Thursday, November 16, 2006

Tax Cut 2: Ireland, Turkey

Another good development in the "tax cut" and "tax competition" movement in the world -- N. Ireland planning to slash its corporate income tax from 30% to only 12%! Wow! And it looks like this tax cut can help unite further theProtestants and the Catholic Sinn Fein, which will further improve peace and order situation there.

The tax-hungry finance officers of UK are somehow panicking, naturally. More and more UK-based companies will start moving to N. Ireland and do business there. While N. Ireland's tax rate goes down, it does not necessarily lead to lower revenues as the revenue base -- the numberof companies doing business and paying taxes -- will go up*.

(* Note: Tax Revenue = tax rate x revenue base)

My country's legislators -- egged by Finance and congressionalbureaucrats -- raised corporate income tax, along with VAT hike,effective this year from 32% to 35%. This is 3x that being planned inindustrialized N. Ireland!

As I have posted in the previous blog re "flat tax countries in the world", the extent of tax competition in eastern Europe is really hot, and some economies in Western Europe, like Ireland, are simply adjusting. But EU rules and bureaucracies make their plans a little bit more difficult.

I hope the same tax competition will happen in Asia too!
A lower tax rate but plentier number of business and entrepreneurs doing businesses, expanding the production of various goods and services in the economy, should work well in creating more jobs and slashing poverty.

Below is the news report from the Financial Times:
12% business tax proposed for N Ireland

By John Murray Brown in Dublin
Published: November 13 2006 22:40

Companies in Northern Ireland would be exempt from corporation tax on the first 60 per cent of profits under a private sector plan to be put to the UK government on Wednesday in a bid to stimulate the province's economy.

The paper is published by the Economic Research Institute, a local think tank, and backed by Sir George Quigley, former chairman of Ulster Bank and head of the Northern Ireland civil service. It represents the most detailed case yet made for special tax treatment for the province, which is emerging from three decades of unrest.

Under the proposal, after the zero-rated first 60 per cent of profits, the remainder would incur tax at the prevailing UK rate of 30 percent. This would mean businesses based in the province would have a rate of 12 per cent, in effect, just less than that in the Irish Republic.

The issue has become embroiled in the political negotiations on therestoration of the assembly and power sharing executive. Both theProtestant Democratic Unionists and largely Catholic Sinn Féin arecalling for lower tax rates. Ian Paisley junior, son of the DUP leader Ian Paisley, says that without a tax deal the DUP will not agree to go into government with Sinn Féin by the deadline of the end of next week...

Meanwhile, I posted this last June 23, 2006:

Tax Cut: Turkey

Turkey will abolish (ie, drop to zero) the 15% withholding tax on income and dividends from financial instruments held by foreign investors starting January next year. While the rates applied to Turkish residents would be cut from 15 to 10 per cent.

Government though, will retain the 15 per cent withholding tax on deposits and repos held by domestic investors, while the tax exemption for derivative instruments will stay.
See FT report today, "Turkey to scrap tax for foreign investors" (

Such moves are meant to help reverse the flight of capital from risky emerging markets that started last May.

Turkey is still waiting for EU nod to be admitted as a new member of the currently 25-countries union. EU is known for heavy regulations. Previously liberalizing countries that later on became EU members went back to multiple regulations. Dominant member-countries of the EU like France and Germany do not like low corporate taxes in other member-countries because the former are afraid that they might further lose some of their corporations and move to countries with lower taxes.

So this tax cut move by Turkey might not sound good to the ears of certain EU bureaucrats who want more, more taxes and avoid any competition in tax policies (ie, bringing down taxes as low as possible).

Finally, here are the corporate income taxes for the following Asia-Pacific countries, 2006 (in %):

Japan 40.1 (40.7 in '05)
S. Korea 35
Pakistan 35
Philippines 35 (32 in '05)
India 33.7 (36.6 in '05)
China 33
New Zealand 33
Sri Lanka 32.5
Australia 30
Bangladesh 30
Indonesia 30
Thailand 30
Malaysia 28
Vietnam 28
Taiwan 25
Singapore 20
Hong Kong 17.5

Thursday, November 09, 2006

CSOs and State 2: NGOs and Government Clubs

There are plenty of world forum/meetings by statists and socialist-oriented civil society groups, as well as clubs by governments and international bureaucrats. Among these are:

1. World Social Forum (WSF) – “an annual meeting held by members of the anti-globalization movement to coordinate world campaigns, share and refine organizing strategies”, according to its main website. In the WSF India held in mid-November 2006, it describes it as a forum of “groups and movements of civil society that are opposed to neo- liberalism and to domination of the world by capital and any form of imperialism”. In short, it is the forum of anti-globalization, anti-market, anti-capitalism, anti-free trade, sort of anti-everything NGOs, media people, academics, etc. They mobilize many people in WTO Ministerial meeting, in G8 summit, in annual WB-IMF meeting, in WEF, as well as their own-initiated international meetings.

2. International People’s Forum (IPF) – it “demands for multilateral debt cancellation, transparency and participatory audits of international financial institutions (IFI) lending and policies, and an end to IFI involvement in privatization of public services and environmentally destructive projects”. It was formed in Singapore during the WB-IMF Annual Meeting held in that city-state in September 2006. Many of the IPF members or convenors are also WSF members.

3 World Economic Forum (WEF) – a private international organization that links big businessmen with political leaders around the world, with occasional participation by big NGO leaders. It’s a smaller gathering compared to WSF but more influential economically and politically.

4 WB-IMF Annual Meeting – a gathering of international bureaucrats of these 2 bodies plus finance ministers, central bank governors, other top bureaucrats of member-countries. Selected number of civil society leaders (often among WSF leaders also) are also invited by the WB-IMF guys.

5 G8 Summit – a gathering of the Presidents or Prime Ministers of 8 industrialized countries + big developing countries like China, Brazil, India, etc.

6. Organization for Economic Cooperation and Development (OECD) – a club of governments of 30 industrialized and industrializing countries around the world promoting “democratic government and the market economy”.

7. United Nations (UN) – the mother of all international bureaucracies. Somehow the name “united nations” is a misnomer; a more appropriate term should have been “United Governments”. Though a number of international “public goods” have been addressed by the UN, it has also introduced a number of international “public bads”, like the justification if not promotion of high taxation in many countries to finance more government- and UN-sponsored projects.

While many civil society groups are very critical of multilateral institutions like the WB-IMF, government clubs like the UN, G8, OECD, and private international for a like WEF, those civil society groups actually have more similarities than differences with them. That is, they are mostly statists and forced collectivists. They want the state to have bigger intervention in the citizens’ lives. They want individual’s incomes to be forcibly collectivized, and individual responsibilities be transformed to state and collective responsibilities.

The only difference between those who criticize and those being criticized, is the degree of intervention to be slapped on the citizens; ie, the level of taxation that will be confiscated from the citizens’ pockets, the level of budgetary reallocation, and level of subsidies that will be given to the poor. While the WB-IMF and government clubs can tolerate a certain level of de-governmentization through privatization and economic deregulations, the statist NGOs want socialism-type of income confiscation and welfare distribution.

Free marketers can criticize both groups because they advocate very small income confiscation, small government intervention, and bigger individual freedom and responsibility. Individuals, not just big corporations, comprise markets. Thus, to liberalize markets is to liberalize individuals.

Last March 23, 2006, I wrote this:

The Elites and the Statists

A friend, Atty. Ime Deinla, called my attention to a paper entitled "Voices from the Top of the Pile: Elite Perceptions of Poverty and the Poor in the Philippines", authored by Gerard Clarke and Marites Sison. It was in a pdf formal file, 28 pages long, no date of publication or name of paper where it was published. I skimmed through the pages and read the concluding points, and this part is a disappointment to me. The authors wrote,
The Filipino elite feel a sense of responsibility to the poor, but this responsibility is met through the provision of assistance on a patron-client or philantrophic activity, rather than more substantive commitment to redistributive action led by the state, involving for instance, elaborate social safety nets financed by higher taxes.
Ouch! We don't have enough taxes, we need to create more? And our taxes ain't high enough, we need to hike them more? Socialists, statists and interventionists really like this line. Confiscate more income and savings from the rich, from the elite, from the productive sectors of society, and give them to the poor, the downtrodden, the weak. And an elaborate maze of bureaucracies, multiple-layers of politicians, with rah-rah boys from many NGOs and civil societies as middlemen between the two.

I have said it and I will say it again: poverty is very often self-inflicted.
Recipe #1 to be poor: Just be a lazy bum, don't work hard (if at all), drink and party too often; you'd rather drink and discuss with other guys how hard life is, how govt. and the church and the rich and your relatives abandon you, while a piece of land near your house which could have been planted to vegetables or raising farm animals are full of tall cogons, other grasses and vines.

Recipe #2: Be lazy and have plenty of kids, be irresponsible; anyway, government will confiscate rich people's income and savings to educate and feed your kids.

Recipe #3: Work hard and earn big (like working abroad), but also spend hard and save nothing; when the rainy days come, nothing to dig from the pockets.

There are other natural causes (like your house and car and land were gobbled by a volcanic eruption or a big landslide, or cracked to pieces by a strong earthquake) and other people-caused miseries (like your house burned, your car stolen, your land grabbed, your family members beaten and imprisoned for unjustified reasons) to explain poverty. And my favorite, government and its underdevelopmental roles of high and multiple taxes; costly and multiple requirements, permits, licenses, registrations, inspections, accreditations, before one can even start a carinderia or vulcanizing shop, if you do not want to be labelled as "underground" economy and "tax evader".

I would also add that philantrophy should not be dismissed as if it's an insignificant and near useless act, not to be pooh-poohed as encouraging patron-client mentality. Philantrophy and charity signify 2 important things:

(1) It is a voluntary act by an individual or group of individuals in a voluntary organization (club, association, brotherhood, etc.), not mandated by the constitution or by legislation or by an executive order; and
(2) Its funding is from the individuals' savings, from hard work, not from taxes and forced contribution.

Of course, some guys and organizations or foundations use charity for tax-shield purposes. But that's primarily because taxes are high and a plenty, and it's not the taxpayers who determine where the tax money goes, but the politicians and top government bureaucrats.

Ooppss, these kind of remarks would probably alert the authors, Clarke and Sison, to call Oplas "one of the elites". Wrrooonnggg!! Este, riiiigghhhtttt pala!
I'm E-lectrifyingly L-ovable, I-nsiduous, and T-antalizingly E-lectrifying! That's ELITE! hehehe, joke.

The paper is commendable though for gathering a big number of insightful interviewees, from politicians to businessmen to academics and NGO leaders.

Wednesday, November 08, 2006

ASEAN 1: Asian regional bureaucracies

As mobility of people, goods and services, around the world hastens, so have government bureaucracies expand. Not contented with “national planning”, governments extend to “regional planning” and “global planning”.

In Asia, as many Asian economies grow fast – ie, relative to other countries and regions or continent in the world – Asian governments also create new regional bureaucracies fast. Consider the following bodies in Asia:

1. ASEAN – Association of South East Asian Nations, 10 countries (Indonesia, Singapore, Malaysia, Brunei, Philippines, Thailand, Laos, Cambodia, Vietnam, Myanmar). Presidents and/or Prime Ministers of these countries meet annually.

2. ASEAN Plus Three (APT) – composed of Asean10 + China, S. Korea, Japan. Since the late 90s, there has been no strict or exclusive “Asean summit” because they have always been APT. And more recently, it has become “Asean Plus Six”, composed of APT + India, Australia and New Zealand.

3. APEC – Asia-Pacific Economic Cooperation. This is an expanded Asean + 6, to also include the US, Canada, Russia, Mexico, Chile, Peru, other Pacific countries. They hold summit meeting every 2 years.

4. ASEM – Asia-Europe Meeting; composed of APT + EU 25. They also hold summit meeting every 2 years.

5. CSCAP – Council for Security Cooperation in the Asia Pacific

6. NPCSD – North Pacific Cooperative Security Dialogue

7. NEACD – North East Asia Cooperation Dialogue

Proposed new bodies:

1. AMF – Asian Monetary Fund; this is different from the existing Asian Development Bank (ADB).

2. CNEA – Concert of North East Asia

3. NEASD – North East Asia Security Dialogue

Not included above are the various regional free trade agreements (FTAs) like AFTA (Asean FTA), SAFTA (South Asia FTA), NEAFTA (North East Asia FTA, and so on. Also not included are dozens of bilateral FTAs (existing and proposed), or EPAs (economic partnership agreement) by Japan with selected Asean countries.

Annual or biennial summit meetings of those heads of states and their ministers are never cheap. Taxpayers of host governments spend a lot for those meetings, including preparations and post-meeting monitoring.

The main goal of those various bureaucracies and trade agreements is “more economic and security cooperation” among governments of member-countries. This sounds lofty and holy, except that they are agreements AMONG GOVERNMENTS, and not exactly among the citizens of those countries. People to people voluntary arrangement is still restricted by their own governments. For instance, despite the Japan-Philippines EPA (JPEPA), an average old and aging Japanese household who cannot find younger private Japanese caretakers and nurses, cannot hire a Filipino caretaker or health professional anytime they want because the Japanese government has restricted to only X number the entry of Filipino (and other foreign) health professionals every year.

It has been noted that the single important rule of a bureaucracy, is that once created, it does not die on its own; rather, it seeks to expand and perpetuate itself. After all, the cost of maintaining and expanding it does not come from its own bureaucrats, but from the taxpayers in the private sector.