as tax havens highlight the problems of high taxation rather than low. “Low-tax jurisdictions are also a constant reminder to us that tax burdens do not have to be high. The most constructive response to them would be to chart a gently downward course for tax rates, thereby promoting economic growth,” he said.
“There are some bad jurisdictions, which facilitate tax evasion or worse crimes. But we must also recognise that low-tax jurisdictions can oil the wheels of commerce. It is perfectly reasonable for other states to act to protect their tax revenues, but they must be careful not to throw grit into the mechanism. “
Baron said the criticism by G20 nations at the London summit in April and the renewed push to eliminate low-tax offshore financial centres “may not be the most productive” choices.
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