Pfizer Merger Illustrates Need to Outlaw Tax Havens

The American drug giant Pfizer has merged with the Dublin-based Allergan not “because some wizard potion has been discovered in the hills of Connemara” but “to dodge tax,” writes Simon Jenkins at The Guardian. The same is true of “Starbucks, Amazon, Google and countless other global companies.”

International custom and practice stipulates that tax should be made in the country in which “value is added”. That has come to be identified, ludicrously, with a company’s headquarters. All states fight to secure inward investment, often with tax easements, in the hope of promoting subsequent exports. They feel they can hardly object to small states doing the same. On this flimsy basis a great edifice of evasion, avoidance, mendacity and sometimes even crime has arisen. Like all such edifices, it is sustained by a raggle-taggle army of consultants and lobbyists.

Tax havens should be illegal in international law. They are patently unfair. They protect money laundering and crime. They bear few of the costs of the modern nation state, while sucking those states dry of the revenue needed to sustain them. […]

The answer is clear. Companies should pay corporation tax on the basis not of their headquarters or research base or place of origin.

They should pay on the proportionate spread of their sales. Likewise, individuals should pay tax to the country where they live or whose citizenship they enjoy – as is the case with most Americans. Tax havens that harbour companies or individuals who dodge tax should be subject to economic sanction, like many poorer states round the world that have upset western regimes. If you want to pay tax in the Caymans, live in the Caymans and don’t come to Britain.

— Posted by Alexander Reed Kelly.