Tax sovereignty


Where does the right for a state to tax income stop? Traditionally the answer to this question has been at the border. However, this is no longer always the case. When many people try to move country, they will be faced with a long list of bilateral agreements and international regulations which oblige them to still pay taxes in the country from which they came. They can even be taxed in both countries. The free movement of labour is not so free after all.

So what about the movement of capital, does the taxation of capital stop at the border? The short answer is no, as Daniel Mitchell sets out in this video. International bodies like the OECD and the UN are being used by larger and more powerful jurisdictions to bully smaller jurisdictions known as tax havens to engage in various agreements. International institutions are being used to violate sovereignty in order to control citizens living in the UK. Should this really be the job of international institutions? I suggest not.

The sovereign right for a state to choose its own jurisdiction was obtained as a consequence of the experiences of the thirty years war 1618 – 1648. It was agreed upon in the peace of Westphalia in 1648. This international agreement has been a valuable institution for peacful relations between states and I can’t see why we should discard this in favour of bullying states.