Friday, August 17, 2007


British Times reports that pope has condemned tax havens and declared tax evasion, referring to fund investment in low-tax jurisdictions, as socially unjust. In addition, Italian prime minister urged church leaders to speak out on tax evasion. Italy's prime minister also began a crackdown on tax evaders, saying that it would target individuals with second homes and other signs of “conspicuous wealth”.

It is a sort of disappointment that influential religious figure believe that social compassion geared by extensive taxation and high government expenditure should be the basic function of the government, thus punishing productive behavior through high tax rates on individual and corporate tax income, making it harder for poor people to create wealth and prosperity through individual responsibility. The empirical evidence says that high tax burden hinders and slows output growth and income mobility.

It is rather frustrating that relgious figures avoid the understanding of basic lessons of economics. Tax evasion, which pope has emphasized, is a consequence of high tax rates whereas complexity of the tax system accelerates the absence of earned income from tax basis through numerous deductions and tax exemptions. In the hard-hitting manner, the pope argues that the opening of bank account in an offshore jurisdiction reduces the revenue 'for the benefit of society'. Nevertheless, anyone has a right to choose the provider of financial services for her and his own pursuits. It is personally irresponsible to instinctly confuse empirical facts with aggresive ideology against territories with low taxes on work, saving and investment.

The pope also argued for a 'world trade and economic system regulated in such a way as to avoid further injustice and discrimination'. Obviously, the pope does not understand that the issue of injustice and discrimination is attached to the enforcement of the rule of law, in terms of treating everyone equally before the law. Trade and market transactions are nothing else but a free-exchange in the marketplace. There is no such thing as involuntary exchange in the market where supply (sellers) and demand (buyers) determine prices and quantity supplied and demanded.

Pope's encyclical continues: "those peoples who are striving to escape from hunger, misery, endemic diseases and ignorance and are looking for a wider share in the benefits of civilisation..." The key to the fighting against endemic diseases and hunger is definitely not regulation as the pope says, but empirically-confirmed openness to international trade as an important engine of growth.

For instance, the abolishment of quotas and tariffs on imports and the quitting of protectionist policies, would result in an open way to import very much need drugs, medical technology and net direct investment to fight poverty, hunger and misery instead of foreign aid.

Another example of flawed morality in Vatican is the hysteria of the pope calling for " equitable world economic system based on social justice rather than profit."
It seems that Vatican's figures dream of a centrally-planned economy in pursuit of economic justice. However, no one could possess enough sufficient knowledge to plan the economy, make production decisions and efficiently allocate resources.

The talk of social justice is absurd and the redistribution of income and wealth is utterly mistaken since social justice is commonly nothing else but a theft legalized by extensive taxation. There is nothing more spontaneous than economic inequality which is the result of innumerable decisions of individuals with different preferences, ends and pursuits in life.

The fact is that there's nobody to be blamed for economic inequality since the latter is the result of free competition in the market where equal conditions to compete, innovate and create are distributed to everyone, and to say it in a genuine manner: social justice is a trojan horse exercised by totalitarian governments.

In the state of religious coercion, the pilgrims usually need an authoritarian leader to brainwash their minds and the things left are lies, ideologies and propaganda. And Vatican is no exemption to that rule.

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