In light of these relocations, let’s talk about a phenomenon that is becoming increasingly evident: Tax competition between countries. Globalisation has also reached the point where supply and demand Taxation policies in different countries attract capital flows from one state to another. Perhaps we should now leave behind the notions of the unsympathetic rich, tax evaders and other commonly used labels, and begin to realise that by demonising their behaviour, we will achieve nothing as long as neighbouring countries offer more favourable tax conditions to our wealthy citizens. I’m not saying this is a better or worse scenario than the old «Either pay up, in accordance with current legislation, or go to prison«, it may well be even more unfair. But that’s the harsh reality; these days it’s more a case of a «you pay, in accordance with current legislation in Spain (with 17 regional laws in force where (choose) or pay in accordance with the legislation in force in any other country that offers you better conditions«… Something like the old «’Have a look, compare, and if you find something better relocate.»
What was previously seen as a matter of ethics and solidarity towards the poorest within the same state should increasingly be treated as a matter of the market and fiscal globalisation.
That is why the poorest countries that impose lower taxes on the fortunes of the wealthy from neighbouring countries will attract them to a greater or lesser extent (such as Malta, Ireland, Uruguay, Belize or the Eastern European countries themselves). This enriches their public coffers, enabling them to become less and less poor. This creates a certain market-driven redistribution of wealth; however, we need to shift our mindset away from nationalism to understand this and think more in terms of globalisation, including on tax matters.
Some might say that, traditionally, the most tax-friendly countries are not exactly poor – quite the opposite, in fact – but let us ask ourselves what the main source of their wealth is… How wealthy were countries such as Monaco, Luxembourg and Switzerland years before they introduced favourable tax laws?
It may not be a fairer scenario – or perhaps it is – but globalisation is leading us in that direction. Whether we like it or not. We can think of countless examples of debatable fairness that we could compare: Is it fair that fruit growers in Europe, in the absence of protectionist laws, lose market share to African or South American farmers who charge less for their produce? Is it fair to pay €3, 6 or 12,000 per square metre for a property? Is it fair to pay 10 or 100 times a company’s intrinsic value for a single share? Is it fair for a wealthy individual from country A to shift their tax liability to the treasury of country B, which charges lower tax rates? Market realities sometimes overshadow justice.
But does the market disregard justice, or does it interpret it differently? It is debatable whether it is fairer for a European to have to give up their job or business in favour of poorer workers and businesspeople in the Second and Third Worlds. It would also be questionable whether a Volkswagen worker in Navarre should lose their job in favour of an unemployed person in Slovakia or Romania, where new car factories are being built. Or whether it was fair to the German worker who became unemployed following Volkswagen’s relocation to Navarre. It basically depends on the colour of the glass through which you look at it. If we think globally, the laws of the market often redistribute the world’s wealth to some extent.
Whilst some people remain outraged and continue to hurl insults at MPs and the wealthy because of their unpunished collusion, perhaps we should accept a multinational reality in which ethics or immorality are to be found in the very laws of the free market. Laws which, paradoxically, can redistribute the world’s wealth more efficiently than politics itself. And the flow of wealth in search of lower tax rates is no exception.
Whether we like it or not, the global tax landscape is moving in that direction. Putting up barriers to the countryside has always proved very difficult. A SICAV or the waiver or abolition of gift tax, to give a few examples, are no longer malicious strategies devised by the rich for the rich. They are the natural evolution to avoid absurd barriers in the field. And globalisation has turned tax systems across the entire planet into one vast field.