20 December 2012
Kitty's Kountry Rankings are below, with a description of how they are kompiled. This week, as every week, I give out three Encomiums to countries which have done Good Things, and award three Execrations for countries which according to my highly personal and partial views have done Bad Things.
Full marks to Channel Islands Jersey and Guernsey for standing up to the UK's bullying over FATCA, and by the same token, a black mark to the UK. The UK Treasury regards the UK's offshore dependencies (Jersey, Guernsey and the Isle of Man) as so many little puppy dogs to be ordered around at its convenience, despite frequent reports showing that they provide tens of billions of pounds' worth of benefit to the mainland every year through tax-efficient investment which would otherwise flow to Hong Kong or elsewhere in the world. The UK shows no gratitude or recognition whatsoever, on the contrary, punishing the islands whenever it can. Recent outrages include changes to the Isle of Man's VAT settlement which worsen the IOM's finances by at least GBP100m a year, standing by with arms folded while the EU's Code of Conduct Committee (Star Chamber) forced changes to the islands' income tax regime, and the use of British courts to abolish low-value consignment relief (which actually forms part of settled EU directives) for the islands, but not for anyone else, which chopped hundreds of jobs away from these tiny economies, at the behest of UK retailers. I ask myself, why don't they quit, and demand full independence from the UK and the EU? Especially now that the rolling tide of financial EU directives is impinging more and more every day on their economies. The AIMFD is just one example of the wave of nannying, obstructive and unnecessary legislation which will harm the islands for decades to come. The dependencies have very large cash balances saved up from the good years, even if they are running temporary minor deficits, and can well afford to stand on their own feet.
Just a couple of weeks ago I was rewarding Vietnam for cutting personal income tax rates; now the country gets another star for listening to business and cutting corporate income tax rates in a package which is heavily slanted towards encouraging SMEs. True, the headline rate at 23% (20% for SMEs) will be no lower than the UK's after the cuts, but Vietnam is in competition with surrounding countries such as China (headline 25%), South Korea (24.2%) and Thailand (23%, falling to 20% next year). I bet tax revenue increases as a result.
After slamming France last week I was minded to leave the poor dears alone in their Slough of Despond for a few weeks, but Prime Minister Jean-Marc Ayrault's attack on famous actor Gérard Depardieu is so egregious that it can't pass unmentioned. After Ayrault called him "pathetic" and "unpatriotic" for moving to Belgium in order to pay less tax, Depardieu mailed his passport to Ayrault, mentioning that he had paid 85% of his income in tax last year, and that he had paid EUR145m in tax in his career. He also sent in his social security card, which he said he had never used. Ayrault should take a lesson from Colbert, who famously said that the art of taxing was to extract the maximum number of feathers from the goose with the minimum amount of hissing. Well, now he will have no feathers and a lot of hissing. This latest black mark sends France to the bottom of my table of business-friendly countries. It's not a question of the government's politics (with which, needless to say, I completely disagree), it's a simple matter of practicality. They seem to be doing everything they can to drive away wealth-creation. If Colbert understood how to tax, Cameron's almost-equally-famous red carpet across la Manche shows that he has a better understanding of wealth creation than Francois Hollande and his legions. The British government published figures recently showing that hundreds of French citizens have recently taken advantage of the UK's HINWI immigration scheme, under which someone with assets of GBP2m and intending to invest GBP750,000 in a UK business can gain residence quickly and easily, as well as using the non-dom scheme to pay a set amount of tax. Work it out: one Depardieu pays 80% of his income to France; let's say that's 80% of EUR500,000 = EUR400,000. Losing 100 such individuals will cost France EUR40m a year. Perhaps to glorious politicians juggling with billions and the next election, that's chicken-feed. Chicken-feed it may be; golden goose feed it ain't!
Kitty's Encomiums and Execrations
Methodology: each week (this is the 31st) three countries are given encomiums and three are given execrations. Those are the entries below with descriptive links. In the following week, each encomium counts as 1 for that country, and each execration counts as – 1, being added to that country's existing score. Over time, therefore, a ranking will build up for each country, and further countries will join the listing. Germany has a ranking of – 1, since in the second week it had an execration and in the first week it had an encomium, leaving it at neutral; then it had an execration in week four, thus dropping to – 1, and another one in week six, dropping to – 2; finally in week 13 it got something right, so it went back up to – 1; then in week 16 it gained a further star, so then it was in neutral territory until week 23 when it dropped back to minus one, falling back again in week 24 to minus two.
The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but as time goes by they are becoming useful for decision-making. For any country in negative territory, you should think carefully before starting a business there.
Channel Islands showing some spine
Vietnam wields the tax knife again
And Kitty's Execrations:
France shoots the messenger
United Kingdom getting everything wrong
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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