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Let them starve, would be my motto

Kitty Miv, Editor
01 November, 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.

I wasn't quite sure about it when Hong Kong introduced its Mandatory Provident Fund ten years ago or so, because I am seldom in favour of anything mandatory, other than cocktails before lunch, but doubtless I am wrong. If there is a country on the planet which doesn't force its citizens to save for their old age, then it doesn't come to mind, but perhaps there is some beknighted corner of Africa that would qualify. If people are stupid enough to get to retirement without savings, then let them starve, would be my motto. That's what families and charities are for: it's no business of the State. But I am a lone voice crying in the wilderness, for sure. Anyway, the MPF exists, and Hong Kong gets a star for actually reducing the fees it charges its members. How many countries would do that?

The IRS has postponed FATCA, which is the next best thing to abandoning it altogether, and much as the IRS would always like to collect more tax, it must be thinking that there are easier ways of making a living. Given the enormous extra work-load that's going to be put on the agency next year as a result of ObamaCare and the last-minute dismantling of the fiscal cliff which will have to take place during the 'lame-duck' session of Congress next month, another load of bureaucracy under FATCA is the last thing it needs, so the top brass, whatever its private political persuasions, must be hoping for a 3-way Republican victory which would see the abolition of both ObamaCare and FATCA. Dream on, guys! It ain't gonna happen, unfortunately.

Turkey doesn't figure in my rankings yet, despite being equal in size to the fourth biggest EU state, economically speaking, and a key business hub for large slabs of the Middle East, so this week's announcement that it won't be bringing in any significant changes to taxation this year is a good opportunity to bring it on board with a star. Like China (well, not very like China, because Turkey is at least a democracy) we have to overlook some negative factors like Turkey's treatment of the Kurds, the Cyprus problem, Islamist influences, the Armenian denial, absence of free speech etc etc. But when you compare Turkey to its neighbours Syria and Iran it is a beacon of rectitude, and it is more business-friendly than many other countries in the neighbourhood.

Government spending is completely out of control in South Africa, and only massive increases in taxation have masked the problem. This year the deficit is reckoned to increase from 4.2% to 4.8% despite a 10.6% increase in tax receipts. These are really scary numbers, especially because the government seems to have no idea that it is heading for a crunch collision. The government says it is committed to real increases in spending of 'only' 2.9% per year. Inflation is running at 5.5%, so the government is planning to spend 8.5% more in cash terms every year. The Revenue Service has done a spectacular job of increasing tax receipts through efficiency improvements and the rounding up of more taxpayers, but these are once-off gains which have deluded the government into thinking that the river of gold will flow for ever. In reality, increases in public spending are notoriously sticky and extremely hard to reverse, even if there is willingness and understanding of the need for it, which is blatantly absent in the current administration.

I paid my garbage tax in Italy last week. It's not a vast sum of money, and the garbage crews (given that I live in the south, we don't enquire as to their - ahem - political affiliations) are timely and effective. But, and this is Italy to a T, the demand didn't come through the mail, but was delivered to my gate by an agent of the local government's garbage management service. Oh no, said my usual informant on matters municipal, they don't use the mail, they have their own postal service. Now how crazy is that? It's as if the IRS or HMRC had their own parallel post office, trudging down cart-tracks in the boondocks or the Welsh marches to deliver tax demands. Meanwhile the parliament is fiddling with Mr Monti's latest austerity package and looks as if it will succeed in making the various measures even more complicated to administer than they already are. And not a word about public spending, of course. I was amazed when a friend told me last week that he was on the way to visit his 'commercialista' (sort of combined accountant and business adviser) in order to set up a new, small business 'correctly'. I didn't say so, but that means he'll still be struggling with the bureaucracy in six months' time and he'll probably give up before he even gets started.

Nobody seems to be able to work out what the results are of the Australian government's carbon tax, imposed since July on a select number of larger companies, although it's at least clear that the government feels it's necessary to compensate 4m households for extra costs they are incurring, mostly perhaps through electricity bills; and felt it had to abandon the decrease in corporation tax it had promised to finance from its minerals resource rent tax. Publicly, the government denies that the carbon tax is responsible for price rises. Whatever the truth of the matter, it's indisputable that businesses are paying more, and consumers are having to be supported. This is called redistribution in my book and is business-unfriendly; so, an execration for the Gillard government!

Kitty's Encomiums and Execrations

Methodology: each week (this is the 24th) 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; 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.

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.

Kitty's Encomiums:

Hong Kong being user-friendly

Turkey is still growing

United States gets real

And Kitty's Execrations:

Australia bashing business

Italy fiddling while Rome burns

South Africa on course for fiscal disaster




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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