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punted into the long grass

Kitty Miv, Editor
08 May, 2018

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.

According to the conclusions of a public consultation by New Zealand's Tax Working Group, the majority of New Zealanders want major changes to the tax system. Who doesn't! Will they get them? Probably not – but why so sure? Recent history of tax developments, say over the last 20 years or so, is littered with discarded "root and branch" tax reviews, undertaken by panels of independent experts and other worthies, whose conclusions ultimately get shelved, kicked down the road, or punted into the long grass.

Furthermore, recent experience has taught us that the simplification of tax regimes isn't as simple as it first sounds. Few would argue convincingly that the US tax code is much simpler because of the Tax Cuts and Jobs Act, especially for individual taxpayers with their own business, which, apart from multinational businesses, tend to have the most complicated tax affairs. In fact, by all accounts, for some professions, the situation has gotten much worse, rather than better.

Across the Atlantic, the United Kingdom's Office of Tax Simplification has had eight years of simplifying time since its formation by the Government in 2010. However, here too, anecdotal evidence from tax practitioners and taxpayers is that tax legislation has got a great deal more intricate. But what do you expect with finance bills several-hundred pages long these days? Not that that's the OTS's fault. It's the Government's. Indeed, I propose renaming Her Majesty's Treasury "the Office for Tax Complication." I'm not sure how Her Majesty would feel about it, but at least it would be an accurate description.

So, New Zealand, perhaps you should be careful what you wish for. You're a country that is already highly rated by international analysts and investors on tax, regulation, and other factors, which have a bearing on how easy it is or otherwise to do business in a given jurisdiction. Indeed, the World Bank rates New Zealand as the best place in the world for doing business, and it's in the top-ten for ease of paying business taxes, according to PwC's Paying Taxes Index. Therefore, perhaps it's the case that there is considerably more scope for making New Zealand's tax environment worse than for making it better. This isn't to say that efforts shouldn't be made to improve things. And engagement with the public by government on any area of policy has to be a positive development. But, on the other hand, even simple tax regimes can have complexities, and maybe taxpayers at large are not best placed to know how to fix them.

Greece, on the other hand, is in urgent need of a tax overhaul, at least in the opinion of the International Monetary Fund, the OECD, and other international quasi-governmental organizations. Indeed, can there be a tax regime that's had more words written about it in the last few years? Even more, I would venture, than Japan's consumption tax. And that's saying something. But, if you're attempting to get up to speed with the Greek crisis – at least the taxation aspects of it – I could be about to save you a considerable amount of time. Essentially, all the coverage boils down to the following sentence: Greece needs to crack down on tax evasion and broaden its tax base.

This, essentially, was the conclusion of the OECD's latest report for the country, published in April, which said that Greece's tax system still relies on high rates and narrow bases – mainly due to tax evasion. It recommends further action to fight tax evasion through improved risk analysis, targeted tax audits, and strengthened incentives to encourage voluntary tax compliance. In short, much the same conclusion as the other innumerable reports on the Greek crisis. Indeed, if you swapped this report with one written in about 2010 or 2011, and scribbled out the date, few people would notice.

Still, there are some green shoots of economic recovery appearing in Greece after a long and grueling slog through fiscal austerity. Nevertheless, for investors, the country must represent a risky place to do business. As the country's creditors continue to apply pressure for tax reforms, this means taxpayers never quite know what changes might be lurking around the corner.

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

New Zealand engages

Kitty's Execrations

Greece risky



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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