EU Tax Hypocrisy – Hopefully The Fightback Begins.…

Clameur de Haro notes from the website of The Adam Smith Institute that Jersey Finance’s Geoff Cook will be one of the key speakers participating in an ASI seminar on 4 November on the subject of “Tax Competition: Economic Freedom and National Sovereignty”.

This is good news, for one of the other key speakers is Richard Teather. Apart from his role as Senior Lecturer in Tax Law at Bournemouth University Business School, Mr Teather is also the author of the much acclaimed “The Benefits of Tax Competition”, probably one of the seminal works on the economic justification for, and benefits arising from, the competition provided to high-tax jurisdictions by their relatively low-tax counterparts. CdeH’s own copy is much read, and extensively bookmarked. Mr Teather, thankfully, is also an adviser to the States of Jersey scrutiny functions on tax policy and tax matters.

Mr Cook himself has sound views on the futility and hypocrisy of the attempts by high-tax jurisdictions to deflect attention from their own macro-economic and fiscal deficiencies by attempting to coerce low-tax jurisdictions into emulating them, and Clameur de Haro makes no apology for repeating them.

If through the populism of voter appeal or through some systematic ideology the means of wealth creation are overburdened, the incentive to create wealth is diminished, and governments consume a greater and greater proportion of the total economic value available. Eventually the economic engine becomes too dependent on an inverted pyramid of wealth creators. The creators become disincentivised and go elsewhere, or simply down tools.

Free markets, globalisation and tax competition have all combined to produce stellar growth in world GDP over the last thirty years pulling countless millions out of poverty.

An unlikely alliance of tax hobbyists, left wing newspapers, trades unions, and development agencies has catalysed around calls for greater concentration of the means of wealth creation in the hands of governments, and implicitly greater taxation of business and wealthy individuals through the outlawing of wealth structuring and planning, together with restrictions on cross border capital flows. They hope that their own constituencies will be beneficiaries of this new ‘contract’, with the authors, the tax hobbyists, gaining fame and funding, and their supporters feeling validated in their enduring distrust of the wealthy and their advisers.

Moves are in train to stigmatise wealth structuring and planning; to restrict capital movement through attacks on the use of international finance centre:, and to undermine transfer pricing arrangements. If successful the combined effects of these protectionist measures will be to trap capital within borders, significantly reducing overall economic activity.

Such measures will restrict wealth creating activity and encourage growth in central government expenditure. The net effect will be a constriction of wealth, a reduction in tax bases and a loss of global prosperity, driven by a short sighted grab for tax, all delivered through the Trojan horse of transparency.

To accuse banks, or companies, or individuals, of illicit or immoral behaviour because they plan their international affairs in perfectly legal ways simply raises the spectre of wrongdoing in a misleading and mischievous manner. Paid for ‘research’, produced by the tax hobbyists, supported by self interested union groups, and trumpeted by sympathetic bugles, claims that billions is being misappropriated through international finance centres. These claims have no credible evidence underpinning them, demonstrating an opacity which these same sources would find intolerable were it postulated by others.

Hopefully Mr Teather and Mr Cook will be both inclined, and able, to convince the Chief and Treasury Ministers of the need for a robust response to the EU and HMG – particularly as the current HMG has a future lifespan measurable in months at most.

Add to del.icio.usDigg It!Stumble This

Two More Nails in the Coffin of Legitimate Financial Freedom

Clameur de Haro regrets to see that two more blows were struck this week against the freedom of the law-abiding to deploy their legally-acquired assets in entirely lawful ways.

On Tuesday, as part of a Tax Information Exchange Agreement with Lichtenstein, HM Revenue & Customs cut a deal with the Principality’s authorities under which HMRC will “offer” limited penalties on unpaid UK tax liabilities originating from Lichtenstein bank deposits, but the Lichtenstein authorities will arbitrarily close the accounts of depositors who decline to volunteer details to HMRC.

It’s disturbing to note that the intensification of pressure on the Principality arose largely from the German Government being prepared to trade in stolen property, i.e. buying customer data stolen from a Lichtenstein bank by a former employee.

Then on Wednesday, the HMRC Special Commissioners delivered a ruling which means that some 308 national and international banks with operations in the UK will be forced to hand over details of customers with bank accounts offshore, in defiance of banking confidentiality.

If both of these initiatives are targeted solely at illegal tax evasion, then Clameur de Haro has no objection whatsoever. As he posted some time last Autumn –

Neither the slightest degree of opprobrium, nor the slightest taint of immorality, should attach to any private citizen, whether an individual or a corporation, who so arranges his financial affairs, by lawful means, as to minimise or avoid the appropriation of his wealth by the state. [Note the words “by lawful means” and “avoid” – and the latter’s important distinction from “evade” – for CdeH does not defend or attempt to justify in any way, and roundly condemns, the illegal evasion of obligations in contravention of the law of the land].

So CdeH welcome theses initiatives if they only counter illegal evasion and incidentally detect illegal money-laundering - the transgressors deserve what they get, because for freedom to function, it must mean freedom under the law.

But HMRC has recently started to adopt a much more aggressive, authoritarian approach to its remit, one not always in accordance with the settled law of the land. Two things in particular should be of concern: it has been deliberately trying to blur the distinction between legal avoidance and illegal evasion in the direction of treating any and all legitimate avoidance as being, by definition, evasion: and it has been increasingly adopting the position that actual tax law is not what is laid out in statute, as interpreted by the judicial process, but what HMRC consider the intentions of the framers of legislation to have been, irrespective of the actual wording.

In this context, even the law-abiding with legally-held accounts, with no connotations of evading UK tax liabilities, have reason to fear. When government purports to arrogate to itself the power to decide what the law is, we all have reason to fear.

In such ways do viscerally high-taxing states seek to eliminate, by threats and intimidation, the alternatives available to their citizens, rather than lowering their profligate spending, decreasing the tax burdens they impose to fund it, and so reducing the incentives for taxpayers to shelter themselves from it.

Add to del.icio.usDigg It!Stumble This

Deconstructing the Financial Crises

On his way back from the Far East, Clameur de Haro passed a good deal of time reading arguably one of the best books yet to be published on the causes of the 2007-08 credit crunch and the subsequent banking crisis, Gillan Tett's book "Fool's Gold".

In an excellent read, Tett comprehensively charts the genesis and development of the ever more exotic, opaque, and risky off-balance-sheet financial instruments and structures that played such a pivotal part in creating the 2007 credit and liquidity crunches, and the ensuing banking meltdown.

Refreshingly however, she also shows that the anti-capitalist left who gleefully parrot the unthinking, intellectually lazy, but - for them - politically expedient mantra of "blame the bankers and blame free markets", disregard the myriad other relevant contributing factors, including those to be laid at the door of governments.

Prominent among these was the 1990’s Clinton administrations’ forcing mortgage providers, on the threat of prosecution and legal sanction under their own misconceived, mal-administered, political correctness-driven equality legislation, to lend to fundamentally uncreditworthy borrowers, with the consequent ratcheting up of the risk of defaults.

Equally significant were the inadequacy of government-conceived regulatory structures whose mandates explicitly excluded the credit derivatives markets and the parallel banking sector, and the lax monetary and interest-rate policies pursued for too long by central banks, at the behest of governments more concerned with creating a short-term feel-good factor for base political purposes, rather than pursuing policies ensuring medium-term financial stability.

Definitely a must-read for those who want to know, and for those who wrongly just assume that they do.

Add to del.icio.usDigg It!Stumble This