Lowtax Network

Back To Top

I know which epic I'd rather read

Kitty Miv, Editor
02 May, 2017

Kitty's Country Rankings are below, with a description of how they are compiled. 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.

Survey after survey shows that business taxpayers all over the world are experiencing rising levels of uncertainty with regards to their future tax obligations. Yet policy makers seem either blind to the problem or wilfully ignore it. Or perhaps it is a case that they are simply unable to do much about it, at least not on a global scale.

Why is this issue so important? Because businesses tend to prize tax certainty above most other factors when making key decisions, often placing more value on certainty than simplicity and tax rates. And this was confirmed yet again in a recent survey of companies based in the Asia-Pacific region, in which almost 40 percent of respondents considered high predictability about future developments of tax law as the most important factor in business decision-making.  

Tax certainty – or the perceived lack of it – has also been flagged up as a concern by the OECD, which along with the International Monetary Fund submitted a report to the G20 last month on improving tax certainty for businesses. That development seems particularly ironic, considering that the OECD has been a major contributor to tax uncertainty, at least in the short term, with its BEPS work.

Then again, at least the OECD seems to be taking the matter seriously, and it is the G20 countries – not the OECD – that are implementing the BEPS recommendations in a not particularly coordinated and predictable way. Indeed, Deloitte's Asia-Pac survey found that 80 percent of respondents are concerned about the implementation of BEPS, up from 60 percent three years ago.

However, given that no government is going to legislate against the national (or electoral) interest unless it really can't avoid it, it is hardly surprising that the international response to the BEPS proposals has been inconsistent. What's more, some countries can find themselves hostages to political and economic fortune, and developments in these areas can often mitigate against certainty.

The United Kingdom is a prime example of this right now. Luckily for the country, it is still relatively highly regarded by international investors, as reflected in its impressive ranking of 10th out of 190 jurisdictions in the 2017 Paying Taxes Index. But the country really is not doing itself any favors. If the instability caused by a multitude of elections, including on such fundamental issues as its EU membership and the integrity of nation itself, wasn't enough to deter potential investors, there is the huge shadow cast by the Brexit process itself. And just when you thought the waters couldn't be muddied any further, along comes another election, and speculation that the Government could raise taxes in yet another Budget statement this summer.  

It's quite spectacular how the successive Conservative-led administrations in power since 2010 have undermined their good work on corporate tax with an almost compulsive desire to tinker with the finer points of tax legislation and regulations. Indeed, there has been an inverse relationship between the level of corporate tax and the length of annual (sometimes semi-annual) finance bills.

While the corporate tax rate has fallen considerably, finance bills have mutated into outsize legislative monsters, with more fine print than an insurance policy. And the figures back this up. When David Cameron became Prime Minister in 2010, corporate tax was levied at a not-very-competitive 28 percent rate, and the finance bill enacted at the end of that year was a relatively snappy 108 pages. By 2012, corporate tax was down to 24 percent, but that year's finance bill weighed in, like an aging and increasingly bulky heavyweight boxer, at 686 pages. By 2017, corporate tax was a lean and mean 19 percent, but the pre-truncated 2017 finance bill (since slimmed down in order for it to squeeze through by June's election) was a bloated 762 pages. Apparently, it contained more words than JRR Tolkien's Lord of the Rings trilogy combined. I know which epic I'd rather read!

Meanwhile, across the Atlantic, President Trump attempted to alleviate growing uncertainty over the US tax code by publishing his much-anticipated tax reform plan. Unfortunately, it probably had the opposite effect. The plan itself merely parroted the proposals he issued in the latter stages of the presidential election campaign last year and offered little insight into how they would be reconciled with the tax reform framework favored by Republicans in the House of Representatives. Importantly, we are still none the wiser about the approach that will be taken to implement some form of border taxation, and the President himself appears unsure what to think about House Speaker Paul Ryan's border adjustment tax idea. All of which is hardly ideal for multinational businesses with long and complex international supply chains, who were doubtless hoping that the White House would put some more meat on the tax reform bones. Instead, they will have to wait for Congress and the Administration to chew some more fat on the issue of corporate taxation and health care reforms.

At least things seem fairly predictable in France at the moment, and pollsters – a profession which has taken something of a reputational knock recently – must have breathed a sigh of relief when the first round of the French elections ended as predicted, with Emmanuel Macron and Marine Le Pen through to the upcoming run-off vote.

Yet, there's an element of the unknown about both choices. For this isn't the usual straight fight between mainstream left and right; it's a contest between a relatively politically inexperienced unaffiliated centrist and a firebrand nationalist.

In an age when many politicians are accused of being cut from the same cloth and eternally vying for the middle ground, nobody can accuse Macron and Le Pen of being the same, including in the area of tax. Consequently, for business taxpayers, tax policy could go in two very different directions as a result of this election: Marcon's business-friendly tax cuts; or Le Pen's worker-friendly protectionism. Either way, the French seem to have grown tired of the political establishment after years of low growth and high taxation – the fact that Benoit Hamon, the candidate for the ruling Socialist Party, mustered just six percent of the vote, says a lot – and are looking for a shake-up. And for that an encomium is due.


Kitty's Encomiums and Execrations

Methodology: each week (this is the 147th) 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.

Kitty's Encomiums

France shake-up

Kitty's Execrations

United Kingdom clear as mud

United States none the wiser



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


« Go Back to Blogs

Blog Archive

Event Listings

Listings for the leading worldwide conferences and events in accounting, investment, banking and finance, transfer pricing, corporate taxation and more...
See Event Listings »