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guarded optimism has turned to outright alarm that Pandora's box has been opened

Kitty Miv, Editor
29 December, 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.

Last year belonged to the OECD, surely? From before the Lough Erne G8 leaders summit and until and after the Cairns G-20 Finance Ministers show, the airwaves and the blogosphere have been dominated by the OECD, the G8, the G20 and their BEPS agenda. At first the international business community was respectful, if cautious, agreeing that something needed to be done. A majority of senior commentators were in favour of the initiative, although worried that the time-scales were very challenging, and pleading that damage should not be done to the intricate apparatus of international business taxation as reflected in tax treaties. A year later, this guarded optimism has turned to outright alarm that Pandora's box has been opened, and that only harm can come of the BEPS initiative; a senior business leader in one of our featured news stories above reports that a mere 23 percent of 2,500 businesses think that there can now be a good outcome.

In one of our news analyses this week, we point out that the reasons for the failure of so many of the EU's brilliant ideas is that they are hatched away from reality and brought to their poisonous fruition in a hot-house atmosphere by people who have no direct connection with business, or even in many cases with politics. Well, if that is the case with the Brussels bureaucracy, it is true in spades of the OECD, the G8 and the G20. These organizations have no substance: they have no citizens, no polling booths, no shops, navies, coal mines (my dear, imagine the dirt!) or cemeteries. They have wine cellars, it is true, very nice ones by all accounts, and they have secretariats, by all means, stuffed with interns, professors on sabbaticals, and career diplomats on secondment. Flunkeys they have in abundance, of course, and they have giant budgets willingly provided by their component nations, whose leaders have given up the effort to work out what to do for themselves.

How has it happened that we have put ourselves in the hands of these self-important, destructive cuckoos? There is no one answer to that question, although I am going to attempt some partial answers, while on the way to a discussion of how it might still be possible to draw back from the ultimate fiscal and economic disaster which is about to overwhelm large parts of the developed world.

We have to begin with the dawn of the age of the intern, roughly thirty years ago, with the politicization of legislators and the final divorce of government from economic sanity. Ronald Reagan and Margaret Thatcher were the last two Western leaders who had any real grasp over the actual running of a country. The interns "disease," as we may call it, was already biting hard, but it took until roughly 2000 before governments around the world had fallen mostly into the hands of a political class of "operators" who when they came into power naturally reached out to the "think-tanks" and the "multilaterals" such as the OECD for their policies, having none of their own. It is unfortunate, but may have been inevitable, that the period of "government by proxy" that ensued was one which saw a largely left-wing set of leaders in power, while at the same time the level of "bread and circuses" (let's call them entitlements) grew beyond the capacity of governments to finance them. The result, whatever mechanism was involved, was the emergence of a new fiscal revenue-raising paradigm that threw all restraint out of the window, and has now become the norm for all parties in all countries. Don't forget that the interns now spend all of their time with each other and none with you and me. When was then last time that you heard anyone praise individual wealth? or entrepreneurial achievement? (except on The Apprentice, of course, where the business world is treated as just another aspect of the shadow-play that dominates our economic lives).

Well, that has been quite a diversion through territory you may not have been expecting, but it brings us back to terra firma. The first thing to do is to get rid of all the shadow people and their organizations. Send them back to the universities and institutions they came from, where they can continue to win imaginary prizes for scratching each others' backs. As for our elected leaders, the second thing is that we need to tell them to stop spending money, and in particular to stop getting into debt. If we don't do those two things, then within two to three years the fairies will have succeeded in destroying the laboriously constructed international business house which sits today protectively over the heads of cross-border traders big and small, and it will be open season for every government inside and outside the OECD to take what it fancies under any old pretext, and fight it out in court with any taxpayer who is rich enough to stand up for themselves. If you doubt me, then just look at the behaviour of the British Government over the last two weeks, which has cast off the last fig-leaf of legal propriety and is allowing and perhaps even encouraging HMRC to introduce a series of ever more Draconian anti-business laws. By now, it probably calculates, might is right, and it will get first mover advantage, while other countries, which are in an even worse fiscal state than the UK, will have to play catch-up and won't dare to be as grasping as Perfidious Albion. We can expect to see Italy and France, both of which are going to be in desperate need of assistance from the unmentionables, persist with the statist game whatever the colour of their Governments. Russia now finds itself in the same camp, unexpectedly enough, although it has had a bad year in terms of international trade rules. So, execrations for all four of them. Australia, which is by now a sort of pallid resource reflection of China, hardly has a short-term future at all. Most of South and Central America has been practising being anti-internationalist for so long now that it should be becoming almost second-nature for them. India has lately shown the world just what it thinks of international law; so no surprises in that direction.

There is one remaining question that niggles me. If everyone is accounted for, then who is left to pull the trigger? Ah, Uncle Sam. But if the Hill takes as little notice of the OECD as China does (it's based in Paris, remember), then not much is going to happen. Few people would by now remember that the OECD got its start as a kind of classy, unbiassed Governmental Research Office, and the odd thing is that turned into an anti-business organization, captured, like all the budding leaders, by the Great Heresy, when you might have expected the opposite. Why then is it that international business has failed to form its own voice in the last 30 years? That's inexplicable. OK, there are all those Pink Wombat Associations, Rotarians, fraternities with Greek names and such-like, but they don't amount to a hill of beans. Not even jelly-beans.


Kitty's Encomiums and Execrations

Methodology: each week (this is the 137th) one or more countries are given encomiums and one or more 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 minus 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; 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.

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.

And Kitty's Execrations:

Italy And France for sucking up to the fairies

Russia not sufficiently unfriendly

China for not being able to find Paris on a map



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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