Category Archives: transfer payments

For the European élite, high tax is an intrinsic good

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Not a happy ending

Every country, Dalrymple points out, ought to

use the means at its disposal to solve its own problems that arise from history and culture.

Yet a large part of the so-called European project is the plan for a

fiscal straitjacket, accompanied by transfer payments from one country to another.

Glancing at the newspaper the Monde, Dalrymple comes across an article on the subject of la tentation du paradis fiscal that carries the heading

Après le Brexit, le Royaume-Uni fait le choix des charmes dangereux du dumping fiscal

This is a reference to an idea floated in some parts of the UK government that corporate tax might be cut to 15%. ‘Fiscal dumping’ here means

levying a tax rate on corporate profits lower than that of other nations.

Some people, Dalrymple ventures,

might call this competition.

The Monde‘s use of the term ‘fiscal dumping’ is telling, says Dalrymple, about

the dirigiste European political élite mindset. They cannot say a priori what rate is ‘correct’, but terming a 15% corporate tax rate ‘dumping’ implies that there is a correct rate.

The implication is that national differences in tax rates are inherently wrong, and that the tax rate ought to be high, even if a lower rate results in a higher take.

One might think that the main attraction of high tax rates is the distress they cause to those who pay them.

Dalrymple explains that the belief in a ‘correct’ tax rate

can only mean a belief in the uniformity of tax rates in Europe, and in overruling each individual country’s preferences and needs. Uniformity implies the need for a centralised authority over which there could never be the slightest democratic oversight. There is no European people to elect a European government, and never will be.

Official tax rates and effective tax rates may differ.

A system of concessions, exceptions, and bribery is likely to flourish where rates are high and it is worth avoiding and evading tax. A corrupt or flexible polity with a high tax rate may impose less tax in reality than an honest one with a low tax rate.

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Belgian diagnosis

Screen Shot 2015-04-27 at 07.12.36Flemings, Walloons and a failed European project

In the course of a discussion of the implosion of the European Union, Dalrymple cites Belgium, stating a fact that is obvious to all but the West’s political and intellectual leaders:

What has not worked in two centuries in a small area with only two populations will not work in a few years in a much larger area with a multitude of populations.

Screen Shot 2015-04-27 at 07.44.36Belgium has existed since it was cobbled together in 1830.

In all that time, it has not been able to create a durable national identity.

The country is divided into populations with incompatible politics: Wallonia and Flanders. Belgium is officially bilingual, yet you will not see a word of Flemish in Wallonia or of French in Flanders.

Not pretty

But it’s not pretty

The division could not be starker if barbed wire separated the two provinces. Only in the capital, Brussels, does one find any concession to bilingualism.

Wallonia,

though it contained a minority of Belgium’s population, long dominated its culture and economy.

Even upper-class Flemings spoke French at home, while Flemish was the language of the peasantry; until recently, Belgian schools forbade children from speaking Flemish in class.

With the decline of Wallonia’s coal and steel industries and the economic rise of Flanders, the pattern of dominance changed. Flanders

Screen Shot 2015-04-27 at 07.54.21went from being the poor relation to being the rich one, albeit with something of an inferiority complex. It started to make large transfer payments to Wallonia, which suffered from comparatively high unemployment.

Such payments

rarely promote goodwill between groups. Resentment is common among both the donors, who harbour suspicions that the recipients are exploiting them, and the recipients, who indulge in mental contortions to explain their dependency away.

The largest political parties in Flanders

Screen Shot 2015-04-27 at 08.01.59are either nationalist or free-market; both philosophies lead to reducing or stopping the transfer payments.

The largest political party in Wallonia

is socialist and wants the payments to continue or increase. The Wallonian socialist party’s patronage powers in its territory are almost feudal in nature and extent; the last thing that the party of social change wants is actual change.

Binding the Flemings and Walloons together

Binding the Flemings and Walloons together

The Walloons

want higher taxes to maintain the current arrangements.

The Flemings

want lower taxes and reduced spending to promote long-term growth.

A masterpiece.

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