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Read the Fine Print: The “German” Is in the Details

Sov­er­eign “Bonds”: Gen­er­al Anton Dostler’s exe­cu­tion for killing 15 unarmed Amer­i­can POW’s.

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COMMENT: Watch­ing the stun­ning devel­op­ments in Europe, we’ve expe­ri­enced con­sid­er­able alarm in the con­tem­pla­tion of when the Ger­man-engi­neered night­mare unfold­ing there would cross the Atlantic. 

Of par­tic­u­lar sig­nif­i­cance in this con­text is the creep­ing nega­tion of demo­c­ra­t­ic process and nation­al sov­er­eign­ty man­i­fest­ing in Europe. We have won­dered how long it will be before “it’s our turn.”

(Recall that the plan for a Europa Ger­man­i­ca, build­ing on the the­o­ret­i­cal struc­ture of Friedrich von List, envi­sioned the grad­ual teth­er­ing of the Unit­ed States to an eco­nom­i­cal­ly unit­ed and Ger­man-dom­i­nat­ed Europe.)

It is against this back­ground that we view with mis­giv­ings a pro­pos­al that would per­mit the Ger­man tax author­i­ties to col­lect a tax on trans­ac­tions between a UK and US insti­tu­tion, if it involved shares of a Ger­man com­pa­ny.

In addi­tion to rep­re­sent­ing encroach­ment on UK sov­er­eign­ty, this gam­bit might set a prece­dent that would see the Unit­ed States grad­u­al­ly sub­sumed into the Ger­man eco­nom­ic play­book. 

A nation’s fis­cal auton­o­my and abil­i­ty to raise rev­enue is fun­da­men­tal to nation­al sov­er­eign­ty. Whether through levies/taxation, the issuance of sov­er­eign bonds or adjust­ing cur­ren­cy exchange rates, this is cen­tral to the func­tion­al auton­o­my of any soci­ety.

Although the FTT appli­ca­tion hypoth­e­sized above might seem triv­ial, but it is a har­bin­ger of US/EU (read “Ger­man”) fis­cal inte­gra­tion. What comes next, from the rule-chang­ing troika/

The US should stu­dious­ly avoid becom­ing enmeshed in the Euro­pean spi­der web.

Stay tuned.

“House of Lords Com­mit­tee Urges Legal Chal­lenge To Finan­cial Trans­ac­tion Tax” by Aman­da Banks; Tax-News.com; 4/2/2013.

EXCERPT: The House of Lords Euro­pean Union Com­mit­tee has warned that a Finan­cial Trans­ac­tion Tax with­in parts of the Euro­pean Union will have “far-reach­ing adverse con­se­quences for UK res­i­dent insti­tu­tions,” and it has urged the Trea­sury to take advice on a pos­si­ble legal chal­lenge at the Euro­pean Court of Jus­tice.

Eleven Euro­pean Union coun­tries have so far agreed to imple­ment the tax. How­ev­er, although the tax has been dis­missed by UK Prime Min­is­ter David Cameron as “sim­ply mad­ness,” a let­ter from com­mit­tee chair­man Lord Boswell to Greg Clark MP, finan­cial sec­re­tary at HM Trea­sury, accus­es the Gov­ern­ment of “com­pla­cen­cy” on the issue. The let­ter warns that UK finan­cial insti­tu­tions will have to pay the tax when deal­ing with coun­tries that have the FTT; this is because of the issuance prin­ci­ple, which seeks to pre­vent avoid­ance by tax­ing finan­cial instru­ments when trad­ed, even if those con­duct­ing the trans­ac­tion are out­side the FTT zone.

Accord­ing to the com­mit­tee, this could leave the UK liable even for tax claimed against com­pa­nies in for­eign juris­dic­tions, par­tic­u­lar­ly those in the USA. The let­ter gives the exam­ple of a finan­cial trans­ac­tion involv­ing Ger­man shares between a US and a UK insti­tu­tion: “Under the issuance prin­ci­ple this would give rise to FTT upon both par­ties PAYABLE TO THE GERMAN TAX AUTHORITIES. Giv­en that col­lec­tion of this tax from the US finan­cial insti­tu­tion may be dif­fi­cult, the pro­pos­al would enable the Ger­man tax author­i­ties to impose joint and sev­er­al lia­bil­i­ty for both instances of the FTT upon the UK finan­cial insti­tu­tion and recov­er the whole amount using the EU mutu­al assis­tance regime.” (Empha­sis added.)

Lord Boswell also high­lights lack of detail as to how the tax will be col­lect­ed and lack of clar­i­ty as to how the FTT will affect sub­sidiaries out­side the FTT zone. . . .

. . . . Lord Har­ri­son, who chairs the EU Sub-Com­mit­tee on Eco­nom­ic and Finan­cial Affairs, was quot­ed as say­ing that: “We are high­ly alarmed that so lit­tle atten­tion has been giv­en to the poten­tial impact of an FTT on non-par­tic­i­pat­ing Mem­ber States such as the UK.

Discussion

One comment for “Read the Fine Print: The “German” Is in the Details”

  1. “Deutsche Bank has “zero tol­er­ance” for tax evaders: CEO”

    Reuters April 28, 2013

    http://www.reuters.com/article/2013/04/28/us-deutschebank-tax-idUSBRE93R05C20130428

    “....if the bank had the slight­est indi­ca­tion that for­eign assets han­dled by the bank were not taxed, it would demand that cus­tomers prove the assets were legit­i­mate.”.....

    “Sep­a­rate­ly, UBS Chair­man Axel Weber told Wirtschaftswoche mag­a­zine that Switzer­land’s biggest bank would no longer do busi­ness with cus­tomers seek­ing to evade tax­es.

    “I am con­fi­dent that we can per­suade the affect­ed cus­tomers to put their sit­u­a­tion with the Ger­man tax author­i­ties in order,” said Weber, who is a for­mer Bun­des­bank pres­i­dent.”

    Posted by GK | April 28, 2013, 7:34 pm

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