| 20 July 2008
It's been a great week for doomsters in the West, with markets collapsing and
debt ballooning all over the place. And what will our ever-wise governments
do about it? Why, raise taxes and attack offshore, of course. That's what they
always do.
After the insane public spending spree conducted by Gordon Brown at the UK's
Treasury during which he wiped out the hard-won gains of 18 years of Thatcherite
orthodoxy, his unfortunate successor Alistair Darling had to announce last week
that public borrowing for the first three months of the fiscal year 2008/9 rose
to GBP24.4bn, the highest since records began in 1946. Not to worry, the government
is only taking just over 40% of national income to waste on behalf of the populace,
so no-one will notice another percent or two to put things right. German Finance
Minister Peer Steinbrueck showed the way last week, saying he would increase
rates of income tax for the wealthy in order to recoup revenue that will be
lost as a result of a recent ruling by the Constitutional Court allowing German
taxpayers to offset health contributions against tax. Strange, I thought they
had a right-wing Chancellor.
Sir Win Bischoff, a leading City figure, said last week that he expected at
least two years more of credit crunch problems, with falling house prices in
the US and the UK. Perhaps that 40% will have to go to 43%, as the one thing
you can be sure the government won't do is to cut back on spending. Oh, no John,
no John, No! Sir Win has been put in charge of the Financial Services Global
Competitiveness Group, which has the unenviable task of working out how to stop
all the rich people leaving Britain now that the government has turned on the
'non-dom' hedge fund managers who were supporting it with their spending.
The Brits' rubber-stamp Parliament continues meanwhile to whinge about 'offshore',
just like the US Congress. Both bodies have Committees taking another of their
regular sour-faced inspections of offshore - that's where all the rich people
go when they're driven out - and will come up with some more spendid wheezes
for making it more difficult to transfer money to low-tax jurisdictions.
Not that 'offshore' will care. The more governments try to throttle it, the
better it seems to do. One fund administrator in Guernsey last week threw a
party to celebrate 400% growth in its assets in a mere two years from EUR12bn
to EUR50bn. And that's just one firm; altogether Guernsey's financial assets
top half a trillion dollars, up 100% in the last five years. This story could
be repeated dozens of times around the world in other offshore jurisdictions:
Bermuda is booming; Luxembourg (the richest country in the world by GDP per
head) now has 48,000 stock exchange listings, up 11% in the last year; Hong
Kong (reserves up to just under USD500bn) is another place that never seems
to go backwards; in the Gulf, Dubai, Qatar and Bahrain are swimming in money.
Explain it, I can't. If it's more and more illlegal every year to hide money
offshore, and if offshore is more and more transparent every year, how does
the money get there? Perhaps there's an undiscovered physical principle equivalent
to gravity: a sort of osmosis whereby national boundaries become financially
porous in proportion to the comparative levels of taxation on either side. Let's
call it Gore's Law and maybe I'll be famous after all.
You have been reading an entry on the following blog:
Jeremy Hetherington-Gore Unleashed
Jeremy tackles the difficult issues head on!
Contact: jeremy@lowtax.net
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