Will tax-dodging dentists fill growth gap?

[R. A. Hettinga]

<http://www.timesonline.co.uk/printFriendly/0,,1-37-793402,00.html>

The Times

August 27, 2003 

European Briefing 

Will tax-dodging dentists fill growth gap? 
By Carl Mortished 

HOW do you catch a Belgian dentist? This is not a silly joke, but a question for the Belgian parliament, which is debating a tax amnesty Bill. By 2005 an EU directive will impose an obligation on the EU`s bankers to disclose details of foreign bank accounts to other EU tax authorities. With internal EU capital flight coming to an end, Belgium is seizing its chance to grab an estimated g160 billion (#110 billion) that is thought to be stashed by its famous 14dentists12 in Luxembourg and elsewhere. 

The Belgian 14dentists12, afficionados of untraceable bearer bonds and offshore accounts free of withholding taxes, are to be tempted back with a pardon and a penalty. Success could bring the financially challenged treasury an estimated g500 million. There is even talk of a boost to Belgian equity markets if the dentists are persuaded to invest in stocks in exchange for lower fines. 

The problem is fixing the level of the fine. Too high and the tax-dodgers will turn up their noses; too low and it becomes morally indefensible and could be politically embarrassing. 

But the lure of billions of euros has created a momentum and there is a model that is exciting the imitators. The Italian Government just avoided breaching the eurozone`s 3 per cent public deficit rule because of g8 billion of exceptional income courtesy of Italy`s returning tax cheats. Vast sums of money, held in Swiss banks, were repatriated. Germany also has a Bill in hand. Gerhard Schr\der, the Chancellor, believes that his countrymen have secreted g100 billion abroad and he hopes the delightfully named 14Act for the Promotion of Tax Honesty12 will encourage the repatriation of much of this money to the benefit of the German state and the Frankfurt b\rse. 

If it succeeds, and France follows the trend, the recycling of hundreds of billions of euros could be a welcome stimulus to the eurozone economy. Belgian tax experts suggest that the fiscally shy Belgian 14dentists12 will take the bait, not least because a new generation wants the cash. The original capital, hoarded by professionals, is now being inherited by children who get no pleasure from watching interest accrue in a Luxembourg private bank. 

In the end, there is something grubby about a tax amnesty. Tax law is rigid and subject to very narrow interpretation. You pay exactly what the law says you owe, not a penny more, nor a penny less. There is no overriding political objective here. Forget to pay and you will be charged interest. Hide your income and you go to jail. But find a loophole and you are free to exploit it. 

How then does an amnesty promote honesty? It does not, but rather promotes contempt of the taxman, who is increasingly seen not as a law enforcer, but as a manager of a government profit centre. 

The solution, of course, is for the state to reduce its tithe and offer no incentive to cheats. Low taxes mean never having to say you are sorry. 


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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
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