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Neither could remember whether they had ever eaten one

Kitty Miv, Editor
31 May, 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.

The UK wins this week's first encomium for abolishing a tax. Mind you, the government hadn't much choice after it was heaped with ridicule during 'pastygate'. In England, pasties are a rather down-market food often bought by poorer people hot from take-aways, big on pastry and potato, with a token piece of meat hiding somewhere in the middle. Operators of take-aways said they would let the pasties cool off before selling them (avoiding the tax) and install diy ovens for customers to re-heat them. But the best was that neither the Prime Minister nor the Chancellor (both seriously rich toffs) could remember whether they had ever eaten one. Probably not!

Like the UK, the Philippines, another island nation, may not have had too much choice when it decided to remove the tax on airline turnover, which had caused every single airline to abandon its direct long-haul flights from the Philippines. Unlike air ticket taxes, this one bears on the airlines and not their customers. So people end up having to take a shortish hop to say Hong Kong and then fly on to London or New York. So far the bill has just passed the House of Representatives, but it's a racing certainty that it will go the whole way.

I am half-hearted in giving the week's third encomium to New Zealand, which unveiled a budget which will see fiscal surpluses from 2014 onwards, although taxes rise rather than fall in order to achieve this. No country will be able to offer business or its citizens a happy home unless it gets its debt under control: in New Zealand's case the debt is topping out at just 40% of GDP, compared with the stratospheric levels of more than 100% for some Old World countries, and the government says it will be able to start reducing debt in 2015. I would have preferred to see the government take the axe to public spending, of course.

As usual, it's a lot easier to find candidates for execrations than encomiums (governments seldom act in the interests of their citizens), but from the embarras du richesse on offer this week I'll take my first pot-shot at Germany, which is refusing to reduce the level of its air travel tax, using as evidence an analysis produced by the finance ministry, and this just days after the Transport Minister said he was open to a discussion on the subject. The finance ministry always wins, of course, in Germany as elsewhere. It disputes that people in border regions are choosing to fly out of neighbouring, cheaper airports, on the grounds that overall traffic has gone up,which is laughable. These taxes, which are very prevalent in the EU, are a direct attack on the freedom of movement of individuals, which is one of the EU's most basic principles, and one of the few areas in which it can really be said to have made a difference. Why doesn't the supine ECJ ban them?

The week's most egregious behaviour comes from Spain (again!), which has dug around in its statute book for laws which will allow it to extract tribute retrospectively (hated word!) from two offshore gaming companies, Bwin (based in Gibraltar, hmmm) and Sportingbet, based in Guernsey, by applying a tax to their Spanish turnover which was originally intended to cover offline gaming. The companies will cough up, because they want to be given licenses under Spain's new gaming law. As in a number of other EU countries, this law attempts to force gaming providers to do so through Spain-based servers, and/or to tax Spanish transactions routed through offshore providers. Such laws drive a coach and horses through EU single market principles, and it is a tragedy that the ECJ is standing by with its arms folded during this destruction of hard-won freedoms.

Now I'm going to be retrospective myself and award a black mark to Italy for its new and improved tax on residential buildings, called IMU, which first bites in July. Among all the tax rises in Europe this year, it has the biggest effect, intending to draw in an extra EUR10bn a year. That's massive, and it's an increase, not a rearrangement. The Italian press is full of the screeches of small businesses, which say they are the highest taxed in Europe: why does the supposedly wise and technocratic Italian government think that increasing tax is the way to help taxpayers? Will more houses be built or enlarged? Will people save more? The Italian state is a byword for inefficiency, feather-bedding and, sad to say, corruption. I caught a train the other day from a provincial Italian station which sees all of three trains an hour, and there were eleven railway staff members dotted around with no visible occupation other than to sell the occasional ticket (no ticket machine, needless to say) and wave a red flag once every 20 minutes. Yet no member of any government, technocratic or otherwise, has the balls to talk about privatization or cost-cutting.

Kitty's Encomiums and Execrations

Methodology: each week (this is the fourth) 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 0, since in the second week it had an execration and in the first week it had an encomium; since it has an execration this week, it will drop to – 1 for next week.

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.

Kitty's Encomiums:

Canada 1

Dubai 1

Hong Kong 1

Ireland 1

New Zealand 1

New Zealand surpluses in sight!

The Philippines 1

The Philippines takes off a tax

Russia 1

The United Kingdom flees from pastygate

In neutral territory:

Australia 0

Germany 0

And Kitty's Execrations:

Germany against freedom of movement

Hungary – 1

India – 1

Italy shooting itself in the foot

United Kingdom – 1

Spain – 2

Spain puts the shackles on betting

United States – 2



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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