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Hong Kong Is At It All The Time

Kitty Miv, Editor
17 May, 2012

Many thanks to those of you who wrote in with apt alliterative adaptations and alternatives to my proposed Encomiums and Execrations, some of which are very good. The editorial director has gone into a huddle with himself and is thinking about them. Gives him something to do for a change! 

Now, on with the show! You'll see in the list below that last week's nominations now have a 1 or a – 1 rather than the commentary given last week, while this week's new nominations have commentary – next week that will turn into plusses and minuses, and that's how the rankings will build up over time.

Things don't move quickly in Germany; very often progress is deliberate and even predictable, and sadly the Bundesrat's veto of Angela Merkel's attempt to reduce income tax was just that: predictable. But that doesn't make it any the more forgivable. In fact, the vote is probably unconstitutional – the government has no choice but to try to reverse the effects of what most people call 'bracket creep', the automatic increases in tax that follow on after inflationary wage increases if tax brackets remain the same. It seems hard to punish the country's ranking in such circumstances; but it's results that matter, and higher taxes are a Bad Thing, however they come about. The deputies should be ashamed of themselves.

I can't think of the last time that Germany abolished a tax; but Hong Kong is at it all the time. This week it got rid of the duty levied on companies' capital issuances. When Hong Kong can't abolish a tax, it sometimes gives tax money back to citizens, as it has done for the last two years with income tax. Snipers will say that it's because it has such massive cash reserves that it can easily afford it: but the truth is that the cash reserves are a result of low taxes, not the other way around. It's probably predictable that Hong Kong is going to end up at the head of our rankings; but events will determine that, not me.

Now here is a real disgrace: in a week when the UK government is pulling out all the stops to encourage growth in the economy by assisting business, the retrograde, stick-in-the-mud tax authority, HMRC, has dealt a savage blow to small businesses by refusing to abandon its vindictive and destructive IR35 legislation, which attempts to turn entrepreneurs into wage slaves. Joined up government? Do me a favour!

It's not often that I have a good word to say for Vladimir Putin; but, credit where credit is due, he has seen off the vested interests of his domestic protectionists who would like to continue making money from foisting antiquated Soviet-era goods on hapless consumers and is insisting that Russia should forge ahead with the process of joining the WTO (the best of all Good Things, of course). Who would have guessed it?

Perhaps I shouldn't be complimenting the Philippines on increasing 'sin' taxes; but that blooper is outweighed by the fact that they have put a difficult WTO ruling into effect within a matter of weeks, equalizing the taxation of local hooch with imported spirits, something which must have been fiercely resisted by local distilleries, but which will offer much improved choice to citizens. No chance of Scotland doing that, of course, and if it was an independent country it would be getting a severe black mark for its repressive intention to put a minimum floor under booze prices.

Speaking of illiberal legislation, perhaps it is unfair to penalize the US Congress for introducing a law which stands no chance of being passed; but businesses take decisions every day, not just on election night, and heavy-handed attempts to force companies to repatriate overseas jobs with unworkable and restrictive legislation will have the opposite effect of encouraging companies to invest anywhere other than in the US. The way to encourage business growth is to reduce taxes, not invent new ones; but the Democrats aren't listening.

Kitty's Encomiums:

Canada 1

Germany 1

Hong Kong abolishes a tax

New Zealand 1

The Philippines accepts a WTO ruling

Russia marches into the WTO

And Kitty's Execrations:

Australia – 1

Germany's upper house of parliament refusing to cut taxes

India – 1

Spain – 1

United Kingdom fails to help SMEs

United States against the world



About the Author

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. kitty@lowtax.net


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