Tax gives financial expression to a nation’s cultural code and national priorities. Any dialogue about identity and nationhood will always lean on discussions about taxation. Tax is political. How we tax, who we tax, and why we tax, takes us back to the fundamental issues of ‘fairness’ and ‘equality’. From within a socio-legal frame there is compelling evidence that tax impacts the experience of women in society, LGBT+ people, ethnic minorities, first peoples, immigrants and persons on the margins of society. On the far side of the tax continuum are Arabian fiefdoms that have zero income tax. This relieves their rulers of having to offer the populace any opportunity for authentic participation in governance. No tax- no representation.
In 1903, bottles and stones soared through stained glass windows from one side and bullets on the other as members of the Ratepayers Association gathered in Brunswick Square, Trinidad. The Red House was set ablaze in response to a proposal to increase water rates. Recently in Paris, Yellow Vest protesters voiced their outrage at the government’s decision to target automobile pollution by imposing a Carbon Tax. The pre-tax minimum wage among the poor in France is €1,498.47 ($1,701.80) a month, for a work week of 35 hours, or roughly $11.22 an hour. In the US, the federal minimum wage is $7.25 per hour since 2009. The Paris revolts spiralled into a violent expression of general discontent with demands ranging from lower taxes and improved spending power to better public services.
The demands of the Yellow Vest protesters scorched a gaping hole in the French national budget. The fiscal package needed to plug the pit and pacify the people was €10bn (£9bn; $11bn). A straightforward consequence of corking the cavity was immediate cut backs on urban regeneration, education, border security, health care and other national priorities unless some new source of revenue could be identified quickly. A digital services tax that targeted twenty-four firms including several high-profile technology U.S. brands, comprising Google, Apple, Facebook and Amazon (GAFA) was one certain way to fund an unforeseen deficit. The new GAFA Tax is projected to collect about $560 million annually.
The industrialist Mr. Norman Sabga recently hoisted thoughtful economic sociology questions for every post-plantation economy in the eAge. His unambiguous position demystified the linkages between: capital outlay in plant and machinery, wages and levies, customs duties, VAT and stimulating economic growth through employment on the one hand, and the total absence of digital taxes on domiciles that have no physicality, which declare hefty profits, create no employment, and have no related expenses for plant and machinery on the other hand. How can companies in a Caribbean Single Market and Economy be competitive whilst they remain nested like Russian Babushka Dolls inside larger external shells that evade every tax and all other costs associated with the market? In April 2020 the UK’s digital tax will go into effect. Austria, the Czech Republic, Germany, Italy, Poland, and Spain will follow immediately thereafter.
Talent is the principal asset of the entrepreneurial state and Brexit will compel UK firms to worry over issues related to talent, including: immigration, tax and mobility policy. Further ahead and deeper beneath Brexit are problems related to foreign exchange, VAT, dividend withholding tax, capital gains tax deferrals and group relief. Any shift in these rivers of revenue will have consequences for the aspirations of the UK to provide outstanding education, and the £1.8bn injection needed to upgrade health care.
England took control of the Cayman Islands along with Jamaica under the 1670 Treaty of Madrid. With no arable land available the Caymans never became a plantation economy that could mimic the majesty and opulence derived from Jamaican plantations. And so a slave society never emerged there. Instead the Caymans was primarily a maritime economy. It was a dependency of Jamaica under the Treaty of Madrid and the question of tax never arose. Over time, legislation scaffolded the development of a banking industry.
Today, it is one of the largest financial centres in the world ranking number five directly after New York, London, Tokyo and Hong Kong; offering first class financial infrastructure, a rich product portfolio and is home to 80% of the world´s mutual funds and hedge funds. It is also the second largest offshore insurance centre in the world. In the Caymans there is no income tax, no corporation tax, no arable land and no economy. To be competitive, onshore jurisdictions have started to borrow or mimic offshore products and services.
The FSF produces a table of the jurisdictions with the highest concentration of shadow banking financial assets, versus domestic GDP. In its 2018 report, several jurisdictions had shadow banking institution sectors that were quite large compared to the size of the domestic economy. OFI assets were 2,118 times GDP in the Cayman Islands, 246 times GDP in Luxembourg, 13 times GDP in Ireland, and 8.6 times GDP in the Netherlands.
Critical tax reform can reshape West Indian societies. This will enable states to give expression to their own cultural code, respond to people on the margins and drive the competitiveness of indigenous companies by taxing domiciles with no physicality.