Compromising the Privacy of the Vast Majority
Kitty Miv, Editor
29 January, 2015
Kitty's Kountry Rankings are below, with a description of how they are kompiled. This week, as every week, I give out Encomiums to countries which have done Good Things, and award Execrations for countries which according to my highly personal and partial views have done Bad Things.
The United Kingdom has been getting a lot attention in this column lately, and not a lot of it has been very kind. But it's hard to avoid the temptation to give Her Majesty's Government the treatment when it behaves so stupidly on such a regular basis. This time, it's the Government's plans for transparency of beneficial ownership of companies registered in the UK. I thought that the coalition might quietly shelve these proposals in the melee of the upcoming general election campaign but apparently not, for the Government confirmed on January 15 that companies will need to keep a register of people with "significant control" from January 2016, and file such information with Companies House from April next year, provided such legislation is approved. "Ah, here she goes again" some of you might say. "Last week she defended tax dodgers by attacking FATCA, now she's defending criminals by opposing public beneficial ownership registries." But as I pointed out in my previous blog, a determined tax evader will just find another way to hide his money. Similarly, money launderers, terrorists and other undesirables aren't going to be scared by these plans either. They will just go deeper to ground, making the paper trail even more difficult for law enforcement authorities to chase. Or they could just set up a series of companies outside the UK's jurisdictional reach, because few other countries have expressed the slightest bit of interest in this idea, beyond the usual lip service at the G8; even the EU has backtracked on this. In fact, why would anyone want to have a company in the UK at all, if every Tom, Dick and Harry can know your business? I've yet to see a really convincing argument in favor of this. Prime Minister Cameron said in 2013 that "for too long a small minority have hidden their business dealings behind a complicated web of shell companies." But, David, they will just continue to do so with or without a beneficial ownership registry. Just like FATCA, compromising the privacy of the vast majority seems like a very high price to pay to punish a small minority. At all events, it is a junior minister in the Department for Business, Innovation and Skills, who goes by the official title of "Parliamentary Under Secretary of State for Employment Relations, Consumer and Postal Affairs" who seems to have been given the unenviable task of pushing through these proposals. The minister, whose resume does not display any obvious direct business experience, has been sent on a fool's errand indeed. Cameron and Chancellor Osborne should know better.
Nobody is pretending that Spain is out of the woods yet after getting sucked into the eurozone crisis. But the way the economy is performing compared to the rest of the eurozone suggests that the Government must be doing something right in the area of economic policy. Last month, the Bank of Spain said that improving domestic demand was helping to sustain a recovery, and that the eurozone's fourth-largest economy would grow by 1.4 percent in 2014 and possibly by as much as 2 percent in 2015. Given anemic growth elsewhere in the eurozone, especially in France (predicted 0.5 percent growth this year) and Italy (probably even slower 2014 growth than France) – the second and third-largest economies in the single currency area – it almost looks like boom time in Spain. Why is this the case? Well, economies are complicated things, and there are countless variables coming into play here. But I think the fact that Spain's conservative Government has managed to pass structural economic reform, perhaps the most important part of which was loosening up the labor market, something neither France nor Italy has managed to do, is one of the main reasons for the three countries' contrasting fortunes. Spain has also reformed and cut taxes, a policy that is reaping dividends, according to Secretary of State for Finance, Miguel Ferre Navarrete. You might have noticed that taxes have got rather high in France lately. QED. Spain's fate is of course still tied to the fortunes of the eurozone, which is currently staring over the precipice of a deflationary sinkhole. What? You think my language a little hyperbolic? Well, the fact that the European Central Bank has been permitted to print money like there's no tomorrow is an indication of how seriously the deflationary threat is being taken in Brussels and Berlin. But Spain must nevertheless try to keep up the good work.
Well it was fairly predictable wasn't it? The Brazilian Government cut a lot of taxes last year. Then there was an election in October, and President Dilma Rousseff won another four years in power. But guess what. Conditions seem to have changed so much since the election that the Government thinks taxes will have to rise. Credit is due to new Finance Minister Joaquim Levy for breaking the news gently to the Brazilian people, though. First, there was the hint of tax rises, with Levy telling taxpayers in early January that the country needs some "fiscal rebalancing." Levy laid the ground further a few days later by suggesting that tax rises, should they be needed, would have no effect on the economy. Then came the sucker punch: the finance ministry's announcement on January 19 of approximately USD7.8 billion in tax increases for 2015. Who'd have thought it? The reality is that Brazil's economy has been unbalanced for a number of years, and it is largely the Government that is to blame. As has become customary in such situations however, taxpayers pay the heaviest price. The Government has turned to that familiar fiscal lever, the IOF tax on financial transactions, which will result in the doubling of the tax on personal loans. It must be almost impossible to try to work out how much tax is payable on a financial transaction in Brazil, as the rates seem to change by the week. Indeed, Brazil's tax code is now so nightmarish that comparisons to a dense and impenetrable jungle akin to something you'd encounter in the farthest reaches of the Amazonian rainforest spring easily to mind. No wonder the economy is faltering. The average firm is spending almost a third of the year filling in tax forms.
Kitty's Encomiums and Execrations
Methodology: each week (this is the 141st) one or more countries are given encomiums and one or more 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 at minus 2, 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, but then quickly recovered one step. Etc etc.
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.
Spain makes a difference
And Kitty's Execrations:
Brazil Levy and levies
United Kingdom stupid
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