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2012: Tax, the Euro and the Gold Standard: A Roundup

Monday, January 7th, 2013

By Mark Rogers

Tax

In a move practically designed to prove my assertion that the Inland Revenue is behaving more like the Stasi than a branch of democratic government, it was announced on Friday 4 January that the H.M.R.C. was publishing the names and photographs of some of the worst tax “cheats” of the previous year. Yet the lack of clarity persists: “The Government invested £917m in tackling tax evasion, avoidance and fraud in 2011-12, with an additional £77m planned over the next two years. ‘Most people play by the rules and pay what they owe, but HMRC is cracking down on those who don’t,’ said Exchequer Secretary to the Treasury David Gauke. ‘We hope that publishing these pictures will help get across that it always makes sense to declare all your income, and tax dodgers are simply storing up trouble for the future.’”

While the news report does give details of an overtly criminal gang, the persistence in lumping together criminals on the one hand and dodgers and avoiders on the other is deeply worrying; the latter are people who have committed no crime. Until and unless the law is specifically changed the pursuit of those who legally avoid paying tax is a direct assault of the rule of law. And it will not do to pass legislation criminalising avoidance: avoidance only takes place because the tax code is too large, too multifarious, too unfair and too confiscatory. It would be an even graver assault on the rule of law if criminalising legal behaviour was to be the government and parliament’s preferred option rather than a serious overhaul of the tax code. But then expecting that is like expecting the EU’s commissioners, politicians and bankers to sort out the euro mess.

The Euro

Where is the promised resolution to the Euro crisis, specifically the problems in the first place of Greece? The European Stability Mechanism merely defers the inevitable, but true to form, the EU’s political class is congratulating itself that “something is being done”.

In his book America Alone: The End of the World as We Know It (Regnery Publishing, Inc. Washingto, 2008), Mark Steyn makes the following observation: “The progressive Left can be in favour of Big Government or population control but not both. That mutual incompatibility is about to plunge Europe into societal collapse. There is no precedent in human history for economic growth on declining human capital – and that’s before anyone invented unsustainable welfare states.”

Thus a decline in the European demographic, which was predicated on the welfare state providing for all and giving a better standard of living which in turn is often taken to mean fewer children, is ensuring that the welfare state is collapsing while its beneficiaries demand more – see, for example, the Greek reaction to “austerity”.

But was “Europe” on any of its models ever going to be sustainable? In an interesting article from an old Encounter that I recently picked up, much food for thought suggesting that the answer was no from the beginning is to be found in an article by François Bondy, The Sick Man of Europe is .. Europe (Encounter, Vol. X, No. 6, June 1958). While he is talking about NATO, rather than the emergent political arrangements that would eventually become the EU as we know it, it must be remembered that The Europeans leapt under the NATO nuclear and military umbrella on the specific assumption that the Americans would be footing the bill; this in turn, allowed France to pursue her squalid little colonial war in Algeria, while allowing them all to begin that slide into welfarism, the effects (or rather, defects) of which are now manifest. Bondy says this of the relations that the Europeans and the Americans thought they were entering into at the time:

The truth is that, in essentials, the West Europeans have relied on the United States for their defence, and that N.A.T.O. is the instrument, not of a partnership, but of a receivership.” [My emphasis]

That note of insolvency struck right at the very beginning!

He also goes on to be very prescient about how things would fall out: “A great and present danger would arise out of an unequal division of privileges, responsibilities, and burdens among the European states; this inequality could generate new national hatreds and rivalries, and make of Europe simply a greater Balkans.”

Which is exactly how to describe the quite deliberate plan to bring this state of affairs about through the melding of the “hardcore” euro currency countries into a fiscal “heartland” for the EU. He goes on to ask: “Balkans or Switzerland? Perhaps neither goal is likely to arouse enthusiasm in the citizens of that Europe which discovered the modern world, established it, and ruled it for so long. But Balkanisation will only be the fate of those who are themselves ready for it, and prefer to be a shrunken power rather than a small state.”

And this was said in 1958.

And the gold standard, what has that to do with welfarism?

The Gold Standard

“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. … The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty understanding the statists’ antagonism toward the gold standard.” (Quoted in, The Coming Collapse of the Dollar and How to Profit from It, James Turn and John Rubino, Doubleday, New York, London etc., 2004)

Well said, that man! But who was that man? No less than Alan Greenspan, whose views clearly cover the span between what he said in 1966 in an essay, “Gold and Economic Freedom”, and his own genial oversight of “an unlimited expansion of credit”, no doubt thinking the while that this was because this had to be done to counter the expansionist ambitions of the welfare statists, but with, inevitably, the same result.

But as a succinct description of what in effect has happened in the banking crisis, his first sentence is spot on, and this may yet be revealed as not only the way the crisis evolved, but of the very motor at the heart of it, the politically expedient manipulation of the LIBOR.

And the future of the gold standard? We shall see if the Utah sound money scheme catches on in other States in the U.S.A. And we shall see if the arguments for its return start stacking up in the minds of those whose minds need to accommodate it. But the really serious question is if Basel III, if, when, implemented does turn out to be a tentative restoration outside the political system, and if indeed it does turn out to be a de facto gold standard, how will the politicians react?

Basel III is difficult to interpret, and so far this year the main news about it is that the Reserve Bank of India has declared that it is to defer implementing it for at least a few months.

How strange it is that the most perceptive remarks about Europe’s decline and the warning about the welfare state’s destruction of wealth should have been made in 1958 and 1966 respectively. History indeed is a gold mine!

For more on tax go to: STARBUCKS AND ALL THAT TAX, which also contains a link to a brief summary of my arguments and a link to all the previous articles on tax.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS

And for background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

And for a review of one of the most important books on the financial crisis published last year: THE MESS WE’RE IN: WHY POLITICIANS CAN’T FIX FINANCIAL CRISES

PUNISH BENEFIT CHEATS

Sunday, November 4th, 2012

DO DEALS (IF YOU MUST) WITH SO-CALLED TAX EVADERS

By Mark Rogers

After all the froth over tax evasion, in a remarkably short space of time the taxman is doing a deal: “Hundreds of tax evaders … will escape prosecution and keep their identities secret under immunity deals offered by Revenue & Customs,” reported The Times on Friday, 2nd November, in a front page story. The idea is not to waste Court time and further expense if so-called “secret account-holders” simply stump up their taxes and pay penalties. There has already been one prosecution for “serious fraud” and there will be a select few more.

The newspaper also quotes a former taxman who now works for a law firm as saying: “It is those at the lower end of the social scale who go to prison. There is no immunity for benefit cheats.”

In a development in Greece, a journalist who published 2,000 names of Greek “secret account-holders”, which include industrialists, financiers and politicians, was acquitted of breaching privacy laws, after the prosecution offered no witnesses. The journalist Kostas Vaxevanis is quoted, in a separate story on page 8, as suggesting that the list detailed “groups of people stealing from the Greek state”.

The HMRC deals are being offered to those British people who turned up on a list of account holders at a Swiss branch of HSBC, which list was stolen two and a half years ago by an employee of the bank – thus violating bank-client confidentiality – which was given to the then French Finance Minister, Christine Lagarde (now head of the IMF). She in turn gave HMRC 6,000 names of UK citizens (500 of whom have so far been investigated for fraud).

HMRC, Evasion and the Mis-spending of Savings

Before looking at the moral dilemmas of what has recently happened, and in particular the unfortunate view of Mr Vaxevanis, let us look at some of the more straightforward economic practicalities.

HMRC is assuming that the Lagarde list contains people who do not have a cash flow problem i.e., the deals, which as noted save precious court time, are possible because both the tax and the fines are assumed to be achievable. A deal, to work, requires the agreement of both parties as to what is feasible, whereas justice demands that one party has justice visited upon it in the name of the law, as pursued by the aggrieved party.

As it is deals that are being offered, the back taxes and the fines must come out of savings. This gets to the heart of the problem, which is that among the reasons for the evasion in the first place is the perception that the state misapplies resources, and therefore the taxing of successful businessmen is to mis-spend savings which would otherwise have been applied as investments. This is also another reason, of course, for not sending the majority of these so-called evaders to jail: they are after all a productive element in any economy, producing goods, services and jobs. The problem of UK taxpayers’ assets being held abroad is the simple recognition that the tax regime is too onerous in the UK and that government wastes money.

Deals and assets

So there is at least a tacit recognition that these individuals play a productive part in economic life. What is required is the further recognition that when a tax regime becomes too complex, and the welfare state, which inevitably requires big government, is all-pervasive, then the problem is the government, not the so-called evader.

But these deals usher in another confusion. Hitherto, most of the fuss has been about legal tax avoidance (as discussed for example here, Cowboy Accountants – or Lone Rangers?). Now it transpires that the Lagarde list exposes the problem of hidden assets. This is indeed only, from an anti-Keynesian point of view, the reverse side of the problem of the initial evasion, the hidden assets being on the Keynesian view “hoardings”.

This is the operation of Gresham’s Law in the welfare state economy: bad money/bad monetary policy driving out good money, either into Swiss bank accounts, or, as another aspect of the tax furore initiated by the Chancellor revealed, into good works – this was the attempt by the Chancellor to cap charitable giving; this attempt revealed that many rich donors, who use the tax exemption schemes drawn up by HMRC, actually give more to charity than the exemption is worth!

Whistleblowing? Accountability?

The term “whistleblower” entered the political lexicon largely to describe a civil servant who has come across corruption and incompetence in government and decides to risk all by exposing it – the biggest two in the UK in recent years being the utter incompetence of the immigration department and the corruption of the MPs’ expenses scandal.

So why is the private employee of a private institution being called a whistleblower for sneaking on his employer’s clients? The answer lies in the vexing view of Vaxevanis, the Greek journalist who believes that asset hiders are “stealing from the Greek state”.

That is the welfarist assumption in a nutshell: that private citizens’ money actually belongs to the state. However wasteful the state, and however much that waste prompts the operation of Gresham’s Law, those who avoid taxes, in the hope that more productive times might return (after all, with interest rates so low, why invest?), are branded thieves – for hanging on to their own money.

This view of the vexing Vaxevanis reverses the idea of accountability – as I have remarked before, the state needs to be very sure that taxpayers are getting value for money before accusing citizens of being in effect criminals (and see here for further implications for constitutional government).

Real cheats

Which brings us back to the idea that there are two modes of justice: one for the rich, even when they save their money against government waste, incompetence and malfeasance, and another for those poor who cheat on the benefits system. It is however, wholly commensurate with the idea of justice that the latter are punished: they have devised ways to make claims on hardworking taxpayers’ money to steal what does not belong to them. As the actions of HMRC have implicitly acknowledged, all that “evaders” and “hoarders” have done is to hang on to more of what is actually theirs.

A benefit cheat is breaking the criminal law, a long-sanctioned element of the English Common Law. A tax avoider is simply breaching legislation, often passed in fits of class antagonism “against the rich”, that allows the state to snatch a portion of his wealth, that allows the state to believe that all our incomes belong to it – see the Orwellian notion of “the taxpayer’s allowance”.

This is a morally corrosive view, which leads to constitutional vandalism. That, not tax evasion, is the real problem of our times.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS 

And for background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

CHANCELLOR FRAU AUSTERITY: HOW MUCH DID YOUR VISIT COST?

Tuesday, October 9th, 2012

By Mark Rogers

There’s austerity and then some. Why did Chancellor Merkel decide to visit Athens? It certainly wasn’t to boost the revenues from tourism.

It is reported that some 7,000 police officers, secret agents, snipers and commandos were deployed against Greek demonstrators who defied bans on entering certain parts of Athens during her seven hour visit. To attempt to contain the demonstrators, some 50,000 of them apparently, tear gas and stun grenades were fired.

All these men and munitions cost money, a lot of it.

So why did the Chancellor try to boost the chances of the bail outs working by paying a very expensive visit to Athens? She knows that neither she nor her country are at all popular in Greece, in spite of the wish of much of the Greek population to stay in the euro, and therefore the Greeks’ ingratitude for the way in which the German government, against its own people’s wishes, has so far been bailing out the Greeks and keeping their decades’ long corrupt and dysfunctional welfare state and civil service going.

As Sky News reports today, 9 October 2012, online: “GSEE and ADEDY, the umbrella labour unions for private and public sector employees, have called for a three-hour strike across the greater Athens area from noon, bringing the country’s already anaemic economy to a fresh standstill.”

Yesterday, The Daily Telegraph reported that “Alexis Tsipras, who leads the opposition Syriza party in Greece, said: ‘She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system. We will give her the welcome she deserves.’”

And what is Alexis Tsipras recommending in place of the “corrupt, disgraced and servile political system”? Why, the hiring of 100,000 more civil servants, free meals for students etc. – in other words more of the same bankrupt welfarist policies that have brought the Greeks to the brink, and which they managed all on their own.

Merkel’s visit belongs in the same category as the activities of those Greek “anarchists” who, in protest at austerity, set fire to a cinema and other private property in Athens: the effect of their actions, just as Chancellor Merkel’s, is to cause the unnecessary spending of more money when there is already no money.

Austerity, anyone, at all?

Well, yes as it happens, and in Greece too, by people who have actually understood what is happening and are quietly re-ordering their lives and, in doing so, are prepared for the worst… we met them here.

Readers curious as to why articles of this nature should be appearing on a gold investment website should read: GOLDCOIN.ORG: MIXING POLITICS AND NUMISMATICS 

And for background on the writer: CONFESSIONS OF A LAW AND ORDER ANARCHIST

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"For a mountaineer, the important things are the effort, the posture and the muscles. The rope that holds him serves no purpose when everything works but it gives him a sense of security. In the same way, all gold does is ensure confidence; it's a safe haven."