mad money

DANIEL.DAVIES at flemings.com DANIEL.DAVIES at flemings.com
Fri Sep 10 07:58:43 PDT 1999


RB:
>> . . .
She also explores how states have lost control over taxation where their spending power is beyond their own control, determined by the whims of foreign bondholders and by the agilty of buisness leaders in using tax havens to pay less. . . .

<dd>++++++++++++++++ . . . Good point on tax competition, less so on bondholders. Surely the main thing we've learnt from the last few crises is that bondholders don't really exercise any control at all? . . . </dd>++++++++++++++++++++

mbs: "Lost control" is a bit of an overstatement. Tax revenues/GDP stopped growing in the 1980's but they have not declined. There was some shifting away from capital taxes, but this could have been due to politics rather than economic feasibility.

Taxing interest-bearing accounts and other financial assets is a big problem in Europe, [...]

++++++++++++++++++++++++

Oh yes, and how. ECOFIN meeting this week discussing that very topic, and

it will be bloody in extremis. The Germans don't like seeing all

their tax money disappearing in Luxembourgeois avoidance schemes,

while the Luxemburghers don't want to lose their banking industry

(which basically lives off German savings accounts).

Meanwhile the official line of Her Majesty's Treasury is that they can do

what they like, as long as they don't knacker the Eurobond market

(despite the name, this is nothing to do with the Euro and is

actually based in London). All because people don't like paying

withholding tax. Ah well ....

[I've got quite a lot of material on the European withholding tax wars, if

anyone ever wants any]

dd

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