In the EU referendum the UK said no to the EU’s bureaucracy, and that was indeed the people’s refusal of any bureaucratic failures in general, in which the OECD should be counted, as proven by its own reactions to Brexit.
As a result of the referendum, the UK regained several rights of freedom, one of which is fiscal freedom. The EU imposes austerity to its member countries, and they are required to maintain their budget deficit below 3% of their GDP, and thus the UK is now ready to enjoy their freedom outside the EU.
The OECD against the UK’s tax cut
The British finmin George Osborne recently announced a plan to cut the corporate tax rate to below 15%, down from current 20% (FT). This was a plan to keep companies inside the UK after Brexit, whilst many of them were worried about losing access to the European Single Market.
However, the OECD seems to be against it, according to its internal memo published by Reuters. “The negative impact of the Brexit on UK competitiveness may push the UK to be even more aggressive in its tax offer,” the memo said, “A further step in that direction would really turn the UK into a tax haven type of economy”.
The reason why the OECD is worried about the UK’s fiscal policy is unfortunately not its kind care for the British people but underlain by its bureaucratic ambition in the global economies.
The OECD
Then, what is the aim of the OECD? Historically, the OECD was originally established as the Marshall Plan, an American initiative to aid the western European economy after the WWII, in order to be against the expansion of communism in eastern Europe.
However, its mission has been altered as communism faded out of the history, and the OECD is recently more known for its Committee on Fiscal Affairs, an international tax authority that aims to maintain high tax rates around the world.
Through the Committee, the OECD criticizes the countries with low tax rates as “tax havens” and tries to force them to introduce higher rates to become less competitive against the major economies. Switzerland has been suffering from the OECD’s claims and made come compromises to avoid sanctions from the OECD, which would do anything to keep high tax rates around the world.
Austerity and bureaucrats
Yet, then why does it want to keep high tax rates? Here the crucial relationship between austerity and bureaucrats reveals. Bureaucrats tend to promote austerity as they feed on the budgets they gather. The EU, for example, obviously hires employees with the money collected from the member countries, and this is also true in all the governments that the bureaucrats are paid by the budget the tax payers pay.
Thus, this is obvious that bureaucrats want more budgets, and this is not only about their salary but also about their political power. Governments collect money from tax payers and then distribute in a form of public investment, and thus the more the budget is, the more people, politicians or businesspeople, would come to the bureaucrats to beg them for the distribution.
The chair of the OECD’s Committee on Fiscal Affairs is a person who is very likely to seek such a reign of bureaucracy. The current chair is Mr Masatsugu Asakawa, who is also the top bureaucrat of Japan’s Ministry of Finance, which is one of the most austerity-oriented organization for the purpose described above. Japan’s economy sank despite massive easing of Abenomics due to the consumption tax hike imposed by the Ministry of Finance, as proven in the GDP data.
The OECD as a cartel
As a representative of the governments of the major economies, the OECD tries to keep high tax rates around the world. The OECD bureaucrats are even frank to mention their power to do so. In the internal memo, they also say the UK would face “practical and domestic political barriers” to lowering tax rates.
What would be the “practical and domestic political barriers” here? That would be the bureaucrats in the UK government who would not prefer a smaller budget. The bureaucratic powers dwell everywhere in the world, against which people are showing their anger in the EU referendum or the US presidential election 2016.
If this were in the business world, such an attempt as the OECD’s hindering competitive tax rates should be called a cartel and thus considered illegal, but in the bureaucratic world the governments can do what they want to do. People must acknowledge this benefits bureaucrats and never tax payers.
Austerity for whom?
Some might say austerity is to maintain fiscal stability, and higher tax rates are to aid low-paid citizens. It could work theoretically, but in the real world it is not functioning. In the EU, German austerity has been increasing the Greek debt, and Abenomics in Japan, which was a combination of a consumption tax rise and public investment, benefited the rich much more than the poor.
How much will the reign of the bureaucrats sustain? The international atmosphere is obviously acknowledging the corruption. The British chose to leave the EU, and the furious US citizens are eager to support Mr Trump. The nations are seeking to take the controls back, and you may call it either anti-globalism or their sovereign act, as you may prefer.