Treasure Islands - Nicholas Shaxson [97]
And then we get to the question of freedom. Mitchell is quite clear about his views. The high-tax welfare state, he says, is “a prison for the human soul. It’s making pets out of all of us. It’s going to put us in a little cage, control our freedom, control our lives—that’s what we need to fight against.” Tax is bad, and tax havens are the answer.
In this worldview personal property is inviolable, and tax is theft. “It makes sense,” Mitchell says, “to protect your family’s interest by putting your money someplace like Hong Kong, where the politicians from your country can’t find out about it. And if they can’t find out about it, they can’t steal it.”
Leaving aside the question of whether or not this is a general incitement to criminal tax evasion, it is worth asking if tax is theft.
Property rights, as the philosopher Martin O’Neill points out, emerge from a general system of legal and political rules that includes the rules of taxation. To say tax is theft, then, is to use a system of which tax is a central part as your weapon against taxation. It is to argue in an illogical circle.
Corporations, too, emerge from states, legally speaking. “The state is the only institution in the world that can bring a corporation to life,” explains Joel Bakan in his best-selling book The Corporation. “It alone grants corporations their essential rights, such as legal personhood and limited liability…. Without the state, the corporation is nothing. Literally nothing.”20 To say that corporation tax is theft is, again, simply illogical.
You can find any number of other illogical eddies, ironies, and contradictions in the world of offshore. Secrecy jurisdictions routinely say their role is to promote efficiency in financial markets—but the cloak of secrecy they provide directly contradicts the idea of efficient markets, which require transparency. In an article entitled “Why Do I Have to Deal with People Like Dan Mitchell?”21 the University of California, Berkeley, economist Brad deLong points to several of Mitchell’s articles—including one praising Iceland for its tax-cutting, deregulated economic policies, just before Iceland’s economy collapsed, and one entitled “A Better Way to Chastise France,” urging the United States to eliminate withholding taxes on all dividends paid to foreigners, so as to suck tax-dodging capital out of “oppressive high-tax nations.” So Mitchell contradicts himself: Tax havenry does “chastise” other nations after all.
Monetary policy is another case where offshore cheerleaders find themselves confused. Generally, these cheerleaders have supported the Monetarist doctrine, which argues that you tackle inflation and unemployment by managing the quantity of money. Yet it is ironic that this doctrine began its rise with a paper by Milton Friedman in 1956, the very year when the offshore Eurodollar market and the offshore system properly took off. But the offshore system directly undermined monetarism: In a world where capital flits effortlessly to unregulated offshore worlds, and where banks can create money willy-nilly, governments struggle to control their money supplies. “The use of quantity of money as a target,” Friedman himself finally conceded in 2003, “has not been a success.”
Tax avoidance is another case in point. Tax havens endlessly promote themselves as delivering “tax efficiency” to corporations—but this tax avoidance is inefficient. “If tax abuse is needed to ensure an investment is viable,” notes the accountant Richard Murphy, “it’s a misallocation of resources to do it.”
Another offshore antitax favorite is the old claim that tax cuts actually raise revenue partly because people will be less inclined to dodge taxes. Therefore tax competition, driving down tax rates, must be a good thing. This has been bundled together in many