Talk The Talk, Walk The Walk

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.

The Affordable Care Act – or Obamacare, as it is more popularly known these days (I suspect more disparagingly rather than affectionately) – is still a hugely divisive piece (or, to be more accurate, pieces) of legislation that highlights the ideological schism separating most Democrats from most Republicans in the United States, probably more than any other. It’s something I’m not going to pass judgment on here directly, except to say that the health care reforms are hugely expensive; involve a lot of taxes (about 50 of them); and perhaps could have achieved the same goals in a less clumsy way. One particularly ill-thought-through measure is the medical device tax. Obamacare’s supporters might argue that it is only right that big pharmaceutical companies pay a small portion of their mega profits to help the needy access health care. Except that the medical device tax isn’t a tax on profit; it’s a tax on revenue. And small companies pay it too, regardless of whether they’re profitable or not. It can’t be very helpful to the cause of innovation in the healthcare sector, or the advancement of medical science, if companies are forced to use money earmarked for the research and development of new medical devices to pay this tax. It’s also encouraging US medical device makers to – using one of President Obama’s favorite phrases – ship jobs overseas, with numerous firms said to have already established operations in lower-tax jurisdictions, or they are now actively considering such a move. According to Senator Patrick Toomey (R – Pennsylvania), the Chairman of the Senate Finance Committee on Health Care, 55 percent of clinical trials are now being conducted overseas, and most novel medical devices are now launched outside the US. The fact that Democrats have in the past joined Republicans to seek repeal of the tax suggests that it’s not just the medical device industry that thinks it was a bad idea. So I suppose the House of Representatives deserves an encomium for voting to scrap the tax, if only because it shows that the two sides can agree on something. Unhelpfully, the authors of the bill have neglected to say how the lost revenue will be offset. And this will give President Obama further justification for wielding the veto over this particular law.

In the beginning, when the internet broke out from its traditional role as a communications device for academics, college nerds, and the US military, offshore was predicted to be the center of the e-commerce universe. By locating websites offshore and in low-tax jurisdictions to carry out functions previously based in high-tax jurisdictions, businesses would be able to take advantage of low rates of taxation for increasingly substantial parts of their operation, or so the theory went. Indeed, in many cases, there’d be no need to have a presence “onshore” at all. Obviously, most internet-based businesses have taken full advantage of their almost ethereal presence to pay less tax in places like the US and Europe, and the world’s governments are only now starting to catch up. However, while many offshore jurisdictions talked the talk during the early phases of the growth in e-commerce and the digitalization of services, announcing grandiose plans to become the next e-commerce hub, very few actually walked the walk, and only a select few have been prepared to back up words with solid investment in telecoms infrastructure. The Isle of Man can be considered part of this offshore e-commerce elite group. Indeed, the jurisdiction’s telecommunication systems are probably among the most advanced in Europe, if not the world. I bet you didn’t know that Manx Telecom was the first European operator to launch a 3G mobile service and the first in the world to launch a 3.5G mobile service? And the island’s telecoms infrastructure is now so resilient it has almost magical “self-healing” properties in the event of a failure somewhere in the system (called the Tolkien-esque “self-healing ring” by the Government). It’s certainly an investment that has paid off, for the e-business sector now accounts for 20 percent of the Manx economy. The island isn’t resting on its laurels either, having announced its new digital strategy, which, appropriate enough, was published online last week. It remains to be seen how BEPS affects places like the Isle of Man. Nevertheless, the island is showing the world what can be achieved in the area of technology with a well-thought-out digital strategy backed up by serious investment.

Kitty’s Encomiums

United States unites

Isle of Man digitizes

Kitty’s Execrations

European Union harmonizes

Ciao

Kitty