Buying and selling citizenship is quite a thriving business
Kitty Miv, Editor
11 September, 2013
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.
It's a small thing, heaven knows, when set against the backdrop of a general picture of rapidly increasing taxes, but we should congratulate Spain's Minister for Public Works Ana Pastor who announced plans to reduce, by 5 percent, the fees charged for the use of port infrastructure by vessels, passengers and freight, and an 8.5 percent reduction in port property occupation tax. Together the cuts will be worth just EUR50m, but what is important is that they support trade and they show that at least one part of the Spanish Government has the right priorities. Spanish exports grew 10 percent in the first half of 2013, a healthy sign. Otherwise, Spain didn't have such a good week, with the 300-year old Gibraltar row rumbling on (a British minister said that long-term damage was being done to the two countries' relations), and British expat communities in Spain (there are plenty – more fish and chip shops on the Costa Brava than there are in Wigan) being labeled as havens for wanted criminals. My solution to the Gibraltar problem is the same as for Argentina and the Falkland Islands: sell it back to the Spanish and use the money to buy a Greek island to re-settle the population. But I hope no-one from Gibraltar reads this or I'll be in real trouble.
Buying and selling citizenship is quite a thriving business. Countries often don't talk too much about it, although almost all of them do it in one way or another: you want to be British? Australian? Russian? It will cost you just a few million bucks (you can be Russian just by purloining a few million US state papers, but that does carry some risks and you won't be able to go to the Super Bowl any longer). The latest country to play the game is Antigua and Barbuda, which plans to open a Citizenship by Investment Unit, said the Prime Minister Baldwin Spencer. This is a practical way of making money for the tiny country, which lost its golden geese when the US Justice Department landed like a ton of bricks on its e-gaming sector a few years back. More practical than the trade sanctions which the WTO is allowing Antigua to impose on the US by way of contravening IP rights. I must say I do find that a most peculiar suggestion: normally I strongly support the WTO, but how can it be right to allow Antigua to take the intellectual property of US companies? They will run yelling to Uncle Sam, who will presumably have to compensate them. Is that a recipe for future good relations between the US and Antigua? There will be no winners in that game.
Speaking of Russia, and indeed the US and the UK, these were the ringleaders of the G20's attack in St Petersburg last week on tax avoidance, by making automatic exchange of tax information the global standard, and agreeing to steps for cracking down on base erosion and profit shifting (BEPS). Vladimir Putin said that they planned to adopt a joint Action Plan for the prevention of BEPS; and the end-of-meeting declaration said that the G20 has been in talks with the OECD to create a single global standard for the automatic exchange of information.
Now it's very easy for international political leaders to climb onto the morality bandwaggon and pontificate about how awful it is that individuals and companies evade tax, but to me the whole world has gone topsy-turvy. The present parlous state of the global economy and threadbare national treasuries is directly and unequivocally the fault of political leaders who have luxuriated in debt and spending over the last 20 years. Taxes and debt are both the highest they have ever been in almost all of the G20 countries, except in some places which are lucky enough to have plenty of black gold (Russia being one of them, actually). But instead of turning their efforts to cutting back on wasteful spending, which is of course politically very unpopular, these spendthrift politicians send up a barrage of criticism directed at "tax havens," which they would of course like to exterminate, and at companies which can't defend themselves and don't have votes.
"In light of ongoing budget consolidation, the budget revenue base should be expanded. It causes widespread anger when companies operate in one country, pay taxes in the other, and take profit out of the countries where they operate and render services," says Russian Finance Minister Anton Siluanov, while Vladimir Putin says that the implementation of the G20's Plan should result in "a significant reduction in the practice of channeling profits into offshore accounts and an increase in tax payment in the jurisdiction where a given product or service is produced."
In other words, increase already high levels of tax. That's all they seem to be able to think of. Why can't people see that it's the politicians who are the problem? Rhetorical question, of course; and the media are largely to blame for permitting and even encouraging the game to be played. So the grandstanding and the waste will continue, and a whole generation of young people in Europe face a bleak future. NEETs, they are called: Not in Employment, Education or Training. On a long-term view, what is happening is a shift of economic power from over-taxed and over-governed "old" countries to economically younger parts of the world, although that's no comfort to the NEETs.
Ah well, time to lighten up, not that there's anything much to laugh about in this week's batch of tax news. But there's a sort of wry amusement to be gained from seeing the outraged squeals emanating from Bermuda, the British Virgin Islands and Jersey in response to their inclusion on France's new blacklist of non-cooperative territories. It's a serious matter for any French investors with companies in those places, since tax rates reach a crucifying 73 percent on remittances from France to these "paradis fiscaux" as the French call them. "Paradis infernelles" would be more like it, as seen from the banks of the Seine. Monaco must be trembling in its boots.
Kitty's Encomiums and Execrations
Methodology: each week (this is the 69th) two or three countries are given encomiums and two or 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 is on + 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, but reverting to neutral territory in the following week, then dropping to minus one in week 50, and back up to plus one in week 51, then to plus two in week 52. Some weeks ago it dropped a place, though.
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.
Antigua open for business
Spain supports trade
And Kitty's Execrations:
France lashes out
Russia, US, UK on the wrong side
« Go Back to Blogs