Imagine Paying your Income Tax at your Local Walmart
Kitty Miv, Editor
09 August, 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.
It's good that Vietnam is dishing out some tax exemptions and reductions, and quite rightly these are mostly directed at SMEs. It's lucky for small Vietnamese companise that they're not in the EU, where such largesse would of course be banned as illegitimate State Aid. ASEAN hasn't yet developed the powers and excrescenses that litter the sidewalks of Brussels, and let's hope it never does, although I'm perfectly certain that, as I write, in some back room at the egalitarian OECD, a bearded (male) economist is drawing up rules to prohibit all discriminatory incentives to SMEs. ASEAN itself is still mostly a pro-trade organization (like the EU before it got carried away with Delorsian delusions of empire) and Vietnam is building on the existing trading treaty by negotiating an FTA with South Korea, another member, which therefore receives the week's second encomium.
So Hong Kong will allow various types of tax payment to be made through convenience stores. Good; and obvious, you would think. But it takes a liberal-minded, citizen-friendly government to think in that way. Compare with the UK or the USA, where innumerable government departments and death-defying volumes of paper are involved in even the simplest of transactions between citizen and government. The equivalent would be to imagine paying your income tax at Tesco Express or your local Walmart. That such a thing is possible in Hong Kong speaks to the simplicity of the tax system, which is itself partly a consequence of low tax rates, matched by willingness to pay on the part of citizens. In the 'advanced' countries (advancing towards collapse, that is) taxes are high, citizens are unwilling, and the system is complex. Go figure.
Brazil has immense natural riches, a reasonably liberal society, and in general terms is business friendly. But the government doesn't 'get it'. Simplicity and stability are what is needed if business is to thrive, and even Brazil's warmest friends wouldn't claim either of these virtues for the country. Its attitudes, on the contrary, are lamentably protectionist and merchantilist, as most recently witnessed by the shabby history of its attempts to preserve its automotive industry from the consequences of international competition. Don't know where these attitudes come from, but there must be a fair bit of post-colonialist anti-European angst involved, cynically used by the ruling industrial oligarchy to further its own selfish interests. Of course I could be talking about any one of a number of emerging markets. India springs to mind as being quite similar. These policies may work in the short-term, but in the longer run they will be negative for the country that uses them.
The Cayman Islands isn't exactly a country, although they probably think they are. Anyway, being against nationalism on principle, I am certainly not going to take sides in that debate. They are an independent actor on the international stage. Well, not quite: the UK can still force the Cayman government to act in a fiscally responsible way, and has just done so. It's amazing to me however that a place with such an overwhelming mass of banks and hedge funds and with more cash in its balance sheets than any other country in the world bar possibly Switzerland, could be short of money. There must have been incompetence, to use the kindest possible word, on a grotesque scale to achieve such a result. And what do they do about it? Why, of course, they punish the foreigners, that's right, the ones who have brought them their lush life-styles in the first place. They are not the only Caribbean territory to have resorted to such xenophobic tactics, but it's negative. It's a small matter, the new tax that is being invented, but it is the thin end of the wedge. Well, overnight and just before publication they have back-tracked, and now seem likely to abandon the expat tax. They still get a black mark though, for even thinking about it in the first place!
It's never quite easy to work out what real motives lie behind the behaviour of the Kremlin, and last week's threat to hike car taxes is a case in point. You can believe, if you are Alice in Wonderland and you haven't had breakfast yet, that it is indeed part of a general move from direct to indirect taxes; and given the difficulty of tracking income in a cash-using country like Russia, you would have to say that this is a correct policy. The trouble is, that coming in the week when Russia finally signed up to the WTO, it looks suspiciously like a piece of advance damage limitation: bounce up the costs of owning an expensive car in order to protect the still-hopelessly-inefficient Russian cheapo car industry. Russia is another country that doesn't 'get it', although its history is the opposite of Brazil's. 'I want to suppress excessive personal consumption,' says Vladimir Putin. Sorry, wrong! You should want to encourage excessive personal consumption, if anything. And anyway, it's none of your business, what people consume or don't consume. The results of your and your predecessors' obsession with restricting the behaviour of successive generations of Russians can be seen on every beach and in every night club in Europe and beyond, where indeed they consume excessively and excessively loudly. Thank goodness. What you should do is to start asking yourself why they choose to do their consuming outside Russia, rather than Gradgrinding your way onto the wrong side of history. Well, you're already there, so there's no helping you, I suppose. Come back, Boris Nikolaevich, all is forgiven!
Kitty's Encomiums and Execrations
Methodology: each week (this is the 14th) 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.
The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but hopefully one day they will become useful for decision-making, even if for the moment it is all just an amusing game. For any country in negative territory, you should think carefully before starting a business there.
Hong Kong: pay your taxes as you buy your rice
South Korea burnishes its free trade credentials
And Kitty's Execrations:
Russia deep in primroses
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