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one person's whistleblower is another person's thief

Kitty Miv, Editor
15 August, 2016

Kitty's Country Rankings are below, with a description of how they are compiled. 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.

Here we go again. Another moral dilemma in government. The German state of North Rhine-Westphalia has disseminated personal financial information belonging to 160,000 suspected tax evaders to 20 countries, presumably all over the world. Was it justified in doing so? Some people might see this as a black and white issue, an open and shut case whereby tax evaders should be punished regardless of the means of capture. For me, however, this is a very gray area.

The statement which accompanies NRW's announcement doesn't go into too much detail about how it came about this treasure trove of information on Luxembourg bank accounts. It only mentions an anonymous source. Given these leaks are hardly unprecedented, we are to assume that a familiar sequence of events occurred. The whistleblower in question, likely an employee of a bank with a wealth management arm, or a former employee of one, felt morally compelled to fill up a USB stick with bank account details of mainly wealthy people that, the allegation goes, have invested in structures to help them evade tax. Said details are then passed to a tax authority, in this case the NRW tax office, who throws the book at the exposed offenders.

I'm choosing my words carefully here though, because you could equally look at this chain of events a different way. A disgruntled employee/ex-employee of the bank in question, in flagrant disregard of data protection and confidentiality laws, willfully stole sensitive personal financial information of a huge number of people, some of whom may have avoided/evaded tax, but many of whom may be perfectly innocent. Complicit in the crime, tax authorities willingly receive and share this private information, in effect handling stolen goods. And they may pay the perps handsomely for the privilege.

These are two very different interpretations, and I've got a feeling if you are inclined to believe the latter, you're in a minority these days. But where do you draw the line? When is it appropriate for the privacy of the many to be compromised to winkle out the law-breaking few? And what sort of example are governments setting when they are prepared to set aside laws that they expect the majority to abide by in pursuit of the bad guys? A moral dilemma, indeed. But I suppose one person's whistleblower is another person's thief.

Here's an interesting one. A government prepared to share the bounty of its natural resources directly with the people, instead of hiving off the proceeds to spend on vanity projects or various other things generally disliked by the citizenry. I refer of course to news that the UK Government is considering sharing some of the tax revenues derived from shale gas sales with residents living close to fracking sites. At first glance this seems like an uncharacteristically generous, yet reasonable, thing for a Government to do, given the potential for disruption to peoples' daily lives as a result of local fracking operations. But then again.

Fracking is hugely controversial, and while some countries have forged ahead with the shale gas revolution in the name of energy security, it seems that nobody really knows what the long-term environmental consequences are of blasting the living daylights out of the substrata with a mixture of toxic liquids. And for countries with a high population density like the UK, you could say that it is especially important that we find out.

With the UK's North Sea oil and gas fields becoming increasingly marginal, and the country more and more reliant on gas imports from Norway, Russia, and the Middle East, the UK Government's pragmatism regarding fracking and shale gas is understandable. However, its profit-sharing offer does have the whiff of bribery about it. Usually it's poor people who are affected by the blight of mineral extraction. This time, it's middle-class home owners in the heart of England's green and pleasant land. The type of people likely to vote Conservative, in fact.

Well, I never thought I'd see the day. No, don't worry, I haven't taken leave of my senses and put the family fortune into Bitcoin. I'm referring to the approval by India's Rajya Sabha, the upper house of parliament, of legislation that will, hopefully, pave the way for the introduction of a national goods and services tax system.

It's not often that a new tax should be so celebrated, but the GST isn't just a victory for simplification (well, almost at three taxes in one). It's also being seen as a major triumph for the BJP Government and its reformist credentials. Certainly, it has taken Narendra Modi's Government two tortuous years to get to this point, even though it was one of its top priorities. But it has accomplished far more in those two years than the previous administration – whose idea GST was – had achieved in more than 10. However, where India and taxation are concerned, things are rarely straight forward. This isn't a done deal yet. The Constitutional Amendment Bill passed on August 5 lays the groundwork, but the architects have yet decided on some key features of the structure. For a start, there is just the small matter of the state and central governments getting together to agree GST rates, while various other key parameters like registration thresholds and exemptions have been kicked down the road. What could possibly go wrong!

Staying in the subcontinent, Sri Lanka has had its fair share of problems in the recent past, including a protracted and brutal civil war, which left many innocent people on this beautiful island terrorized. But it's good to know that a nation state with legal checks and balances still functions. At least, that's the impression I got when reading of the Supreme court's decision to throw out the Government's four percent VAT hike. At a time when certain governments feel justified in making far-reaching changes to tax rules without the consent of the legislature, or certain countries can change their political leadership at the drop of a hat without the consent of the electorate (no names, no pack drill), little Sri Lanka could teach the West a thing or two about democratic government!


Kitty's Encomiums and Execrations

Methodology: each week (this is the 147th) 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.

Kitty's Encomiums

India on the cusp

Sri Lanka checks and balances

Kitty's Execrations

Germany double standards

United Kingdom dubious




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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