The Misguided Urge to Close Loopholes


As 'Der Spiegel' reports, there are efforts underway in the EU to close the tax loopholes used by multinational corporations to quite legally avoid taxes. Allegedly it is a 'tough battle' as a few member states are not very happy about these plans. Recently Apple's CEO was forced to defend his company's use of such loopholes in front of a very hostile Congress. Everybody seems agreed that tax loopholes are somehow bad. But are they really?

Ludwig von Mises reportedly once remarked that 'tax loopholes allow capitalism to breathe'. In a speech he delivered in 1951 at a conference in White Sulphur Springs, West Virginia, he remarked that so-called 'loopholes' are actually simply the law. One should not even call them 'loopholes'.


“What is a loophole? If the law does not punish a definite action or does not tax a definite thing, this is not a loophole. It is simply the law. . . . The income-tax exemptions in our income tax are not loopholes. The gentleman who complained about loopholes in our income tax . . . implicitly starts from the assumption that all income over fifteen or twenty thousand dollars ought to be confiscated and calls therefore a loophole the fact that his ideal is not yet attained. Let us be grateful for the fact that there are still such things as those the honorable gentleman calls loopholes. Thanks to these loopholes this country is still a free country.”


(emphasis added)

Murray Rothbard had this to say in 'Man, Economy and State':


“Many writers denounce tax exemptions and levy their fire at the tax-exempt, particularly those instrumental in obtaining the exemptions for themselves. These writers include those advocates of the free market who treat a tax exemption as a special privilege and attack it as equivalent to a subsidy and therefore inconsistent with the free market. Yet an exemption from taxation or any other burden is not equivalent to a subsidy. There is a key difference. In the latter case a man is receiving a special grant of privilege wrested from his fellowmen; in the former he is escaping a burden imposed on other men. Whereas the one is done at the expense of his fellowmen, the other is not.  For in the former case, the grantee is participating in the acquisition of loot; in the latter, he escapes payment of tribute to the looters. To blame him for escaping is equivalent to blaming the slave for fleeing his master.

It is clear that if a certain burden is unjust, blame should be levied, not on the man who escapes the burden, but on the man or men who impose it in the first place. If a tax is in fact unjust, and some are exempt from it, the hue and cry should not be to extend the tax to everyone, but on the contrary to extend the exemption to everyone. The exemption itself cannot be considered unjust unless the tax or other burden is first established as just.

Thus, uniformity of treatment per se cannot be established as a canon of justice. A tax must first be proven just; if it is unjust, then uniformity is simply imposition of general injustice, and exemption is to be welcomed. Since the very fact of taxation is an interference with the free market, it is particularly incongruous and incorrect for advocates of a free market to advocate uniformity of taxation.”


(emphasis added)

Now this is the proposal and general attitude the EU should adopt. It would immediately curb illegal tax evasion and an economic recovery would likely ensue shortly.


Nigel Farage on the Taxation Question and the Privileges of the Eurocrats

The always dependable Nigel Farage has strongly criticized the EU's plans to increase tax collection by all means available. In the course of his speech he inter alia attacked the privileges the eurocrats have granted to themselves.

What we found especially interesting is the revelation that the professional eurocrats not only enjoy huge salaries and generous perks, they also pay almost no tax. In fact, their tax rate amounts to a de minimis 12%. It would be a worthy project to strive to lower the taxes of rest of the citizenry that pays for their upkeep to the same level.



Nigel Farage speaks out on the drive to close tax loopholes and the special privileges enjoyed by the eurocrats.



In this context note also that the Eurocracy has quietly decided to kill the attempt to slim the bureaucracy down by simply ignoring a provision of the Lisbon treaty (and wouldn't you know, they use a 'loophole' in the treaty to do so!):


From the outside, it looks as though the  European Union is hopelessly divided. Northern member states demand budgetary discipline while those in the south bemoan drastic austerity measures. Furthermore, the Franco-German alliance is brittle, to the point that a planned policy paper on the future of the European common currency area – to be written jointly by German Chancellor Angela Merkel and French President François Hollande — has yet to materialize.

Astoundingly, however, the 27 EU member-states can still reach consensus. At the EU summit meeting this Wednesday, leaders are set to rubber stamp an agreement that has been reached on the quiet in recent weeks — that of ignoring the Lisbon Treaty provision that calls for a reduction to the size of the European Commission.

Currently, there are 27 commissioners on the European Union's executive body, one for each country in the club. With Croatia set to become the 28th member on July 1, the European Council on Wednesday plans to allow Zagreb to send a commissioner to Brussels for the rest of Commission President José Manuel Barroso's term.

Yet what looks to be little more than a routine resolution is actually the public face of a much more sweeping ruling set for passage at the summit. The formulation "one commissioner per country" is to be maintained beyond the year 2014, as SPIEGEL ONLINE learned from EU diplomats. It will be valid not only for the incumbent Commission, but also for the next Commission to be installed following European elections in May 2014.

It is a move which flies in the face of the intent of the Lisbon Treaty, which went into effect on Dec. 1, 2009. Article 17, paragraph 5 of the treaty states: "As from 1 November 2014, the Commission shall consist of a number of members, including its President and the High Representative of the Union for Foreign Affairs and Security Policy, corresponding to two thirds of the number of Member States." European leaders, however, want to make use of the clause in the treaty which allows the European Council to alter that number.”


(emphasis added)

Is it any wonder that EU citizens are increasingly turning against the 'European project'?



EU Kommissare

EU commission: when it comes to its own privileges, it knows very well where to find the necessary loopholes.

(Photo via Reuters)





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