Catching Capital and The Hidden Wealth of Nations

In This Review

Catching Capital: The Ethics of Tax Competition
by Peter Dietsch
Oxford University Press, 2015
280 pp.
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The Hidden Wealth of Nations: The Scourge of Tax Havens
by Gabriel Zucman; translated by Teresa Lavender Fagan
University of Chicago Press, 2015
200 pp.
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Tax avoidance (which is legal) and tax evasion (which is not) have been around ever since authorities began to levy taxes, as have attempts to influence the rules of taxation. But in the current era, these activities have become increasingly global in character and scope, significantly eroding the taxation of income and capital gains in a race to the bottom accelerated by the rise of tax havens and by countries that arrange their tax rules to make themselves attractive to internationally mobile capital, a phenomenon known as tax competition. Dietsch’s book sets forth
a good overview of this troubling state of affairs and makes a carefully argued philosophical case for restoring fiscal autonomy to national governments. Dietsch proposes going far beyond the current efforts of the Organization for Economic Cooperation and Development and the EU to limit tax competition between countries. He advocates the creation of common rules for corporate taxation that would be administered by a new international tax organization.

Zucman has assembled and analyzed data released relatively recently by Luxembourg, Switzerland, and a few other popular tax havens to estimate the financial wealth held abroad that surreptitiously escapes taxation. He arrives at the staggering figure of $7.6 trillion, which is equal to about eight percent of all global financial wealth, at a minimum. He calculates that governments around the world are cheated out of about $200 billion in tax revenues every year. According to Zucman, Switzerland is still the main culprit in tax evasion, although others have also emerged. European governments are the biggest losers in this game, but some developing countries, especially in Africa, increasingly suffer as well. He suggests a threefold remedy: governments should cooperatively create a global registry of the true owners of all financial wealth, threaten to impose financial sanctions on anyone who refuses to comply with the registry, and impose a small (0.1 percent) annual tax on all assets that are not reported by their owners to national fiscal authorities, all of which would create an incentive for people and corporations to declare their income honestly and voluntarily.