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Why do the nations so furiously rage together?

Kitty Miv, Editor
26 July, 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.

In lumping Continental countries into a bag called 'statist' it's often forgotten that historically, say over the last 40 years, Germany and Denmark at least have far more often been on the side of pro-market initiatives than in the protectionist camp. Not so the European Parliament which is a Bad Thing writ large: anti-market, crazy left fringe, consumerist, green etc. So Mrs Merkel's support this week for a free trade agreement between the EU and Thailand is a welcome reversion to type. It's not enough to make me forgive her for supporting the financial transactions tax, but then everyone knows that's not going to happen; you might as well blame The Pope for being against contraception.

Why do the nations so furiously rage together? (Acts 4:25-26; and of course the Messiah). Indeed. So we must welcome examples of international co-operation, which heaven knows are few and far between. There is the Barenboim's East-Western Divan Orchestra playing Beethoven's symphonies this week at the Proms in London (although that is not the nations working together; it's their citizens. And no, they don't play while reclining on sofas; 'divan' means collection of poetry). But my encomium is for Australia, which is giving tax relief to Italian earthquake donations. That's heart-warming, but why, though? There have been earthquakes in plenty of other countries lately. And, correct me if I'm wrong, but I don't think I noticed the Italian government giving tax relief for donations to Australian flood victims last year. Perhaps there are a lot of Italians in the Australian parliament.

The USA and Canada don't do a lot of furiously raging together; their spats are usually conducted in very polite terms, as witness the dispute over Canada's timber exports to the US, which have lumbered ponderously along for at least five years, and may, just may, have reached a conclusion which both sides accept, even if with some reluctance on the part of the US. The important point is that the parties accept the rule of law, and have fairly punctiliously stuck to the required procedures during the various stages of the long-drawn-out game. That is not always the case with international trade-squabbling: all too often the participants game the system mercilessly on the principle that, the more you ask for the more you get. But that is not a good idea in principled negotiation. Although countries are not people, their negotiators are, so that concepts of fairness and the tendency towards altruism can operate even at national level. 'Beggar-my-neighbour' is not a successful strategy in international affairs. More likely you will beggar yourself.

When I read that UK Treasury Minister David Gauke thinks that paying cash to someone for a service is 'morally wrong' on the grounds that they may or may not pay tax on the money, I automatically assumed that he was a LibDem - no Conservative could mouth such an illiberal sentiment, surely? Wrong. He is a Conservative. But of course I was forgetting that he is in the Treasury, where they believe as an article of faith that every single citizen outside Whitehall (and a good few within it) is a criminal. Well, I have news for Mr Gauke: it's he that is the criminal; he and every other Treasury denizen that subjects British citizens to extortionate, grasping tax rates to raise money to be spent on futile, wasteful redistributive programs. He should be ashamed of himself. Perhaps the hostile response to his gauche remark may convince him that he was wrong, but don't count on it. They are all petty tyrants in the Treasury, and exceedingly arrogant besides. As for Mr Gauke, he is already dead meat.

You know what a GAAR is? It's an ugly name for an ugly thing. It means that when a country can't maintain a tax regime that is acceptable to its businesses, it gives itself powers to take (steal) money wherever it chooses. The very words themselves tell the story: it isn't a 'General Anti-Evasion Rule'; it's an Anti-Avoidance Rule'. There is nothing wrong with tax avoidance, if done within the law. So a rule that is against it is against natural justice. Possibly, just possibly, in a country where the rule of law is clearly and firmly established and the courts uphold the law regardless, a GAAR can be justified. The UK is going to have one, as a poor substitute (as an enforcement mechanism) for lower taxes. But India's proposed GAAR is a mere cover for incompetence and graft. We may call it a Robin Hood tax: let's take money from the rich and give it to the poor. Not that they will give it to the poor in India; they will give it to themselves. 'They', the rich governing classes, need to shrive themselves before they start flaying the international companies that employ their poor.

Shame on Switzerland for falling over and playing dead on the issue of OECD group information exchange. I suppose it's because it wants to solidify its deals on withholding taxes with the source-countries of its richest clients, which enshrine privacy, or so it hopes, and doesn't want any aggravation with the OECD in the meantime. But it wouldn't have been the first time that Switzerland was prepared to refuse an OECD ruling. Just to be clear, under the OECD's new and unacceptable rule, a country can ask for information about a group of people identified only by their characteristics and not individually names. 'Fishing expeditions' are still not allowed, but who needs a fishing expedition when you can just explode a mortar bomb in the river and kill everything living in a 100m radius? How about: every Russian national? every client with a bank account in the BVI? Let's hope that the Swiss people demand a referendum (as they can) and put up two fingers to the OECD, which has become one of the nastiest organizations on the planet.

Kitty's Encomiums and Execrations

Methodology: each week (this is the 12th) 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 – 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.

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.






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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