Tag Archives: Golden Geese

Property is taxation in waiting

There’s a great article in the Sunday Times today (March 16, 2014), all about the perils of British expat’s in EU countries. If ever we needed proof that governments are thrashing around, frantic to tax everything in sight, then this is it.

In France you have to declare bank accounts held in other countries you are fined €1500 per account per year; this includes PayPal. One expat has been fined a total of €25,000 because he had totally forgotten about a dormant account.

Of course the real target is property. Renting out a second home in France now incurs a 15.5% ‘social charge’ on top of a %20 tax, and this cannot be offset against British Income tax. Selling a second home incurs a 19% capital gains tax, and a 15.5% ‘social charge’ if the property was owned for less than 22 years.

No Hiding Place

How are the mighty fallen. Uli Hoeness, hero of Germany’s 1974 World Cup winning team, and president of Bayern Munich has been sentenced to three and a half years in jail for tax fraud.

Hoeness, had admitted hiding large sums in a Swiss bank under a “voluntary disclosure” scheme, hoping to avoid trial by paying the taxes owed plus a 6% interest. This is far more generous than the US tax evasion amnesties of 2009 and 2011, with fines being a substantial percentage of the total capital, not just the tax owed. Of course, any one going down this route must declare everything. Further revelations showed that Hoeness had been dishonest when disclosing the scale of his assets, hence the court case.

Subsequently 26,000 German tax evaders have opted for voluntary disclosure. If a national icon can be taken out, then no one is safe.

All around the world governments are tracking down tax evaders with a vengeance. No one is safe from the tax police. Once you are in their crosshairs there is no escape. In the age of computerization it’s like shooting fish in a barrel. One way or another, they will find out the scale of any individual’s tax evasion. As we are saying in The Flight of the Golden Geese, the days of tax evasion are over. The only legal way for the rich to protect their wealth from their country’s tax grab is to give up their citizenship, and leave for friendlier jurisdictions.

New Barbarians in the Home Office

It seems that mandarins in the UK Home Office have been reading my New Barbarian Manifesto.

At present non-EU nationals who invest £1 million, £5 million and £10 million in government bonds can apply for permanent residency in the UK after five, three and two years respectively.

Now someone in the Migration Advisory Committee (MAC) has proposed a sealed bid auction of around 100 visas annually, minimum bid £2.5 million, £2 million of which goes straight into government coffers.

Critics say the British Public won’t like this. I beg to differ. The British public don’t want dole queue immigrants. They’d be delighted to welcome the rich who spend money and thus employ people, and pay taxes. In the New Barbarian Manifesto I said that the UK “should drag them of the planes if necessary”. It looks like someone in MAC is thinking along the same lines.

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A three-letter word ending in X

My friends say I have a one-track mind. I’m always thinking about a three-letter word ending in X. … TAX.

It seems I’m not the only one. For yesterday in the House of Commons MP Ben Gummer stated a fact that has always irritated me. His bone of contention was National Insurance. For non-Brits I should explain that British subjects who earn more that £149 per week has to pay 12 per cent or more of their earnings on a so-called contributions based scheme that supposedly pays for various sickness and unemployment benefits and pensions. Gummer says it is a stealth tax masquerading as a social good.

National Insurance is a sanctimonious euphemism, it is a tax mechanism for redistributing wealth. The state should come clean and admit that it is nothing less than an ‘Additional Income Tax’.

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Obamacare Wars

It’s impossible to read an American newspaper, or switch on the television without a story that says the Affordable Care Act will be devastating to the American way of life, and the country’s economy. Everybody is arguing about it.

A recent report by the non-partisan Congressional Budget Office claimed that Obamacare would destroy over two million jobs over the next decade. Republicans say that people would choose not to work, or work less, in order to maximise their benefits offered by the government. It sounds just like the dependency culture in the U.K.

The Democrats counter by claiming that Obamacare will increase demand for goods and services, and so boost employment. Of course, being by far the largest sector of the tax-paying public, the hard working middle classes would have to pay to supply that demand. As a result their standard of healthcare will decrease, or they’ll have to pay more.

Will there be dramatic benefits as the Democrats claims? Look out of the window, alongside the Golden Geese, the pigs are flying, and better-off US citizens will have to shoot for bacon.

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Golden Geese everywhere

It seems wherever I go in the world I am fated to meet high net worth individuals (HNWIs) who for one reason or another are contemplating flying the coop to become fully fledged Golden Geese.

This afternoon (Valentines Day) I was taking a Nature Air flight from Liberia (the town in Costa Rica, not the country) to San Jose (the capital). I got chatting to a US citizen seated in front of me (I’ll keep him anonymous). He was buying real estate in Costa Rica having sold up his businesses in the US. He wasn’t yet contemplating giving up his passport, but he was determined to spend much if not most of his time away from the States.

This time it wasn’t the IRS that was chasing him away. Within five minutes he was telling me a series of stories about gratuitous litigation, and how, because he was perceived to be rich within a community where he had undertaken an educational project, he had become the target for ambulance chaser lawyers of clients with the most spurious claims. He ended up settling out of court, because the legal costs would likely swamp the size of the claim. Also he was given the run around by vindictive petty officials, adding months to the project life cycle.

A disagreement with a partner that led to litigation was the last straw. Sick and tired of these cynical opportunists, depressed by the incessant midge biting, he decided to get out. The end of his American Dream. Sadly his story is all too common.

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Learning the lessons of the Laffer Curve

During the late 1970s the U.K.’s top income tax rates were over 80%, and yet the top 5% of income taxpayers contributed just 24% of the total, whereas nowadays at much lower tax rates this group pays around 43% of the total; the top 10% paid 57.6% in 2011/12. The top 1% paid 11% of the total in the 70s; and 27.7% in 2011/12 (up from 21.3% in 1999/2000) – raising £44 billion, more than raised from companies. Apart from showing that the wealthy pay a disproportionate amount of taxes, the figures clearly imply that lower tax rates actually increase tax revenues. This counter-intuitive observation seems to support the Laffer Curve theory, which sees two counteracting effects at play in the raising of tax revenue: that of ‘arithmetic’ accumulation and the ‘economic’ consequences. The arithmetic effect is straightforward: revenue collected is the tax rate multiplied by tax-base (the taxable amount available) accumulated across the various bands. The economic effect is the recognition that the tax rates imposed will have a dampening effect on the tax-base – a higher tax rate will trigger tax evasion, more effort in avoidance, less incentive to earn, more time spent at leisure, and some tax-payers permanently leaving the jurisdiction.

At the extreme a 100% tax would mean no incentive at all; no one would bother to work since all the fruits of their labour would all be taken off them. Hence the economic effect of a total tax would mean an empty tax-base, and a consequential tax take of zero. Charging tax at 0% would also bring in nothing. Hence there must be an optimum tax level that maximizes the tax take balancing these two effects. But what level? This is an impossibly complicated calculation that would also have to take into account special circumstances (like paying for a war, or subsiding the unearned bonuses of the banking sector), or the availability of offshore tax havens, or changes in the overall economic climate etc. Nevertheless it seems clear that punitive tax levels actually drive down revenue.

Why is it that the taxman focuses on the arithmetic consequences, but has no conception of economic ones? Does he believe in a kind of Newton’s Law of Taxation: where to every action (that is tax) there is an equal and opposite reaction (namely everybody pays up in full)? According to their simplistic arithmetic logic, tax creates a revenue stream, and a higher tax makes for a larger stream. Not in Laffer’s non-linear world of consequences. The only law the Revenue should consider is that of Diminishing Returns. Taxing is disturbing. There is an uncertainty principle at play here. The act of taxing disturbs and changes the attitude of both the persons being taxed, and those doing the taxing. Those profiting from taxes get an appetite for it, and like Oliver Twist will ask for more. However, keep increasing tax levels, and the tax-base collapses. And when the tax-base collapses, so does the economy, and ultimately so does the country. Death by taxes – a lesson that every socialist state eventually learns. One that President Hollande’s France will learn very soon. The rate of tax needn’t even be that high – the mere introduction of a new tax is interpreted as a statement of intent, a signal of more to come.

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“Hell hath no fury like a woman scorned”

Before starting this article, we should first use the correct quotation:
“Heaven has no rage like love to hatred turned, Nor hell a fury like a woman scorned”.

When William Congreve wrote those words in 1697 in his play “The Mourning Bride” little did he realize he was giving tax advice to errant husbands of the twenty-first century, like Scot Young. Young, a tycoon now fallen on hard times, is at the centre of a bitter £400 million divorce battle with his wife Michelle. The highly acrimonious case has got the whole of Britain in thrall.

Scot Young declared himself bankrupt, owing £2m to the taxman. Claiming to be broke, Scot is unable to give Michelle and their two children any financial help. That having been said, apparently she has received more than £1m from her husband’s friends. Michelle, having lost her privileged lifestyle, was not satisfied. “We are just living one day at a time. He is eating in the finest restaurants with beautiful young models while my girls don’t know their futures”.

She asserts that her husband has salted away large sums, and wants her share. But how can Michelle prove her claim? She can’t. She doesn’t have the resources to track down the money through a maze of concealed deals. However, she knows someone who does. The British tax man!

Scot should have listened to Congreve before giving his old laptop computer to his children Scarlet, 17, and Sasha, 15, to help them study for their exams. Of course he first ‘sensibly’ deleted all his personal files. Mistake! In her fury Michelle got experts to scour the hard disk, and they managed to recover five-years’ worth of encrypted files, containing hundreds of e-mails and other sensitive data on Scot’s financial and property dealings. We can now expect HMRC to unleash its hounds of hell to sniff out any hidden assets, particularly if they can grab a share – and Michelle will grab the rest.

Watch this space!

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The Pomperipossa Effect

Once upon a time, long, long ago (well actually in 1975) in a land far, far away (Sweden) there lived a kindly fairy godmother named Astrid Lindgren. Astrid brought smiles to the faces of children from all over the world with her stories of Pippi Longstocking and other charming characters. Indeed, her stories were so popular that her books became very successful and sold in vast numbers. Her royalty income just grew and grew. And she lived happily ever after?

Well, not quite! A big bad wolf in the form of the Swedish Social Democrat Government had other ideas. It introduced a new tax regime that meant self-employed individuals had to pay both regular income tax and employer’s fees. In Lindgren’s case this meant a marginal tax rate of 102%. Unbelievable. She had to pay more in tax than she actually earned.

This idiocy has subsequently been dubbed the ‘Pomperipossa Effect’ after a allegorical story ‘Pomperipossa in Monismania’ (in English ‘Pomperipossa in the World of Money’), which she published in Stockholm’s evening tabloid newspaper, Expressen, on 3 March 1976. Even the Swedes, who are normally fairly passive over high levels of tax, were incensed. It was no accident that later that year the Social Democrats were thrown out of government after being in power for 44 years.

So there was a happy ending. Astrid Lindgren did live happily ever after paying a mere 80% of her income – she died in 2002. However, this isn’t a fairy story – more a horror story. The big bad wolves haven’t gone away. They have spread out from Sweden to join governments all around the globe. Don’t be surprised when the nightmare of the Pomperipossa Effect suddenly reappears in your country.

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All taxation is theft

This is a presentation given by Professor Ian Angell at the London Stock Exchange, Tuesday March 7, 2006 in a debate with Sir Nicholas Montague, former head of H.M. Inland Revenue.

“… Thus began the fierce endeavour of the State to squeeze the population to the last drop. Since economic resources fell short of what was needed, … [t]he full rigour of the law was let loose on the population. Soldiers acted as bailiffs, or wandered as secret police through the land. Those who suffered most were, of course, the propertied class. It was relatively easy to lay hands on their property, and in an emergency, they were the class from whom something could be extorted, most frequently and quickly…”

Sounds familiar? No, this isn’t today’s Britain, with its middle classes ravaged by stealth taxes, speed cameras, national insurance, income tax, death duties, VAT, petrol, alcohol, tobacco duty, community charges etc. This is a quotation from The Cambridge Ancient History, on the decline and fall of the Roman Empire. There’s nothing new under the sun. Once again the State is predator. Look closely at today’s Britain, and the same signs are there: such is the end of Empire.

“…If the propertied class buried their money, or sacrificed up to two-thirds of their estates to escape … ; or went so far as to give up their whole property in order to get free of the domains rent, and while the non-propertied class just ran away, the State replied by increasing the pressure…” This is why such large hoards of Roman gold and silver are still being unearthed. The owners were hiding their wealth, not from barbarians, but from the swarms of state registered looters.

Don’t think that this couldn’t happen in a democracy. According to Alexander Tytler, an 18th century philosopher: “a democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largesse out of the public treasury”  – out of taxation.

In the new globalized socio-economic conditions, governments chosen by the majority are governments chosen by losers. They are losers because labour has become a commodity, and must compete on price. The International Labour Organization calculates that nearly a billion workers have entered the global job market. Why should the world’s sub-employed all live in developing countries? Automation and exportation of jobs is sending shock waves through western workforces previously protected by national interests, but which are now incapable of fending off foreign incursions. Because of the minimum wage, companies are lowering staffing levels. It is no accident that most are instigating downsizing, delayering and outsourcing programmes.

Because of computerised production, the structured world of semi‑skilled labour, that arose out of the industrial revolution, is now disintegrating.  Professor Richard Scase tells us that in the UK today, more people are working in Indian restaurants than in the iron & steel, shipbuilding and coal industries combined.

Meanwhile, the politicians still pretend to be in control. Trust me, “I’m from the government and I’m here to help” (which according to President Reagan are the nine most terrifying words in the English language). Politicians, both the knaves and the naive, pander to the masses. They say they can conjure up hundreds of thousands of new jobs for the huge number of soon-to-be-unemployed. What a nerve! Businesses create jobs, governments create non-jobs and pensions-in-waiting, all paid for by taxes, and in doing so tax real jobs out of existence.

Today, productivity is delivered by a technology needing only a few machine minders. A typical factory employs one man and a dog. The man is there to feed the dog, and the dog insures that the man doesn’t touch anything. Growth is created from talent, not from low-grade labour. It has been decoupled from employment. National economies can no longer grow themselves out of unemployment. A large population, particularly an uneducated and ageing population, is a now liability: a major problem facing all Western governments. The twentieth century, the century of the masses, is over. A degenerate political system based on manipulating those masses is over too, but it won’t go quietly.

Just as in Ancient Rome, they hang on by soaking the rich. Hence, the wealthy look to escape, taking with them as much of their wealth as possible, and a vicious circle of decline begins. A series of tiny tax hikes, each seeming so obvious, harmless, beneficial even, are the first steps on the road to perdition. There are no alarm bells; life goes on, only with each infringement, ethical standards drip away. Drip, drip, drip, until the floodgates open. Then instead of setting standards and punishing wrongdoers, the government is ‘at it’ themselves. Croneyism is rampant; government has become corrupt and corrupting.

Strapped for cash, they will steal (tax) anything in solid form. Taxes will inevitably rise on fuel, food, clothes and property. ‘Who guards the guardians?’ when morality collapses into vice. The ‘will of the people’, voting for full employment, a minimum wage, and fair taxation, is merely the turkeys voting for Christmas. To stay in power, the government needs to subsidise preferred voters, and so it will stuff the turkeys.

Don’t think the other lot will make any difference. That’s the trouble with elections, the government always wins. And if voting made a difference, they would have made it illegal. Whatever the government, they all face the same problem: income collapsing, and expenditure going through the roof. How dare Chancellors call it a budget, when they just steal even more from the public to pay for their mistakes.

To justify their tax take, the state professes a superior morality. However, the legitimacy of the state does not stem from any unassailable moral position, but from raw power: the domination of the individual by the tribe. This is the same immoral morality that deludes ‘incorruptible’ tax collectors and policemen as to the rightness of their legitimate brutality. Indeed, the enforcers of state power, preening themselves in this sanctimonious morality, are given the right to, nay the obligation to, invade the privacy of its citizens.

Consequently, the wealthy are losing their faith in the nation-state, which supports the profligate and penalises the thrifty. The state no longer delivers its side of the Faustian pact, where the individual submits to the legitimate violence of the state in return for protection and security. Globalization has shown the James Bond myth, that the state is good and global corporations (Spectre) are bad, to be blatant propaganda on behalf of the nation-state: a morality tale told by tax-collectors. James Bond, the patron saint of civil servants, the thug of state, is now just another dirty old man.

The nation-state does not stand on some moral high ground, rather on a squalid collectivist doctrine: we are all equal in that we are all property of the state, or rather of the leaders of the state; and those leaders can dispose of its property as they see fit. All taxation is theft. It is the state obtaining money with menaces. Government is merely legitimate organized crime; and even the mafia doesn’t charge 60%. Taxation without representation may be tyranny, but it’s a lot cheaper than the alternative!

Ralph Waldo Emerson once visited David Thoreau in jail, where he had been imprisoned for non-payment of taxes. Emerson asked “why are you here?” to which Thoreau replied “why are you not here?” Thoreau saw himself as a prisoner of conscience, a political prisoner, and was asking why all free men were not acting in the same way, defending the right of the individual against coercion by government. The morality of the common good should not intimidate the wealthy. The ‘Common Good’ isn’t good, it is merely common!

However the politicos are addicted to, and dependent on their tax take. They won’t give up that easily, and they have found a newweapon: radio-frequency identification (RFID) tags. A tag, costing less than five cents, fitted in each banknote, will uniquely identify that note to every sensor it passes. The authorities will claim its purpose is to combat counterfeiting. Science fiction, you may think. The new 10,000 Yen bills (~$100) are to be implanted with Hitachi’s ‘mu-chip’. Each chip costs around a mere 50 Yen (soon to be 5Yen)! The EU is considering implanting tags in its notes. By insisting that only notes with operational tags are legal tender, governments may cancel the cash of any targeted individual – what a fantastic method for instantly taxing citizens, or destroying political opponents!

The state’s database won’t stop with money. In the name of homeland security, U.S. passports will soon contain an embedded tag. Holland already has tags in its ID cards. This will save the Dutch citizen any inconvenience of having to show the card on request – how thoughtful of the Dutch government.

Officials can validate a person’s identity anywhere they have secreted a reader, and all without the permission or even awareness of that person. The world’s national borders will soon be so equipped, thereby controlling the transnational flow of people. There’ll be no more slipping through customs without paying duty, or carrying suitcases of money to Switzerland. The state will know who you are, everything you are carrying and wearing, and where you’ve been.

But why stop with ID cards. The tagging of pets has been very successful, so why not implant tags in everyone? Just like it says in the Book of Revelations, Chapter 13, verses 16 to 18:

16. And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:

17. And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

18. Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.

The state is the beast, and its number is 666, the symbol of everything evil. Society will be turned into a Panopticon prison, where the Revenue can, not only calculate every tax bill, but also seize payment. In the words of Friedrich von Hayek: “The complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape not merely for the rich, but for everybody”?

Then we can expect ‘differential rights’ for ‘differentiated citizens’, identified in a data-base and policed by smart ID cards. Party members, will use the card to gorge on benefits – euphemistically called entitlements, while opponents, trapped by their Ahnenpass, are harassed, suppressed, and worse. How long before ‘Human Rights’ becomes as outdated as the “Divine Right of Kings’?

Rome used the threat of the Visigoths to extort penal taxes from its citizens. Today terrorism and organized crime are the equivalent justification. If parliament defines terrorism as ‘a threat to the financial viability of the state’, then tax collectors will have the right to sweat a suspected tax evader for 28 days without charge. You have been warned.

The US government may claim it is chasing narco-dollars, but it is using money-laundering laws to track down tax-flight dollars in Switzerland and Grand Cayman. Every global corporation is now at the regulatory sharp end of US extraterritorial muscle. Failure to comply will lead to the seizure of their dollar assets. Compliance with the demands of government: both in US and UK! That’s the next big issue for business; Sarbanes Oxley was just the start. Forget about computer hackers; government regulations are the ultimate denial of service attack on the corporate sector. It’s going to find itself knee-deep in compliance officers.

Don’t expect the EU to protect you. European politicians think that all businesses are run for their benefit, to pay for schemes that will buy them votes. Their tax freedom day is the end of June, a month later than ours, and we come six weeks after the US – they are in mid-April.

The European Union is just another collectivist disaster waiting to happen: the USSR with a forty-year time lag – the EU-SSR.

What do you get when you mix the British Pound (B£) with the EURO? The anagrammatic ROUB£E.

I have one piece of advice for you. In the words of W.C. Fields: “Start the day with a smile and get it over with”, because you’ve got nothing to smile about, when all taxation is theft.


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