What tax havens teach us about the benefits of low-tax economies

3 November 2007

What are the three richest countries in the world? You might be tempted to answer America, maybe Switzerland, or perhaps even Ireland.

What are the three richest countries in the world? You might be tempted to answer America, maybe Switzerland, or perhaps even Ireland. The right answer, however, is Luxembourg, Bermuda and Jersey in that order.

The CIA, which as well as spying on people collects economic data, recently published its annual ranking of global wealth, measured by gross domestic product (GDP) per capita, adjusted for the purchasing powers of different currencies. There are few better ways of measuring, not total economic power, but how well-off on average each individual citizen is – which should, of course, be the main test of economic policy.

What is striking about the list is not only that none of the big economic powers are that near the top, but that so many of the leading places are taken up by tax havens or low-tax countries.

Of the 20 wealthiest nations, 13 of them are low-tax territories. Luxembourg, Bermuda and Jersey might lead the way, but the top 20 also includes: Equatorial Guinea, Guernsey, Ireland, the Cayman Islands, Andorra, Hong Kong, the British Virgin Islands, the Isle of Man, San Marino and Switzerland.

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