How the European Left Manipulates You With Headlines
Political and economic terminology is seldom morally neutral, especially in newspapers and in public discussions. It usually comes with a heavy burden of positive or negative connotation.
For example, see the following headline from the French newspaper of record, Le Monde:
The United Kingdom Makes the Disastrous Choice of Fiscal Dumping
The article, by a French economist who works at the French foreign aid agency, was in response to the British government’s suggestion -- not yet a proposal -- to cut the British corporate tax rate to 15 percent. This suggestion would be an attempt to persuade European and other companies not to move their activities out of the UK.
So, what does "fiscal dumping" really mean?
Here, fiscal dumping means levying a tax rate on corporate profits lower than that of other nations. Some might call this "competition."
The misappropriation of the word tells us quite a lot about the European mindset, or at least about the European "political elite" mindset. It is thoroughly dirigiste. For the European elite, high taxes are an intrinsic good. However, just like people who support low taxes, they cannot say a priori what rate of tax is the "correct" rate.
But terming a 15 percent rate of corporate taxation "dumping" implies that there is a correct rate.
The headline implies that national differences in tax rates are intrinsically wrong, and that the tax rate ought to be high -- even if, as is possible but not certain, a lower tax rate results in a higher total take of tax.
If one did not know better, one might think that the main attraction of high tax rates is the distress they cause to those who pay them.
The belief in a "correct" rate can only mean a belief in the uniformity of tax rates in Europe, and in overruling each individual country’s preferences and needs. (Ireland’s corporate tax rate is 12.5 percent, and it was a necessary condition of the vast increase in the prosperity of the country since it was instituted. With uniformity of tax rates, Ireland’s "fiscal dumping" would have to stop.) Uniformity implies the need for a centralized authority entitled to impose it, an authority over which, for obvious reasons, there could never be even the slightest democratic oversight. There is no European people to elect a European government, and never will be.
Official tax rates and effective tax rates may be very different, of course. A system of concessions, exceptions, and downright bribery is likely to flourish where rates are high and it is worth avoiding and evading tax. A corrupt or flexible polity with a high tax rate may actually impose less tax in reality than an honest one with a low tax rate.
The effect of taxation also depends on how it is spent once collected. People are surprised when I tell them that France, in a large sense, is a much less corrupt country that Britain since a unit of tax in France will buy the public that pays it considerably more benefit than it would buy in Britain -- even if much is still wasted. France has about the same national debt as Britain, but has much more to show for it, as is obvious the moment you cross the Channel.
Every country, however, must use the means at its disposal to solve its own problems that arise from history and culture. The proposed fiscal straightjacket, accompanied by transfer payments from one country to another, is a large part of the so-called European project.