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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

In defence of tax havens

Written by Tom Clougherty | Thursday 28 February 2008

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A year ago, a leading article in The Economist remarked, "Tax havens are an unavoidable part of globalisation and, ultimately, a healthy one". Now tax havens are back in the public eye, with the news that HM Revenue & Customs paid £100,000 for the (stolen) bank details of wealthy Britons with cash stashed in Liechtenstein. Leaving aside the questionable ethics of purchasing illegally obtained information, are HMRC right to go on the offensive against tax havens? After all, don't tax havens cost the Treasury vast sums of money, and force the rest of us to pay more?

Well, yes and no. Certainly, HMRC has a duty to prevent the illegal non-payment of UK taxes and it's probably true that substantial sums of money are indeed being squirreled away overseas. But I still agree with The Economist's sentiment that tax havens and the tax competition they engender is a good thing. And the reason is that competition drives governments towards better tax policy.

The reason that wealthy individuals are able to hide money in tax havens is the British tax law has become overly complex (to put it mildly) and correspondingly full of loopholes for the well-advised individual to take advantage of. Tax competition should therefore drive governments to simplify the tax system, making it fairer, more transparent and cheaper to administer as a result.

Tax competition also helps to keep tax rates low. In a globalized world economy, where companies, capital and high-income individuals are increasingly mobile governments can only raise taxes so much before it becomes obvious that they are losing out. Tax competition helps to keep government lean and encourage them to provide more value for money.

If you believe in high taxes and ever-growing government and public spending all this is, needless to say, rather horrifying and requires urgent international efforts to co-ordinate tax regimes. If, on the other hand, you believe in small government and low taxes, then it's time to give three cheers for tax havens!

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Going underground

Written by Tom Bowman | Thursday 28 February 2008

Kit Malthouse had a fascinating article in The Times on Tuesday, urging us make greater use of the tunnels under London. A couple of the most appealing ideas in the piece were as follows:

We could, for instance, drop the dual carriageway that currently blights the north side of the Thames into a tunnel below, replacing it with a four-mile long riverside park from Blackfriars to Battersea Bridge. Bypassing Parliament Square at the same time would allow it to be pedestrianised on two sides.

Similarly a tunnel could take traffic from the Edgware Road under Hyde Park and the gardens of Buckingham Palace and allow it to emerge south of Victoria station, where most of it is heading in any event.

The entire Hyde Park Corner interchange could be dropped below ground, and the three great parks of Central London could be united. You could walk from Parliament Square to Queensway, about three miles, without crossing a road. Park Lane would be freed up for redevelopment, and a grand new public square could be created at Marble Arch.

Malthouse's ideas sound good to me. As usual though, the ASI was there first. As we said in our 1994 publication 20-20 Vision:

There are many tunnels under London, and even Underground stations, obsolete for existing use. It should be one of our priorities to investigate how many of these tunnels could be restored and extended for use as urban tollways. They would offer motorists the opportunity to cross under London at various points, paying a toll to miss some of the surface congestion.

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Quote of the day

Written by Wordsmith | Thursday 28 February 2008

If you have been voting for politicians who promise to give you goodies at someone else's expense, then you have no right to complain when they take your money and give it to someone else, including themselves.

Thomas Sowell (1992)

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Blog Review 520

Written by Netsmith | Wednesday 27 February 2008

A place or country can look wealthy and not be: it depends upon whetther it was wealthy at some point or not. This helps to explain the Argentine debt default, so it is said.

A similar point made here about Zimbabwe. 

Opposing government action is not the same thing as opposing the goals of the well-meaning advocates of such government action. 

That surge in American house prices in recent years: not so much about an increase in mortgage affordability, more an increase in mortgage availability. 

To segue to Northern Rock: yes, we taxpayers will be making the contributions to the Northern Rock Foundation. My, there are a lot of Labour Party MPs in the North East, aren't there? 

Gaining links by the day: correcting Nick Clegg on a matter of corporate accountancy.  

And finally, this might be going a little far, even for theocrats. 

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Power lunch with David Mundell MP

Written by Dr Eamonn Butler | Wednesday 27 February 2008

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David Mundell MP – Conservative shadow Scottish Secretary – was our guest at a Power Lunch in Westminster this week, where the Highland Spring was flowing freely. Naturally, much of the discussion focused on the Scottish Parliament, whether Alex Salmond can continue to succeed so spectacularly while having only a minority of MSPs, what might happen in the event of a Conservative victory in Westminster, and other issues of great interest to politicos.

David reminded us that Alex Salmond – I was at university with him – is a politician of national skill and status, well versed in the workings of Westminster, and how the lobby system and national political reporting works. Many other MSPs have never been involved in politics outside Scotland. So Salmond's touch can be a lot surer on a number of key issues. Perhaps it is why he has been able to identify and play up a number of issues – like the future of the Lockerbie bombers – where Westminster has seemed to push ahead without apparently realizing that its actions can cause offence and resentment North of the border.

There's certainly a case that the Labour party, having spawned the Scottish Parliament as a way of entrenching Labour rule in Soctland for all time, is rather flummoxed now that it's not actually running things there. Some Labour stalwarts seem to be going off the whole idea of a Scottish Parliament, if the Scots are uncharitable enough to vote in another party to run it.

Still, the chance of policy changing much seems slim. Some 54% of the population get their living from the public sector, so why should they vote for lower spending? It needs a national debate on how money is raised, not just (as at present) how it is spent. If Scotland had financial autonomy, that debate might happen. It might even go down the low-tax route that did so well for Ireland two decades ago. But there's not much sign of it right now.

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Common Error No. 47

Written by Dr Madsen Pirie | Wednesday 27 February 2008

47. "A national minimum wage prevents the exploitation of young workers."

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Many young people make less useful employees than those with a few years experience. They may have enthusiasm and energy, but have yet to learn the habits of work, and the preferred ways of doing things. They have to be trained, and to learn, and this costs time and attention. This disadvantage is made up by the lower wages generally paid to young employees; they may not yet be worth as much as older ones, but this is compensated for because they don't cost as much.

When the state sets a minimum wage, it is legislating to have young employees paid more than the market rate. In some sectors this is not a problem, but in others employers might find it not worthwhile to employ any at the required rate. The result in the US has been that whenever Congress has raised the minimum wage, there has been an increase in youth unemployment, worst for ethnic minorities.

It's like fixing the price of anything. You can't make it worth more than it actually is, but legislators can alter the supply, in this case of jobs. The UK minimum wage recognizes this by setting a lower rate for younger employees. Low wage campaigners don't like this, but it has ameliorated the youth unemployment that a standard minimum wage would have caused. If employers have to pay young people the same rate as more useful employees, they are less likely to hire them. However, young people have an economic advantage when they cost less; it gives them a selling point when they might otherwise have none.

The great majority of top CEOs in the US started employment in a low wage job. If those jobs had been priced out of existence by high minimum wages, many of them might never have got that vital first start. Far from preventing the exploitation of young people, minimum wages can seriously damage their prospects.

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A catalogue of errors

Written by Dr Eamonn Butler | Wednesday 27 February 2008

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Remember when Her Majesty's Revenue & Customs lost disks containing information on 20,000 people, including their bank account numbers and health details? Of course you do. Remember all the other dozens of cases where people in authority have 'lost' the data that they collect on us? Probably not.

But fortunately the Open Rights Group have been cataloguing them here.

There is, for example, the 5,123 patients' medical records that were on a laptop stolen from a Black Country hospital. Though that pales into insignificance alongside the NHS warning last month that perhaps 1.7m records have been dumped in skips, lost in the mail, left on stolen computers, pinched from doctors' lockers, or forgotten in the pub.

Also last month, a laptop was stolen from a Royal Navy officer. It contained information on 600,000 people, including their passport numbers, National Insurance and bank details.

Then last November, the Department for Work and Pensions lost yet another computer disk containing personal and fnancial details of 40,000 Housing Benefit claimants.

I don't know about you, but I just don't trust officialdom to protect the information it holds about me and other people like me. If there was one knock-down argument against the national ID database, the Open Rights Group list of failures is it.

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Quote of the day

Written by Wordsmith | Wednesday 27 February 2008

... [I]t's interesting to note a comment made by Harriet Harman in The Independent yesterday. Answering a series of questions from readers, Ms Harman came across exactly as you’d expect a New Labour MP to come across – arrogant, bristlingly defensive at any hint of criticism, and also frighteningly ignorant.
When asked by one reader if it was true that she had remortgaged her house to fund her campaign to become deputy leader, she answered: “Yes. And I trust Alistair Darling will keep interest rates low!”
We’re always complaining about financial literacy, or the lack of it, in this country. But when even a member of the cabinet doesn’t know who’s responsible for adjusting the country’s most important economic variable – in case you’re reading Harriet, it’s Mervyn King, the governor of the Bank of England - then what hope is there for everyone else?

John Stepek in Money Morning

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Blog Review 519

Written by Netsmith | Tuesday 26 February 2008

I wonder if we'll ever get an apology from Friends of the Earth for this? Soaring food prices, the felling of forests, rising CO2 emissions: all their fault.

Another surprising emissions finding: taking the car is better than walking. 

This banning of plastic bags: do the people proposing it really understand what they're doing? 

Is this a group of charities lobbying for change? Or is it the government paying a group of charities to lobby the government for change? 

The Laffer Curve part II: the second video from Cato on the subject. 

Gun buybacks and amnesties: are any of them any more effective than this? 

And finally, which Nobel Laureate rhymes with which food?

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Common Error No. 46

Written by Dr Madsen Pirie | Tuesday 26 February 2008

46. "Getting everyone's DNA on file would allow us to track down criminals and protect society."

dna.jpgIf we wanted simply to track down criminals and protect society in the most efficient way, we would watch everyone all the time, listen in on their every conversation, constantly record all their movements, and know everything about them it was possible to know. Criminal activity would be difficult, given this approach, but no doubt clever criminals would find news ways of concealing their activities.

Even though it would undoubtedly be efficient, we don't allow it because we don't want to live in that kind of society. We want a private domain in which we have space that is only for ourselves and those we choose to share it with. The state has no business in that domain.

We treat people as innocent until proven guilty. We do not start with the assumption that all people are criminals, if only we had enough information on which to convict them. Only those who transgress the law, or who give grounds for reasonable suspicion, forfeit the right to that private space and prompt the state to enter it to protect the rest of us.

Our DNA is private information. It not only tells uniquely who we are, it can be used to tell where we have been, and in some cases what we have been doing. The state has no right to such information without good grounds for suspicion. It is more information than it can be trusted with. DNA tells even more than that, however, it tells of our genetic traits, something of our abilities and potential, and the conditions and diseases to which we might be prone. There is no way we want this information in the hands of a body we put in place to serve our interests. It would give it more power than any authority can be trusted with.

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