Oligarchy

BIDEN TAX PLAN/HUNGARY

It’s been a while since I got excited about Joe Biden’s global tax reform plan, which would – in a complex, not-very-satisfactory but ultimately better-than-nothing kind of a way – finally prevent (if only a bit) multinational companies from abusing flaws in global regulations to pay no tax. This time last year, fully 130 countries signed up to the scheme, and I did allow myself to get unwisely hopeful that this might be a real inflexion point.

Hollow laugh. I should have known.

Obviously, the Republican Party was opposed to the plan from the onset, because the idea of everyone being liable to pay the taxes voted on by the people’s elected representatives is a violation of the principles on which the United States was founded (for the avoidance of doubt, this is a joke), but it did look like the White House had managed to get the plan past European opposition, which suggested there could be enough international support to sneak it over the line.

That has now fallen apart, with the key opposition coming from Hungary. The European Union has to agree fiscal policy unanimously, which gives Budapest a veto over EU policy, and that veto has now been exercised. Speaking as a Brit, pretty much the only upside of Brexit that I could see was the prospect of not having key aspects of foreign policy vetoed by Viktor Orban. Sadly, it turns out that regarding global tax policy he gets to veto things whether we like it or not, so it’s suddenly not looking like much of an upside at all.

•   “If you wanted a case history of the fact that unanimity creates difficult circumstances, this case history is here,” the European Union’s Economy Commissioner Paolo Gentiloni said. “[It’s] difficult to have a clearer one.”

There is more to it than that, however, since there is also a complex transatlantic feedback mechanism in place, which deserves a bit of picking apart. It turns out that Republicans in the U.S. and the Hungarians in the EU are not just looking to block any progress at home but also supporting each other’s efforts abroad. If the Hungarians can doom progress in the EU, it’s bad for Biden (and therefore, presumably good for the Republicans); and if the Republicans can doom progress in the U.S., the plan won’t proceed in Europe, so the Hungarians will mark that up as a W as well.

It feels extraordinary – and dare I say it, quite unpatriotic — that they should be happy to undermine the efforts of each other’s governments so as to torpedo a global deal on something as foundational as the taxation of multinational corporations, but that’s where we are.

• “We are constantly consulting with the Republicans. There is a constant professional consultation on this issue,” said Foreign Minister Peter Szijjarto, a member of Orban’s government. “Republicans in the United States are against this law. It was just yesterday that we received a letter from the Republican leaders of the House’s taxation and commerce policy subcommittees, from two Republican representatives, in which they expressed their appreciation for us not supporting the global minimum tax.”

That letter came from Adrian Smith and Mike Kelly, who sit on the House Ways and Means Committee.

•  “We write to thank you for Hungary’s wisdom in opposing European Union (EU) adoption,” they wrote. “We would like to extend an offer for a direct dialogue with Congressional Republicans as you consider Hungary’s position on the global tax agreement.”

Of course, the bromance between Republicans and Orban is nothing new, with American conservatives seeing his Putinite-adjacent policies as an ideal direction to take their own party in. The Conservative Political Action Conference even held its conference in Budapest in May.

• “We live in a pivotal age. The question CPAC Hungary will pose is if we can protect our Western civilization, our true Western values, and face down the onslaught of the Left,” the CPAC’s statement announcing the conference said.

This is a strange situation, and I suspect I am not the only person who thinks the real thing they’re trying to protect is the ability of their oligarchic backers to avoid having to pay their fair share of tax, and I’m a little bit miffed that they’re probably going to get away with it.

UKRAINE/OLIGARCHS

Another day, another speech by Ukraine’s tireless president Volodymyr Zelensky (as if it wasn’t enough that he had to meet Richard Branson), who told a conference in Switzerland that his country would need $750 billion to rebuild, and that the world should seize the money from Russian oligarchs.

Making Vladimir Putin and his friends pay for the damage he has done is clearly an attractive prospect, but could it be done? Firstly, how much money has actually been frozen? According to the Russian Elites, Proxies and Oligarchs (REPO) task force, Western countries have blocked $30 billion worth of financial assets belonging to wealthy Russians. On top of that, Western countries have frozen $300 billion belonging to the Russian Central Bank, and are looking for more.

•  “Where appropriate and possible, REPO members are undertaking efforts to update or expand and implement their respective legal frameworks that enable the freezing, seizure, forfeiture and/or disposal of assets, for example within criminal law. These efforts better position members to achieve REPO’s objectives,” said a statement from the U.S. Treasury.

That may lead to more assets being identified, plus there is the haul of frozen real estate and at least five superyachts, which have yet to be valued, but with the best will in the world, that is never going to bring the total to even half of $750 billion, let alone all of it. In fact, if you add up the assets of all the Russian billionaires on this year’s Forbes list (and that is a very expansive definition of “oligarchs”), you get only slightly more than $300 billion anyway.

In short, the oligarchs’ wealth is nothing like enough to pay the total identified by Zelensky’s government as necessary to rebuild Ukraine, even if it could be found and confiscated. The Ukrainian president is no fool and he presumably knows this, so why does he keep saying it? Well, perhaps he just likes the sound of it, but personally I think it’s a rather clever way of reminding Western countries that they for far too long allowed Putin’s cronies to spend their stolen wealth on assets in their countries, and that they have a moral responsible to help Ukraine as a result. And who, apart perhaps from Republican Congressmen and Hungarian government ministers, could deny that he has a point?

WHERE ARE THE BILLIONAIRES?!?

It’s time for Wealth-X’s annual billionaire census, and I tremble with anticipation while I wait for it to download. Will their population have recovered or will they, like the otters suffering from agricultural pollution in Wales’ rivers, slip into decline? Worry not, dear readers, times are good (for billionaires).

• “2021 witnessed the third successive year of billionaire population expansion but the weakest growth since 2018. The global billionaire population rose by 3.3% to 3,311 individuals, with total wealth surging by 17.8% to a record $11.8 trillion.”

Or rather, times are good for multi-billionaires, but not so good for those at the bottom of the three-comma pile. It turns out that inequality is as much of a problem in the 0.0001%, as it is everywhere else. The bottom 85% of billionaires control just 42% of billionaire-owned wealth, with the lucky top 15% owning the rest.

• “A clear trend that has emerged in recent years has been a more skewed distribution of wealth among the billionaire population itself, to the benefit of those individuals at the very peak of the global wealth pyramid.”

It’s too early to say what the impact of the Russian invasion of Ukraine, and resulting sanctions, will be, because these figures are for 2021. However, it’s notable that – even in 2021 – Russia’s billionaire population had slipped by 11%, compared to the year before. If Putin’s policies continue to lead to wealthy people becoming less wealthy, will he start to lose support? It would be nice to think so, but don’t hold your breath (unlike the person in the next item).

PUTIN’S POO

I have two apologies to make before I begin this item. Firstly, although I admire the verve and vim of all varieties of the English language – from New Zealand to New York to Newcastle – and, in deference to U.S. sensibilities, this newsletter is spell-checked into the American version of the language, I cannot abide the word “poop”, so we’re sticking with the Britishism “poo.” Sorry about that. Secondly, this item is about poo. Sorry about that as well.

• “An agent had to place Putin’s excrement in pockets provided for this purpose, so as to leave no trace and bring everything back to the country in a special suitcase,” reported Le Monde in an article last month, when exploring the vexed question of whether Putin is or is not dangerously ill.

I was thinking about this last night as I walked down to the river for a swim and wondered if there was a worse job anywhere in the world than being the person who has to pick up Putin’s poo and put it in a special bag so as to repatriate it to Russia. Then my dog Tilly squatted down, meaning I had to package up her poo and put it in a special bag, and my mind raced ahead (despite my best efforts to stop it) to wondering what being Putin’s poo-man – kakashnik? — might involve. Does the Russian president, like Tilly, just squat down any old place, no matter how inappropriate, and leave the poo-man to deal with it? Does the poo-man, like me, sometimes forget to bring one of the special poo bags and have to borrow one off, I don’t know, President Xi’s poo-man?

I often argue that Russian politics can perhaps be best understood by comparison to Tudor England, with Putin playing the role of Henry VIII, and the oligarchs being the barons. In that context, it seems relevant that Tudor England had a poo-man too: Groom of the Stool, the courtier tasked with keeping an eye on the royal bowel movements. And there’s hope here for Putin’s poo-man, although it may not seem like it when he feels the warmth through the plastic bag while endeavoring to breathe only through his mouth. In early modern England, proximity to the royal bottom often led to promotion, with at least one of the grooms of the stool ending up as prime minister.

We spend a lot of time wondering who’s going to succeed Putin in the Kremlin. Obviously, the smart money is on Nikolai Patrushev or another insider, but it has to be worth keeping an eye on Putin’s poo-man, just in case history repeats itself.

WHAT I’M READING

I’ve decided I don’t know enough about money laundering, so I’m reading The Outlaw Bank, a wild ride into the secret heart of BCCI to catch up on some of the raw material. If you have any favorite books on money laundering, please send over suggestions. All of them are gratefully received.