15 March 2012
Let's have a tycoon tax, gloats British Deputy prime minister Nick Clegg; let's slap a minimum tax rate on large companies, exults President Sarkozy in France; and Italian tax inspectors enjoy themselves on the ski slopes in pursuit of rich tax-dodgers.
Superficially, what these incidents have in common is that they all involve high-taxing countries trying to bring to book wealthy individuals or companies that are gaming the system or simply hiding assets in order to pay less tax. The same process is taking place in most developed countries, with endless appeals to 'fairness' on the part of cash-strapped finance ministers. Although it is also happening in America, it is particularly noticeable in Europe, groaning under massive debts and suffering from low or non-existent growth, ever-higher unemployment, and dissatisfaction on the part of tax-paying citizens.
Sorry, I meant to say, 'electors', because of course these 'bash-the-rich' measures are not primarily aimed at collecting more tax; if anything, they are usually counter-productive on that level, as the UK Treasury is refusing to admit over its catastrophic 50% rate of tax. No, this is just politicians trying to look as if they are doing something to help their voters.
The countries where this kind of game is being played have something else more important in common, being that their tax levels are already too high, and are getting higher. Faced with ever fiercer competition from newer, more energetic rivals with growth rates in the high single figures or even in double figures, most of which have tax levels of half or less of those in Europe, their gluttonous governments are effectively committing suicide, condemning themselves to gradual decline, and their populations to ever lower living standards.
And what is their chosen remedy? To punish the rich. So what will be the behaviour of an Argentine non-dom living in London who now has to pay an extra GBP10,000 a year to stay in the country, plus 3% (say) a year on her wealth including that flat in Mayfair worth GBP11m (that's a total of GBP310,000 a year). She was already wondering about placing her next manufacturing plant in Vietnam, where wages are 20% of British levels, and swapping her flat for a vast penthouse in Singapore at a quarter of the price. And her sister, who took French nationality when she married a champagne grower but now lives back in Buenos Aires will have to give it up again or be taxed in France on her world-wide income.
The tragedy is that the people who will suffer from this wholesale exiling of the geese with golden eggs will not be the rich, who can just get on a plane (at least Mr Osborne will get GBP160 from the air ticket tax), but the poor workers themselves who can do nothing but grit their teeth and soldier on. Why don't they realize? Why don't they see through the phoney promises and snake-oil nostrums of their leaders? Because they are mis-educated, that's why. They have been through an educational system staffed almost entirely by socialist or very often Marxist teachers and professors, who pass on their own incomprehension of the basic rules of human economic behaviour to their pupils.
In almost all countries embedded left-wing educationalists have fiercely resisted attempts to import competition and economic sanity into the schools system. Generation after generation of libertarian, right-wing thinkers have thrown themseves uselessly at this problem, and have invariably failed. Politicians, to give them some credit, do often understand that the key to change lies in reform of the educational system, and even sometimes take office saying that they will put it at the head of their priorities. But they stand no chance against the educationalists, and especially not the ones who staff education ministries, who are the worst of the lot. Politicians quickly come to see that change will take generations, and why should they care about 50 years' time? They will be long out of office.
And so the whirligig goes on. I just don't know what can be done, short of a revolution, and I'm not sure even that would work. I used to think that the Internet would break through the educationalists' stranglehold, and perhaps I still do, but it is going to take so long that I will never see it. Meanwhile the best thing you can do is to educate your children at home and just make sure they never go near a teacher or a text-book.
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Kitty Miv, Editor
Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. email@example.com