It would be a brave girl who asserted that she understood the economic situation of Egypt, except to say that it is dire; but it seems a reasonable proposition that the IMF (from which the government is hoping to borrow USD15bn or some such number) was behind this week’s five percent increase in the top rate of tax. Individual well-off Egyptians are round about 99 times cleverer than any government they have had in the past 50 years or are ever likely to have, so this has to be regarded as a piece of window-dressing. But other IMF prescriptions this week also follow the usual tax-increasing path: in Luxembourg it’s VAT and property taxes; in Lithuania it’s property taxes and vehicles; in Latvia it’s the flat tax thresholds. And here is a particularly abysmal example of first world high-taxing double-speak applied to a troubled third-world country: “eliminating tax exemptions that have little benefit for production but undermine growth-enhancing spending and constrain vibrant private sector growth.” If these weasel words are capable of any translation into understandable English at all, they seem to be saying that giving tax incentives takes away from government spending. Excuse me, but there is no such thing as “growth-enhancing spending.” All spending is bad. What planet does this person live on? I am reminded of The Gipper’s famous joking words: “I’m from the government, and I’m here to help.”
I have to admit however to being slightly conflicted over the IMF, given that, as part of the Troika, it is playing a useful role in controlling the spending of bankrupt EU countries that have proved unable to manage themselves. I suppose that, like the OECD, another sprawling, undirected organization, the IMF has good bits and bad bits. Trouble is, we only seem to hear from the bad bits: the horny-handed sons of toil working away at the coal-face persuading Finance Ministers to stop spending money get no recognition, while the Article IV tax-and-spend brigade get all the kudos. Which side is the management on, I’d like to know?
Attacking the IMF may be a fairly futile exercise in the short term; but the OECD seems more vulnerable. Its recent “BEPS” propaganda onslaught against multi-national businesses has started to run into the buffers, with a growing chorus of negative responses to such idiocies as translated country-by-country reports and the proposed separation of digital business from non-digital business for tax purposes (at least we now know which century they’re living in, and, hint, it isn’t the 20th or the 21st). They are living in the century of nation states, which is of course an accurate reflection of their membership. With any luck, we will find that they have over-reached themselves, and they will implode. I continue not to understand why the business world has failed to create a countervailing organization to fight against the OECD’s statist doctrines. But perhaps the ever-wise bosses of the world’s MNEs have simply calculated that the OECD, in its overweening arrogance, will bring about its own downfall, leaving behind an international community of nations even less coherent than it was before the OECD’s arrival on the world stage.