As long as there are taxes, there will be tax avoidance. This turns out to even be true of at least one government operation:
The state-owned Dutch railway company NS has managed to cut its Dutch tax bill by at least €250m since 1999 by routing the cost of new trains through Ireland, the Volkskrant reported at the weekend.
The tax dodge means the treasury has lost out on income generated by a company it owns, the paper points out. The finance ministry, meanwhile, is said to be ‘unhappy’ about the arrangement, which it has been aware of from the beginning.
Through some tricky maneuvering, the NS’s Irish financial wing 
bought trains in Ireland, where taxes are lower, and then rented the new trains to the Dutch public railway. Even though the trains had never run in Ireland.
Ah, the advantages of globalism!
Political posturing then ensued, with talk of “lack of morals” rampant. An economist touted for his expertise on railways charged that the “NS is busy ‘playing at being a company.’ But the NS is not a company but a government service, he said.”
Government service or no, the players at the NS had a very businesslike response, claiming (quite plausibly) that the “tax route” allowed it to “better compete in the market.”
The lesson I draw from this is one some politicians won’t want to hear: High taxes are bad. They cripple enterprise, including government enterprise. When your government operations turn to elaborate tax-avoidance schemes, you should be planning tax decreases. And accompanying decreases in spending.
This is Common Sense. I’m Paul Jacob.
6 replies on “Dutch Treat”
What is the determinant which qualifies a statement of “high taxes”? Rather then perpetuating the mangled prose of the politico we should strive to determine the level of tax required for the service requested of our government. If we wish to have the government provide rail service then what is the cost? Are the majority of us willing to pay for this service in the form of a tax increase? Better still, we should determine what “…insure domestic Tranquility, provide for the common defense, promote the general Welfare…” means in order to determine the scope of the government before we get to the point of having to pay for a service that is, in terms of the U.S. Government, intrinsically non-govermental.
All taxes, by definition, and especially selective taxes, distort and confuse the market price signals, leading to dislocations and ineffiencies. A flat VAT would minimize the problem but does not lend itself to political pandering.
Qudos to NS for acting in an economically rational manner to lower the cost of transportation to it “customers”. Perhaps it could did even better totally privatized.
Higher taxes make it harder to compet in the market. Who woulda think it? Governments should not be competing in the market anyway.
There is absolutely nothing wrong with tax avoidance. No one should pay more than they are legally required to pay.
Tax evasion on the other hand…
If a politician avoids taxes, uses tax havens, and is still paid by a Capital Investment company which also avoids taxes, it might be forgivable.
But only if the politician is not trying to introduce new taxes – such as VAT or Carbon Tax. And only if the politician is not eager to raise taxes on the energy industry, nor raise fees, and has not in the past. And it would help, if the politician wants to pay 15% tax through avoidance, that his goal is to offer all Americans a 15% flat tax.
No. No reason why I brought that up.
Rob asks two good questions, what should the scope of government be, and what tax level is required for it.
I say government exists to protect our “life, liberty, and pursuit of happiness.” Not to redistribute income to those who government decides deserves it (this is immoral and contrary to protecting our liberty – as it takes from us by force the fruits of our labor, for the benefit of others).
To provide for this, history shows that ALL levels of government can operate taking less than 8% of GDP – see http://www.usgovernmentspending.com/past_spending
One can only conclude our government has become the immoral means by which people us it to steal for themselves.