17 junho 2003

ECO-TERROR
Economic murder-suicide: On June 3, 2003, the European Commission adopted measures to "tackle harmful tax competition." If the term "harmful tax competition" sounds to you like an oxymoron, you are thinking clearly. The EU's measures are designed to make it easier for them to tax savings but, in reality, will largely destroy the small amount of remaining legal savings by EU citizens. [...]
To understand the problem, assume you are a citizen of France. You save $1,000 and receive an interest payment of $60 (6 percent). Inflation is 3 percent, so your real interest earnings are only $30. However, you must pay a 59.7 percent tax, or $35.82, on the $60 of interest, plus the $30 inflation tax. (Remember, inflation is caused by government producing too much money.) This leaves you a net loss of almost $6 on each $1,000 saved. (In those EU countries where inflation is 3 percent or more and maximum tax rates are 50 percent or more, many savers have effective tax rates on interest of more than 100 percent.)
People quickly figure out they are worse off rather than better off by saving; hence, they either move their savings out of the country to a more tax-friendly jurisdiction or stop saving. The EU will receive virtually no increase in tax revenue from these new measures. They will only succeed in driving their citizens to find legal or illegal loopholes.
Any reduction in savings rates in the EU will be a disaster.