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Keep the taxman out of matters to do with my health

Kitty Miv, Editor
22 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.

All in all, it's been a pretty bad couple of weeks for the United States if you believe, as I do, that small government is preferable to big government. On January 12, the Internal Revenue Service (IRS) announced that foreign financial institutions and national tax authorities could begin enrolling in its International Data Exchange Service (IDES), the mechanism through which information on the bank accounts of US citizens will be transmitted to the IRS under the insidious FATCA legislation. "But why are you so against FATCA?" I hear you ask. "FATCA will root out tax dodgers, therefore, you must support tax dodging!" No, I don't condone tax dodging at all. But I certainly do value individual privacy, and FATCA tramples all over it to find what is likely to be a relatively small handful of Americans who forgot, couldn't be bothered, or wilfully neglected to fulfil their tax obligations to Uncle Sam. At any rate, don't you think that those who fall into the third category and are determined to remain there saw FATCA coming (they had plenty of warning) and have made alternative financial arrangements? We might not ever know, but I'll bet they have.

A few days earlier, on January 8, the Treasury Department and the Department of Health and Human Services (HHS) announced that they will provide individuals with additional information and resources to help them report their health insurance status for the first time on their 2014 tax returns. On their tax returns? This sounds all very nice of people at the Treasury and the HHS, but it's starting to look like the IRS is staging a gradual takeover of US Government functions after having had its remit expanded massively by Congress in recent years. "Mission creep," they call it in bureaucratic circles. Or in the case of the IRS, "mission leap" might be a more appropriate description of the moment when the agency was tasked with administering large swathes of the largely tax-funded Affordable Care Act. With its 50 or so revenue provisions, the ACA is as much a piece of tax legislation as it is a reorganization of the US healthcare industry. And the taxes range from the whacky (the belly button tax?) to the sinister (the Orwellian-sounding "shared responsibilty payment"). Nevertheless, I'm not really sure what to make of Obamacare yet. Something needed to be done to lower the cost of healthcare, but the ACA just feels messy, with its 1,000 pages of legislation and tentacles stretching into all sorts of unlikely places. Free marketeers point to the failings of the UK's NHS as an example of why governments should butt out of health care. But, funnily enough, the Brits, who by and large are very proud of their health service, point to the failings of the almost-totally-private system that operated in the US pre-Obamacare to justify massive government spending on health. I suppose somewhere in between the two the answer must lie. Although, to be perfectly honest, I'd prefer to keep the taxman out of matters to do with my health.

Well, it looks like crunch time is approaching for Greece. Again. Voters go to the polls on Sunday in a snap election called by Prime Minister Antonis Samaras late last year which the left wing anti-austerity party Syriza looks set to win, according to opinion polls at the time of writing. What does this mean? Well, nobody knows for sure. Syriza's leader, Alexis Tsipras, thinks he can put an end to the four years of crushing austerity policies which have stifled Greece and locked it into a long-term recession while keeping Greece's international creditors happy and ensuring the country remains in the eurozone. This is probably music to the ears of a former public sector worker who lost her job as a result of spending cuts, or the small business owner facing a daily battle against the odds to stay afloat, and who can blame them? However, Syriza's platform sounds to me like the sort of "all things to all people" approach to government that helped to get Greece into this mess in the first place. And perhaps it is equally criminal to offer the people false hope. As a result, Samaras and his ministers have been filling the airwaves with warnings of Syriza's dangerous complacency with regards to the crisis. It is a strategy that is backfiring, however, as it has merely drawn attention to the precariousness of Greece's situation. Questions are being asked about how the Government, whoever is in charge of it, will meet EUR4.3bn of debt due in early this year, with threadbare reserves and without the support of new funding from the "troika." Syriza thinks it can bridge the gap by getting local banks to buy short-term bonds. Really? Apparently, about EUR3bn has been withdrawn from Greek banks by nervous depositors in the last two months alone, and last week it emerged that two of Greece's largest institutions have requested access to the ECB's "emergency liquidity assistance" program via their the Central Bank. So Tsipras might have to think again. What's more, clearly spooked, the markets are speaking, and their prognosis isn't good, with the cost of Greek Government debt once again on the rise. However, it's Samaras and his Government that get the execration here, with a promise to cut taxes if voters reward them with another term. If it sounds unrealistic it's because it probably is. What a very dangerous time to be playing politics!

The award for silliest tax so far in 2015 must surely go to Hungary, and it's going to take some beating I think. Most countries now provide tax incentives in one form or another to the renewable energy industry, while simultaneously increasing or creating new taxes on the use of fossil fuels. Yes, the jury is still out as to what the perfect environmental tax policy should be to reduce emissions of greenhouse gas, or, indeed, whether taxes work at all. But it's still an eminently sensible policy you might think, when you're trying to save the world. Hungary thinks rather differently, and in its wisdom has slapped an environmental levy on solar panels. This is because, says the Government, solar cells contain hazardous materials and are therefore difficult to dispose of at the end of their lives. The solar industry counters that panels are actually recyclable, and in any case, have very long lives, in the order of 40 years. This move says more about Hungary's desperation to tax anything it can get away with, in view of its fragile fiscal situation, than it does about its ministers' apparent lack of common sense. I refer you to the equally daft attempt last year to tax internet usage, which was quickly slapped down by the EU and brought Hungarians out on to the streets in protest. An environmentally-unfriendly solar panel indeed. I think I've heard it all now.

Kitty's Encomiums and Execrations

Methodology: each week (this is the 140th) 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.

And Kitty's Execrations:

Greece crunch time

Hungary silly

United States Dr. Taxman




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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