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Kitty Miv, Editor
24 December, 2013

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.

It's Christmas week, isn't it, so obviously lots of governments will be making goodwill gestures to their stressed-out, over-taxed citizens, to show how grateful they are for the tax money that pays for their big, black cars, the trips to G3, G5, G8, G20, G30 junkets in beautiful places with long-legged personal assistants and the rest. Well, let's see: Mexico is increasing the scope of VAT and has gone back on some promised tax reductions; Max Baucus wants to reduce energy tax incentives (increase taxes, in other words and am I seeing things, or does he have a double who's going to be the Ambassador to China – that definitely proves that the President has gone off the TPP); community taxes are increasing right across Belgium; and France (that traditional home of Christmas bonhomie) is going to scale back the increases it is planning to the electricity contribution (but not for households), after the politician piloting the latest Finance Bill through parliament admitted that the rises were "brutal." So, a savage sovereign Bah, Humbug is what we're going to get. Well, politicians know all about humbug, I suppose.

So let's keep looking. New Zealand is increasing the tax credits it gives to movie producers, which will help employment in the media, I suppose, although such people aren't usually the poorest in the community. That's not the reason for doing it of course: they simply have no choice, given that there is a race to the the bottom going on between a large number of countries and US states to attract "runaway" productions with incentives. Presumably the net result in tax terms is to reduce the amount collected; but it would be too Scrooge-like to point out that the Finance Ministry will therefore have to increase taxes to make up for it, so I won't. I will point out though that there are now quite a few business sectors in which corporate taxation is yielding to international competition: the media, as we have seen; intellectual property (with Patent Boxes sprouting all over the place like mushrooms); and the shipping/airline sectors, in which some very high percentage of planes and ships benefit from preferential tax regimes. And why? Because they can vote with their engines, and go elsewhere if they are not provided with incentives. This is not the first time that I have forecast the end of corporation tax in this column, and it is measurably closer today than it was a year and a half ago when I started writing for you.

Another candidate to go on that list of tax-privileged sectors would be R&D. Most countries give some sort of beneficial treatment to investments in technology, particularly start-ups, and this week's particular case is Italy, which will favor young entrepreneurs for the next few years. I do like the fact that there is positive discrimination in favor of women entrepreneurs of any age, while for men only the young ones are rewarded. Given how many Italian men are living at home with their parents, and not just young ones, I predict a rash of granny start-ups: so when in three years' time you see a statistic showing that Italy has the most innovative oldsters in the world, you'll know why. "Cherchez l'impot" is just as true as "Cherchez la femme." More generally, it's stretching a point to give Italy a prize this week; the Government is bouncing from one crisis to another, and it has no coherent policy for dealing with the country's woes, which include disastrously high unemployment, particularly among the young, and a debt level at the outer edge of sustainability which can only get worse in the forseeable future. The feeble performance of Europe's leaders this week over the formation of a banking resolution mechanism (like they have completely failed to construct a credible regime) reduces the chances of a successful Italian bail-out to nil. Given that Angela Merkel is clearly determined not to pay to save the south, and that getting decisive behaviour out of the German coalition will be impossible for the next few years in any case, even if the lady was willing, it seems to me that this is the time for Italy to cut loose. But it won't; so the show will continue towards some sort of European Gotterdamerung, and I don't mean at Bayreuth.

On that cheerful note, I will close my whimpering for 2013, wish you all a very happy holiday, and promise to be just as ornery in 2014. I'll try to be funnier, as well, but believe me, our masters do make it much easier for a poor hack like me to cry rather than laugh.

 

Kitty's Encomiums and Execrations

Methodology: each week (this is the 84th) two or three countries are given encomiums and two or 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 is on + 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, 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.

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:

Italy gives it to the grannies

New Zealand loves the lovies

And Kitty's Execrations:

Belgium soaking householders

France being "brutal"

Mexico in post-election blues

United States to hammer energy users

 

Ciao

Kitty



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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