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Financial Times

July 20, 2002,

 Letters To The Editor
Wrong way to tackle EU's tax evaders

From Prof Luis Suarez-Villa

Sir, The unlimited exchange of information proposed by the European Union's Savings Tax Directive will essentially install a high-tax cartel that will eliminate tax competition in Europe ("Swiss role", July 3). Cartels, whether of oil producers, vehicle manufacturers or high-tax nations, are harmful. Tax competition between nations constitutes no more a "race to the bottom" than competition between manufacturers or oil producers.

The EU's initiative will make high-tax bureaucracies and free-spending politicians less accountable than ever before.

This will occur partly because decisions on taxes, even in the most democratic of nations, are seldom ever brought to voters for approval, and also because governments are often less honest than they give themselves credit for (Victoria Curzon Price's Letter, July 18).

Tax evasion in the EU can be curbed by means other than the obliteration of personal financial privacy now being proposed.

Reducing tax burdens, reforming tax laws and bureaucracies to make them simpler and more accountable, and making government more efficient can help prevent the sort of capital flight that the EU's high-tax nations want to stem.

Luis Suarez-Villa, Professor of Social Ecology, University of California, Irvine CA 92697, US


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