March 04, 2008

A flat tax is what a flat world needs!

Sir much as I wholeheartedly agree with the intentions that John Christensen and David Spencer express in their "Stop this timidity in ending tax haven abuse" March 4, and that establishing a network of bilateral tax agreements will not be sufficient to solve the problem of world wide tax evasion, I do not believe that what they propose in terms of shifting the focus "towards the infrastructure of cross-border economic crime, including accountants, lawyers and financial institutions" will cut it either. On the contrary we could just be opening up new growth opportunities for those many illegal and illicit organizations that thrive so much on all our prohibitions.

What I would suggest is to go instead for a real worldwide tax transparency by making all countries sign up on an easy to understand world wide flat tax. This would help to remove the incentives to geographically arbitrate taxes and that keeps so many accountants, lawyers and financial institutions in the business "legal and intelligent tax avoidance"; and that keeps so many governments from not knowing whether they are giving true and needed tax incentives to attract investments or just being taken for a ride.

In all, a flat tax is precisely what a flat world needs; and by the way, just in case, a flat tax can be construed as a progressive tax too.