Wall Street Journal Out-Businesses The FT

by Jeremy Hetherington-Gore, Tax-News.com, London

28 June 2001

The Wall Street Journal is as pro-business as the Financial Times is against it.

After telling its readers to vote for Labour in the recent British election, the pink newspaper outdid itself last week. In an article headed 'Fight Against Tax Evasion Persists', the FT attacked the 'hostility of these libertarian lobbyists' to the OECD's egregious 'harmful tax competition' initiative.

Says the Centre for Freedom and Prosperity (a, or even the libertarian lobbyist in question):

'The FT once again is missing the point. We are not in favor of tax evasion. Instead, the real question is how to deal with evasion. Should countries reform their tax codes and lower tax rates, as the Center urges? Or, should countries conspire to eliminate financial privacy to enforce oppressive tax laws on an extra-territorial basis? In reality, the FT, EU and OECD are the ones showing “hostility.” In fact, “libertarian lobbyists” are having fun watching government bureaucrats from all over the world squirm.'

This week, the WSJ has a perceptive and amusing article on Everyman's right to organise his affairs to minimise tax under the title: 'If You Can't Say Something Nice about Tax Shelters . . .' by Holman W Jenkins Jr.

'During last year's presidential election, every candidate set aside a week here or a day there to deplore "corporate tax shelters." Even George W. Bush, pro-business candidate, deplored them. Corporate tax shelters are the antibaseball, antiapple pie of political speech. They're bad because they're bad. Or at least that was the consensus
before two important court decisions arrived this month.'

The article reports two two US Appeal Court decisions reversing lower court rulings in favour of the IRS against corporate tax shelter schemes.

Says the article: 'Both rulings were blows in favor of legal tax avoidance. You can't retroactively outlaw transactions because you don't like the tax consequences. Both courts quoted a holy of holies, 1935's Gregory v. Helvering:
"The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted."

'And why not? A business is nothing more than a conduit for passing along costs to its customers. Taxes are a cost, so tax avoidance is part and parcel of competition to bring consumers better stuff at lower cost.'

As Mrs Thatcher famously said: 'Businesses don't pay taxes - only people pay taxes'.

'Were we still living in a Clinton world,' continues Mr Jenkins, 'Larry Summers would be infarcting right now. He spent his last months at Treasury berating lawyers and accountants over proliferating corporate tax avoidance. "Combating abusive tax shelters is perhaps the biggest challenge facing our tax administration system today," quoth the former secretary.'

Mr Jenkins understands that 'offshore e-commerce' is the threat which is making the issue of tax avoidance so potent for high-taxing countries. 'Places like the Isle of Man', he says, 'are laying on thick bundles of fiber-optic. Low taxes have become a major weapon in competition to attract corporate headquarters and such.'

The article continues on to its conclusion that corporate income tax is probably dead, although it doesn't really develop ideas about the alternative means of taxation that will be needed instead. But at least it begins from a pro-business, pro-individual standpoint, which is more than can be said for the dismal, British pink 'un.

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