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.
That is why, for many years now, in Brussels, our technocrats have been fighting to obtain from our European partners what they call tax « harmonization. » That is to say an alignment — obviously from the top rather than the bottom — of the taxes in all the member countries to be imposed on companies, in particular the corporate tax.
This nagging French demand is also echoed in many other countries, who would like, at a minimum, to see their fiscal resources stabilized. However, since such a decision should be taken unanimously, by the 28 members of the Union, it has no chance at all, unless it were to go in the opposite direction to approximate the rate applied by Ireland, which is 12.5%, compared with an average rate of an astonishing 38% in France for medium and large companies.
Needless to say, that form of harmonization is not one that would be in the interests of the French tax bureaucrats head-quartered at the Quai de Bercy on the Seine in Paris. So it has no chance of materializing, at least not in the immediate future.
In the longer term, it is less of a sure bet. For the European bureaucracy has the means to blackmail and retaliate against states that they consider recalcitrant to its standards. This we saw in the case of the bank account anonymity case: even Switzerland — a non-EU country albeit with many ties thereto — had to fold and give up its anonymous bank account system. This, by the way, will eventually lead to an automatic exchange of data on a global scale, placing the holder of the smallest bank account on the planet under the supervision of the global taxation big brother.…
We must therefore remain cautious and on our guard. And thus, we must be ready to challenge, on ideological grounds, the very notion of fiscal harmonization that imperils the fundamental freedom to come and go.
It will be countered that this applies only to companies, and then only to the largest ones. That is true. For the moment…
It will be countered that individuals are not concerned. That’s incorrect. Alongside the harmonization of the corporate tax, another project has long lingered on the table of the Brussels Commission: the harmonization of the VAT, the fraud of which would costs the European nations some 160 billion euros each year.
National unity, and European unity, for that matter, does not require tax harmonization. The differences in taxation within the United States, from one state to another, amply illustrates this truth.
On the other hand, the very freedom of individuals depends on competition. Including in the tax sector.
Alain Dumait, co founder of Contribuables Associés