If there is a universal law of the free market, it must be the principle of competition, notably with regards to prices. Our walls, our screens, our media remind us of this every single day. Without this competition, technical progress would be of no benefit to consumers. Herein lies the crucial flaw of state-directed economies. The market always knows better than a commission of super technocrats what must be the correct price of a pair of shoelaces.

The public sphere claims to escape from this iron-clad rule. The downward trend in the rate of growth in Europe’s developed economies may well be explained by the perpetual increase in the range of the public sphere.

In a country like France, indeed, 60% of the production of goods and services escapes this iron-clad rule. Not only the services of the State with their regal character, but also virtually all the parts of the so-called social sector, most of the cultural production, the state monopolies that remain, the services rendered by local and regional authorities.

The exorbitant tax burden that pummels the French taxpayer is only a consequence of this situation.

At the same time, however, every day the world « shrinks » more and more, and all the best-performing companies are of a « global » nature. In the digital age that we live in, all the new rulers of the world chuckle at the borders that serve as a basis for humanity’s tax services. The giants of the web, Google, Apple, FaceBook, Amazon (called GAFA in France from the companies’ initials) address seven billion consumers directly, easily circumventing the obstacles invented by the various countries’ respective tax authorities. Of course, these companies, like all others, need logistics, factories, warehouses, personnel, etc, but all these can be easily (at their scale) relocated. What gave rise to the companies’ brazen fortunes are their services and products.

As it happens, these giants obviously have a preference for countries with reasonable taxation in which to manage their operations. Thus, states find themselves in a form of tax competition.

For example, when choosing a place to establish a headquarters building, the GAFAs — who are not in the philanthropic business — will prefer a country with a low corporate tax. Who would not do the same?

This situation, eventually, is likely to be fatal for high-tax states such as France.

Publié dans Les impôts et taxes