The sole economic benefit of the increases in higher rate
income tax in the USA and UK is repeat business for those who print tourism
brochures and immigration forms for the likes of Monaco, Dubai, Lichtenstein,
Jersey, the Isle of Man, and bits of the West Indies.
Everyone seems to be talking about tax havens now. Many will do
more than talk.
Others – mainly those who cannot afford to move – sneer,
“There is more to life than low taxes.”
Actually, that is rather the point...
1 Tax havens often have better public services.
The streets on Monte Carlo were always cleaner than those of Soviet Russia.
High-tax economies usually manage their public services very badly because the
money is used to build huge, centralised bureaucracies. Low-tax economies
attract businessmen, so that even their public services are expected to run in
a businesslike way.
2 Tax havens are virtuous circles. Low tax
rates attract and encourage wealth; wealth increases the tax base; an increased
tax base means tax rates can be lowered without cutting services; lower tax
rates attract and encourage wealth, etc, etc... Meanwhile, other places
experience the opposite, a vicious circle of spiralling tax rates and poverty.
3 Tax evasion becomes pointless if tax rates
are low. This obviously helps the public services, but it is also good for
the honest-tax payer: it reduces rates even further, and makes the tax
authorities less paranoid and irrational. So, in addition to paying a lower
rate, the tax-payer experiences less hassle in the process – which is, in many
ways, more agreeable than the low rate.
4 Small states have a better sense of
community. They retain a strong sense of local identity, and immigrants are
expected to respect local traditions and values. While some ideologies claim
that “civic society” and free market capitalism are incompatible, the empirical
evidence suggests the complete opposite: tax havens show more real social
cohesion than large, centralised states.
5 Crime is usually lower than in most
metropolitan areas. This is not true of all tax havens – the
West Indies are having particular problems – but most have a combination of
efficient police, traditional values, and low unemployment that makes petty
crime particularly irrational. Of course, white collar crime is another matter,
but even there, tax havens have an additional deterrent: no one, even a crook,
wants to be thrown out of Paradise.
6 Tax havens are politically stable. Most
monarchies – the most consistently stable from of government – or de facto oligarchies which
command general consent. Parties and factions have less influence than in
centralised democracies. The small size of the community makes it more
desirable to keep a consensus and radical divisions are discouraged.
7 Private sector services too are usually well
developed. Money attracts money.
8 Like attracts like. A businessman who
emigrates to a tax haven will find other businessmen there. That is useful for
business networking – especially since the odds of meeting key decision makers
are increased within a relatively small population in a relatively small area –
and also pleasant if you prefer to socialise with people with similar
interests, outlooks, and backgrounds. Others may find this claustrophobic, but
that only emphasises the greatest benefit of all...
9 Tax havens give the freedom to come and go
at will. Travel to and from most big Western states is increasingly
restrictive. While residency of most tax havens is guarded carefully, once
granted it confers more practical liberty than a passport from one of the great