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will it be riches beyond their wildest dreams or their own slow, painful demise

Kitty Miv, Editor
04 July, 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.

If Brexit is compared to a daring and bold exploration of new lands by a band of adventurers, you could say that said adventurers, let's call them the Three Brexiteers, have arrived at their launch point having forgotten to bring a map, or a compass, or indeed any navigational aids at all. And none of them are quite sure how arduous the journey will be, or what they expect to find at the end of it – will it be riches beyond their wildest dreams or their own slow, painful demise? Or something in between? Either way, perhaps they should have spent less time dreaming, and more time planning and preparing.

Britain's fellow Europeans certainly seem keen that the Brexiteers commence their journey sooner rather than later, although they remain convinced that they won't find what they're looking for. And neither will any other member state inspired by the UK referendum to embark on a similarly foolhardy venture, according to the message coming out of the European Parliament, the Commission, and certain parts of the Council. Jean Claude Juncker is certainly keen for them to go. And preferably not come back. In fact, good riddance to these obstructive little islanders, he has more or less said.

So, the Brexit saga rumbles on, and it is scarcely believable that it's been just a matter of days since the British people made their momentous decision – it's starting to feel like a lifetime. With coverage reaching saturation point in many parts of the media, but with virtually no progress towards an actual Brexit having been made, there's nothing I can really add here, except to say that my opening analogy points to the beginning of a very long process, rather than the end of one. But only if the explorers don't begin to have second thoughts about their venture into the unknown.

Nevertheless, on more prosaic matters, there will be unavoidable consequences for tax in the UK if Brexit is achieved, as I wrote last week. Still, as the Chartered Institute of Taxation has pointed out, the Government might want to use any new-found tax freedoms wisely, and with a measure of restraint. And, ever the pessimist, Chancellor George Osborne is convinced that our intrepid explorers are doomed, as he broke his post-referendum silence to once again speak of the inevitability of tax hikes.

At least the Brexiteers have received some encouragement for their project internationally now the initial gasps of shock have died down. A number of countries have expressed an interest in concluding free trade agreements with a post-EU UK, including Australia (although that might change depending on the outcome of elections), Mexico, South Korea, and the United States (albeit in the form of support from House Speaker Paul Ryan rather than the US Government). Nevertheless, this suggests that the UK isn't necessarily back of the trade queue.

Moving to the issue of international trade more generally, it's actually rather a bad time for supporters of free trade. According to a recent World Trade Organization (WTO) report, between mid-October 2015 and mid-May 2016, G20 nations applied 145 new trade-restrictive measures, or an average of almost 21 new measures a month, up from 17 in the preceding period. This is the highest monthly average of new trade restrictive measures registered since the WTO began its monitoring exercise in 2009. In addition, G20 states initiated 96 anti-dumping investigations in the most recent period for which data is available (June-December 2015), while 80 were initiated during the previous six months.

Nevertheless, there have still been some glimmers of hope for free traders recently. One of them was confirmation by the South African Department of Trade and Industry that tariff-free access to the United States market will be granted to South Africa's farmers through 2025 under the African Growth and Opportunity Act (AGOA). AGOA allows almost all goods produced in AGOA-eligible countries (approximately 6,800 items) to enter the US market tariff-free, and for South Africa, the stakes of being kicked out of the AGOA scheme were high. According to South African Trade and Industry Minister Rob Davies, about ZAR25bn (USD1.5bn) of South Africa's ZAR70bn annual exports to the United States have been traded within AGOA, and he claimed that some 62,000 South African jobs were at risk prior to AGOA benefits being fully restored.

Trade is of course something of a touchy subject in the United States at the moment, with presumptive Republican presidential candidate Donald Trump pledging to increase trade barriers with certain countries thought not to be playing by the rules, including China and Mexico. However, in this hothouse atmosphere, the current Administration has decided to expand its Generalized System of Preferences program to travel goods imported from Least Developed Countries and AGOA countries, which is something of a brave move, even if it will benefit mostly poor countries.

We have also seen some major economies pledge to trade more freely in recent days and weeks: India and South Korea have agreed to enter into talks aimed at expanding their existing Comprehensive Economic Partnership Arrangement; and India and the member states of the European Free Trade Association (EFTA – Iceland, Liechtenstein, Norway, and Switzerland), have begun stock-taking talks following a pause in free trade negotiations. In fact, EFTA has been keeping its trade negotiators very busy recently. Since the beginning of the year, it has launched talks on expanding existing FTAs with Mexico and South Korea; progressed negotiations with Malaysia and Indonesia; concluded trade talks with Georgia; and signed an FTA with the Philippines. As the Brexiteers would say, who needs the EU!

 

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 open

Kitty's Execrations

United Kingdom drifting

 

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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