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Joining the European Union was an act of submission

Kitty Miv, Editor
19 July, 2012

Company law is a fairly dull subject, but nothing is more infuriating than having to negotiate your way through forests of ambiguous, bureaucratic legislation when trying to set up a new company, organize a takeover or issue shares. It's good for lawyers of course, but in the end even they should probably be in favour of simplicity, because if no-one wants to set up in your jurisdiction there won't be any work at all! Hong Kong is near the end of a comprehensive re-write of its companies law, which will considerably improve clarity and transparency. Not that the old law seems to have stopped new entrants from flooding in.

South Korea is rivalling Canada as a star in the firmament of free trade. Having dragged the USA and the EU kicking and screaming to the free trade altar, South Korea is now plunging ahead towards CEPA-like deals with ASEAN members. There was a rocky moment during the negotiation with the USA, when it briefly seemed that the opposition would win an election and blow out the deal, but the electors were sensible and returned the pro-business Grand Union Party to power. Of course we would all prefer the Doha Round (wouldn't we?) but while it lumbers laboriously on, CEPAs are better than nothing. And something that is usually not noticed: FTAs and CEPAs often prescribe WTO dispute resolution. Maybe that is the multilateral future for global trading: CEPAs with parallel WTO adjudication.

Singapore was touting its business-friendly wares this week, and it needs to be in my ranking, even if it hasn't done anything new in the last couple of months. If governments can impose retrospective taxes, I can award retrospective encomiums, and it's certainly true that the country's last budget was stuffed full of goodies for business, especially for SMEs. Singapore has aspirations to rival Hong Kong: it's interesting to speculate on whether they would do better to specialize, rather than competing on the same turf as Hong Kong. To some extent that's inevitable: Singapore can't rival the SAR as a Chinese gateway, and is evidently better placed than Hong Kong to be a gateway into India and Indonesia. Still, that hasn't stopped Singapore from setting its cap at the international renminbi market.

Perhaps it's unfair to penalize Spain, as I'm going to, for increasing VAT by a whopping three percent, when Prime Minister Rajoy was saying all the right things: get the regions under control, reorganize the civil service, privatize swathes of infrastructure. Well, words come easy. When he actually does those things he will get stars, but not right now. When he got himself elected recently there was no mention of higher taxes, union-bashing and the rest. It's only now, when he has no choice and the troika is breathing down his neck that suddenly they jump up the agenda. We shall see!

I didn't think that France could do anything more awful than it already has, but I was wrong. The honourable deputies duly waved through the new finance bill (just another EUR7bn of taxes this year), but we expected that. Now that the government is on a roll, it has put forward yet more suggestions for new taxes: a retroactive tax on overtime pay? ooh, goody, that's another EUR1.4bn we can spend on grands projets - how about a bridge over the Manche so that all the rich French who are now living in London can drive back to pay their dividend taxes? And what about increasing the portentously titled 'contribution generale sociale' (sorry, we don't do accents)? It's just a tax, after all, so it ought to be increased, non? And the lovely thing is that it will hit higher earners harder than the voters (oops, sorry again, I meant to say, the poor).

Hungary is going ahead with its financial transactions tax. What can I say? Obviously Mr Orban doesn't read this column. Nor does he seem to understand that joining the European Union was an act of submission. Post-imperial countries are always very conscious of their (ex) status, and in Hungary's case, as the junior partner in the Austro-Hungarian empire, this hunger for glorious autonomy is especially pointed. Austria seems to have become comfortable in its own skin, and has turned its imperial heritage into a tourist attraction. Well done! Not so hungry Hungary. Perhaps one must be charitable and allow that forty years under the Soviet yoke may not have been the very best medicine for post-imperial blues. OK; but now it's time to grow up!

Kitty's Encomiums and Execrations

Methodology: each week (this is the 11th) 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 – 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.

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.






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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