Oligarchy

TAXING

This time last year, we were all cock-a-hoop about President Joe Biden’s international tax plan, which would stop multinationals playing countries off against each other and force them to pay at least 15% of their profits to support the societies in which they operate. A new era beckoned: democratically elected politicians would regain primacy over capitalism’s elite; tax havens would wither; societies would rebound thanks to the investment enabled by the flood of money.

There was always going to be a time when such rhetoric needed translation into the sordid dialect of politics, but it happened far more conclusively than even the most cynical of observers (i.e., me) anticipated.

For the world to change, the United States had to change. For the United States to change, the European Union had to change. For the European Union to change, EU members had to agree, which means countries like Hungary have to agree. So the future of the world depends on Viktor Orban, the lilli-Putin of Budapest, who’s sulking because he’s so foul that other Europeans won’t play with him anymore.

•  “The U.S. was looking across the ocean at the EU and seeing the troubles of getting policies through the EU council and saying, ‘Well, if the EU can’t move forward, let’s not move too quickly ourselves’,” said Daniel Bunn of the Tax Foundation.

There are various options involving EU procedural technicalities, but they aren’t imminent or likely. Without progress in Europe, it’s hard to see the senate ratifying the deal; and without the U.S., it’s hard to see the U.K., Switzerland or anywhere else signing off on it. Perhaps some EU countries could start their own game and leave Orban out of it, but it’s not clear that would even work. So.

And this is all just half of Biden’s plan — the so-called Pillar 2 — which is supposed to be the easy bit. Seriously, take a look at the proposed ‘Draft Rules for Nexus and Revenue Sourcing under Amount A of Pillar One’ and feel yourself die inside. It makes the Glass Bead Game look like snakes and ladders. It’s a wonder anyone can even understand it let alone sign up to it.

So what to do? Biden’s proposals were made via the Organization for Economic Cooperation and Development, or OECD, a club of rich countries which tends to dominate tax policy, and has the slogan ‘Better Policies for Better Lives’, a claim that quite a lot of poorer countries would strongly and vehemently disagree with.

• “All developing countries are impacted unfairly by current global tax rules, and the majority will make insignificant or no gains in taxing rights and revenue from the recent OECD proposals,” said Irene Ovonji-Odida, a Uganda lawyer and former member of the so-called Mbeki Panel looking into illicit financial flows out of Africa.

Why not then work via a more inclusive club: the United Nations? I have up to now been even more cynical about attempts to reform global tax via the UN than I have been about efforts to do so via the OECD, because if you can’t get the EU and U.S. to sign up to a deal they negotiated between themselves, what chance have you got of getting them to sign up to something written by developing nations? And let’s not get started on what Viktor Orban would think about signing up to something created in Africa. The Biden plan was already skewed towards the interests of rich countries, so how would a more equitable plan gain any support from Western countries at all?

But actually, why not? The reason why Biden came up with his plan was because a number of European countries had taken to taxing Silicon Valley giants unilaterally (and have agreed to cancel their taxes once the Biden plan is in force). If the whole developing world did the same thing and started imposing new taxes on American and European companies, perhaps it would force Washington and Brussels to negotiate more urgently.

• “Tax norms need strengthening to address digitalization and globalization in ways that meet the needs and capacities of developing countries. A global convention on tax with universal participation may help with this effort,” said a report from the UN’s Secretary-General last month.

And Nigeria last week tabled a motion (to be voted on in December), which calls on Antonio Guterres to get started on a whole new international convention.

• “Effective taxation on international profits and capital is vital for people and societies to achieve progress on human rights, in the face of extreme inequalities and the climate crisis. The OECD’s flawed dominance of international tax puts shackles on effective taxation all around the world — but the UN tax convention represents an urgent opportunity to throw these off,” said Alex Cobham, chief executive at the Tax Justice Network.

I’m going to go out on a limb here and say this plan has zero chance of success. However, there is a lot to be said for every movement having a militant wing. A more radical alternative suddenly makes the mainstream option more palatable, just like communism made socialism look acceptable across Europe after World War Two. So, I hope the Nigerian plan gains real momentum, and scares Brussels into the kind of urgency it only ever finds in a crisis, and if that requires Orban sulking even more, I for one could live with that.

HELPING IRAN

I’m sure I’m not the only person who’s been watching the extraordinary videos of defiance from Iran’s girls and women (and, at least in my case, wondering what it would take for Russians to protest like that…), and wondering if there’s anything Western countries can do to help without making it looks like the protesters are stooges.

As such, I was pleased to read this report from Nate Sibley on the nature of corruption in Iran, which analyses the regime, looks at various recent scandals, and makes some suggestions for how to cut off its access to western finance (a task made all the more urgent by its decision to sell Russia the weapons it’s using to target Ukrainian civilians). Along with the usual suggestions of maintaining pressure on insiders, as well as freezing/seizing their assets, squeezing tax havens, and exposing kleptocrats’ ill behavior, Sibley brings the debate closer to home.

• “The Biden administration should accelerate the implementation of its U.S. Strategy on Countering Corruption. In particular, Washington needs to roll out the U.S. corporate beneficial ownership register, which will help tackle shell company abuse, and extend anti-money laundering responsibilities beyond traditional banks to include other sectors. These basic transparency measures will make it harder for Iranian kleptocrats to use the US financial system,” he notes.

I couldn’t agree more. The easiest steps that all Western countries could take to benefit people resisting kleptocracy — whether in Ukraine, Iran or anywhere — is to close their economies to the kleptocrats. As such, it was good to see that Britain’s second Economic Crime Bill of the year is inching forward despite the complete implosion of the country’s government. There was a revealing slip-of-the-tongue in the debate that accompanied it, when Home Secretary Suella Braverman accidentally said the silent bit out loud.

• “When it comes to golden visas, I was very proud of the action the Government took in relation to Russian individuals following the invasion, where we stopped the sale of golden visas to particular individuals,” she said, before correcting herself and referring to the “issuance” of golden visas.

It would be unfortunate if the imminent collapse of the British government prevented this bill from becoming law. Although, on the plus side, it might lead to less dreadful people being in positions of responsibility in London — Braverman recently said her “dream” was to see a flight taking asylum seekers from the U.K. to Rwanda — so, you know, there would at least be a silver lining.

And there is lots still to do. Spotlight on Corruption has published an excellent new analysis of how British money laundering supervision is failing to properly manage the country’s many lawyers, who have consistently been failing to abide even by the non-particularly-onerous rules already in place, at least partly because of wildly inconsistent standards from the nine different bodies tasked with checking on compliance. The fact that one of those bodies (Scotland’s Faculty of Advocates) regulates only six people is proof enough on its own that this is an area ripe for reform.

• “The U.K. has a well-deserved reputation as the laundromat of choice for the world’s kleptocratic regimes. This couldn’t have been achieved without the legal profession — wittingly or unwittingly — playing an essential role. But our research shows that the efforts of professional body supervisors to deal with this long-standing problem are falling far short of where they need to be,” said Sue Hawley, Executive Director at Spotlight on Corruption. “Even on the vanishingly rare occasions when misconduct is identified, fines are negligible and criminal prosecutions non-existent.”

The U.K. treasury is “consulting” on changes, apparently, which may or may not mean anything.

WHAT I’M READING

There are a handful of novelists — Ian Rankin, John le Carré (may he rest in peace), Ben Aaronovitch — who I’ll read anything by. As soon as they have a book out, I read it. Once someone gets on this list, it’s quite hard for them to get off it, and Robert Harris has confirmed his position for another year with the excellent Act of Oblivion. Unlike the others on my go-to list (who write within particular genres) Harris experiments with subject matter, theme, and period, so some of his books can be a bit weak, but when he’s good — as with this one — he’s seriously good. I’d recommend it if you’re looking for something racy to take your mind off the state of the world.