Soak the rich, lose the rich

In a world of mobile money, people are divided over the net effect on the economy of raising taxes on the rich, and there never seems to be a definitive answer to be had.  Individuals and companies will threaten to leave a country when taxes are increased, and some will actually leave. But whether there is a significant outflow of wealth is only part of the equation.  With no one knowing reliably what inward investment opportunities are lost, the effect of headline tax hikes is never going to be proven to any satisfactory extent.

When, as in the UK, tax rises are combined with inept law making and overtly political omessages, it does increasingly seem that it is very quickly possible for a country to acquire leper status on the international stage.  Anecodotal evidence suggests that the ill advised, knee jerk, remittance basis changes announced in 2007 did the UK no good in terms of its reputation as a stable environment for a potential inward investor.  The recent Budget, and the continued procrastination by the government in resolving the foreign company agenda, has pretty much now sent the UK to the back of queue of locations being considered by those businesses and individuals wanting to base themselves somewhere in Europe.  And, most worryingly, this is often the case for persons who would not even be affected by the laws in question; with merely the perception of punitive taxation being sufficient to deter them from examining the merits of relocating the the UK.

This article from the Wall Street Journal comments on the topic from a USA perspective.  The author is Arthur Laffer (of the Laffer Curve).