Members’ Area

Welcome to the WTA Members Blog. Here is where members update one another with their latest news and campaigns. All members can send their submissions to http://worldtaxpayers.org/members-update/

Satirical “Coalition of Obsolete Industries” Returns!

Section: Members Highlights / WTA Blog
15 March 2017 | Australian Taxpayers’ Alliance / Australia

Australia

 

Following the success slightly over a year ago of the satirical “Coalition of Obsolete Industries” campaign going internationally viral, The Australian Taxpayers’ Alliance has produced a sequel!

The sequel targets a proposal by the Victorian State Government to impose a $2 tax on all rides to fund a bailout of the taxi industry followed by the introduction of Uber and features people in costume calling for new taxes to bail out town criers, the telegram industry, horseshoe makers etc. A tax on tires to bail out the horseshoe makers etc.

 

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The Swedish professor Hans Rosling passed away yesterday

Section: Members Highlights / WTA Blog
8 February 2017 | The Swedish professor Hans Rosling passed away yesterday

 

Hans Rosling

Hans Rosling was a worldwide celebrity because of his enthusiasm, ways of making complicated questions understandable, constantly showing how the world is improving in the face of pessimism. He was encouraging people, lifting them to new levels of understanding, hope and involvement. He passed away too early and will be missed by the many of us who believe in a better future, a humane world. A professor of the old tree, demanding, teaching but living in the new world with constant hope for the future. You can learn from him and share his heritage on his website:  http://www.gapminder.org/.

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WTA Chairman’s Update #4 – January-March 2017

Section: Letter from the Chairman / Members Highlights / WTA Blog
19 January 2017 | WTA Chairman’s Update #4 – January-March 2017

 

January-March 2017

Dear WTA Members, Observers, and Friends:

Happy New Year! Hope this finds you well, rested, and ready for 2017.

 

WTA Secretary General: Changing of the Guard

I’m pleased to announce the appointment of Cristina Berechet as the new Secretary General of World Taxpayers Associations (WTA). Cristina will join WTA in a part-time capacity working from Spain effective immediately. Cristina is currently General Manager of the Spanish Taxpayers Union which she joined in 2016. However, many of you may better remember her with the Spanish think tank Civismo where she served for five years. I’ve had the great pleasure to know Cristina for some time as a thoughtful and important leader in our movement. I’m delighted that she has agreed to join us and look forward to working with her in growing taxpayer advocacy around the world. Please join me in welcoming her. She can be reached at cristinaberechet@worldtaxpayers.org.

Of course in saying all of this I was sad to receive an e-mail before Christmas from our current Secretary General Sarah Elliott announcing her intention – for personal reasons – to step down early in 2017.  Sarah joined us shortly after the Vancouver conference in 2014 and, alongside chairman Staffan Wennberg, completely rebooted the organization. From a new website, social media presence, administrative practices, strategic plans, budgets, funding proposals and of course events … Sarah had a patient and capable hand in all of it. Thank-you also for the many WTA friends you and your husband Matthew hosted in London. Please join me in sending Sarah a thank-you sarah.elliott@worldtaxpayer.org.

 

Regional Taxpayers Forum Zagreb Croatia April 24-25, 2017

The first of two WTA-sponsored Regional Taxpayer Forums in 2017 will take place in Zagreb, Croatia April 24-25. We are pleased to be working with hosts Lipa and Free Market Road Show (FMRS). FMRS will lead proceedings the morning of April 24. Registration for the event is not yet posted, but we ask that anyone interested please pre-register here as there are only 35 spots available and the event will sell out on a first come, first serve basis. Please note, there is no cost for WTA Members who have paid their dues for 2017 (invoices to go out shortly). Any matters concerning the event should be directed to Cristina. We look forward to welcoming you in Zagreb in April. A date for our next Regional Taxpayers Forum in Bangkok will be confirmed in my next Update.

 

2017 Member Fees Now Due

Invoices for 2017 WTA member fees will be sent out this month. Please note that events like the Regional Taxpayer Forums are free to paid WTA Members.  Our ability to support networking, events, social media, our website and newsletter are all dependent on membership dues, so thank-you in advance for your ongoing support!  This year we will provide a formal letter of membership embossed with an official WTA seal as per the request of some Member organizations.

 

A Visit Down Under

I was pleased to be hosted by our friends on a trip to New Zealand and Australia in November. Very special thanks to New Zealand Taxpayers Union, Auckland Ratepayers’ Alliance, Taxpayers Australia, Australian Taxpayers’ Alliance and the Institute of Public Affairs (IPA).  IPA kindly sponsored a talk I gave in Sydney.  Australia will host the next World Taxpayers Conference so it was good to meet with our friends well in advance to make sure we’re supporting the best event possible.

(L to R) WTA Chair Troy Lanigan with Jo Holmes and Carmel Claridge of the Auckland Ratepayers Alliance and Jordan Williams of the New Zealand Taxpayers Union on Waiheke Island.

 

 

 

 

 

 

Meeting with the Board of Directors of Taxpayers Australia who will be the hosts of the 2019 World Taxpayers Conference.  (L to R): Moti Kshirsagar (CEO), Robert Krigsman, Troy Lanigan, Mark Dodds (President), Stephen Ware and Terry Blenkinsop.  

 

 

 

 

 

Meeting with Australian Taxpayers’ Alliance Executive Director Tim Andrews in Sydney, Australia. 

 

 

 

 

 

 

 

A ‘Lobbyist for Taxpayers’

Congratulations to WTA Executive Committee Member and President of the National Taxpayers Union, Pete Sepp, who earned a significant profile in the US newspaper, The Hill.  The profile comes at an important juncture for tax policy in the United States.

“Pete Sepp started working at the National Taxpayers Union (NTU) in 1988 as a receptionist … Today — as Congress gears up to overhaul the tax code for the first time in more than 30 years — he’s the group’s president.”  The article goes on to state: “Pete is just remarkably good about being the good guy when he agrees with you, and when he doesn’t agree with you.”

Well deserved praise for one of the most important taxpayer leaders in the world. Please read the full profile here.

 

Tax Reform Happening in Eastern Europe

Ukraine: Maryan Zablotskyy, President of the Ukrainian Economics Freedom Foundation (UEFF) reports the Ukrainian Parliament adopted UEFF recommended changes to the tax code, which are expected to be adopted in this year’s State Budget Law.

One of the recommendations allows producers of grapes to set up their own wine production. Previously, the law allowed wine only to be made by the producers of cognac. This created a monopoly allowing cognac producers to dictate the price for grapes.

Now, if grape producers don’t receive a price they are happy with they will be able to produce their own wine. Increased levels of economic freedom will be a boost for the southern regions of Ukraine.

Croatia: The government’s recently-announced tax reform which includes lower personal and business incomes taxes is expected to stimulate private spending and economic growth.

Lipa’s Krunoslav Saric says, “We finally have a [Finance Minister] who understands … with these changes more than half of employees in Croatia will have 0% income tax.”

An article discussing the changes can be found here.

Another positive indicator is falling public debt in Croatia. Saric notes: “we had major campaigns during the last two elections and I think we can take full credit for pushing that problem into the public spotlight and reversing the trend.”

 

Member News

Taxpayer Protection Alliance: United States

Drew Johnson from the Taxpayer Protection Alliance was kicked out of a United Nations meeting stating: “My crime? Being a journalist at a taxpayer-funded meeting where government representatives from 180 countries make decisions that impact 90 percent of the world’s population.” You can read the entire article here. The video can be viewed here.

“One thing that wasn’t recorded was the applause I received from several other journalists … I know my actions reflect thousands of journalists across the globe who feel the UN and its agencies have become unaccountable to the public and combative towards the press.”

 

The Tax Revolution Institute: United States

We are pleased to welcome a new taxpayer protection group in the United States called The Tax Revolution Institute. They are backing a project to audit the IRS. Check it out here.

 

Taxpayers Alliance Ghana: Ghana

Taxpayers Alliance Ghana (TAG) president Frank Asiedu issued a statement congratulating new president of Ghana Nana Addo Danquah Akuffo Addo. TAG implores the incoming president to make good on his business-friendly tax proposals.  TAG will work collaboratively with the government to implement tax regimes that will spur growth and create jobs for the youth of Ghana.

 

Momentum 107: Hong Kong

Congratulations to Raymond Ho and Momentum 107 on their celebration in December, commemorating nine years as a successful and vibrant organization in Hong Kong!

 

The Taxpayers Union of Bulgaria: Bulgaria

 Congratulations to Nikolay Popov and the Taxpayers Union of Bulgaria that celebrated 25 years in December!

 

 

Slovenian Taxpayers Association: Slovenia

Slovenian Taxpayer Association’s  Marusa Pozvek (right) was honoured to be invited  and to participate in the Liberty Fund Colloquium hosted by Federico Fernandez of the Austrian Economics Center in Vienna.  The invitation-only event uses the Socratic method to discuss the relationship between freedom, markets, and culture.

 

Lithuanian Free Market Institute: Lithuania

In high schools across the world, most students graduate without any exposure to the concepts of market economics. The Lithuanian Free Market Institute (LFMI), based in Vilnius, sought to change that by developing its Economics in 31 Hours textbook, which was awarded the prestigious $100,000 Templeton Freedom Award this past November. The award, generously supported by the Templeton Religion Trust, was presented during Atlas Network’s Freedom Dinner this past November in New York City.

Congratulations to Žilvinas Šilėnas and his colleagues at the Lithuanian Free Market Institute! See the video here.

 

Recommended Reading

Human Freedom Index: Where Does Your Country Stand?

The Human Freedom Index 2016 presents the state of human freedom in the world based on a broad measure that encompasses personal, civil, and economic freedom. Co-published by the Cato Institute, the Fraser Institute, and the Liberales Institut at the Friedrich Naumann Foundation for Freedom.

Human freedom is a social concept that recognizes the dignity of individuals and is defined here as negative liberty or the absence of coercive constraint. Because freedom is inherently valuable and plays a role in human progress, it is worth measuring carefully. The Index can be found here.

The Decline of Global Inequality: Bjorn Lomborg

A thoughtful and counter-intuitive piece asking if 2016 was the best year ever?

Africa Research Institute: 10 Things to Watch in 2017

 

Annual Reviews

Many members have asked about creating and formatting annual reviews for your respective supporters and donors. Here are two really good examples of how it’s done:

UK’s Taxpayers’ Alliance: http://www.taxpayersalliance.com/annual_reviews

New Zealand’s Taxpayers’ Union: http://www.taxpayers.org.nz/tags/annual_review

 

In closing I’d like to encourage everyone to please visit our website and our Facebook group. Our community is only as strong and as beneficial as we choose to make it. Please work with our new Secretary General Cristina Berechet to feed good content into our network.

Keep up the fight!

 

Troy Lanigan
Chair, World Taxpayers Associations
President, Canadian Taxpayers Federation

E-mail | troy.lanigan@worldtaxpayers.org
Skype | troy_lanigan

Read the full letter

WTA Letter from the Chairman – Autumn 2016

Section: Letter from the Chairman / Members Highlights / WTA Blog
18 October 2016 | WTA Letter from the Chairman – Autumn 2016

Autumn 2016
WTA members, observers and friends,

It was my great pleasure to attend the Liberty Forum put on by Atlas Network in Miami in September where I met with new UK TaxPayers Alliance Chief Executive John O’Connell; Marusa Pozvek of the Slovenia Taxpayers; Krunoslav Saric from Lipa in Croatia; Lorenzo Montanari from Americans for Tax Reform; Tim Andrews of Australian Taxpayers Alliance and for the first time Jose Beteta of Respect for Taxpayershttp://respeto.pe/ from Peru. Much work needs to be done developing taxpayer groups in central and South America so it was of particular interest to meet Jose. Congratulations to all of you on the great work you are doing!

Also in Miami was the opportunity to meet the heads of several think tanks from around the globe which we will add to our “friends” list and encourage the complimentary exchange advocacy groups popularizing and advancing the important work think tanks are doing.

Finally, I met with Shari Williams from the Krieble Foundation to update her on recent activities of WTA and thank the foundation for its support of WTA.

Tax Freedom Day and Tax Competition

In Miami, I had the opportunity to meet with Scott Hodge who is President of the Washington-DC based Tax Foundation. The Tax Foundation created Tax Freedom Day (TFD) which is now used by organizations around the world to illustrate the taxes paid by citizens in various countries.

I talked to Scott about collaborating on methodology for calculating TFD and maybe even a “World Tax Freedom Day” project both of which would be beneficial to WTA member and observer organizations.

Of more immediate interest, the Tax Foundation just released its 2016 International Tax Competitiveness Index. This Index ranks the 35 OECD nations on how competitive their tax systems are based on more than 40 variables—such as corporate taxes, individual taxes, consumption taxes and property taxes. By ranking countries, the Tax Foundation hopes to foster competition in ways that promote growth.

The Index can be a useful tool for WTA member and observer groups to push for reforms in your respective countries. It can be used as a roadmap for 1) identifying the worst aspects of a country’s tax system and 2) focusing lawmakers on which aspects of their tax systems they need to fix.

Scott uses Ireland as an example where he notes the country’s 12.5% corporate tax rate is commendable, but many other aspects of their tax system are very poorly structured—especially the individual tax code—so it does not rank as highly on the Index as the corporate rate might suggest. For the record, Estonia has the most competitive tax system and France the worst. Scott can be reached athodge@taxfoundation.org.

Petitions

CitizenGo and the Austrian Economics Center are asking WTA European member and observer groups to sign their petition opposing the EU’s dangerous tax harmonization policy. The European Commission recently accused Ireland of giving “illegal tax benefits” to Apple. Now, they want Ireland to retroactively charge €13 billion to Apple due to this “unfair” treatment.

This ruling by the European Commission is extremely dangerous. Such an overreach by the EU’s antitrust regulator puts Ireland’s national sovereignty—and the sovereignty of all EU nations—under threat.

Ireland’s policy towards Apple was an intelligent use of tax competition. The European Commission should overturn this ruling and immediately abandon their dangerous and damaging tax harmonization policy. The Commission should respect the national sovereignty and economic freedom of all European nations. The
petition can be found here: http://www.citizengo.org/en/signit/37265/view

You can read the Hibernia Forum’s Eamon Delaney on the issue affecting Ireland here.

Taxpayer Protection Alliance’s Petition to the World Health Organization

David William’s of the Taxpayer Protection Alliance (TPA) is putting together a coalition letter he hopes all WTA member and observer organizations will sign. The letter is to the World Health Organization asking for fiscal responsibility, transparency and press freedom.

To sign the letter, please e-mail David Williams, president of the Taxpayer Protection Alliance: DavidWilliams@protectingtaxpayers.org. The letter must be signed before October 21st.

Youth Outreach and Debt Clock Tour in Canada

In 2013, the Canadian Taxpayers Federation founded Generation Screwed (en françaisGeneration Trompee), a campus-based initiative to inform and mobilize young Canadians to push back against government debts, unfunded liabilities and roadblocks to economic development that impede future opportunity and prosperity. This past September, recruitment booths were set-up on 27 campuses across the country. We believe in just three short years it has become the country’s largest pro-limited government student group in Canada. A similar group has been created in the UK (http://www.taxpayersalliance.com/the_taxpayers_alliance_at_liberty_league_s_freedom_forum). I encourage WTA member and observer groups to consider a similar initiative as an investment in the future of your organization and country. To learn more contact Aaron Gunn (agunn@taxpayer.com).

The CTF took its National Debt Clock across the country this past summer and also to 13 campuses in September where Generation Screwed coordinators organized student events.  A video can be seen here.  To learn more about creating your own rolling debt clock display contact Scott Hennig (shennig@taxpayer.com)

Lithuanian Free Market Institute’s Tax Calculator

The Lithuanian Free Market Institute (LFMI) has developed a great tool called the Tax Calculator, and they want to share it with you! The tax calculator can be found athttp://mokumokescius.lt/en/

Here’s how it works: one indicates the individual net wage income, the amount of income and social security contributions (and a breakdown of these), and then travels through personal expenditures to see what taxes are paid every time money is spent on different categories of goods or services. At the end, one receives a personal Tax Freedom Day as well as a personal bill from the government showing how the government spends your earnings.

LFMI can help other groups to replicate the tax calculator and even provide resources. LFMI has adapted the tax calculator for Poland http://sprawdzpodatki.pl. Institute of Economic and Social Studies (INESS) in Slovakia has created an app based on the concept and design. The Economic Institute Molinari is now working on a French version, the Bendukidze Free Market Center is developing it for Ukraine, and they are guiding a group in Bosnia and Herzegovina, the Centre for Policy and Governance.

If you are interested in adapting this Tax Calculator to your country, please contact their Development & Programs Director, Aneta Vainė: aneta@freema.org. They are eager to help!

WTA in Germany’s Handelsblatt

Here is the multi-page edition of the World Taxpayers Conference 2016 featured in Germany’s widely-circulated and respected Handelsblatt with in-depth articles and photos. It was a great time had by all, and our most diverse conference to date! Look for photos of yourself and feel free to publish on your organization’s website handelsblatteventeditionmay2016

Upcoming Visits

I will be in New Zealand visiting WTA member organization the New Zealand Taxpayers Union on November 18th followed by a trip across the Tasman Sea November 25th to meet with both the Australian Taxpayers Alliance and Taxpayers Australia who will be hosting the next World Taxpayers Conference in Melbourne in 2019.

In closing I’d like to encourage you to please visit our website and our Facebook group. Our community is only as strong and as beneficial as we choose to make it. So please, work with our Secretary General Sarah Elliott to feed good content into our network!

Keep up the fight!

Troy Lanigan
Chair, World Taxpayers Associations
President, Canadian Taxpayers Federation

E-mail | troy.lanigan@worldtaxpayers.org
Skype | troy_lanigan

Read the full letter

The Tax Foundation’s 2016 International Tax Competitiveness Index

Section: Members Highlights / Tax Facts / WTA Blog
8 October 2016 | Tax Foundation / United States

United States

The Tax Foundation has released the third annual International Tax Competitiveness Index. Once again, the United States ranks among the bottom 5 countries with the 5th least competitive tax system in the OECD. Only Greece, Portugal, Italy, and France have less competitive tax codes. On the other end of the spectrum, Estonia takes the number one spot once again, with New Zealand and Latvia having the second and third most competitive tax systems, respectively.

The International Tax Competitiveness Index measures how well a country’s tax system promotes sustainable economic growth and investment. The report looks at over 40 tax policy variables in five categories: corporate income taxes, individual taxes, consumption taxes, property taxes, and the treatment of foreign earnings. The International Tax Competitiveness Index gives a comprehensive overview of how developed countries’ tax codes compare, explains why certain tax codes stand out as good or bad models for reform, and provides important insight into how to think about tax policy.

For the third year in a row, France earns the distinction of having the least competitive tax system in the OECD. In addition to having one of the highest corporate tax rates in the developed world at 34.4 percent, France maintains high and poorly structured property taxes along with high, progressive individual income taxes.

Estonia, on the other hand, continues to have the most competitive tax system in the developed world. Its top score is driven by four positive features of its tax code: a low corporate income tax; a well-structured, 20 percent tax on individual income; a property tax applied only to the value of land rather than the value of real property or capital; and a well-designed territorial tax system.

New Zealand is a good example of a country that has reformed its tax system. In a 2010 presentation, the chief economist of the New Zealand treasury stated, “Global trends in corporate and personal taxes are making New Zealand’s system less internationally competitive.”[1] In response to these global trends, New Zealand cut its top marginal individual income tax rate from 38 percent to 33 percent, shifted to a greater reliance on the goods and services tax, and cut its corporate tax rate to 28 percent from 30 percent. New Zealand added these changes to a tax system that already had multiple competitive features, including no inheritance tax, no general capital gains tax, and no payroll taxes.

“No longer can a country levy high taxes on investment without adversely affecting its economic performance,” said Tax Foundation Economist Kyle Pomerleau. “In recent years, many countries have recognized this fact and have moved to reform their tax codes to be more competitive while raising enough revenue for government priorities. However, others have failed to do so and are falling behind the global movement.”

For the full 2016 International Tax Competitiveness Index – http://taxfoundation.org/article/2016-international-tax-competitiveness-index

 

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Sign Here to Oppose the EU’s Dangerous Tax Harmonization Policy

Section: Members Highlights / WTA Blog
30 September 2016 | Austrian Economics Center / Austria

Austria

Petition from CitizenGO and the Austrian Economics Center:

The European Commission recently accused Ireland of giving “illegal tax benefits” to Apple. Now, they want Ireland to retroactively charge €13 billion to Apple due to this “unfair” treatment.

This ruling by the European Commission is extremely dangerous. Such an overreach by the EU’s antitrust regulator puts Ireland’s national sovereignty—and the sovereignty of all EU nations—under threat.

According to Greek and Roman mythology, Saturn devoured his own sons. The Commission runs the risk of doing something similar to European nations by taking away their national sovereignty and their opportunity to succeed economically.

Ireland’s policy towards Apple was an intelligent use of tax competition and globalization. Threatening foreign direct investment in Ireland would condemn the country to stagnation and poverty.

We believe that the European Commission should overturn this ruling and immediately abandon their dangerous and damaging tax harmonization policy. The Commission should respect the national sovereignty and economic freedom of all European nations.

SIGN THE PETITION HERE: http://www.citizengo.org/en/signit/37265/view

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Fiscal Lessons: Ten Years Without the Swedish Inheritance Tax

Section: Members Highlights / WTA Blog
30 September 2016 | Fiscal Lessons: Ten Years Without the Swedish Inheritance Tax

The Cayman Financial Review

By Anders Ydstedt

Sweden might not have much to teach other countries about tax policy. The tax-to-GDP-ratio of 42.8 percent (2013) exceeds the OECD average by nearly 9 percentage points. Our marginal tax rate on labor income is the world’s highest, and the capital gains tax is almost twice as high as the average in the EU, OECD and the BRIC countries. That being said, the developments from the year 2000 until today might still be interesting even for foreign readers.

In 2004, high tax Sweden abolished the inheritance tax and gift tax. This decision was taken by a unanimous Riksdag (parliament). In a new book, ‘Ten years without the Swedish inheritance tax: Mourned by no one – missed by few,’ by Amanda Wollstad and myself, we tell the history of the inheritance tax, its abolishment and what consequences it had on Swedish business owners and tax revenues. We also look at the tax situation in some other countries.

The Swedish inheritance tax has existed in various permutations since the 17th century. The tax was assessed against property acquired through inheritance, bequest and, in some cases, life insurance. The acquirer, the heir, was the taxable party. The tax was calculated on the value of the heir’s share of the estate, was progressive and varied depending upon the tax class to which the heir belonged. The inheritance tax rate reached a record high in 1983, with a top rate of 70 percent applicable to spouses and children. The phase-out commenced a few years later. In 2004, the year when it was repealed, the tax rate was 30 percent. The gift tax was calculated likewise. Most OECD countries that still have an inheritance tax regime have some kind of gift tax and the rules and percentage rates often coincide.

Inheritance and gift taxes were never a substantial source of income for the Swedish state. Revenues from inheritance and gift taxes reached a zenith in the 1930s, at about 0.3 percent of GDP. When the inheritance tax was repealed, the income equaled about 0.15 percent of GDP. The main reasons for the tax instead were based on notions of fairness and the wealth distribution policy and, to complement and legitimize other tax legislation, such as the wealth tax.

flagInheritance and gift taxes are harmful not only to families but to the society as a whole. The classic example of the destructive impact of the inheritance tax was the surviving spouse who could no longer afford to live in the heavily taxed family home because all assets were tied up in the property. Likewise, many families were forced to sell family homes and holiday cottages. Such cases were far from unusual and even relatively low sums of tax due could cause tremendous personal harm. This may partly be because Swedes are, by international comparison, considered as having little readily available capital. According to at study by Credit Suisse, the average financial wealth among Swedes is 43 percent of total wealth, which can be compared with the United States, where the share is 85 percent, or Denmark at 69 percent. The European average is also higher, at 57 percent. Only the United Kingdom, with its high real estate prices, has a lower share, 34 percent, but it should be noted that the total wealth per capita is one third higher in the United Kingdom than in Sweden. The household savings rate in Sweden is also low, perhaps due to high trust in collective welfare systems and an expansive social safety net.

The major problem with the inheritance tax arose in family businesses in connection with generational succession. These problems had much more profound consequences upon society in general and the Swedish economy. The basis for taxation, even with the relief rules introduced on several occasions specifically to lighten the burden on small and family businesses, often consisted of tied assets. Business owners were compelled to withdraw liquid assets from the business. The income, taxed as dividends, was then used to pay the inheritance tax. Even if the company had prepared for the distribution of the estate, tax planning takes time, energy and sometimes money away from the core operations of the business. It was not unusual that the inheritance tax drained companies of so much capital that their future development was endangered. Sweden even had some cases were the bequest went broke due to the taxation.

A famous case was the estate of Sally Kistner, widow of the founder of the pharmaceutical company Astra. The estate was worth SEK300 million (US$36 million in today’s exchange rate) when she died in 1984. The majority of her fortune was tied up in Astra-shares and the value of the shareholding was appraised at the market value on the date Kistner died. The stock market, however, realized that the heirs would have to sell a large portion of the shareholding in order to pay the inheritance tax and that the sale would adversely affect the value of remaining shares. The share price sank and, combined with the capital gains tax, the previously determined inheritance tax exceeded the value of the total assets of the estate. The estate was declared insolvent.

Taxes were probably the most important reason why families like Wallenberg changed their core business into a foundation to secure its future. Other families simply left the country, taking their fortunes and businesses with them. Tetra Pak founder Ruben Rausing, IKEA founder Ingvar Kamprad, and industrialist Fredrik Lundberg all chose to emigrate, mainly due to Swedish tax policy.

In 2002, the Social Democrat government appointed a parliamentary inquiry to review and evaluate taxes on ownership. There seems to have been growing understanding among Social Democrats of the problems related to these taxes. There was also rising concern about how Swedish taxes on capital worked in a globalized world.

The parliamentary inquiry suggested in June 2004 substantial reductions of the inheritance and gift tax. But this was certainly not enough. Protests from entrepreneurs were huge and the response to the proposal was very critical.

In September 2004, the Social Democrats, the Green Party and the Left Party presented the news about the budget bill for 2005. They had all agreed to repeal the inheritance and gift tax altogether. The government wrote, “For reasons including improving conditions for running a business, the inheritance and gift tax is repealed, which will facilitate generational succession.”

The ongoing attempts to craft exemptions and provide relief to small enterprises and family-owned businesses proved to be inadequate. The politicians finally realized that it was not possible to exempt, in any simple or predictable way, certain companies from the destructive effects of the inheritance tax without simultaneously undermining the foundations of the tax as a whole. I think the German politicians after the judgment in Karlsruhe now face the same challenge. Efforts to save the German Mittelstand from inheritance taxation will probably be perceived as unfair by the public when workers will have to pay more than factory owners in inheritance tax.

The repeal of the inheritance and gift tax also triggered a more intense discussion about the impact of taxes on ownership. In Sweden taxation of ownership was considered a “free lunch” for a long time. Much of the Swedish business sector is made up of owner-managed businesses that create a great many jobs and account for a significant share of economic growth. In Sweden, even most listed companies have controlling owners who take active responsibility for the company’s development. This discussion eventually led to the abolishment of the wealth tax in 2007 and a more reasonable taxation of owner-led corporations. These reforms were made by both a Social Democratic government led by Göran Persson and the following center-right government led by Fredrik Reinfeldt.

The repeal of these destructive taxes has given Sweden a smarter tax system and has brought entrepreneurs and investment capital back to the country. A smarter tax system generates higher economic growth and thus higher tax revenues. The tax ratio declined from 51 percent of GDP in 2000 to 44 percent in 2014, even as tax income increased by SEK260 billion (US$31.2 billion), adjusted for inflation. This is the result of several measures, including the repeal of gift, inheritance and net wealth taxes and the institution of the in-work tax credit, which has meant that more people have jobs to go to. In some ways, you could say that Swedish tax developments beginning in 2000 are proof of the Laffer-curve. With lower tax rates, especially lower taxes on ownership, the tax revenues increased.

Today Ingvar Kamprad and other successful entrepreneurs have moved back to Sweden and Swedish family business owners do not need to worry any more about inheritance tax planning. The political support for these reforms is strong, only the Left Party has changed its policy since 2004.

Sweden’s repeal of the inheritance tax was not unique. Many other countries have no inheritance tax, or at least none within the family. Several European countries have no inheritance tax regimes, including Austria, Cyprus, Czech Republic, Estonia, Liechtenstein, Norway, Russia and Slovakia. Countries outside Europe that have no inheritance tax include Australia and India. The effective tax rate can be zero even in countries that formally have an inheritance tax, or at least lower than it appears to be on tax rate tables. This applies in Switzerland, for example, where the effective taxation of a relatively large inheritance within the family is zero in practice. Studies of effective tax rates by AGN Europe show that the trend is generally moving towards lower taxation of inheritances in Europe.

Sweden still has the highest marginal tax rate in the world and taxes savings at nearly double the rate in effect elsewhere. We strongly need lower taxes. But foreign readers of our new book might find some interesting facts and experiences from the Swedish inheritance tax reform in 2004.

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Separating Economic Sense and Nonsense

Section: Members Highlights / WTA Blog
30 September 2016 | Separating Economic Sense and Nonsense

The Washington Times
– – Monday, September 26, 2016

ANALYSIS/OPINION:

Why is it that many politicians and journalists can quickly grasp the idea that if the tax on cigarettes or soft drinks with sugar is increased, the demand for them will decline, but seem unable to understand that increasing a tax on labor, like a mandated increase in the minimum wage, will cause a decline in the demand for labor, leading to higher unemployment?

A number of years ago, I was on a European speaking tour with a couple of other economists. One had received a Nobel Prize in economics. He was exceptionally smart, a math whiz, and a most pleasant fellow. Among his many accomplishments, he developed investment models with others, which were used to forecast. One of the forecasts had turned out to be spectacularly wrong and costly. When chatting with him about the matter, I realized that the problem was the number of years of data they used was too few (more years of the necessary data were not available at the time) to give them the level of certainty they thought they had. In our conversations, I also came to understand that he had done only limited reading in economic history (it was not his field), and was unaware of various financial and monetary bubbles and crashes that have occurred over the last few centuries. Perhaps if he and his colleagues had been as well schooled in economic history as they were in applied mathematics, their risk assessments might have been different.

It is always disheartening to hear politicians propose policies that will not make citizens richer with more opportunities as claimed, but make them less wealthy with fewer options. Politicians who advocate for higher capital gains tax rates, higher taxes on the “wealthy,” higher inheritance tax rates, higher tariffs, more government spending and more regulations, fail to recognize, or admit, that all of this has been tried many times before, with disastrous results. They are either ignorant of economic history or are relying on the ignorance of the press and the people to buy such claptrap. Even more disconcerting are those economists who try to make an argument of why this time the outcomes from bad policies are going to be different — apparently to curry favor with the political and media class.

The high priests of many academic disciplines, with the intent of making it seem more difficult, create many unnecessary new words, when simple, commonly understood words in the English language will suffice in most cases. Economists have not only been guilty of that sin, but in recent decades, have developed the fashion of insisting that almost every academic article be expressed in mathematical terms, or at least have a mathematical appendix, even when totally unnecessary or inappropriate. The result has been that increasing numbers of economics students, both at the undergraduate and graduate level, have spent much of their time studying math rather than economic principles and history. In 2000, the noted economist Thomas Sowell wrote a very fine and well-reviewed introduction to economics, “Basic Economics: A Citizen’s Guide to the Economy,” proving that it was possible to write a clear, accurate and concise economics text without equations, graphs or jargon.

The great intellectual debate among non-socialist economists about the proper role of government during the last 80 years is largely between the followers of John Maynard Keynes and the Austrian school of economists led by F.A. Hayek and Ludwig von Mises, and their frequent Chicago school allies led by Milton Friedman. The great tragedy is many economic students graduate without knowing who Friedman and Hayek were, let alone their contributions to economic thought. Prime Minister Margaret Thatcher and President Ronald Reagan were fans and disciples of Hayek, while many big-government types tend to be Keynesians. Without understanding the substantive debate between these two conflicting visions, it is hard for members of the press and the political class to present coherent thoughts on many public policy issues.

For those wishing to acquire basic economic literacy without the technicalities, I suggest the 2016 edition of short classic bestseller for non-economists, “Common Sense Economics: What Everyone Should Know About Wealth and Prosperity,” by James Gwartney and others. Again, for those who have no background in economics but would like to learn about money and the great bubbles and panics of the past, I recommend the very entertaining bestseller, “The Ascent of Money: A Financial History of the World,” by the distinguished historian Niall Ferguson. This book was adapted for an Emmy Award-winning PBS documentary. Finally, the single best one-volume book on the history of economic thought — both entertaining and dense in useful information, and now in its third edition — is Mark Skousen’s “The Making of Modern Economics: The Lives and Ideas of the Great Thinkers.” The above books provide what one needs to distill the sense from the nonsense about economics coming from the media and political class.

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