According to English Chancellor George Osborne there is a new British/Swiss tax agreement. The agreement’s attack will start with a pulling of over a third (34%) of the value from accounts held by England’s subjects in Switzerland. The holders names will not be revealed, but their monies will be appropriated. After the initial strike an annual withholding tax will be applied at almost half of normal income (48%), and over a quarter (27%) of income from capital gains.
You can almost see the negotiations. The formally dressed British fellow with fangs says: “Give us a third of any subject’s savings immediately, half of all future income.” As he sets down the unused whip the Swiss fellow with the three piece suit licks his boots and whines, “Let’s alter the numbers slightly so they don’t sound so arbitrary — and give a half off special on future capital gain taxes so we Swiss can be seen as conscientious investment managers.” The British representative, now assured a life of personal ease for his accomplishments on behalf of the exchequer concedes, “so let it be done: have a concubine bring me my tea.”
The upstart is, if you notice your Swiss account is a third lighter; you will have to prove you are not an abject subject of the old empire, or admit you are and submit to humiliation as you try to claim back a bit of your money – money already stolen and spent. There will be more information about this deal soon and I’m sure accountants and lawyers are already drafting plans to earn huge fees.
There is an interesting insight in this quote from Osborne, “Tax evasion is wrong at the best of times but in economic circumstances like this it means the hard-pressed law-abiding taxpayers are forced to pay even more. That is why this Coalition government made it a priority to go after those who don’t pay their fair share. We will be as tough on the richest who evade tax as those who cheat on benefits.”
Really Mr. Osborne? Hard pressed taxpayers had to pay more before this investment capital was confiscated? Since you now have this extra tax revenue will there be a decrease in overall taxes so they can finally pay less? Will we be seeing a rebate of those excessive tax extractions taken from England’s hard-pressed taxpayers? No. Treasury sources say the money raised will not be used to cut taxes in Britain, instead it will be used to reduce the deficit. So, just as with huge fines and penalties the money will not return to any supposedly injured parties – it’s just another new tax piled on top of all the other taxes. Also, don’t expect any adjustments to the deficit. Instead these appropriated monies will assuredly join other undefined funds for unspecified government adventures and largess.
I have disregarded the total values mentioned in pounds and dollars, it’s a fair assumption they were arrived at by the same sort of guessing game used in deciding the percentages to drain from the accounts of unknown people. Any numbers you see will be fabricated for shock and awe effects. If it is thought to astound the masses, amounts will be invented as round numbers or to the exact fraction of a penny.
The Economist J. K. Galbraith used to talk about embezzlement. He called half the account where two people think they own the same money the “Bezzle.” He claimed that in a perverse way the Bezzle is good for an economy. In a have the cake and eat it too fashion, one party is busy consuming and momentarily adding to GDP while the other party is investing and adding to long term growth and employment. In good times people are trusting and the Bezzle expands, aiding the virtuous cycle; in bad times the inverse distrust reinforces a vicious cycle. By parallel reasoning, the British government has been caught having already spent its subjects savings located in Swiss banks. The investor that had the money working now must sell investments at fire sale and stop financing new businesses to cover his loss – growth, markets, and employment (of presumably hard-pressed tax payers) will be adversely effected.
The Swiss concessions will now be used as a lever to stage similar hijackings of life savings from other small countries. The City in London, and Wall Street in the US are tax havens for anyone not overlorded by Alice’s Euroland or DC’s satrap states respectively. Will we see similar actions on offshore deposits by banks domiciled with Twiddle Dee and Twiddle Dum? Probably not until all The City and Wall Street’s tax game competitors have capitulated first.
This is not the end of the world nor even a reason to become despondent. The pendulum is approaching an extreme. We must expect major dislocations until an inevitable reversal begins. If you have broadly used all six flags of freedom, this is but a time for considering reallocation of a flag or two. If you have not yet acquired a first flag, what are you waiting for?
If you didn’t realize you can choose to not be exploited; any of our reports just became your next important read.
Josh Morph