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riding through the tough times and coming out good in the end

Kitty Miv, Editor
03 June, 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.

Bashing big business is de rigueur these days – an appropriate use of a French phrase considering the recent early morning raid by (reportedly) around 100 investigators and five magistrates on Google’s offices in Paris. Accusations of aggravated financial fraud and money laundering abound, linked to Google’s headquarters in Ireland.

That is quite a joint accusation against one the globe’s biggest businesses.

But it is no secret that France – with Germany – has long held a grudge against Ireland and its competitive business tax and streamlined regulatory environment. That grudge became most apparent when the Celtic tiger lost its teeth during the financial crash, and refused to budge on calls led by those two countries to increase its low (for EU standards) 12.5 percent corporate tax rate as a condition for a bailout.

While Greece had little choice but to up its taxes and accept unrelenting austerity, Ireland at least had global business interests to protect. Judging by how quickly, compared to other nations hit by austerity measures, Ireland has turned things around, it is perhaps little wonder that the likes of France would want to declaw the resurgent Celtic tiger to get some needed tax revenues into its own coffers.

The question, though, is whether throwing around what look to be unfounded accusations against a largely respected company would be an effective tool to achieving this. Perhaps this is France’s way of scaring other multinationals within its borders to cough up more taxes, even if they are playing by French and EU rules.

The matter was, unsurprisingly, raised during Prime Minister’s Questions in the UK Parliament in relation to HMRC’s own GBP130m deal with Google earlier this year. (France has made clear that such a deal will not be negotiated with Google.)

What is surprising is that the “leave” campaign in the UK’s upcoming referendum on EU membership did not seize on this as another example of an EU member state being quick to jump on the European Commission’s overreaching anti-BEPS bandwagon. Which in turn is undermining big business in the Union, with all the associated economic threats to inward investment from major players like the US – that big trading bloc just across the pond, which is already concerned about Commission state aid investigations raising unexpected, backdated tax bills on US multinationals, and about the exposure threat of public country-by-country reporting requirements.

This becomes more pertinent in relation to Northern Ireland, which is seeking to break away, in tax terms, from the rest of the UK and reduce its corporate income tax rate to 12.5 percent (i.e., the same as the Republic of Ireland). There are already mutterings among some EU member states that the UK is gaining an unfair advantage through its own much reduced corporate tax rate (with further reductions on the way); the volume of noise around this can only increase once Northern Ireland reduces its rate much further. I already anticipate the term “tax haven” being thrown around by certain other EU member states, and calls for the UK, just as has happened with Ireland, to “play fair” and be rid of such “uncompetitive” measures within its own territory.

France, of course, could simply reduce its own heavy tax burdens on businesses large, medium and small and lighten its regulatory grip to better compete. It has, as reported in this very column only two weeks ago, begun a tax reduction programme, but it pales against the more robustly competitive and globally receptive UK and Ireland. That’s not to say the UK is perfect – far from it; Prime Minister David Cameron’s own stance on tackling BEPS and bringing low-tax jurisdictions into line is raising concerns for businesses. But Britain has a habit of riding through the tough times and coming out good in the end, by being predominantly pro-business.

In France, sadly, that is not the case. Yes, it is a country rich in culture and cuisine, and for that it cannot be faulted. But you’d think by now it would have learned that high taxation and having an ivory tower moral stance on the matter rarely make for a good, all-round business environment.



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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