For several decades now, politicians around the world have tried to curtail tax competition to make it easier for them to increase the tax burdens on their citizens without them fleeing to other lower-tax jurisdictions. The best way to achieve their goal is to create a global high-tax cartel. If implemented, the recent G7 countries’ agreement to impose minimum taxes on multinational companies would get them much closer to this shady objective.
It’s no mystery why politicians don’t like tax competition. In a global economy like ours, individuals and businesses are better able to work and invest in nations with lower tax rates. The ability to shift residences and operations from country to country puts pressure on governments to keep taxes on income, investment, and wealth lower than politicians would like. Politicians in each country fear that raising taxes will prompt high-income earners and capital to move away.
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