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Posts Tagged ‘OECD’

It’s a bad idea when governments demand information on your bank accounts and investments so they can impose economically destructive double taxation.

It’s a worse idea when they also demand the right to tax economic activity in other jurisdictions (otherwise known as “worldwide taxation“).

And it’s the worst possible development when governments decide that they should impose a global network of data collection and dissemination as part of a scheme of worldwide double taxation.

Yet that’s exactly what’s happening. High-tax nations, working through the Paris-based Organization for Economic Cooperation and Development, want to impose a one-size-fits-all system of “automatic information exchange” that would necessitate the complete evisceration of financial privacy.

David Burton of the Heritage Foundation explains the new scheme for giving governments more access to peoples’ private financial information.

…the Organization for Economic Cooperation and Development released the full version of the global standard for automatic exchange of information. The Standard for Automatic Exchange of Financial Account Information in Tax Matters calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.

I think this is bad policy, regardless. It is based on imposing and enforcing bad tax policy.

But David goes one step farther. He warns that this global network of tax police includes many unsavory nations.

It is one thing to exchange financial account information with Western countries that generally respect privacy and are allied with the United States. It is an entirely different matter to exchange sensitive financial information about American citizens or corporations with countries that do not respect Western privacy norms, have systematic problems with corruption or are antagonistic to the United States. States that fall into one of these problematic categories but are participating in the OECD automatic exchange of information initiative include Colombia, China and Russia. …The Obama administration enthusiastically supports the OECD initiative.

Moreover, David wisely does not believe we should trust the Obama Administration’s hollow assurances that other nations won’t misuse the data.

…even the administration has realized important privacy issues at are stake. Robert B. Stack, Deputy Assistant Secretary of the Treasury for International Tax Affairs, has testified that “the United States will not enter into an information exchange agreement unless the Treasury Department and the IRS are satisfied that the foreign government has strict confidentiality protections…” Leaving these determinations to a tax agency with little institutional interest in anything other than raising tax revenue is dangerous. There is little doubt sensitive financial information about American citizens and businesses can and will be used by some governments for reasons that have nothing to do with tax administration, such as identifying political opponents’ financial resources or industrial espionage. In addition, individuals in corrupt governments may use the information for criminal purposes such as identity theft, to access others’ funds or to identify potential kidnapping victims. It is naïve to think otherwise. …The Senate should not ratify this protocol. The risks to American citizens and American businesses are too great.

David is exactly right, but too restrained and polite in his assessment.

Richard Rahn, my colleague at Cato, is more blunt in his analysis. Here’s some of what he wrote for the Washington Times.

Do you want the Obama administration sharing all of your financial information with the Russian, Chinese and Saudi Arabian governments? You may be thinking, not even President Obama would go that far. Not so… The rationale behind this despicable idea is to more effectively enable governments, such as that of France and the United States, to identify tax evaders. This might sound like a good idea until one realizes that every individual and business will be stripped of all of their financial privacy if this becomes the law of the land… all of the information that financial institutions now report to the U.S. government to try to ensure income-tax compliance, including your account balances, interest, dividends, proceeds from the sale of financial assets — would be shared with foreign governments. This would apply not only for individuals, but also for both financial and nonfinancial businesses, plus trust funds and foundations. 

Richard then explains that we can’t even trust the bureaucrats at the IRS.

The United States and other governments will, of course, claim that your sensitive financial information will remain confidential — and that you can trust the governments. After the recent Internal Revenue Service scandals — which recur every decade or so — why would anyone believe anything the IRS says? Remember, the IRS leaked information on some of Mitt Romney’s donors during the 2012 presidential campaign. It was blatantly illegal, and the IRS (i.e., you the taxpayer) paid a small fine, but no one went to jail. Many U.S. presidents have misused the IRS, starting at least as far back as Franklin Roosevelt, and the American people are always told “never again,” which is the beginning of the new lie.

And he logically concludes it would be even more foolish to trust foreign tax bureaucracies.

Particularly the tax authorities of the many nations that abuse human rights and persecute minorities, as well the tax police in nations that are too incompetent to be trusted with sensitive data.

…just think what is going to happen when all of those corrupt officials in foreign governments get ahold of it. Some will use the information for identity theft and to raid bank accounts, others for industrial espionage, some to identify potential kidnapping victims and some for political purposes. The potential list goes on and on. The U.S. Treasury Department says it will insist on strict confidentiality protections. (Lois Lerner, please call your office.) If you are a Ukrainian-American who donates to Ukrainian free-market and democratic causes, would you really think that Vladimir Putin’s team, having your financial information, would not misuse it? If you are an American Jew who donates to Israeli causes, do you really think that all of those in the Saudi government who now have full access to your confidential financial information are not going to misuse it? The Chinese are well known for using malware against their opponents. Just think of all the mischief they could cause if they had access to all of the sensitive financial information of human rights advocates in America.

Richard draws the appropriate conclusion. Simply stated, there’s no way we should have a global regime of automatic information exchange simply because a handful of high-tax nations want to remake global tax policy so they can prop up their decrepit welfare states.

As Lord Acton famously reminded us, governments are prone to misuse information and power. The instrument behind this information-sharing ploy is the OECD, which started out as a statistical collection and dissemination agency to promote free trade among its members. It has now morphed into an international agency promoting big government and higher taxes, and the destruction of financial freedom — while at the same time, by treaty, its staff salaries are tax-exempt. No hypocrisy there. Thinking Republicans and Democrats should unite around opposition to this terrible treaty and defund the OECD. Those who vote for it will deservedly be easy marks for their political opponents.

And kudos to Richard for urging the defunding of the OECD. It is absurd that American tax dollars are funding a Paris-based bureaucracy that constantly urges policies that would undermine the U.S. economy.

Especially when they’re insulated from the negative effects of the policies they push. Since they’re on the public teat, they don’t suffer when the private economy is battered. And they don’t even have to pay tax on their very generous salaries.

P.S. I’m very glad to report that at least one lawmaker is doing the right thing. Senator Rand Paul is leading the fight to block proposals that would put Americans at risk by requiring the inappropriate collection and sharing of private financial information.

P.P.S. By way of background, the OECD scheme is part of an effort to cripple tax competition so that high-tax nations can impose higher tax rates and finance bigger government. To learn more about tax competition (and tax havens), watch this four-part video series.

P.P.P.S. The OECD scheme is basically a multilateral version of the horrid “FATCA” legislation signed by Obama back in 2010.

P.P.P.P.S. Maybe I’m old-fashioned, but I think a global tax database is even worse than an Obamacare database on our sex lives.

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If some special-interest lobbies give money so that a left-wing group can propose something like a value-added tax to finance bigger government, that’s no surprise.

And if a bunch of subsidy recipients donate money to Barack Obama or some other statist politician because they hope for new programs, that’s also standard procedure in DC.

I’ll fight these initiatives, of course, but I don’t get overly upset when these things happen.

What does drive me crazy, though, is when proponents of big government want to use my money to subsidize left-wing activism.

This is why I’m against taxpayer handouts for groups such as Planned Parenthood and AARP. If they want to endorse bigger government, get voluntary contributions to push that destructive agenda.

All I ask is that you don’t coerce me to subsidize statism.

I get especially upset when international bureaucracies use my money to push for bigger government. And it the past few days, the International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) have delivered a one-two punch for statism.

And they used our money!

The IMF advocated for more government in their recent survey of the United States.

The recent expansion of Medicaid and the increase in health insurance coverage have been concrete steps whose effect on poverty and health outcomes should become more evident over time. An expansion of the Earned Income Tax Credit—to apply to households without children, to older workers, and to low income youth—would be another effective tool to raise living standards for the very poor. …the minimum wage should be increased. …Action is also needed to achieve a sustained increase in both Federal and State spending on infrastructure paid for by…additional revenues, and an expansion of financing sources… The Federal gas tax should be significantly increased. …Some progress has already been made…through implementation of the Affordable Care Act… Addressing the expected depletion of the social security trust fund will require…increases the ceiling on taxable earnings for social security… In addition, the U.S. should introduce a broad-based carbon tax and move toward the introduction of a Federal-level VAT.

Keep in mind, by the way, that the IMF already has endorsed a giant energy tax on American consumers, as well as a value-added tax.

Though, to be fair, they’re not discriminating against Americans. The IMF has a long track record of pushing for bad policy in other nations.

Meanwhile, the statists at the OECD also are pushing for a wide range of bad policies.

The report encourages close cooperation between businesses and government… The Survey highlights that income inequality is high in the United States. …While this cannot be improved easily, the report praises reforms recently adopted or being considered: health care reform will help vulnerable families access high-quality care; OECD Carbon Obamadealing with mental health will help reduce job loss and disability; preschool education would be a good investment in children’s future and help middle-class parents; and paid maternity leave would help working women. …The OECD recommends introducing an adequate pricing of greenhouse gas emissions and supporting innovation in energy saving and low carbon technology.

Unsurprisingly, the OECD endorses a panoply of tax hikes to enable a bigger and more bloated public sector.

Act toward rapid international agreement and take measures to prevent base erosion and profit shifting… Make the personal tax system more redistributive… The federal government could…develop a social insurance programme for paid leave for all workers funded by a small increase in the payroll tax… Taxing the extraction of non-renewable resources offers the potential to raise revenue… Increase reliance on consumption taxation.

The OECD favors higher taxes for everyone, so it’s not as if they’re targeting Americans.

But it’s nonetheless irritating when a bunch of pampered international bureaucrats take money from American taxpayers and then use those funds to produce “research” calling for even higher tax burdens.

Especially when those bureaucrats are exempt from the income tax!!!

And keep in mind that this isn’t the first time that the OECD has acted as a public relations team for Obama’s statist agenda.

P.S. The one silver lining to the dark cloud of the IMF is that the bureaucrats inadvertently generated some very powerful evidence against the VAT.

P.P.S. And the OECD accidentally produced some data showing the poor results of governments schools in the United States, so that’s a bit of consolation as well.

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I’m frequently baffled at the stupidity of Republicans.

When they took control of Congress back in 1994, for instance, they had unrestricted ability to get rid of the bureaucrats that generated bad economic analysis at both the Joint Committee on Taxation and the Congressional Budget Office.

Yet notwithstanding more than a decade of congressional power, GOPers did almost nothing to neutralize the bureaucrats who produced shoddy research that helped the left push for more spending and higher taxes.

Sort of like a football team allowing the opposing coach to pick the refs and design game plans for both teams.

Another painful example is that Republicans never used their majority status to defund the Paris-based Organization for Economic Cooperation and Development.

This international bureaucracy is infamous for pushing policies to expand the power of government. That’s not too surprising since it’s dominated by European welfare states. But it is amazing that Republicans seem to think it’s perfectly fine to send about $100 million each year to subsidize the OECD’s agenda.

Particularly when the OECD so often pushes policies that are directly contrary to American interests.

It has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes in the United States.

The bureaucrats are advocating higher business tax burdens, which would aggravate America’s competitive disadvantage.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

Let’s elaborate on the last item dealing with poverty in the United States. According to the OECD, poverty is more sever in the United States than it is in relatively poor nations such as Greece, Portugal, and Hungary.

Indeed, the bureaucrats in Paris even put together a chart showing how “bad” America ranks in this category.

But it’s all bunk. Utterly dishonest garbage. Here’s some of what I wrote last year on this topic.

…if you read the fine print, you may notice one itsy-bitsy detail. The chart isn’t a measure of poverty. Not even close. Indeed, the chart wouldn’t change if all of the people of any nation (or all nations) suddenly had 10 times as much income. That’s because the OECD is measuring is relative income distribution rather than relative poverty. And the left likes this measure because coerced redistribution automatically leads to the appearance of less poverty. Even if everybody’s income is lower!

But the OECD isn’t letting up. In a new “Society at a Glance” look at the United States last month, here’s what the OECD claimed.

The relative poverty rate in the U.S. is 17.4%, compared to an OECD average of 11.1%. Only Chile, Israel, Mexico and Turkey have higher poverty rates than the U.S.

But unlike in other publications, the OECD didn’t bother to include any fine print admitting that its poverty measure has nothing to do with poverty.

That’s grotesquely dishonest and morally corrupt.

And since we’re on the topic of corruption, let’s broaden our discussion. National Review’s Kevin Williamson has an article on the rampant corruption among elected officials.

But what caught my attention weren’t the parts about pro-gun control politicians trying to help sell weapons to terrorists. Instead, I especially appreciated the broader lesson he provides for readers.

James Madison famously observed that “if men were angels, no government would be necessary.” But he also understood that men do not become angels once they win elections, become police, or are appointed to positions of power. Our constitutional order strikes an elegant balance between policing the non-angels outside of government and constraining the non-angels within government, setting the ambitions of the three branches against one another and subdividing the legislative branch against itself. …Adam Smith’s formula for prosperity — “peace, easy taxes, and a tolerable administration of justice” — is the very modest ambition that conservatives aim for. Limited government is the tool by which government can be made to do good without necessarily being good, or being composed of good men. …The corruptibility of the political classes is fenced in by limiting the power of the political classes per se. You cannot expand the scope and scale of government without expanding in parallel the scope and scale of government corruption.

Amen to that. That’s the core message of this video I narrated, which explains that shrinking the size and scope of government is the only effective way to reduce corruption.

Remember the lesson of this superb poster: If more government is the answer, you’ve asked a very strange question.

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What’s the defining characteristic of our political masters?

Going all the way back to when they ran for student council in 6th grade, is it a craven desire to say or do anything to get elected?

Is it the corrupt compulsion to trade earmarks, loopholes, and favors in exchange for campaign cash?

Or is it the knee-jerk desire to buy votes by spending other people’s money?

The answer is yes, yes, and yes, but I want to add something else to the list.

One of the most odious features of politicians is that they think they’re entitled to all of our money. But it goes beyond that. They also think they’re doing us a favor and being magnanimous if they let us keep some of what we earn.

Think I’m joking or exaggerating?

Consider the fact that the crowd in Washington says that provisions in the internal revenue code such as IRAs are “tax expenditures” and should be considered akin to government spending.

So if you save for retirement and aren’t subject to double taxation, you’re not making a prudent decision with your own money. Instead, you’re the beneficiary of kindness and mercy by politicians that graciously have decided to give you something.

And the statists at the Washington Post will agree, writing that folks with IRAs are getting “a helping hand” from the government.

Or if you have a business and the government doesn’t impose a tax on your investment expenditures, don’t think that you’re being left alone with neutral tax policy. Instead, you should get on your knees and give thanks to politicians that have given you a less-punitive depreciation schedule.

And the Congressional Budget Office, the Joint Committee on Taxation, and the Government Accountability Office will all agree, saying that you’re benefiting from a “tax expenditure.”

The same attitude exists in Europe. But instead of calling it a “tax expenditure” when taxpayers gets to keep the money they earn, the Euro-crats say it is a “subsidy” or a form of “state aid.”

Speaking at the European Competition Forum in Brussels, EU commissioner Joaquin Almunia said he would investigate whether moves by national governments to tailor their tax laws to allow companies to avoid paying tax had the same effect as a subsidy. Subsidising certain businesses could be deemed as anti-competitive, breaching the bloc’s rules on state aid. …The remarks by the Spanish commissioner’s, who described the practice of “aggressive tax planning” as going against the principles of the EU’s single market, are the latest in a series of salvos by EU officials aimed at clamping down on corporate tax avoidance. …He added that the practice “undermines the fairness and integrity of tax systems” and was “socially untenable.”

Needless to say, Senor Almunia’s definition of “fairness” is that a never-ending supply of money should be transferred from taxpayers to the political elite.

The head of the Paris-based Organization for Economic Cooperation and Development wants to take this mentality to the next level. He says companies no longer should try to legally minimize their tax burdens.

International technology companies should stop considering it their “duty” to employ tax-dodging strategies, said Angel Gurria, head of the Organization for Economic Cooperation and Development. …The OECD, an international economic organization supported by 34 member countries including the U.S., U.K., Germany and Japan, will publish the results of its research on the issue for governments to consider within the next two years, Gurria said.

And you won’t be surprised to learn that the OECD’s “research on the issue” is designed to create a one-size-fits-all scheme that will lead to companies paying a lot more tax.

But let’s think about the broader implications of his attitude about taxation. For those of us with kids, should we choose not to utilize the personal exemptions when filling out our tax returns? Should we keep our savings in a regular bank account, where it can be double taxed, instead of an IRA or 401(k)?

Should we not take itemized deductions, or even the standard deduction? Is is somehow immoral to move from a high-tax state to a low-tax state? In other words, should we try to maximize the amount of our income going to politicians?

According to Mr. Gurria, the answer must be yes. If it’s bad for companies to legally reduce their tax liabilities, then it also must be bad for households.

By the way, it’s worth pointing out that bureaucrats at the OECD – including Gurria – are completely exempt from paying any income tax. So if there was an award for hypocrisy, he would win the trophy.

P.S. Switching topics to the NSA spying controversy, here’s a very amusing t-shirt I saw on Twitter.

The shirt isn’t as funny as the Obama-can-hear-you-now images, but it makes a stronger philosophical point.

P.P.S. Let’s close with an update on people going Galt.

I wrote with surprise several years ago about the number of people who were giving up American citizenship to escape America’s onerous tax system.

But that was just the beginning of a larger trend. The numbers began to skyrocket last year, probably in part the result of the awful FATCA legislation.

Well, we now have final numbers for 2013.

Expats_1998_2013

What makes these numbers really remarkable is that expatriates are forced to pay punitive exit taxes before escaping the IRS.

Which is why there are probably at least 10 Americans who simply go “off the grid” and move overseas for every citizen who uses the IRS process to officially expatriate.

Not exactly a ringing endorsement of Obamanomics.

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Over the years, I’ve shared some ridiculous arguments from our leftist friends.

Paul Krugman, for instance, actually wrote that “scare stories” about government-run healthcare in the United Kingdom “are false.” Which means I get to recycle that absurd quote every time I share a new horror story about the failings of the British system.

Today we have some assertions from a statist that are even more absurd

Saint-Amans

“Taxes for thee, but not for me!”

Pascal Saint-Amans is a bureaucrat at the Paris-based Organization for Economic Cooperation and Development. He has spent his entire life sucking at the public teat. After spending many years with the French tax authority, he shifted to the OECD in 2007 and now is in charge of the bureaucracy’s Centre for Tax Policy Administration.

I don’t know why he made the shift, but perhaps he likes the fact that OECD bureaucrats get tax-free salaries, which nicely insulates him from having to deal with the negative consequences of the policies he advocates for folks in the private sector.

Anyhow, Saint-Amans, acting on behalf of the uncompetitive nations that control the OECD, is trying to create one-size-fits-all rules for international taxation and he just wrote a column for the left-wing Huffington Post website. Let’s look at a few excerpts, starting with his stated goal.

To regain the confidence and trust of our citizens, there is a pressing need for action. To this end, the OECD’s work…will pave the way for rehabilitating the global tax system.

You probably won’t be too surprised to learn that the OECD’s definition of “rehabilitating” in order to regain “confidence and trust” does not include tax cuts or fundamental reform. Instead, Monsieur Saint-Amans is referring to the bureaucracy’s work on “tax base erosion and profit shifting (BEPS) and automatic exchange of information.”

I’ve already explained that “exchange of information” is wrong, both because it forces low-tax jurisdictions to weaken their privacy laws so that high-tax governments can more easily double tax income that is saved and invested, and also because such a system necessitates the collection of personal financial data that could wind up in the hands of hackers, identity thieves, and – perhaps most worrisome – under the control of governments that are corrupt and/or venal.

The OECD’s palatial headquarters – funded by U.S. tax dollars

So let’s focus on the OECD’s “BEPS” plan, which is designed to deal with the supposed crisis of “massive revenue losses” caused by corporate tax planning.

I explained back in March why the BEPS proposal was deeply flawed and warned that it will lead to “formula apportionment” for multinational firms. That’s a bit of jargon, but all you need to understand is that the OECD wants to rig the rules of international taxation so that high-tax nations such as France can tax income earned by companies in countries with better business tax systems, such as Ireland.

In his column, Monsieur Saint-Amans tries to soothe the business community. He assures readers that he doesn’t want companies to pay more tax as a punishment. Instead, he wants us to believe his BEPS scheme is designed for the benefit of the business community.

Naturally, the business community feels like it’s in the cross-hairs. …But the point of crafting new international tax rules is not to punish the business community. It is to even the playing field and ensure predictability and fairness.

And maybe he’s right…at least in the sense that high tax rates will be “even” and “predictable” at very high rates all around the world if government succeed in destroying tax competition.

You’re probably thinking that Saint-Amans has a lot of chutzpah for making such a claim, but that’s just one example of his surreal rhetoric.

He also wants readers to believe that higher business tax burdens will “foster economic growth.”

The OECD’s role is to help countries foster economic growth by creating such a predictable environment in which businesses can operate.

I guess we’re supposed to believe that nations such as France grow the fastest and low-tax economies such as Hong Kong and Singapore are stagnant.

Yeah, right. No wonder he doesn’t even try to offer any evidence to support his absurd claims.

But I’ve saved the most absurd claim for last. He actually writes that a failure to confiscate more money from the business community could lead to less government spending – and he wants us to believe that this could further undermine prosperity!

Additionally, in some countries the resulting lack of tax revenue leads to reduced public investment that could promote growth.

Wow. I almost don’t know how to respond to this passage. Does he think government should be even bigger in France, where it already consumes 57 percent of the country’s economic output?

Presumably he’s making an argument that the burden of government spending should be higher in all nations.

If so, he’s ignoring research on the negative impact of excessive government spending from international bureaucracies such as the International Monetary FundWorld Bank, and European Central Bank. And since most of those organizations lean to the left, these results should be particularly persuasive.

He’s also apparently unaware of the work of scholars from all over the world, including the United StatesFinland, AustraliaSwedenItaly, Portugal, and the United Kingdom.

Perhaps he should peruse the compelling data in this video, which includes a comparison of the United States and Europe.

Not that I think it would matter. Saint-Amans is simply flunky for high-tax governments, and I imagine he’s willing to say and write ridiculous things to keep his sinecure.

Let’s close by reviewing some analysis of the OECD’s BEPS scheme. The Wall Street Journal is correctly skeptical of the OECD’s anti-tax competition campaign. Here’s what the WSJ wrote this past July.

…the world’s richest countries have hit upon a new idea that looks a lot like the old: International coordination to raise taxes on business. The Organization for Economic Cooperation and Development on Friday presented its action plan to combat what it calls “base erosion and profit shifting,” or BEPS. This is bureaucratese for not paying as much tax as government wishes you did. The plan bemoans the danger of “double non-taxation,” whatever that is, and even raises the specter of “global tax chaos” if this bogeyman called BEPS isn’t tamed. Don’t be fooled, because this is an attempt to limit corporate global tax competition and take more cash out of the private economy.

P.S. High-tax nations have succeeded in eroding tax competition in the past five years. The politicians generally claimed that they simply wanted to better enforce existing law. Some of them even said they would like to lower tax rates if they collected more revenue. So what did they do once taxpayers had fewer escape options? As you can probably guess, they raised personal income tax rates and increased value-added tax burdens.

P.P.S. If you want more evidence of the OECD’s ideological mission.

It has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

P.P.P.S. I should take this opportunity to admit that Monsieur Saint-Amans probably could get a job in the private sector. His predecessor, for instance, got a lucrative job with a big accounting firm, presumably because “he had ‘value’ to the private sector only because of his insider connections with tax authorities in member nations.” See, it’s very lucrative to be a member of the parasite class.

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If you have any long-term Japanese investments, sell them soon.

How do you say “Barack” in Japanese?

In part, that’s because the Japanese Prime Minister announced another Keynesian spending binge earlier this year – even though several so-called stimulus plans in Japan have flopped over the past two decades (Keynesian economics doesn’t work anywhere, but that’s a topic for another day).

Adding to the burden of government spending is not exactly prudent behavior for a nation that already has the highest level of debt among all industrialized countries.

But the main reason I’m so pessimistic about Japan is that the government has decided to deal with the problem of runaway government spending by imposing  permanently higher taxes on the private sector.

I’m not kidding. Let’s look at parts of a recent Reuters report.

Japan’s Prime Minister Shinzo Abe will…raise the national sales tax to 8 percent in April from 5 percent, a final draft of the government economic plan, seen by Reuters, shows.

Cartoon Fiscal Cliff 3

Japan’s government isn’t even pretending to restrain spending!

And to make a bad situation even worse, some of the money will be used for yet another faux stimulus package.

Abe ordered his government to compile the stimulus package to be announced on Tuesday. It features public-works spending for the 2020 Tokyo Olympics.

The main problem, though, is that Japan’s real fiscal problem is an ever-increasing burden of government spending. The tax increase won’t solve that problem. Indeed, it will give politicians an excuse to postpone much-need reforms.

Surprisingly, the Reuters report acknowledges these problems.

The government has done little to rein in spending…, so some critics doubt Tuesday’s move will be enough to get Japan on track to achieve its goal of halving the budget deficit – excluding debt service and income from debt sales – by the fiscal year to March 2016 and balance it five years later. …any improvement in government revenue from the tax increase is likely to be quickly overwhelmed by expenditures in a country where a rapidly ageing society and generous public services are blowing an ever-bigger hole in the budget.

Time to “decisively” raise taxes!

So why is the Prime Minister doing something that won’t work? Apparently this shows he is decisive. This is not a joke.

…pressing ahead with the tax hike bolsters the image Abe has sought to foster of a decisive leader, withstanding opposition from his advisers and some of his own party.

Gee, isn’t it wonderful that Japan’s Prime Minister decisively wants to do the wrong thing and decisively put his nation deeper in a ditch.

While rational people are puzzled by the Japanese government’s self-defeating decision to raise taxes, there is one group that is cheering. Here are some excerpts from Tax-News.com about the head bureaucrat from the OECD applauding the greed of Japan’s political class.

The Secretary General of the Organization for Economic Cooperation and Development Angel Gurria has warmly welcomed the announcement from Japanese Prime Minister Shinzo Abe that the nation will raise its consumption tax from its current five percent levy to eight percent from April 2014. …”As Abe himself has noted, this increase is essential to maintain confidence in Japan and establish a social security system that is sustainable for future generations. I congratulate Prime Minister Abe for this important step and also encourage the government to complete the second hike in the consumption tax rate to 10 percent in 2015.”

So the OECD wants a hike in the VAT now…and another one in just two years. I’m sure Japanese taxpayers are overjoyed to be subsidizing a bunch of bureaucrats in Paris (who get tax-free salaries!) who urge more taxes on other people.

But, to be fair, the OECD wants higher taxes for everybody – including more Obama-style class-warfare taxes in America. The bureaucrats even argue that VATs are good for growth and job creation!

My view, for what it’s worth, is that this is another piece of evidence showing that the VAT is a money machine for big government. Not just in Japan, but also in Europe.

And the same would be true in America. This video explains further.

P.S. Here are some examples of how the Japanese government wastes money, though regulation of coffee enemas is my favorite example of government stupidity from Japan.

P.P.S. Click here, here, and here to enjoy some very good cartoons on the VAT.

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If I had to identify a “least-favorite” international bureaucracy, it almost certainly would be the Paris-based Organization for Economic Cooperation and Development.

The OECD doesn’t waste as much money as the United Nations, it might not cause as much macroeconomic instability as the International Monetary Fund, and it presumably doesn’t produce as much bad research as the World Bank, but it surely wins the maximum-damage-per-dollar-spent award.

Pampered OECD bureaucrats enjoy luxury while promoting statism

The OECD is pushing for new global rules that will result in higher taxes on the business community.

It has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

All of these stories should enrage people who value economic liberty. But American taxpayers deserve to be especially irate since we pay almost 25 percent of the OECD’s lavish budget.

I’m definitely not happy about the Paris-based bureaucracy, which is why I’ve been fighting against the OECD for years. I even fought them when they threatened to throw me in a Mexican jail.

But all my previous criticisms will seem trivial when you lean about the most jaw-dropping display of hypocrisy ever displayed by a government official.

Here’s a remarkable comment from one of the top bureaucrats at the OECD.

Pascal Saint-Amans, director of the OECD’s centre for tax policy and administration, added: “The golden era of ‘we don’t pay taxes anywhere’ is over.”

Why is this statement worth highlighting? Is it because the OECD is wasting our money persecuting jurisdictions with no income taxes? That’s one of the many bad activities of the OECD, but it’s not what makes Monsieur Saint-Amans’ statement such a stunning display of tone-deaf hypocrisy.

The reason his comments are so absurd is that bureaucrats at the OECD are exempt from paying tax!

I’m not joking. The OECD’s website openly acknowledges that:

Emoluments (basic salary and allowances) are payable in arrears, with the exception of the installation allowance which is payable on taking up duty. Emoluments are exempt from taxation in most Member countries of the Organisation, including France.

Yes, you read correctly. OECD bureaucrats “are exempt from taxation.”

And when the OECD says “most Member countries,” that pretty much means every nation in the world other than the United States. But even that’s not really true since Americans who work at the OECD get extra salary to cover their tax bill to the IRS, so they wind up with just as much in their bank accounts as the workers from other nations who officially get tax-free salaries.

OECD Fringe BenefitsKeep in mind, by the way, that the bureaucrats also get a plethora of fringe benefits. But we’re not just talking about their gold-plated health benefits and generous pensions. OECD bureaucrats get a bevy of special allowances.

Ordinary people like you and me are expected to pay for our kids and our housing out of our paychecks. And that’s after government takes a big bite. And one of the reasons our taxes are so high is so that we can pay big salaries to tax-exempt OECD bureaucrats…and to also give them extra money for kids and housing.

Life must be nice if you’re a member of the gilded class.

Given Monsieur Saint-Amans privileged tax status, you would think that this pampered member of the bureaucratic elite would be somewhat cautious about criticizing a “golden era” when people “don’t pay taxes anywhere.”

But apparently it doesn’t bother him to demonstrate a spectacular level of hypocrisy. Indeed, I suspect that he has set the all-time record for hypocrisy in government.

What do you think? Has this OECD bureaucrat engaged in a more egregious form of hypocrisy than these other examples?

1. The bureaucrats at the IRS presumably like having more power and money to enforce Obamacare, but they don’t want to be subjected to the law.

2. Or how about rich left wingers who bleat about compassion but who are stingy with their own money.

3. And the wealthy leftists who use tax havens while trying to deny others from protecting their money.

4. There are members of the Washington elite who don’t have to live under the gun control laws they impose on others.

5. What about the politically connected business types who endorse higher taxes in exchange for favors from Washington.

6. Or the politicians who evade the taxes they impose on ordinary citizens.

7. How about Canadian politicians who support government-run healthcare but then come to America when they need treatment.

8. And it’s absurd that Europeans claim they’re more compassionate when Americans do far more to help the less fortunate.

9. To close this list on a humorous note, we also have Occupy Wall Street protesters who fight “The Man” while wanting to make “The Man” more powerful.

Maybe my views are affected by my disdain for the OECD, as well as my hostility for taxes, but I certainly think Monsieur Saint-Amans wins the prize.

However, maybe this isn’t a fair competition. After all, he was a tax collector for the French government before joining the OECD, so that gives him an almost super-human level of expertise in promoting bad policy. I’m sure he’s quite proud that there are thousands of people in his country that are forced to pay more than 100 percent of their income to the government.

That being said, I’m sure he’s quite happy that he pays nothing.

P.S. Years ago, the predecessor to Monsieur Saint-Amans testified to the Finance Committee in Washington. I arranged for one of the Senators to ask Jeffrey Owens whether he thought it was hypocritical to advocate higher taxes for everyone else while simultaneously being exempt from income tax. Mr. Owens truculently replied that he could make more money if he worked in the private sector (which didn’t answer the question, but he obviously wanted people to think he was making a big sacrifice by working at a tax-free position).

Even though it was irrelevant, I’m sure what he said was true. But what’s important to understand is that he had “value” to the private sector only because of his insider connections with tax authorities in member nations. In other words, he had high value in a world of big government and crony capitalism. So you won’t be surprised to learn that Mr. Owens went to one of the Big 4 accounting firms after retiring from the OECD.

So Mr. Owens presumably is getting paid a lot of money today. And he’s finally paying tax. But he’s still part of the parasite class. Just like the former Obama Administration officials that are now getting rich serving as advisers and lobbyists helping clients deal with Obamacare. These people may not get paychecks from the government, but they sure as heck get paychecks because of government.

Which is yet another example of why big government is inherently corrupting.

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