The Pope Sanctions the OECD Thugs

A MINORITY VIEW

BY WALTER E. WILLIAMS

RELEASE: WEDNESDAY, AUGUST 29, 2007, AND THEREAFTER

The Pope Sanctions the OECD Thugs

London's Times Online recently reported that, according to Vatican sources, Pope Benedict XVI is working on his second encyclical, a doctrinal pronouncement that will condemn tax evasion as "socially unjust." (See www.timesonline.co.uk/tol/comment/faith/article2237625.ece.) The pontiff will denounce the use of tax havens and offshore banking by wealthy individuals because it reduces tax revenues for the benefit of society as a whole.

Pope Benedict could benefit from a bit of schooling. Tax avoidance is legal conduct whereby individuals arrange their affairs so as to reduce the amount of income that is taxable. Tax avoidance can run the gamut of legal acts, such as investing in tax-free bonds, having employer-paid health plans, making charitable gifts, quitting a job and banking in another country. Tax evasion refers to the conduct by individuals to reduce their tax obligation by illegal means. Tax evasion consists of illegal acts such as falsely claiming dependents, income underreporting and padding expenses.

Pope Benedict's second encyclical puts him squarely in company with a group of thugs known as the Organization for Economic Cooperation & Development (OECD), an international bureaucracy headquartered in Paris and comprised of 30 industrial nations, mostly in Western Europe, the Pacific Rim and North America. One of its reports concluded that low-tax nations are bad for the world economy and identified 35 jurisdictions that are guilty of "harmful tax competition."

In the OECD's view, harmful tax competition is when a nation has taxes so low that saving and investment are lured away from high-taxed OECD countries. The blacklist of countries they've identified as tax havens, having strong financial privacy laws, low taxes or zero taxes on certain activities, includes Panama, the Bahamas, Liberia, Liechtenstein, the Marshall Islands and Monaco.

The OECD demands these nations, as well as offshore financial centers in the Caribbean and the Pacific, in effect surrender their fiscal sovereignty and act as deputy tax collectors for nations like France and Germany. This would be a dream for politicians and bad news for the world's taxpayers; fortunately the hard work of the Center for Freedom and Prosperity has stymied the OECD's proposed tax cartel.

Pope Benedict shares some of the OECD's goals in their attack on low-tax jurisdictions. To support its welfare state, European nations must have high taxes. Government spending exceeds 50 percent of the GDP in France, Sweden, Germany and Italy. If Europeans, as private citizens and businessmen, relocate, invest or save in other jurisdictions, it means less money is available to be taxed to support their welfare states. The pope expresses the same concern when he says that tax havens reduce tax revenues for the benefit of society as a whole. Survival of an ever-growing welfare state requires an assault on jurisdictional tax competition.

There's a more fundamental question that I'd put to the pope: Should the Roman Catholic Church support the welfare state? Or, put more plainly, should the Church support the use of the coercive powers of government to enable one person to live at the expense of another? Put even more plainly, should the Church support the government's taking the property of one person and giving it to another to whom it doesn't belong? When such an act is done privately, we call it theft.

The pope might say that the welfare state reflects the will of the people. Would that mean the Church interprets God's commandment to Moses "Thou shalt not steal" as not an absolute, but as "Thou shalt not steal unless you got a majority vote in parliament or congress"?

I share Pope Benedict's desire to assist our fellow man in need. But I believe that reaching into one's own pocket to do so is praiseworthy and laudable. Reaching into another's pocket to assist one's fellow man in need is despicable and worthy of condemnation.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.