The nightmare of global taxation - Emirates24|7

The nightmare of global taxation

 

I had an awful nightmare recently. Soundly asleep at home in peaceful Umm Suqqeim, my bedroom door was suddenly and violently thrown open. Standing there in front of my sleep-befuddled eyes was a small, balding man in a grey suit with a faint pin-stripe, holding a black leather briefcase.


He reached into his jacket pocket and pulled out an ID wallet, with a gold badge and a card with his mugshot on it. “Special Agent Mercks, Global Revenue Service,” he growled, in an accent I could only place as Northern France, maybe Belgium. “You owe us.”

Then I awoke, realised it was only a bad dream, and dozed off again. In fact I forgot about my nocturnal disturbance until I saw the lead story on the Financial Times that morning. “EU states back call to target tax havens,” ran the headline. Maybe not a nightmare after all – perhaps a premonition.

The EU, egged on by Germany, wants to clamp down on all those small European countries, such as Liechtenstein, Luxembourg and Austria, that EU officials regard as “tax havens”. The bureaucrats of Brussels believe they are missing out on revenue that EU citizens, on the advice of some of the finest brains in the accounting industry, entrust to the admirable banking network of these fine nations. Time to put a stop to it, says the EU.

Well the EU can do as it likes in the EU, provided it persuades member states to go along with it. But the FT piece went on: “The EU was already studying ways to clamp down on tax evasion in non-EU territories such as Hong Kong, Macao and Singapore.” Add the UAE, with its liberal and enlightened approach to personal revenue, to that list, and my nightmare might begin to approach reality.

Worse still, the Organisation for Economic Co-operation and Development (OECD) and something called the Financial Action Task Force (FATF) are busy going round the world giving black marks to countries that do not adhere to their own, very Western and Anglo-Saxon, views on taxation of personal income. They wrap it all up as a “campaign” against money laundering and corruption, but the end result is the same – the revenue takes more of the dollars, deutschemarks or dirhams we work so hard to accumulate.

The nerve of it. I have always felt sorry for Americans, who are taxed on their worldwide income, regardless of where they live or where it is earned. Now it seems the world’s financial policemen want to impose this system on everybody else. What about sovereignty? What about diversity? What about our money?

I understand the principle of income taxation, and agree with it to a point. For the sake of equality of opportunity and alleviation of poverty, ill-health and other social evils, there are services and utilities that are better paid for by the community than by individuals. In the West, the model that has developed has been that of the centralised exchequer gathering taxes and then deciding how they should be spent, for the good of all. But the Western model is not universal. In the Muslim world, for example, many of the same functions have been performed by charities and philanthropy. In Asia, tax on income is a recent phenomenon, and still has not really caught on in still-largely agrarian societies of India and China.

In the UAE, there are taxes imposed by municipalities and emirates on consumption and some corporate activities. But there has been no need so far for taxation on personal incomes. Social inequality and poverty have been addressed by the resources of a benevolent state, the philanthropy of individuals and organisations, and by the cash-generating effects of a dynamic and fast growing economy. To tax individual incomes would throw that efficient wealth-generating machine into reverse.

The other objection to income tax is this: it leaves the tax-payer no choice in how his or her money is spent. Nobody could begrudge giving money for new hospitals, schools or provision of care for old people. Or even for a decent system of public transportation. I paid a lot of tax for many years in Britain, and as long as it was spent on those causes, all well and good.

But to pay for the war in Iraq? Or to bale out Northern Rock? Or to keep the bureaucracy in Brussels in adequate expense accounts? Never.

The anonymous bureaucrats of EU, OECD, FATF and whatever other acronym comes along should be told, firmly and finally, by the rest of the world that there are other fiscal systems far more suitable to the dynamic economies of the Middle East and Asia. The spectre of global taxation must be halted.

 

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