administrative convenience is a more important principle than judicial rectitude
Kitty Miv, Editor
08 May, 2014
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.
So the European Court of Justice, supposedly the guardian of the sacred freedoms of the European Union, has chickened out of one of the most important issues currently confronting the EU, at exactly the moment when it should have taken centre stage and erected or reaffirmed some principles for the Union to follow.
In recusing itself from any involvement in the structural legislative processes of the Union over the question of the Financial Transactions Tax, the Court has diminished itself and the Union, sending a message that administrative convenience is a more important principle than judicial rectitude. It will be many a long day before it recovers from this piece of egregious cowardice, if it ever does.
There are multiple theories to explain the court's behaviour (I hereby deprive it of its capital letter – it no longer deserves it), but the most seductive is that it has indeed been seduced by the Commission. The signs of its subservience to the administrative convenience of the rue de la Loi have been on the wall for some time, not least over its repeated failure to ban national electronic gaming regimes that flagrantly defy the principles of the single market, but after this disgraceful espisode the reality of the situation is no longer in doubt.
It is no secret that I am against the whole idea of a Tobin tax, but that is not the question at issue: the court was asked fair and square to say whether the process of establishing a variable geometry group of nations could be allowed when the consequences would be deleterious for excluded member states. It is irrelevant, whether this particular eleven-legged beast (which indeed doesn't yet exist) is itself legitimate or would offend against the EU's principles. That wasn't the question. All the court had to do was to consider whether and to what extent a variable geometry grouping could be allowed to damage the interests of other Member States. It seems fairly obvious that the answer has to be that no, it can't. So why couldn't the court say so? It's a no-brainer that the Commission has lobbied it heavily to step sideways, while continuing with its mad-cap plan to destroy Europe's financial sector. So much for transparency and probity in Brussels and Luxembourg. A plague on both their houses!
While the "authorities" stand passively aside, business interests in the two countries leading this coup de folie, France and Germany, make their opposition to the proposed tax very plain. We continue to hope and believe that Europe's leaders will avoid this piece of self-destructive craziness, but: "those who do not learn from history are condemned to repeat it." Not clear whether it was Edmund Burke, George Santayana or Winston Churchill who orginated the exact saying; but it certainly applies in spades to the current occupants of the economic thrones in Europe.
Well, after that rant, I'm allowed to be a little bit facetious, and I'll do it by imagining that the USA is going to change from using FATCA to enforce tax transparency to employing it as a way of punishing regimes that it doesn't like, starting of course with Russia, simply by refusing to agree to enter model IGAs with them. The result will be to garner 30 percent of US-source payments to FFIs in such countries, although you have to set those receipts against the tax which the IRS would have harvested in any case on the legitimately-declared income of overseas Americans. But is there such a thing? Some of them have already turned in their passports, others have migrated their bank accounts to places where the IRS can't find them; and even those who are submitting to the FATCA rules of IGA countries are presumably hard at work minimizing the balances and income flows that could get trapped under FATCA. So it's really easier for the IRS not to bother (try finding an IRS statement in favor of FATCA, which it must hate); the more countries applying undiluted FATCA, the better. So, Russia may be the first, but watch out for more to come. You read it here first.
One thing the USA is probably not going to do, unlike many other countries world-wide, and even next-door companion-in-arms, Canada, is to sell citizenship. It is a popular sport nowadays, although many people find something unseemly in the spectacle of white-gloved butlers ushering the rich into a national club by the front door while the great unwashed try to scale the walls at the back of the house, to be beaten back very often, sometime physically, or even shot. These people will not like the fact that the UK is dining out on tax receipts from so-called "non-doms," while deporting refugees and denying social benefits to legitimate immigrants from recent EU entrant countries. In fact there are dozens of countries with active programs to encourage incoming rich individuals: a recent report claims that the average incoming "citizenship" investor has net worth of a stunning USD200m. As ever, I am in favor of competition, and this seems an entirely healthy process, in which individual choice is improved, richer people get to subsidize poorer people, and investment is encouraged, although there may be some less beneficent impacts on the housing market. I would massively expand such top-end experiments to allow a worldwide market in citizenship: thus, citizenship in country A (warm, low taxes, good educational system, no conscription) would be worth X, while citizenship in country B (cold, high taxes, antiquated schools, compulsory military service) would be worth Y (a small fraction of X). The relative prices would be set entirely by a market-discovery process. Competition between countries to attract individuals would immediately become intense. There are some language issues, of course, but they are rapidly losing traction. Before you start back in horror at such a prospect, please consider that this is exactly what is already going on in the shadows: people make their choices based on the relative value of residence in prospective domiciles, but the process is extremely inefficient because they lack information, and, in particular, there is no feedback loop to influence the behaviour of governments. An open market would be far more transparent. And please don't tell me that the result would be a polarized world society with "rich" and "poor" segments – especially don't tell me that while you're in Hamilton, Bermuda, or the back-streets of Delhi.
Kitty's Encomiums and Execrations
Methodology: each week (this is the 103rd) 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 at neutral, 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. Etc etc and now it's on plus 1 again.
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.
United Kingdom charging entrances fees
And Kitty's Execrations:
European Union loses it
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