We started with a brief chat about Belarus – Joel’s ancestors come from there and Michael remembers his mission to Belarus in mid-90ies to help them with the tax policy issues. Joel used to play some tennis, golf and basketball. Michael is Chelsea supporter and was a bit bitter to remember the disappointment at the recent European Championships finals at the Wembley.
Why tax?
Michael started working with tax because of an inspiring mentor and teacher at the Oxford University. Joel told a similar reason – his professor at the Princeton University, but he also was fascinated by the fact that the subject of his studies could easily be at the front page of a newspaper the next day, because a lot of people care about it. And it is very true still today.
Suggested non-tax reading
A book both Joel and Michael would recommend is A Gentleman in Moscow by Amor Towles [1]. Joel also recalls a historic book Alaric the Goth: An Outsider's History of the Fall of Rome by Douglas Boin that also has a tax angle – Rome granted citizenship also because of collecting inheritance tax.[2] From podcasts Michael admits he sometimes listens to history podcasts like “Revolutions” by Mike Duncan.
The new book
Then we switch to Joel’s received an Ig Nobel Prize for a paper concluding that people find a way to postpone their deaths, if that would qualify them for a lower rate on the inheritance tax. The prize is to "honour achievements that first make people laugh, and then make them think". This might be a summary of why both decided to create the latest book -Rebellion, Rascals and Revenue that consists of different fun facts and historic stories related to taxation from around the world. The stories try to illuminate some of the main principles of taxation in a light and entertaining way. Michael admits that some of the stories in the book have no useful lesson at all, but are included just for fun. Joel adds that the book might also be a gift to people in the tax business to inspire them to prove at cocktail parties that the profession is not as dry as one may think.
Tax stories
If both need to choose a story from the book, Joel told one about the beard tax in Russia, but Michael – a bachelor’s tax in Argentina. Both were intended to change behaviours (shave and get married) rather than to collect revenue. That quite often is still the main reason for many of taxes nowadays.
Helicopter view on taxation now
We also had a chat on some of the typical tax issues still in the current systems. The progressive income tax seems more to be of an ethical and solidarity issue. Both are not fans of wealth taxation as a new tax, but rather countries should look at effectiveness of the current capital gains tax. Eastern Europe does not seem to be so special with their systems, but a relative simplicity of the systems is an advantage. VAT fraud gets a lot of press, but the corporate tax one may be equally important.
VAT vs. Sales tax
Joel thinks that US retail sales tax might be more vulnerable to fraud than VAT. And Michael tells a nice example from the book about how initially consumption of gin was taxed at the retail stage until the government realised that collection of the tax at the wholesale is much easier – this may also highlight an aspect of VAT benefits over the sales tax.
Pillar 1 & 2
On 1 July 2021 the shape of Pillar 1 & 2 was announced (taxation of multinationals in the market countries & global minimum corporate tax) - Michael certainly welcomes those changes and believes it is a big step forward in the international cooperation as suggested in the book. Joel hopes the global minimum tax will address the issue of offshore (non)taxation, but it might not be easy to implement.
[1] https://www.goodreads.com/book/show/34066798-a-gentleman-in-moscow : “A Gentleman in Moscow immerses us in another elegantly drawn era with the story of Count Alexander Rostov. When, in 1922, he is deemed an unrepentant aristocrat by a Bolshevik tribunal, the count is sentenced to house arrest in the Metropol, a grand hotel across the street from the Kremlin. Rostov, an indomitable man of erudition and wit, has never worked a day in his life, and must now live in an attic room while some of the most tumultuous decades in Russian history are unfolding outside the hotel’s doors. Unexpectedly, his reduced circumstances provide him a doorway into a much larger world of emotional discovery.”
[2] https://www.amazon.com/Alaric-Goth-Outsiders-History-Fall/dp/0393635694 : “Denied citizenship by the Roman Empire, a soldier named Alaric changed history by unleashing a surprise attack on the capital city of an unjust empire.”
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