A Happy 21st for the Tax Cartel

Home News A Happy 21st for the Tax Cartel

Imagine that the major food manufacturers combined to place a minimum price on food so as to restrict competition and artificially inflate their profits. What an outcry there would be. On 5th June 2021, the governments of the G7 Nations announced that they had agreed to form a cartel, although, of course, they did not call it that, under which they will all impose a minimum Corporation Tax rate of 15%.

Twenty one years ago, in a paper for the Tax Faculty’s collection of papers on fiscal matters, ‘Towards a better tax system’, which was published to mark the Millennium, we argued that tax is the price that sovereign states place on the amenities that they offer. That being the case, we went on to argue that international agreements to restrict tax competition are an oligopolistic practice, designed artificially to inflate governments’ income from providing access to those amenities, which is harmful both to businesses and to the citizens of the oligopolists’, and of other, countries.

We warned that the first tentative steps which were then being taken to restrict tax competition would accelerate and would threaten our prosperity and freedom. Over the following twenty one years our prediction has been amply fulfilled.

As we said then:
…, if you ask an oligopolist if he is in favour of the continuance of his oligopoly, it is not entirely surprising if he says yes. But if you ask the consumer of the oligopolist’s goods or services whether he would prefer the oligopolists to compete with each other, he may give you another answer. Perhaps it is not surprising, therefore, that a debate which has been carried on primarily by governmental organisations has been primarily concerned to prevent competition.

The power to tax is one of the great powers of government. Governments, and their constituent politicians, have a natural interest in creating a tax oligopoly. As it becomes obvious that individual countries and even individual federations of countries such as the European Union cannot do that on their own, there will be a pressure to create worldwide international structures to impose tax rate uniformity. Do we see the first stirrings of that process in the various international initiatives on preventing tax competition? If so, that really is a frightening prospect for the new millennium.’

It was then and is the more so now.

Published in
9 June 2021
Last Updated
10 June 2021