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the future does look bleak for the Brits

Kitty Miv, Editor
03 May, 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.

My, they really want Britain to stay in the European Union, don't they! In the last few days, we've had no less than the leader of the free world imploring the UK to remain in the EU. Then, the OECD – which numbers many EU member states within its own ranks – chipped in to the debate with its own dire warnings about the UK's future outside the bloc. According to this report, Britain can only lose by leaving the EU. In fact, even under the most optimistic scenario, the outcome would be worse that the staying in the EU, says the OECD, apparently unaware of the irony of that statement (i.e. EU membership is somewhat more favorable than terminal, albeit slow, decline). Gosh, the future does look bleak for the Brits, doesn't it!

President Obama was heavily criticized by Brexit campaigners for sticking his nose into a debate they say doesn't concern him, with the risk that the large contingent of undecided voters might be swayed towards the remain camp. London Mayor Boris Johnson for example remarked that it was rather rich of the American President to lecture Britain about the EU when the US wouldn't tolerate for one second the loss of national sovereignty implicit in EU membership. But you can't expect the President not to have a view on one of the most pressing political and economic issues of the day, especially as he was on an official visit to the UK. Otherwise, what was he going to say in response to questioning on the matter? "Er, sorry sir, I'll plead the fifth on that one?" And he was hardly likely to come down in support of Brexit when next on his itinerary was a meeting with Angela Merkel.

Amid the latest OECD scaremongering, another matter that must be worrying the OECD deeply is its inability to kill off tax havens, despite the two decades it has spent trying. In fact, another piece of irony that the Paris-based body's staff seems to have largely missed is that its requirement for ever-greater levels of transparency in offshore financial centers has made these centers more popular, not less. Certainly, this might not be the case in all OFCs, but yearly incorporation statistics and investment data certainly bears out the fact that many are doing very good business, thank you very much. Indeed, Guernsey has said that in certain places, including the United States, investors are actively looking for jurisdictions with good transparency track records. As OECD Secretary-General Angel Gurria observed in 2014, it is now up to the "big islands" to change, not just the little ones.

Staying with the theme of transparency, it was encouraging to see German Finance Minister Wolfgang Schäuble rebelling against European Commission proposals for public country-by-country reporting at the latest meeting of EU finance ministers, given the weight of Germany's voice in the EU. It's going against the grain these days to question the call for greater corporate transparency. And perhaps there's an argument that multinational firms could benefit from being more open about their activities from a public relations point of view, in much the same way as offshore jurisdictions like Guernsey have. Yet, as Schäuble suggested, there has to be a balance between "transparency and practicality."

As Schäuble pointed out to his counterparts in Brussels recently, publishing sensitive company information in the public domain could lead to all sorts of unintended consequences, such as "lining someone up to be pilloried publicly."

And finally, if something's too good to be true, it probably is. This, at any rate, seems to be the case for Finnish pensioners who have decided to see out their dotage in the mild climes of Portugal, at Europe's south-western corner. And who can blame them? I'm sure Finland is a beautiful country, but personally, if forced to choose, I'd rather spend my winters in the Algarve rather than on the Arctic circle, any day of the week.

However, thousands of Finns haven't been attracted to Portugal just for the weather; it may also have been a fiscal decision. Portugal offers retired foreign expats meeting certain conditions a very generous income tax holiday for the first ten years of their stay. Except that the Finnish Government got wind of this tax-free bonanza, and after years of nagging the Portuguese Government, it has finally got its way – an amendment to the Portugal/Finland double tax treaty. It's not immediately clear what the outcome of these changes will be. The pensioners in question won't know their fate for sure until the grisly details of the changes emerge at some point in the near future. However, it would appear that the amendment will give Finland the right to tax more of this pension income.

It seems a bit mean to drop this bombshell on someone who's slaved and saved hard for a comfortable retirement. But you can hardly blame the Finnish Government, can you? I mean, what self-respecting government misses an opportunity to double, triple, or even quadruple tax a person's income? If you're unlucky enough, you could be taxed when you earn it, taxed when you save it, taxed when you retire, and taxed when you die. But without tax, governments wouldn't have a reason to exist, would they...

 

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

Germany rebellious

Guernsey beyond reproach

Kitty's Execrations

United Kingdom warned

Finland mean

 

Ciao

Kitty



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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