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Archive for the ‘David Cameron’ Category

When the new Tory-led government came to power in the United Kingdom, I was rather unimpressed.

David Cameron positioned himself as a British version of George W. Bush, full of “compassionate conservative” ideas to expand the burden of government.

But even worse than Bush, because Cameron also jacked up taxes when he first took office, including big increases in the capital gains tax and the value-added tax.

But I must admit that policy in recent years has moved in the right direction, at least with regard to corporate taxation.

Writing for the U.K.-based Telegraph, Jeremy Warner remarks that business activity has significantly strengthened.

A survey by EY, published on Monday, showed that the UK is continuing to pull away from the rest of Europe in terms of Foreign Direct Investment (FDI). The UK secured nearly 800 projects last year, the highest ever, accounting for around a fifth of all European FDI, far in advance of any other country. …Such investment is in turn helping to fuel Britain’s economic recovery… Go back 10 years and it was all the other way; companies were scrambling to leave the country and domicile somewhere else. It is perhaps the Coalition’s biggest unsung achievement that it has managed to reverse this flow.

So why has the United Kingdom experienced this economic rebound?

Lower corporate tax rates are key, Warner explains.

…it has done so largely through the tax system, where it has been as good as its promise to make the UK the most competitive in the G20. By next year, Britain will have the equal lowest headline rate of corporation tax – along with Russia and Saudi Arabia – in this eclectic group of economies, as well as at 20pc the lowest by some distance of the G7 major advanced economies. Other G7 countries range from 25pc to a crushing 38pc and 39pc in France and the US. …Britain has also halted the double taxation of repatriated foreign profits and the taxation of controlled foreign subsidiaries.

So the 20 percent corporate tax rate has yielded good results.

Now let’s connect the dots.

More economic activity means more income for taxpayers.

And more income means a bigger tax base.

Which means…can you guess?…yup, it means revenue feedback.

In other words, we have another piece of evidence that the Laffer Curve is very real.

…Reducing corporation tax has reversed the outflow of corporate head office functions, and doing so has substantially added to overall employment, output, income tax, national insurance and VAT receipts. Dynamic modelling by the UK Treasury has shown that lower tax rates are helping to drive a higher overall tax take. The “Laffer curve” lives. …Let business profit from its own enterprise. It’s amazing how effective this principle can be in generating growth, and yes, taxes, too.

If you want more evidence about the Laffer Curve, here’s one of the videos I narrated.

Warner points out, by the way, that the United Kingdom should not rest on its laurels.

If modest reductions in the corporate tax rate are good, then deeper cuts should be even better.

If comparatively minor changes like these to the competitiveness of the tax system can have such dramatic effects, just think what more serious, root and branch tax reform might achieve. In Singapore, the headline rate is 17pc, in Hong Kong 16.5pc and in Ireland just 12.5pc. There’s a way to go.

Though if The U.K. keeps moving in the right direction, that may arouse hostility and attacks from countries with uncompetitive tax systems.

Indeed, the statists at the European Commission have just launched an investigation of three countries for supposedly under-taxing companies.

Here are some blurbs from a report in the Wall Street Journal.

European Union regulators are preparing to open a formal investigation into corporate-tax regimes in Ireland, Luxembourg and the Netherlands… The probe by the European Commission, the EU’s executive arm, follows criticism in Europe of low tax rates paid by global corporations… The probe is likely to consider whether generous corporate-tax regimes in Ireland, Luxembourg and the Netherlands amount to illegal state aid. …The EU’s tax commissioner, Algirdas Semeta, has warned that the region “can no longer afford freeloaders who reap huge profits in the EU without contributing to the public purse.”

This is remarkable.

In the twisted minds of the euro-crats in Brussels, it is “state aid” if you let companies keep some of the money they earn.

This is horrible economics, but it’s even worse from a moral perspective.

A subsidy (or “state aid”) occurs when the government taxes money from Person A and gives it to Person B. But it’s a perversion of the English language to say that a subsidy takes place if Person A gets a tax cut.

By the way, this perverse mentality is not limited to Europe.

The “tax expenditure” concept in the United States is based on the twisted notion that a tax cut that results in more money in your pocket is economically (and morally) equivalent to a spending handout that puts more money in your pocket.

P.S. The United Kingdom also provides us with powerful evidence that the Laffer Curve plays a big role when there are changes in the personal income tax.

P.P.S. Notwithstanding a bit of good news on corporate tax, I’m not optimistic about the U.K.’s long-run outlook. Simply stated, the nation’s political elite is too statist.

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As an advocate of small government, I’m often distressed that I sometimes have to rely on Republicans in Washington to fight statism.

Why am I distressed? Because some of the worst people in Washington are GOPers. They may give lip service to fiscal responsibility when campaigning, but then conveniently forget that rhetoric when it’s time to make decisions.

Which helps to explain why spending grew faster under Bush than Obama.

But as bad as Republicans are, there’s no way they could be as bad as the faux Conservative Party in the United Kingdom.

Consider the fundamental debate about whether big government is good and whether we have a moral obligation to maximize the amount of money we turn over to politicians.

Normal people think government is too big and they don’t want to reward a corrupt political class with extra revenue.

And they have strong legal standing for that position. Here’s what Judge Learned Hand famously opined in 1947.

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

Judge Hand obviously is correct. It is nonsense to argue that taxpayers have an obligation to pay more than is legally required.

But not everybody is guided by common sense. And if there was a prize for an absence of common sense (as well as a prize for absence of integrity or principles), the David Cameron government in the United Kingdom would be a strong contestant for that award.

Here’s the latest example of the intellectual bankruptcy of that supposedly conservative government. An official was just forced to resign because – prior to joining the government – he advised people to legally minimize their tax liabilities.

I’m not joking. Here’s an excerpt from a Reuters report.

A tax adviser to the British government has been forced to resign after he was recorded giving tips at a conference on how to pay less tax and “keep money out of the Chancellor’s grubby mitts”, a Treasury minister said. The BBC Panorama investigative program filmed David Heaton – before he joined the government as an adviser on how to clamp down on aggressive tax avoidance – telling delegates at a conference how they could exploit tax loopholes. “Mr Heaton’s statements are directly at odds with the government’s approach to tackling tax avoidance,” Treasury minister David Gauke said in a statement. “Therefore, it is right that Mr Heaton resigned from his position.”

David Gauke, by the way, is infamous for having stated that legal tax avoidance strategies “damage our ability to fund public services and provide support to those who need it.” Hmmm….that phrase seems vaguely familiar. I gather the Tory Party thinks government should be guided by “From each according to his ability, to each according to his need.”

Just in case you think I’m pulling a quote out of context, click here or here for additional evidence of the pervasive statism of the current regime in London.

And take a look at this government poster I photographed in the London subway system. Orwell would be proud.

No wonder I”m so glum about the long-run outlook for the United Kingdom.

And the late great Margaret Thatcher must be spinning in her grave.

P.S. I wrote that this was the “latest example” of the Cameron government’s intellectual bankruptcy. For previous examples, see here, here, here, here, and here.

P.P.S. I started this post with the quote from Judge Learned Hand. Leftists, by contrast, like to share the quote from Justice Oliver Wendell Holmes about “taxes are the price we pay for a civilized society.” What they conveniently forget to include is that he made that statement in 1927, when federal taxes amounted to only $4 billion and the federal government consumed only about 5 percent of economic output. Yes, I’ll gladly pay for that amount of civilization.

P.P.P.S. What’s more hypocritical, the supposed conservatives in the U.K. badgering people to pay extra tax or American leftists utilizing tax havens to lower their own taxes?

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In a recent interview with the BBC, I basically accused UK Prime Minister David Cameron of being a feckless and clueless demagogue who is engaged in a desperate effort to resuscitate his political future.

Two peas in a pod

I shouldn’t have been so kind. Cameron manages to combine bad policy and bad morality in a way that is embarrassing even for a politician.

Writing for the Daily Telegraph, Janet Daley eviscerates Cameron’s puerile approach to fiscal policy, beginning with some mockery of his class-warfare approach to tax enforcement.

David Cameron said something last week that was the precise opposite of the truth…the Prime Minister said was: “If you want a low-tax economy, you have to collect the taxes that are owed.” When what he should have said, of course, was: “If you want to collect the taxes that are owed, you have to have a low-tax economy.” Mr Cameron’s statement was one of the more subtle threats contained in the declaration by the G8 – which was pretty much all they could agree on – that they are now the rightful owners of all the wealth produced by anyone except for certain exemptions that they will, subject to minimal notice, decide upon. His remark, presumably designed to provide moral justification for the unprecedented levels of shared surveillance and breaches of data protection that governments are preparing to launch, actually stood on its head the truth about effective tax collection. Which is that the lower rates of taxation are, the less likely it is that payment of them will be avoided or evaded.

She also makes some very astute points about other issues, including the Laffer Curve.

The introduction of the 50p rate of income tax caused two-thirds of those earning a million pounds per year simply to disappear from the reach of HM Revenue & Customs. Whereas under the previous highest tax level of 40p, 16,000 people were prepared to declare earnings of one million pounds, that number shrank to only 6,000 after Gordon Brown, bless him, raised it to 50p. Result: the Treasury lost £7 billion in revenue.

Ms. Daley also comments on tax compliance and the risks of letting governments destroy financial privacy as part of their efforts to undermine tax competition.

If people regard levels of tax as fair (in the true sense of the word, not the Left-wing sense, which actually means “vindictive”), they will not go to expensive and dangerous lengths to escape from paying. The more punitive and discouraging of wealth-creation taxes are, the more they are avoided by stealth or geographical relocation – or by the even more economically disastrous measure of people being disinclined to increase their own productivity. Ah yes, but isn’t this the problem that those heads of government are determined to address? Rather than lowering taxes to levels that those who are taxed find acceptable, they will simply close off all the avenues of escape. There is to be no more possibility, by international agreement (which is to say, the coercion of smaller, less rich countries), of geographical movement for tax advantage.

She closes by opining on why this is really a debate about the burden of government spending and whether taxpayers exist to feed the spending appetites of politicians.

If you eliminate tax competition – if you create a uniform, universally policed tax standard – it is the poorer countries that suffer because they are deprived of the capacity to attract foreign capital. …What is at the heart of all this is the growth of governments: the treasuries of the world are becoming needier and greedier. …Underlying almost all political debate on this matter now is the unspoken assumption that privately owned wealth is inherently evil, and that its only moral justification is to provide revenue that governments can redistribute. …let me remind you of what you may actually believe, shocking as it may sound in the context of prevailing public discourse. Are you ready? It is not the primary function of business to provide funds for politicians to spend.

Amen. The statists and collectivists that dominate the political elite treat us like a herd of cattle to be milked and slaughtered.

We need tax havens in order to impose at least a tiny bit of restraint on the greed of the political class. These low-tax jurisdictions aren’t a sufficient condition to save us from statism, but they sure as heck are a necessary condition.

P.S. Who moved farther in the wrong direction, U.S. Republicans who went from Reagan to Bush or U.K. Tories who went from Thatcher to Cameron?

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It goes without saying that I’m always ready to defend tax havens when statists are seeking to undermine tax competition, financial privacy, and fiscal sovereignty.

So when the BBC asked if I would debate the topic, I said yes even though I’m in Paris (where supporting liberty is probably a capital crime).

I think the debate went well. Or, to be more precise, I was happy that I got to make my points.

I’ve been in debates on tax havens when I’m outnumbered 3-1, so a fair fight almost seems like a treat.

P.S. If you have a burning desire to watch me debate tax havens, you can see me cross swords with a bunch of different statists by clicking here.

P.P.S. Or if you like watching when I’m outnumbered, here’s my debate against three leftists on state-run TV.

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I just finished up a trip to London.

In previous posts, I’ve expressed pessimism about the future of the United Kingdom, largely because all political parties have a statist mentality.

I criticized Gordon Brown, the former Labor Party Prime Minister, for being a compulsive redistributionist, big spender, and taxaholic.

But nothing’s really changed under Tory leadership. David Cameron is a vacuous statist, undermining the Conservative Party in the same way that George W. Bush eroded the brand name capital of the Republican Party.

This sign was on a train I rode today. It is sponsored by the UK version of the IRS,  and it pretty much symbolizes how the United Kingdom has turned into a predatory state.

UK Tax Orwell

The United Kingdom is in terrible fiscal shape. Government spending has reached record levels, and now consumes a larger share of economic output than the public sectors in failed welfare states such as Spain.

And what are taxpayers getting for their money, other than Orwellian signs?

Not much. They get an increasingly dysfunctional society filled with scroungers such as Natalija, Gina and Danny.

They also get a healthcare system that seemingly prides itself on maltreatment, and a tax system that is more designed to be punitive rather than to generate revenue.

Though the UK government does provide taxpayer-financed sex tours to Amsterdam, so at least a few people are getting screwed as a result of government rather than by the government.

But let’s close by contemplating the mindset of a government that would post such a sign. We already know that Prime Minister Cameron and some of his senior deputies think it’s wrong to engage in legal tax avoidance.

And this is a government that is brainwashing kids into becoming servile snitches, and is even considering a system that would have employers send paychecks to the state and then the government would decide how much to send to taxpayers.

Such a shame since so much of what is good in the Western World came from England.

P.S. This is also a country where they send innocent people to jail for shooting burglars.

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If you live in America and believe in free markets and small government, it’s easy to get depressed. We suffered through eight years of wasteful spending and misguided intervention under Bush, and now we’re enduring four years of additional spending and red tape under Obama.

Moreover, it’s not clear things will get any better in the next four years, regardless of what happens on November 6.

But whenever I begin to feel sorry for myself, I remind myself of how bad things could be if I lived in the United Kingdom.

The burden of government spending in the U.K. rose from 36.5 percent of economic output in 2000 up to 48.7 percent of GDP today. This mostly happened under Labor Party rule, but the coalition of so-called Conservatives and Liberal Democrats that took power in 2010 hasn’t done much to restrain government spending.

To augment the damage, taxes also have been increasing. The feckless Gordon Brown of the Labor Party boosted the top tax rate to 50 percent (a disaster from a Laffer-Curve perspective) before getting evicted by voters.

The Tory-Lib Dem coalition is similarly bad. In recent years, the capital gains tax has been increased (see these amusing posters to understand why this was a foolish idea), along with a big hike in the value-added tax (though, to be fair, the corporate rate has been slightly reduced and part of Gordon Brown’s higher income tax rate has been repealed).

But the Tories and Lib Dems aren’t through with their assault on the economy’s productive sector.

Both Prime Minster David Cameron and one of his deputies have argued that people have a moral obligation to turn more of their income over to the government.

And now the leader of the Lib Dems, Nick Clegg, is proposing a wealth tax. He says it will be a temporary measure until the fiscal emergency ends, but I would be shocked if politicians changed its mind after getting their hands on a new source of revenue (just look, for instance, how British politicians went crazy after first imposing an airline ticket tax).

Here are some illuminating excerpts from a column in the UK-based Telegraph.

“Let them eat cake”

…from what can be gleaned, the Deputy Prime Minister seemed to be suggesting a one-off or short term tax hike rather than a permanent change in the way the wealthiest are taxed. He described it as a “time limited contribution” to the “national effort” – since it was becoming clear, he said, that the country was embarked not on a “short economic battle” but a “longer economic war”. Mr Clegg said it would be “people of considerable wealth” who would be asked to make such a contribution.

It doesn’t appear that this plan will get the necessary support from the Tories, but it’s remarkable that it has been proposed. Like the death tax, the wealth tax is a turbo-charged form of double taxation.

P.S. One of the leading Lib Dem politicians got caught dodging taxes, making him the British version of America’s tax-cheating Treasury Secretary. I generally don’t object when people try to protect their income from greedy and incompetent government, but when they also are the same people proposing higher taxes on everyone else, they deserve special scorn.

P.P.S. This post is describing the current dismal fiscal situation, but the title references “a miserable and hopeless fiscal outlook.” That’s because I see no hope of good fiscal policy in the remaining years of the current government, and I suspect the statist failures of the Tory-Lib Dem coalition government will pave the way for a new Labor Party government. Needless to say, that will be – at best – jumping from one frying pan to another. Incidentally, I’m also worried about the United States for the same reason.

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The United Kingdom has a magnificent history and has produced great leaders.

I get inspired, for instance, when I watch these Margaret Thatcher speeches about “public money” and “the poor poorer.” Sort of the same feeling I get when I watch the Gipper talking about Washington being a “company town” and the “unnecessary and excessive growth of government.”

But just as the United States has devolved by moving over time from Reagan to Obama, the United Kingdom has degenerated by going from Thatcher to David Cameron.

Cameron is supposedly a conservative, but it’s more accurate to say he’s an English version of George W. Bush. Some of the lowlights of his tenure include:

And his statist mentality infects other Tory politicians.

Here is a report on the intellectually bankrupt ramblings of another enemy of freedom, as reported by the Telegraph.

David Gauke, a Treasury minister, told The Daily Telegraph that home owners who allow workmen to evade VAT or income tax were forcing others to pay more. …critics accused the Government of being “unnecessarily moralistic” about ordinary people trying to keep their household bills down. …According to a report by the Public Accounts Committee, more than two million people make cash-in-hand payments costing the Treasury an estimated £2  billion. There is no law against paying someone in cash… In a speech to the Policy Exchange think tank, he said that while using Isas and claiming gift aid on charitable donations was acceptable, buying homes through companies to avoid stamp duty and using service companies to reduce income tax was “morally repugnant”. Mr Gauke said: “These schemes damage our ability to fund public services and provide support to those who need it. They harm businesses by distorting competition. They damage public confidence. And they undermine the actions of the vast majority of taxpayers, who pay more in tax as a consequence of others enjoying a free ride.”

Can anyone imagine Margaret Thatcher saying something this offensive?

Particularly since it is Gauke’s views that are “morally repugnant,” not the actions of people who are trying to protect their property from a rapacious and greedy government.

Keep in mind that the burden of government spending in the United Kingdom consumes nearly 49 percent of economic output according to OECD data. That’s more than Greece, Portugal, Ireland, or Spain!

Sort of makes you wonder how long it will take before investors decide that it’s no longer a good idea to lend money to such a profligate government.

The good news is that the English people aren’t as bad as their politicians. As part of the story, the Telegraph is conducting an online poll, which you can see to your left.

Notwithstanding the statolatry of UK politicians, the voting so far is overwhelmingly on the side of taxpayers rather than the government.

But public opinion doesn’t really matter if government policy continues to drift in the wrong direction.

And, as you can see from this data, the long-term outlook for the United Kingdom is very grim. And we know Cameron isn’t doing anything to address this looming crisis.

Not that this makes the UK special. Thanks to reckless entitlement programs, the same data shows that the United States also is headed for Greek-style fiscal chaos.

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