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Latest blog entries:

14 June 2009
WHO Declares TIEA Pandemic

Everybody knows about Double Tax Avoidance Treaties, those big beasts which roam the international fiscal jungle attempting to reduce the danger that a company or individual will get taxed twice on the same slice of income, and usually also reducing withholding taxes between countries, which encourages trade and foreign direct investment. In brief, they are a Good Thing.

The only problem is, that what you get is often not what it says on the tin, because the treaties have become infected by Mutual Assistance parasites which are bred in the cellars of the OECD in Paris. These nasty little animals are not free-living; but if you go anywhere near a Tax Treaty, they can jump onto you and infect you. They allow, indeed require, a signatory country to provide its co-signatory with all possible information that might be to do with an attempt to minimize (escape, avoid, evade) tax, either unilaterally or on request. One of the most insidious aspects of these pests is that the their DNA is highly secretive - no taxpayer, citizen or individual (you and me, in other words) will ever know that information about them is being passed around between governments.

Not content with unleashing the Mutual Assistance Trojan (MAJ) onto the fiscal landscape, the OECD's scientists went one further and came up with a free-living version of the MAJ called the Convention on Mutual Assistance in Tax Matters, which has infected all the countries of Europe and the OECD on a multilateral basis. This therefore allows (indeed requires) all those 50 or so countries to share among themselves all the information they have that might have a bearing on tax minimization.

The only way for a country to avoid infection by the Convention is to avoid bodily contact with any of those 50 countries, and this has classically been the stance of the 'offshore' tax havens, which in the main have resolutely refused to have anything to do with them, and have thus remained uninfected.

Needless to say, this was anathema to the OECD's experts, who have now come up with the ne plus ultra of anti-avoidance, an independently viable, free-living, self-reproducing MAJ called the Tax Information Exchange Agreement. This highly unpleasant, rodent-like creature can travel around the world until it finds an uninfected host country, where it immediately takes root and begins breeding. The TIEA is so designed that once a country has 12 TIEAs in place, this acts as a critical mass in terms of its relationships with OECD members, and it is only a matter of time before the host country is completely over-run with TIEAs.

The TIEA has already been very successful, to such an extent that the World Health Organization raised its TIEA warning level to 6 this week, meaning that the spread of the disease has reached the level of a pandemic. Governments in the few remaining uninfected countries, such as Andorra and Vanuatu, are considering a total ban on inward and outward travel in order to protect themselves, but it is probably already too late for them to resist.

Welcome to the future! The only consolation is that governments are so incompetent that they are probably losing all this information about you even more quickly than they are assembling it. Not the identity thieves, though, who are as efficient as governments are inefficient, and will undoubtedly steal the information before it can be lost.

The real answer of course is to be so poor that no-one cares about you. See you in the pub later on and we'll spend out last euros together.


Popular Blogs:

Jeremy Hetherington-Gore Unleashed
Jeremy tackles the difficult issues head on!

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Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.

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Peter Macfarlane of The Q Wealth Report blogs on Freedom, Wealth and Privacy

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03 May 2009
Time To Get Out Of Money?

What's a girl to do? Men don't give you things any more since they stopped getting their fat bonuses; that is unless you're lucky enough to have snared a Russian billionaire, and even those are in short supply nowadays.

I've saved up enough from the days of diamonds and roses though to invest it to get a reasonable income, the problem is, in what? You can forget about the banks, interest rates are so low I'd be down to having champagne only once a day. And hedge funds have turned into a black hole.

So let's try to be rational, and look at the economic background. Virtually every country there is has put itself alarmingly into hock, and it's not going to get any better for the foreseeable because unemployment is getting worse by the day, which means that government expenses go up while the tax take goes down. Itaque (you didn't know I could speak Latin, did you? I was quite a blue stocking when I were a lass): taxes are going to go up. Also there is going to be inflation.

That is actually good news for companies. Why? Well, silly, because they are going to be able to sit on their hands and wait for the real cost of wages to go down - wage-slaves aren't going to have any bargaining power for years to come because there aren't any other jobs out there to go to, so they're desperate to hold on to the ones they've got. And while their wages stay static, goods and services will cost more, meaning that companies will get to keep a higher proportion of their inflating incomes. So it all adds up to buying equities.

The only fly in that ointment is that, with economies flat or declining, companies may be over-provided with productive facilities. So, look either for companies in sectors which are more or less immune to the economic cycle, or service providers with low fixed costs and a flexible work-force. Business publishers would be an example of the former, and Internet brokerages an example of the latter.

You may object that taxation is going to hit businesses just as hard as ordinary folk; but I don't think so. Any country that increases its corporation tax rate is going to see an immediate exodus of companies to more favourable jurisdictions. In fact, companies are learning to do that even without tax increases. The UK's tax regime is now so unfavourable to companies with major international involvement that the steady trickle of deserting plcs is going to turn into a flood. The shares of Informa plc rose 14% last week when it announced it was going to become tax-resident in Switzerland.

Even worse is going to happen in the USA, from the tax-collector's perspective: the Democrats are fielding swathes of inimical corporate legislation, lightly disguised by a smoke-screen of anti-tax-haven propaganda, and they're about to get a filibuster-proof majority in the Senate. The option for US companies to shelter much of their international income overseas is going to disappear in short order, leaving them with only one option - to quit. I will particularly look for US multinationals that have low exposure in the US itself, and back them to make the right, tax-saving choice. And then I'm going to order another six cases of Bolly.







 

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