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[Gene GeRue <genegerue AT ruralize.com>]

Few issues are more hotly argued than taxes and the governmental programs 
they support. From the emotional issue of the personal pain to the purely 
pragmatic approach of what works best for the country, taxes are an issue 
that will always affect each of our lives. This article focuses on tax 
competition between countries and argues that lower taxes spur economic growth.


The Outlook for "Tax Competition"
A Flat Tax for the U.S.A.?

By Andrew F. Quinlan

(Editor's Note: For over a decade, tax collectors from the European Union 
(EU) and the Organization for Economic Cooperation and Development (OECD) 
have carried out a campaign of threats and intimidation against low-tax 
jurisdictions to force them to abolish bank secrecy and enforce the fiscal 
laws of high-tax nations.

That campaign now lies in tatters. Andrew Quinlan, head of the Center for 
Freedom and Prosperity (CF&P), explains why high-tax governments haven't 
been able to stamp out tax competition, and what's ahead in the way of 
lower taxes and simpler, less coercive tax collection.)


Tax competition is a good thing. Despite longstanding efforts of high-tax 
welfare states to harmonize taxes at a uniformly high level, nations that 
have lowered taxes have flourished.

Take Ireland, for instance. Not that long ago, Ireland was a high-tax 
nation. And it suffered from 15% unemployment and some of the EU's lowest 
living standards. Since slashing tax rates in the 1990s, Ireland has 
enjoyed a remarkable turnaround. The former "Sick Man of Europe" is now the 
"Celtic Tiger." Income is soaring, unemployment has plummeted to 5% and 
Ireland is now one of the richest economies in Europe.

Ireland isn't alone in proving that tax competition works. The newest 
success stories come from the former communist states of Eastern Europe. 
Since 1994, eight European nations have adopted a flat tax—Estonia (1994), 
Latvia (1995), Russia (2000), Serbia (2003), Ukraine and Slovakia (2004), 
and Georgia and Romania this year. Serious discussions are underway to 
implement a flat tax in Bulgaria, the Czech Republic, Finland, Poland and 
Spain. And outside this "New Europe," even communist China is getting the 
flat tax fever. In 2003, they invited flat tax guru Alvin Rabushka to 
Beijing to discuss the possibility.

A low, predictable flat tax rate in these countries has not only led to 
economic growth, but has also boosted tax revenues. This shouldn't be a 
surprise. Corporate tax revenues skyrocketed when Ireland lowered its 
corporate tax rate from 50% to 12.5%. The same thing happened in tiny 
Estonia, which has a flat rate of tax of 24% for individuals, which is 
slated to fall to 20% over the next two years. According to the Bank of 
Estonia, government revenue for 2003 was 48 billion kroons (US$4.06 
billion). That compares with 42 billion kroons in 2002, and 36 billion 
kroons in 2001. Obviously, lower taxes mean more—not less—government revenues.

Motivated by tax competition, several other nations are reforming their tax 
systems. Austria recently lowered

The rest of the article is at:
http://www.freedomandprosperity.org/Papers/quinlan-si/quinlan-si.shtml