Monday, July 11, 2005

New Book: Markets in Vice, Markets in Virtue

Did you know that from 1996 to 2000, Microsoft Corporation paid 3 billion dollars in taxes at the same time that it reaped the benefits of 12 billion dollars in tax breaks? You may ask yourself how could such a major MNE have paid so little of taxes? ( I am sure that know you are thinking of the pockets of the tax advisors...)

You may find the aswer to this and many more related questions on the last book of John Braithwaite (Professor in the Regulatory Institutions Network at the Australian National University) called Markets in Vice, Markets in Virtue (Oxford Univ. Press, 2005). Reuven Avi-Yonah (Michigan), which sings the book's praises states that "this book draws on a wide range of interviews to offer a compelling depiction of the growth of the tax shelter industry in both Australia and the United States, and of the ways it might effectively be combatted by sophisticated regulators. It should be required reading for anybody interested in the tax shelter problem and, more broadly, the problem of how contemporary competition is creating markets in vice and how they may be turned into markets in virtue".

Here is an abstract:
In this sweeping comparative study of taxation in the United States and Australia, John Braithwaite shows that even as governments in the Western world have become increasingly sophisticated tax collectors, a competitive and ruthless market in advice on tax avoidance has developed. Tax avoidance, like any good, follows market logic: as the supply increases, so does demand. The same competitive forces in the late twentieth century which have driven down prices and sparked efficiencies in the production of fast food or computer parts have helped stimulate the markets for "bads" like tax shelters and problem gambling. How can we change the course of a growing supply cycle for "bads"? Braithwaite draws the surprising conclusion that effective regulation could actually flip markets in vice to markets of virtue. By creating incentives for tax compliance and by regulating promoters of tax avoidance more assiduously, governments could stimulate suppliers of tax avoidance to become providers of legitimate tax advice. Advocacy of virtue coupled with effective regulation in a market society ensures that markets run to virtue and tax systems become more just. Essential reading for anyone involved in policy, governance, and regulation, Markets in Vice, Markets in Virtue provides a blueprint for restoring the equity of Western tax systems and a breakthrough theory of how regulators can support markets in virtue and curtail markets in vice.


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