Double movements

I’ve been too busy with teaching responsibilities the last several days to link or respond to various posts that other people have put up on taxes, collective goods, and related questions, so I’m going to declare intellectual bankruptcy, and just tell you to read “Laura McKenna”:http://11d.typepad.com/blog/2008/02/more-on-the-tax.html, “Will Wilkinson”:http://www.willwilkinson.net/flybottle/2008/02/22/moral-duties-in-contexts-of-partial-compliance/ and “Russell Arben Fox”:http://inmedias.blogspot.com/2008/02/taxation-and-democracy-101-on-lucky.html. But I also wanted to point to some interesting stuff that’s been happening in Germany, which is sort of related to this question. The _Financial Times_ has been running stories for the last week or so about a disgruntled former employee of a Liechtenstein bank, who has sold a list of the beneficial owners of various trusts in Liechtenstein to the German tax authorities for several million dollars.

It looks as though this list was a bargain – the German authorities are expecting to collect very substantial amounts of money from aforementioned beneficiaries. The episode also has an important deterrent effect – tax-dodgers who might have thought previously that they could safely evade the German taxman by stashing their money in Liechtenstein (which notoriously refuses to cooperate with foreign tax authorities) are now likely to have second thoughts. Other tax authorities, including the IRS, are looking to use the list or information from the same employee to go after their own tax evaders. But what is interesting to me is the “political reaction in Germany”:http://www.ft.com/cms/s/0/7d92acb2-df55-11dc-91d4-0000779fd2ac.html.

German business is facing a dramatic loss of influence as a political force after the launch of the country’s biggest ever investigation targeting wealthy tax evaders, according to Jürgen Thumann, the nation’s leading business lobbyist. … There is no question that this case has damaged the reputation of all entrepreneurs and managers in Germany,” Mr Thumann, who chairs the BDI industry federation, said. “It has added to the already rampant anti-business mood and confirmed people’s worst prejudice. My concern is that if this continues to drip week after week, we will lose whatever credibility we have left,” he said. “At stake is our reputation as a part of society and our ability to defend our positions in the political arena.”

What I imagine is happening here is that the specific issue of whether prominent German business leaders are hiding their money in tax havens is being melded together with a more general set of concerns about fairness and economic change. There is a general perception that the last few years of belt-tightening measures have produced austerity and personal sacrifice for some, but not for others. There’s been a resurgence of corporate profits, but wages have been stagnating until very recently (the new agreement with IG-Metall will allow some catch up). This isn’t helping the center-left; the German SPD has been badly damaged both by the fact that it was responsible for many of the austerity measures, and by the sleazy corporate cronyism of its last chancellor, Gerhard Schroeder (imo, Angela Merkel is a quite considerable improvement on Schroeder in nearly every way, even if she’s further to the right).

Thus, when people hear that prominent businessmen who have done very well from the reform process are apparently guilty of tax evasion, they not unsurprisingly draw connections between these businessmen’s behaviour and the more general policy aims of the German business lobby over the last several years. In short, the eagerness of German business to disembed itself from the German economy is resulting in a political backlash. I suspect that the _Economist_ has been complaining in its usual fashion about this (I don’t have a subscription any more, so I can’t say for sure), but the only thing that surprises me about aforementioned backlash is that it has taken so long to materialize.