Superb Defense of Tax Sovereignty in New York Times

Superb Defense of Tax Sovereignty in New York Times. My friend Pierre Bessard of Switzlerand's Liberales Institut has a column in today's New York Times defending financial privacy from the predations of both international bureaucracies and American tax collectors. Pierre sagely notes that the Swiss system respects the privacy of citizens, unlike the "Orwellian" systems in places like America. This approach results in a very high level of tax compliance in Switzerland, and also provides a refuge for oppressed people around the world:

...for us here in Switzerland, our financial privacy laws are a foundation for individual dignity and basic property rights. Unfortunately, the confidentiality that is the hallmark of Swiss banking is coming under increasing pressure. ...Earlier this year, Switzerland was put on a “gray list” by the Organization for Economic Cooperation and Development and threatened with financial sanctions, leading the government to provisionally renegotiate tax agreements with a dozen countries so far. ...Switzerland, which is home to an impressive number of global corporations, has also come under fire from the European Union for offering too-favorable tax rules, including exemptions for income earned abroad. But what critics forget is that these practices also benefit other countries. Swiss firms alone employ hundreds of thousands of people in the United States and Germany, for example. Subsidiaries of multinational corporations usually pay income taxes where they operate, so having their headquarters in Switzerland can help companies avoid multiple taxation in high-tax countries, thereby safeguarding productive capital for investment. ...We think government exists to serve us, not the other way around. We understand that we have to pay taxes — and we do, with numerous studies showing that the Swiss are extraordinarily honest about paying what we owe — but we do not think it is the government’s role to intrude on our privacy and wrench them from us. This attitude goes back to Switzerland’s founding in the 13th century. The original Swiss communities’ resentment of what they saw as the Hapsburgs’ oppressive taxes helped push them to claim their independence in 1291. Today, Swiss citizens continue to vote on any tax increases in referendums (and sometimes even accept them). These healthy curbs on government contrast with the Orwellian concept of the “transparent citizen” whose every act is known to government. We see our system as a social pact between citizens and the state. Swiss privacy laws help preserve basic property rights. Bank secrecy was introduced in 1934, most notably to protect the identities and assets of Jews in Nazi Germany. ...Corruption, expropriation, crime and the persecution of various minorities remain risks in most of the world. For people threatened by such risks, financial privacy can protect their legitimate property. Some would argue that Swiss bank accounts offer the same protections to criminals, but in fact Swiss provisions against money laundering are tough. Swiss bankers are required to know their clients and the origin of the funds they accept. They must alert the regulators if they suspect criminal behavior. Banking confidentiality enjoys overwhelming support in Switzerland. According to the latest annual survey by the polling firm M.I.S. Trend, 78 percent favor maintaining the laws as they are, and 91 percent are shown to value their financial privacy.

I make many of the same points in a three-part video series produced by the Center for Freedom and Prosperity. With so-called tax havens under increasing pressure, this is a good time to review The Economic Case for Tax Havens, The Moral Case for Tax Havens, and Tax Havens: Myths v Facts.

Heading to San Diego Tomorrow for Cato University

I've heard that "Cato U" is the most popular Cato Institute public program, so I'm looking forward to my first visit. I'll be speaking on "Leviathan on a Diet: Tax Competition and Restraints on State Power."

For those of you who won't be there, this eight-minute video is a condensed version of my remarks. And if you're too lazy to watch the video, my message is that forcing governments to compete with each other is the world's most powerful force for freedom.

President Obama's Dishonest Demagoguery

Politicians exaggerate as a routine matter and have well-deserved reputations for stretching the truth. But when they repeatedly make assertions that they (or their aides) know to be false, they surely deserve to be criticized. That is the purpose of my new video. Entitled "President Obama's Dishonest Demagoguery on So-Called Tax Havens," the four-minute presentation looks at the two sound bites that the President uses to demonize low-tax jurisdictions.

Defending Tax Havens in a Debate with Three Collectivists on French TV

A surprising number of people enjoyed the CNBC tax haven debate, so I managed to dig up a debate from last year on French TV (thanks to yadranko). The format was less than ideal since I had to single-handedly debate three opponents. But I think I gave an adequate performance (and hopefully presented a pro-market viewpoint to an audience that rarely hears anything beyond statist blather).

Defending Tax Havens on CNBC

Did I win?

Overseas Americans Paying Heavy Price for IRS Fiscal Imperialism

About one month ago, British banks revealed that they may reject all American customers because the IRS insists on absurdly onerous rules. Now, Swiss banks are adding to the woes of America's global workforce by announcing that U.S. citizens are no longer welcome. Needless to say, this is a huge inconvenience for the tens of thousands of Americans who live and work abroad. The IRS and the Obama Administration argue that this is an acceptable price to pay to compel greater obedience to the internal revenue code, but the academic research shows that lower tax rates are the best way to improve compliance. Unfortunately, the politicians in Washington want to raise tax rates even higher, which will create more incentive for tax evasion and tax avoidance. Bloomberg reports:

UBS AG and Credit Suisse Group AG, the country’s biggest banks, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers. While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about 30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers. “My bank doesn’t want to do that, so we wouldn’t accept an investment account for a U.S. person,” said Pierre Mirabaud, chairman of Mirabaud & Cie. and the Swiss Bankers Association, during a lunch at the American International Club of Geneva. ...The U.S. has also proposed increasing reporting and oversight requirements for so-called qualified intermediaries -- foreign banks that withhold taxes on behalf of the IRS. That may increase the cost of compliance and the risk of violating U.S. laws, said Charles C. Adams, managing partner at the law firm Hogan & Hartson LLP in Geneva. “American citizens are starting to feel like they’re Typhoid Mary,” said Adams who hosted a 2008 fundraiser for Barack Obama that featured actor George Clooney. “The Swiss simply don’t want American customers because it requires so much infrastructure and hassle that they don’t make any money.” Sandra Dysli, an American who has lived in Geneva for 40 years, said Bank Zweiplus AG, the Zurich-based joint venture of Basel-based Bank Sarasin & Cie. and AIG Private Bank, and a Geneva branch of Raiffeisen International Bank-Holding AG refused to open investment accounts for her. ...Two members of the U.S. Congress, Carolyn Maloney and Joe Wilson, wrote a May 27 letter to Treasury Secretary Timothy Geithner saying that if the QI requirements are extended to cash or deposit accounts, “taxpaying Americans living abroad will have no place to bank.” “If neither foreign nor American banks will take American customers, how will the millions of citizens living abroad bank?” wrote Maloney, a New York Democrat, and Wilson, a South Carolina Republican, who are co-chairmen of the Americans Abroad Caucus. ...“The presumption is that you’re a bad person avoiding taxes if you live overseas,” according to Andy Sundberg, who founded Geneva-based American Citizens Abroad in 1978. “The IRS rhetoric is alienating and vindictive.”