Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.
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Transcript of Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.
![Page 1: Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.](https://reader035.fdocuments.us/reader035/viewer/2022070415/56649de45503460f94adc470/html5/thumbnails/1.jpg)
Tax competition:
lower taxes means less poverty
Richard Teather
Bournemouth University
![Page 2: Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.](https://reader035.fdocuments.us/reader035/viewer/2022070415/56649de45503460f94adc470/html5/thumbnails/2.jpg)
Tax competition
“Tax competition brings great benefits, to all society and not just to those who directly take advantage of it”
The Benefits of Tax Competition
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Tax competition
the use by governments
of low effective tax rates
to attract
capital or business activity
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Benefits of tax competition
taxes = wealth
![Page 5: Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.](https://reader035.fdocuments.us/reader035/viewer/2022070415/56649de45503460f94adc470/html5/thumbnails/5.jpg)
Benefits of tax competition
taxes = wealth
• encourages entrepreneurship• encourages savings & investment• encourages work
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Benefits of tax competition
taxes = wealth
• “Growth in government stunts general economic growth.” (Federal Reserve)
• Tax increases “result in a net efficiency loss to the whole economy” (IMF)
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Benefits of tax competition
75 20
VAT (12)
Tax (25)
38.
Tax 13NI 4VAT 7
44
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Benefits of tax competition
taxes = wealth
• efficient global capital markets
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Efficient global capital markets
![Page 10: Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.](https://reader035.fdocuments.us/reader035/viewer/2022070415/56649de45503460f94adc470/html5/thumbnails/10.jpg)
Benefits of tax competition
taxes = wealth
• encourages entrepreneurship• encourages savings & investment• encourages work• efficient global capital markets
![Page 11: Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.](https://reader035.fdocuments.us/reader035/viewer/2022070415/56649de45503460f94adc470/html5/thumbnails/11.jpg)
Benefits of tax competition
GDP per capita (1999 $)
-
5,000
10,000
15,000
20,000
25,000
1950 1975 2000
UK
Hong Kong
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Who benefits?
• the rich get richer ?
• multinationals avoid tax ?
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Who benefits?
$100 tax
$75
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Who benefits?
Cayman finance industry generates:
• 55% of Cayman’s GDP
• 40% of all government revenues
• 30,000 business visitors
• 36% of employment - 12,500 jobs
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Who benefits?Spending vs population
0
100
200
300
400
500
- 25,000 50,000 75,000 100,000 125,000
Population
Go
ve
rnm
en
t s
pe
nd
ing
2
00
8 U
S$
m
Cayman
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Low tax characteristics
Offshore finance centres vary:
• No taxes on income
• Low taxes on income
• High taxes but exemptions
• High taxes but specific treatments
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Alternative taxes
Different sectors:
• Vanilla banking
• Private wealth management
• Fund management
• Insurance
• Hedge funds
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Alternative taxes
Income taxes:
• Prevent most offshore finance
• Highly competitive world
• Mobile customer base
• Exemptions difficult to justify
• Reduces confidence
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Alternative taxes
Payroll taxes:
• Reduces employment
• Directly harms workers
• Discourages high-value operations
• Reduced to back-office function
• Increased ‘brass plate’ operations
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Alternative taxes
VAT:
• Highly complex
• Can’t deal with financial services
• Still harms finance industry
• Discourages flexibility
• Unnecessary in small economy
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VAT
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VAT
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VATAgriculture 0.4%Mining 1.2%Manufacture 1.1%Construction 5.4%Power & water 3.2%Retail 9.2%Tourism 3.7%Transport 6.8%Finance 53.5%Real estate 20.7%Government 6.6%Education 2.4%Health 2.7%
Cayman GDP
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VATAgriculture 0.4%Mining 1.2%Manufacture 1.1%Construction 5.4%Power & water 3.2%Retail 9.2%Tourism 3.7%Transport 6.8%Finance 53.5%Real estate 20.7%Government 6.6%Education 2.4%Health 2.7%
Cayman GDP
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Alternative taxes
Different sectors:
• Vanilla banking
• Private wealth management
• Fund management
• Insurance
• Hedge funds
![Page 26: Tax competition: lower taxes means less poverty Richard Teather Bournemouth University.](https://reader035.fdocuments.us/reader035/viewer/2022070415/56649de45503460f94adc470/html5/thumbnails/26.jpg)
The future
• Tax competition is mutually beneficial• embrace it
• Lower taxes:• increase domestic economy• attract international capital• main benefit goes to workers
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Tax competition:
lower taxes and more growth
Richard Teather
Bournemouth University