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there's only so many movies you can make about hedge fund managers

Kitty Miv, Editor
20 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.

There's not much more to be said about the Brexit debate. I mean, I've heard some pretty outlandish claims in election campaigns in my time. But I think I've heard them all now: come June 23, it's either going to be the beginning of the end of the world, or, at the very least, the end of Britain's world. Brexit, we've been told, will see Britain taxed out of existence, and that it will result in global economic turmoil, potentially prompting the unravelling of the post-war political order and it will represent the prelude to World War Three.

"Remain" lets the rest of the world off the hook, but poor old Britain, according to the more vociferous Brexiters, will soon sink into the ocean under the weight of mass migration and red tape. So much red tape in fact, it would be possible to make a life-size model of the Palace of Westminster out of it, and erect it in Brussels to stand as a memorial to British democracy. I wonder who would build it? Unemployed Conservative MPs perhaps? At least they wouldn't have to work more than 48 hours a week. Anyway, by the time this is published, we'll be very close to knowing Britain's (and the world's) fate. So I'll say no more.

Instead, it's time for a bit of escapism, into the world of the movies. Or, more precisely, those who finance and make them. And when it comes to choosing a location to shoot a movie or television series, or carry out other processes essential to the audiovisual and cinematic entertainment industry, producers are spoiled for choice these days. Not just because there are very few places on the planet that are now so remote and inaccessible that you can't send a camera crew there, along with a motley crew of actors, stunt doubles, technicians, and caterers. More because government incentives often make it well worth a producer's while to make a movie in one country, and pretend it's another. Thus, merry olde England on screen is quite likely to be 21st century Hungary in reality. Likewise, when you think you're watching a scene set in contemporary New York, it could well be contemporary Vancouver.

Indeed, governments seem to be in thrall of the movie industry, and have been falling over themselves to offer tax incentives to producers and investors in recent years. Iceland has an impressive list of movies that have used its dramatic icy vistas as a backdrop, yet still saw fit to improve its incentive scheme further recently — and likewise France. So why do governments seem obsessed with attracting "runaway" production, as it is called. The theory goes that this industry creates just the sort of highly skilled, highly remunerated and often technically orientated jobs that governments love to take the credit for making. Plus, big-budget productions need an army of ancillary workers to sustain them, so it is said that the benefits ripple out into the wider economy. An added bonus is that the industry often acts as a shop window for tourists – just look at how The Lord of the Rings and The Hobbit trilogies showcased New Zealand. But the theory doesn't always stack up, according to some studies. This has especially been the case in the United States, which looked to have reached the end of its film tax credit mania at state level about five years ago. Many states are now pulling the plug on these schemes after cost-benefit analyses revealed they had performed pretty dismally, and had generally been a wasteful use of taxpayer dollars. For example, Connecticut's incentive scheme generated a mere seven cents for every dollar spent. So, I suppose with these types of incentives, it boils down to horses for courses. France can pass for many different places with its varied landscape. And in the sci-fi genre, Iceland can double as just about any planet you dream up with its moon-like appearance. Indeed, it doesn't really matter what a country looks like if it has the skills base the industry requires, and well-targeted tax breaks to smooth the path. Connecticut, on the other hand, is a very nice place, but there's only so many movies you can make about hedge fund managers.

Back to the real world now, and I can't think of any country in recent history which has had such a singular focus on one tax than Japan has had with its consumption tax. The reason for this is that, as many inside Japan, and economists and analysts outside it, have come to conclude, a consumption tax hike is the only thing likely to rescue Japan from future fiscal oblivion. And there are some compelling reasons for increasing the tax. One of them is that, according to the International Monetary Fund, in dollar terms each percentage point increase in consumption tax generates almost USD20bn in revenue. That's some chunk of change for a relatively minor increase in tax, and would obviously go some way towards budget deficit alleviation and public debt reduction. And at eight percent, the tax is lower than equivalent levies in most other countries, so there is some scope for an increase. However, while consumers in other countries, particularly in Europe, take consumption taxes of 20 percent or more for granted now, such a prospect would send the Japanese fleeing from the country's shopping malls en masse. But this isn't just a highly sensitive economic issue; it's a political poison for most who touch it. This, I suspect, might have figured prominently in Prime Minister Shinzo Abe's thinking when he postponed the next scheduled rise to 10 percent. Predictably, the international ratings agencies were quick to condemn the decision as credit-negative. But the near-constant uncertainty about the tax can't be helping the situation either. Indeed, I'd be more likely to offer an encomium if Abe were prepared to jump off the fence, put his career on the line, and decide once and for all about the consumption tax. Indecisiveness is rarely the precursor to successful outcomes.


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

Iceland action!

France allez!

Kitty's Execrations

United Kingdom torn

Japan hesitant




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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