there just aren't enough hours in the day to do everything yourself
Kitty Miv, Editor
07 December, 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.
Well the plot just thickens, doesn't it? Last week we learned through the work of the European Commission and its investigations into "sweetheart deals" between national tax authorities and multinational companies that as a result of two tax rulings issued in 2009, fast food chain McDonalds was permitted by Luxembourg to not pay any corporate tax there at all. And on whose watch was this allowed to happen? Why, only Jean Claude Juncker's, the current President of the European Commission! In fact, not only was Juncker Prime Minister of Luxembourg at the time of the ruling, he also held the Finance Ministry and Treasury Ministry portfolios during 2009, albeit successively rather than concurrently. Still, in the language of law enforcement, you could say that Juncker's fingerprints were all over Luxembourg's economic and tax policy during the period in question. So why didn't he know anything about this and other rulings? And, if he did, why is he now suddenly diametrically opposed to these so-called comfort letters? Perhaps it's best not to try and ask the man himself. I suppose the answer has something to do with the fact that he is a senior politician. Being a Prime Minister or President is a demanding job (no, I'm not being sarcastic – I wouldn't want to do it!), and unless you plan to spend four or five years or more without sleep, there just aren't enough hours in the day to do everything yourself, which is why leaders delegate. But by delegating they often lose touch with what's happening on the ground, and sometimes when their subordinates screw up, they are the ones left with egg on their faces. So I can understand why Juncker would be largely in the dark about these tax rulings. And, no matter how principled one is, politics is almost the dictionary definition of compromise. As the Oxford English Dictionary defines it, "politic" is: "(Of an action) seeming sensible and judicious in the circumstances." The EU's approach to tax rulings, and indeed corporate tax in general, might not appear "sensible" and "judicious" to some of us, but Juncker is probably being a sensible and judicious politician for the role he now plays.
From judiciousness to matters judicial, we now come to the case of Hervé Falciani, who was jailed, in absentia, by the Swiss Federal Court last week. He's the one who gathered (some say stole) information on 130,000 clients of HSBC bank in Switzerland while he was a systems engineer for the firm, before passing it on to the French Government, claiming the individuals he exposed were dodging taxes. France then forwarded the information, pass-the-parcel fashion, to other governments. Some, including HSBC, allege that he did this for personal profit. Others, including the man himself, say that it was a selfless act designed to bring wealthy tax evaders to account. So is he a hero or a villain? I suppose that depends on what the man's true motives were, and I suspect we'll probably never quite get to the truth on this matter. Either way, in my view, he deserves to get punished, even if he's unlikely to ever to receive it. Because, surely, a crime has taken place here, right? I find it very unlikely that HSBC gave Falciani permission to copy those files and pass them to a third party. As I've said before, tax evasion is wrong and deserves to be punished. Equally, receiving stolen goods is also a crime, especially if one has knowledge of their criminal provenance, and no matter how much governments attempt to dress up their dealings with the Falcianis of this world as being for the greater good (let's not forget that money has exchanged hands between those accused of data theft and tax authorities in previous similar cases), two wrongs don't make a right. What's more, how does Falciani know that all 130,000 are guilty of something? How many innocent people have had their private financial information proffered around Europe — and who knows how many other countries too? So well done Switzerland for keeping your head when all those about you seem to be losing theirs. And another thing, the EU will bend over backwards in an attempt to force its will on sovereign states when it suits it, especially in the area of tax – but there's currently no legal arrangements in place to extradite criminals from France to Switzerland? I find that strange.
Now, I have a question. How come corporate tax receipts in Ireland account for roughly the same percentage of overall revenue – about 8 percent in 2014 – as they do in the United Kingdom (just under 10 percent in 2012) and the United States (also just under 10 percent in 2010) when corporate tax in Ireland was half the UK rate in 2012, and about a third of the US's? I could direct that question to the Chancellor of the Exchequer in London, and the Treasury Secretary or any number of senior Congressmen in Washington, but I think they get it already. High corporate tax rates don't necessarily produce high levels of revenue, because they encourage avoidance and discourage investment. Which is why corporate tax rates have been steadily falling all over the world in the last 10 years or so. And which probably accounts for yet another corporate tax windfall for the Irish Exchequer. I think even Francois Hollande gets it now. But I think the "high tax good, low tax bad" brigade in Brussels will take some convincing.
Talking of paradis fiscal, in the early days of the Internet, many offshore jurisdictions talked the talk with their aspirations to be at the forefront of the e-commerce revolution. But not many of them walked the walk, as evidenced by the relatively small number of offshore e-commerce hubs in existence today. Perhaps when it came down to it, some of these isolated rocks just didn't have the resources needed to build the necessary telecommunications infrastructure, nor the skills base to operate it. However, there are a number of jurisdictions, most of which can still be classed as "offshore," which have quietly gone about the business of carving out their own niche in an increasingly digitalized world. Antigua and Barbuda, Gibraltar, and Malta stand out as having made a success of their e-commerce strategies, with all three now by-words for the offshore e-gaming and internet gambling industries (although in poor old Antigua's case, its industry has been hobbled by US legislation and Washington's indifference to numerous WTO rulings in the Caribbean jurisdiction's favor, but that's for another time!) The Isle of Man is arguably the most successful offshore e-commerce jurisdiction, where the sector now accounts for almost one-quarter of the island's gross domestic product, according to the Government. Given that economic diversification is so important for these small territories, most of which lack natural resources and are highly exposed to external economic shocks, an encomium goes to Jersey this week, which has decided to proceed with its plans to develop an e-gaming industry. Although, it's a qualified encomium in a way, Jersey must be careful that it's not coming too late to the party. Its competitors, including the Isle of Man, are well established, and the regulatory and tax currents aren't exactly favorable for offshore e-gaming at the moment. Still, recent history suggests that the authorities in Jersey – and the other Crown Dependencies for that matter – seem much abler in responding to their territory's economic needs than most other countries. Perhaps it's the absence of party politics.
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.
European Union political
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