The Market Center Blog

Center for Freedom and Prosperity

For Immediate Release
Tuesday, August 1, 2006
202-285-0244
www.freedomandprosperity.org

Blaming the Victims: Senate Committee Hearing on
Low-Tax Jurisdictions Fails to Address Problems with
Tax Code, Chooses Instead to Attack Fiscal
Sovereignty and Seeks More Power for the IRS

(Washington, DC, Tuesday, August 1, 2006)  The Senate Permanent Subcommittee on Investigations held a hearing today on "Tax Haven Abuses: The Enablers, The Tools & Secrecy." Clearly designed to criticize taxpayers who use low-tax jurisdictions for tax-planning purposes, the hearing was entirely one-sided, featuring witnesses who want more power for the IRS and more tax money transferred from the productive sector of the economy to government. The following are comments issued by experts on international tax policy.

Andrew F. Quinlan, Center for Freedom and Prosperity:

"Companies have a fiduciary obligation to shareholders to minimize their tax burdens. Because of the punitive tax rates and pervasive double-taxation of capital in the U.S. tax code, low-tax jurisdictions often are excellent platforms for economic activity. So-called tax havens also play a valuable role by encouraging better tax policy in the rest of the world. Policies designed to penalize low-tax jurisdictions would primarily benefit Europe's uncompetitive, high-tax welfare states."

Dan Mitchell, The Heritage Foundation:

"Attacking taxpayers or low-tax jurisdictions for tax planning is a perverse form of 'blaming the victim.' If politicians really want to penalize so-called tax havens, they should fix the tax code by adopting a simple and fair flat tax. Protectionist assaults on low-tax jurisdictions would boomerang against America, which is the world's largest beneficiary of global capital flows. Every jurisdiction should have the sovereign right to choose their own tax laws, and if high-tax nations are upset that jobs and capital are flowing to jurisdictions with better tax law, they should lower their tax rates rather than seeking to bully others into adopting bad policy."

Veronique de Rugy, American Enterprise Institute:

"In part because of the liberalizing impact of tax havens and tax competition, personal income tax rates have dropped by 23 percentage points since 1980 and corporate tax rates have dropped by about 19 percentage points. These pro-growth reforms will be jeopardized if profligate politicians undermine low-tax jurisdictions and succeed in creating a tax cartel. An 'OPEC for politicians' will lead to bigger and more wasteful government."

For additional comments:
Andrew Quinlan can be reached at 202-285-0244, quinlan@freedomandprosperity.org
Dan Mitchell can be reached at 202-608-6224, dan.mitchell@heritage.org
Veronique de Rugy can be reached at 202-862-7165, VdeRugy@aei.org

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