France's President Hollande: Eradicate tax havens … President Hollande was getting poor opinion poll ratings even before the tax scandal … French President Francois Hollande has called for "eradication" of the world's tax havens and told French banks they must declare all of their subsidiaries. He was speaking after presenting a draft law aimed at "moralising" French public life – a response to the tax scandal that has shaken his presidency. France's ex-Budget Minister Jerome Cahuzac has been charged with fraud over a secret Swiss bank account. Mr Hollande said a new central agency would fight fraud and corruption. − BBC
Dominant Social Theme: Finally, we are going to get rid of these tax havens.
Free-Market Analysis: We think we can recognize a dominant social theme when we see one. This sudden emphasis on eradicating tax havens is just such a theme. It is a manufactured media firestorm, intended to go on and on until there are few places to hide money from increasingly demanding governments.
Believe, if you wish, that taxes are a legitimate duty of citizens in the 21st century. This argument still begs the question of why, in an era of central banking, governments need to collect taxes. Banks can print as much as is necessary. And according to such wise men as Ben Bernanke, banks can also drain money if the economy is getting overheated. So why taxes?
In the past, we've suggested that taxes are the currency of modern nation-state credibility. Now that fiat is not backed by any kind of commodity, the ability of a nation to collect taxes reflects directly on the viability of the currency. Taxes are a barometer of state power.
Whatever the reason, there is currently a concerted effort to make sure that citizens cannot move their money – even legally – out of the country of their birth and residence. As we mentioned above, it has the look and feel of a coordinated program, and thus we have little hesitation in labeling it an elite meme, a campaign that has been structured and promoted to attack havens and give governments more control over their citizens' money. Here's more from the BBC article:
Addressing a news conference on Wednesday, Mr Hollande said "tax havens must be eradicated in Europe and worldwide". "I won't hesitate to consider as a tax haven any country that refuses to co-operate fully with France." He said French banks "will have to publish every year the full list of their subsidiaries in the world, country by country". They will also have to explain their business, he said. "In other words it won't be possible for a bank to hide transactions carried out in a tax haven."
Mr Hollande said a new national, specialist prosecutor would act on cases of fraud and corruption. In addition, "a high-level authority will be created to monitor the assets and interests of ministers, members of parliament, top elected officials", he said.nA list of banned professions for politicians will be drawn up, to prevent conflicts of interest.
The BBC's Christian Fraser in Paris says polls suggest respect for ministers and MPs is at an all time low in France. There are now calls for a government reshuffle and in some quarters a new Sixth Republic.
Programs like this one start slowly and tend to build. The modern attack against so-called tax havens began with a focus on Switzerland by the Germans and gradually expanded to include the US as well. It might then have been considered to be coincidence, but not anymore.
As has been pointed out in these pages, a coordinated crackdown seems to be occurring, with countries offering tax amnesties in concert with the same basic features. Add in the Cyprus affair, which was obviously meant to be seen as a warning, and you have what appears to be a concerted effort.
Just yesterday we wrote about media investigations into offshore tax havens. The timing certainly seems to be a bit "coincidental" … or not.
The larger point of all this is that people OUGHT to have a place to move money. Ideally, it should be legal, as no one wants to encourage illegality. But when countries are levying taxes of 50 and 60 and 70 percent on their wealthier individuals, the idea that there is no safe place in which capital may reside is a disturbing prospect.
As always, such campaigns may seem aimed at the wealthy, but sooner or later it is the middle classes that will suffer. For one reason or another, the political class (and others) have decided that an all-out attack on wealth and prosperity is in their best interests.
Those encouraging such attacks in France or elsewhere may regret it. When governments are powerful and there is nowhere to avoid their long reach, the corollary is almost always further abuse of privilege.
It will not end well.