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some countries don't like the European way of doing things

Kitty Miv, Editor
12 October, 2015

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.

It is claimed that the BEPS project is a global initiative, built on a worldwide consensus of OECD and G20 members, and other key economies. That's true to the extent that these countries are regularly heard to pay lip service to the work of the OECD in all its anti-tax avoidance endeavors. But when you look a little closer, there are stark similarities between the OECD's work and Europe's vision of what worldwide corporate taxation should look like. Perhaps this is not surprising, as, after all, the OECD and its 2,500-strong team of technocrats, administrators, and academics are based in Paris. Indeed, Pascal Saint-Amans, one of the main supervisors of the BEPS project, is a former French civil servant. And the fact that 25 of the 34 OECD member countries are in Europe will naturally give much of the OECD's work a European flavor.

Some of the BEPS proposals reflect recent EU tax initiatives, particularly with regards to corporate transparency, VAT on digital services, and harmful tax regimes. This could be the BEPS project's downfall; some countries don't like the European high-tax, big government way of doing things. And when Europeans come preaching their brand of social democracy, hackles rise in Washington. True, we're talking about a Government that foisted FATCA on the world, but there seems little appetite in the current administration for the BEPS project, judging by the comments of Robert Stack, the Treasury's deputy assistant secretary for international tax affairs, who professed his "extreme disappointment" with the BEPS outputs at the OECD Tax Conference in Washington in June, adding that he was "shocked and appalled" at the attitude of tax administrators and their thirst for more power over taxpayers. Orrin Hatch's and Paul Ryan's recent comments on BEPS would seem there'll be even less appetite for the OECD's BEPS recommendations if a Republican President joins the GOP majority in Congress from 2017.

It must also be somewhat irritating for the OECD and the EU that offshore financial centers, said to be "major facilitators of BEPS" with their "harmful" tax regimes, refuse to die in spite of its two-decade campaign to wipe them off of the world's financial map. Indeed, many of them seem to be getting stronger. There have been more examples of this in recent days: the Mauritius Financial Services Commission published its 2014 annual report recently, showing healthy growth in the territory's financial services sector; the Financial Times' Banker magazine named the Cayman Islands as the world's top specialized financial center for banking; and the Channel Islands Securities Exchange announced the first listing by a company with its ultimate parent in China. Indeed, the rate at which offshore structures located in jurisdictions such as the British Virgin Islands and the Channel Islands are used to channel investment out of and into China suggests they will remain important cogs in the world's financial machinery for a while longer yet. 

India is another country that benefits from these financial flows, and is also a country making frequent appearances in this column. But why wouldn't it when life there is rarely dull! Recently, Prime Minister Narendra Modi's Government has been re-building bridges with foreign investors burned so disastrously under the previous regime, and it appears to be keeping up the good work. After clearing up the minimum alternate tax issue in September, the Revenue Department commenced a new dialogue with business representatives to help it shape future tax policy in a more appropriate way. Indeed, the fact that the Finance Ministry is now prepared to think "out of the box" (its own words) on tax policy demonstrates how fast attitudes are changing. Further evidence was witnessed recently when the Government – at long last – appointed an arbitrator to help bring to a close its damaging tax dispute with Cairn Energy, signaling a long overdue softening of India's position in the case. All that needs to happen now is a fundamental overhaul of India's indirect and direct tax regimes. Okay, I'm getting a little carried away. Still, delivering the GST, which is almost near the finish line, would probably be an achievement enough. Perhaps we're asking too much from the Government to deliver the latter.

Finally, I've mentioned before how UK Chancellor George Osborne is something of a policy magpie, claiming some of the opposition's better ideas for himself, and in doing so further condemning them to live in the electoral wilderness. So I couldn't resist mentioning the Chancellor's latest act of political piracy: his proposal for the the devolution of business rates (the equivalent of local business taxes in the UK) to local governments. It seems like a good idea, because it will allow councils to set their own business rates, hopefully leading to cuts in this much-maligned tax. However, it didn't work for the Labour Party when they included it in their last election manifesto – a proposal criticized by the Conservatives at the time – with the Party promptly trounced at the ballot box. But then Osborne seems to have the Midas touch at the moment. One wonders whether he can sustain it for another four or five years, at which point the governing Conservatives will be choosing a new leader – perhaps then he'll be in line for a promotion to the top spot.


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

United States defiant

Mauritius healthy

India out of the box

United Kingdom decentralizes



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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