What’s the real populist risk: Donald Trump and Nigel Farage?
How about the ECB, the European Commission, and the French authorities?
Perhaps a few headline stories can help answer the question.
ECB Warns of Populist Risk to Financial Stability
The Financial Times reports ECB Warns of Populist Risk to Financial Stability.
The ECB said in the latest edition of its twice-yearly Financial Stability Review that a rise in political risk “pose[s] a challenge to fiscal and structural reform implementation and, by extension, public debt sustainability”.
The report was published a day after Norbert Hofer of Austria’s Freedom party narrowly failed to become Europe’s first far-right head of state since the second world war, falling short in the country’s presidential election by just over 30,000 votes.
Years of high unemployment and weak growth have contributed to the rise of populist anti-establishment parties in many parts of the region, including the far-right National Front in France and Spain’s leftwing Podemos party. In some countries, such as Austria, the rise of the populist right also comes in the wake of an unprecedented surge of migrants.
French Authorities Raid Google
Also from the Financial Time front page, please consider Google’s Paris Offices Raided by French authorities in Tax Probe.
French prosecutors have turned up the heat in the spreading European tax war against US tech giants, with an early-morning raid on Tuesday on Google’s Paris office.
The raid involved 25 data experts and was part of a preliminary investigation into aggravated tax fraud opened in June last year, the French authorities said.
France’s aggressive stance comes in stark contrast to the tax accommodation that Google struck with the UK earlier this year. Though the UK is the internet company’s second-biggest market, it reached a settlement that will require it to pay only an extra £130m in back taxes dating back to 2005, an amount that was condemned as a “sweetheart deal” by the opposition Labour party.
In a statement, the French financial prosecutor’s office said: “The investigation aims to verify whether Google Ireland Ltd has a permanent base in France and if, by not declaring parts of its activities carried out in France, it failed its fiscal obligations, including on corporate tax and value added tax.”
The dispute revives a long-running French attempt to force internet companies to pay more tax. Prosecutors raided Google’s Paris office in 2011 as part of a similar investigation into whether the company should be ruled to have a “permanent establishment” in France, something that would preclude it from routing its advertising sales through Dublin. But the company is likely to argue that it would not have extra tax to pay even if the Irish business was found to trade in France.
EU launches Revolution in the VAT Rate
Via translation from El Confidencial, please consider EU launches Revolution in the VAT Rate.
The article does not translate well, but it pertains to VAT collection and the ability of nations to set rates. The EU says this causes “distortions”.
Heaven forbid anyone from France crossing the border with Spain, buying meatloaf then eating the meatloaf in France. I made that example up, buy you get the idea.
The article did mention electronic books and journals. They label this problem the “VAT Gap”.
Here’s the kicker that did translate well. “Solving this mess, however, not be easy. Among other things, the Community rules require the requirement of unanimity between all member states to change any aspect of indirect taxation.”
Got that? Every country has to agree to get anything done. The more countries in the EU, the harder it is to get agreement. France will never give up its protection of French farms that causes every country in the EU to overpay for agricultural products.
The result, says Brussels, is that companies in the European Union “are in a situation of competitive disadvantage” because the third country suppliers can supply to EU consumers goods exempted from VAT under the exemption imports of small consignments.
Case for Brexit Again
Why UK prime minister David Cameron and British voters would want to put up with this bureaucratic nightmare and maze of litigation is beyond comprehension.
Populism Explained
As for the charge of “populism” let me remind the nannycrats that the ultimate in populist movements is the Euro itself.
The ECB’s “one size fits Germany” interest rate policy fueled enormous property bubbles in Spain and a depression in Greece among other distortions.
The ECB then followed through with negative interest rate madness. Topping off the populist insanity, her highness Angela Merkel stupidly gave a populist “welcome” to millions of refugees.
By all means, let’s not call any of that “populism”. Instead, let’s label this what it really is: economic tyranny by a group of populist thugs who need only look in the mirror to discover what the real problem is.
Addendum
Reader Crysangle provides this thoughtful synopsis of the translated VAT article.
Reading through the VAT article the proposition aimed for is a minimum 15% VAT across Europe, with a 5% exemption for basic foodstuffs. They also want automatic tax on anything imported, specifically targeting small private purchases (think Ebay or Alibaba etc.) One absurd reason for the need to ‘harmonize’ the VAT is the tax gap between near exempt and full tax keeps changing and it makes analysis very difficult. The irony is changes in the VAT happen to be EU sponsored, and upwards. It is their motions that created the problem to start off with.
The EU is endlessly in pursuit of central statistical aggregation and hence control, another recent example is Anacredit, all banks being obliged to submit business loan records monthly.
Mike “Mish” Shedlock
