Friday, November 20, 2020

To win the war, stop fighting

 Published on The Critic and in Belgian magazine Knack, in Dutch, also to be found hereunder.

Looking at the underground economy in continental Europe this year is an instructive study as to how we should move past the failed “war on drugs”. Organised crime groups are prospering mightily from Covid restrictions that come on top of other well-intended restrictions, for example the prohibition of drugs. Let us see what is really happening so that we can consider what ought to be sensibly done instead.

This summer, drug violence escalated in Antwerp, Europe’s second biggest port. In 2016, the city took over from London as Europe’s “cocaine capital”. While the police and prosecutors are being flooded with cases related to narcotics, notwithstanding the campaign waged against them by Antwerp Mayor Bart De Wever from 2013 on, grenade attacks on houses in the middle of ordinary neighbourhoods keep happening. 

In Brussels, the situation is also tense. Belgian Police official Alain De Proft recently explained how drug clans operate: “they often have the same structure: a number of core members, with behind them a network of commercial legal entities, strawmen and a series of support elements in the certain neighbourhood. One clan can have quite a bit of impact in a neighbourhood: bars and restaurants serve as a sales point for drugs, real estate, you name it.” Clearly, drug trafficking is not all that different from a regular business.

Peter Muyshondt, who used to be police commissioner in the area around Antwerp, supports a completely different policy approach to repression: “Drugs should be removed from the illegal sphere”, he thinks, “because current drug policies inflict more damage than drugs themselves … Instead of criminalising drugs, it would be better for society to limit the damage they inflict”.

As counter-intuitive it may sound, he may be right. Others, like Vicente Fox, the former President of Mexico, which of course has been infamously hard hit by drug violence, have come to a similar conclusion: “Legalization of drugs is the way to combat cartels”.

He has also 
argued that in Canada, where production of cannabis was also legalised, organised crime remained very active nevertheless. Then Canada imposed lots of restrictions, which left great opportunities for crime groups. To his credit, De Wever does take this into account. He thinks that if drugs would be legalised, “it would in that case need to happen recklessly, not doing it halfway. Because otherwise, the criminals operating in the black market would merely be provided with a legitimate front”.Opponents of this idea will claim that legalising cannabis sales in the Netherlands has not ended the role of the drug mafia. But production was never legal in the Netherlands, so this remained the business of organised crime. Antwerp’s Mayor Bart De Wever, who’s frenetically dealing with the challenge, may be an opponent of legalisation but he still 
thinks that – theoretically at least – legalisation “is an option that one needs to consider”, even if he calls the option “terrible”.

At the moment, Luxembourg is actually planning to completely legalise cannabis, as the first European country to do this. We can only hope it will learn from Canada’s mistakes.

Former police commissioner Peter Muyshondt has made the case for not only legalising cannabis, but also other narcotics, such as XTC and even heroin, but then “with strong government checks”.

This is less extreme than it sounds, because Portugal has actually decriminalised the use of both soft drugs and hard drugs since 2001, something Oregon voters also just decided.  This does not mean that one can trade these products It only means that the government will not criminally prosecute consumption, apart from a low fine. Portugal’s experience is very interesting, because it became evident that drug addiction did not increase as a result of the policy. On the contrary, the country experienced a dramatic drop in the number of overdoses and HIV infections. This in great contrast to thirty years ago, when the country was plagued by huge amounts of heroin addiction. Decriminalisation, as an option, has not appeared out of the blue, but as the conclusion of policies whereby addicts were not treated as criminals, but as victims. 

Of course, crimes still need to be prosecuted, not least when committed by drug addicts. The logic that the many problems resulting from drug abuse should be tackled at root – by criminalising drugs – can be understood, but in practice, this approach has inexorably led to even more crime. To ban drugs leads to opportunities for crime groups comparable with those existing for Al Capone at the time of alcohol prohibition in the United States. Whatever was wrong with alcohol, prohibition made it vastly worse for ordinary Americans: who seriously doubts this today?

There are worrying reports of the enormous financial firepower of the drug mafia. Belgian police official Stanny De Vlieger warned in 2018 in a confidential report for corruption linked to drugs, “and then not just corruption committed by port workers that handle delivery of cocaine from containers. Several of our cases point at links between customs and police”. Mayor De Wever even warned in 2018: “Antwerp is finding itself at the edge of where they are buying themselves political influence”. Fans of TV series The Wire will find this all too familiar. 

A second important consequence of legalising drugs is that the health risks of drug products will be a lot smaller when produced by legitimate companies than if produced by the likes of “Fat Nordin van den Dam“, a Belgian-Moroccan drug lord who was recently arrested in Dubai.

More and more voices within the corporate world are pointing at the economic potential and the benefits of turning the drugs business into a business subject to daylight. Chris Burggraeve, a former top executive of beer giant AB InBev and an investor into America’s cannabis industry, thinks cannabis should be legalised from 2021 on in Belgium, which is precisely 100 years after the country banned the product. It would be a first good step into the right direction, and also does not require changes to international treaties, which is needed to legalise hard drugs.

What is true for the drug trade is equally the case for other sectors within the underground economy. All kinds of well-intentioned initiatives to strictly regulate cigarettes, gambling products, alcohol, prostitution and trade in wild animals, tend to result in underground alternatives becoming comparatively cheaper, more accessible and therefore more attractive. Legitimate companies see their income eroded by criminals, who add it to their daily occupation of human smuggling, theft and protection rackets. On their own, those activities would never be sufficient to provide organised crime an income of 
1% of Europe’s GDP.In countries like Italy, organised crime 
makes as much money from drugs as car manufacturer Fiat makes from selling cars. The Portuguese precedent proves that legalisation does not have an effect on the addiction rate, which is also the case in the United States, despite 50 years of America’s “war on drugs”. The fear for an increase in the number of addictions is the main reason to oppose legalisation, but both the American and Portuguese experiences show that ultimately, a very tough or very relaxed policy with regards to drugs does not affect addiction rates. Legalisation will not solve all issues, but it would make drugs safer and it would signify a massive financial loss to criminals.

report by Euromonitor makes all of that clear. It concludes how the Covid crisis, which led to a lot of extra government intervention, has provided organised crime with a lot of extra opportunities. In particular, demand for medical protection equipment has led to much more illegally produced items. Illicit cigarettes were being smuggled under the cover of personal protective equipment (PPE).

The Euromonitor report mentions how the governments of Malaysia and South Africa “placed an outright ban on the sale and use of tobacco products to curb use during the COVID-19 pandemic”. As a result, “In South Africa, the price of a pack of cigarettes has reportedly tripled”, also costing millions in lost taxes. It notes that “In France, where the resale of masks was outlawed, the government captured over 500,000 masks while dismantling smuggling rings valued at over 30 million euro in April alone.” 

To legalise or alienate the regulatory burden not only of narcotics but also of all kinds of other products would squeeze the profit margins of crime groups, thereby pushing shady operators out of the market. They’re in it to make money, after all: hit their profit margins and you’ll put them out of business. 

The lesson here is that it is better to think twice before regulating or taxing things heavily, whether in a crisis or not. The police and the judiciary may do their best, but that won’t make a difference as long as excessive regulations or outright bans that have not been thought through continue to offer a market to organised crime. 


Deze zomer laaide het drugsgeweld in Antwerpen opnieuw op. Terwijl het gerecht wordt bedolven onder de drugszaken, een gevolg van de "War on Drugs" die Antwerps burgemeester Bart De Wever in 2013 lanceerde, blijven de granaataanvallen in woonwijken maar komen. Ook in Brussel lijkt het drugsgeweld te escaleren, aldus de gerechtelijke politie. Zo legde Alain De Proft recent nog aan Bruzz uit hoe drugsclans er opereren: 'Ze hebben doorgaans dezelfde structuur: een aantal kernleden, met daaronder een kluwen van commerciële vennootschappen met stromannen en verschillende steunpunten in de wijk... Je ziet dat één clan behoorlijk wat maatschappelijke impact kan hebben in een wijk: horecazaken als verkooppunt voor drugs, immobiliën, noem maar op.' Er zit dus een structuur achter die niet zo veel verschilt van die van een reguliere onderneming.

Peter Muyshondt, voormalig hoofdcommissaris van de lokale politie Voorkempen, is één van de pleitbezorgers voor een heel andere aanpak. 'Drugs moeten uit de illegaliteit gehaald worden', vindt hij, 'omdat het huidige drugsbeleid meer schade berokkent dan de drugs zelf. (...) In plaats van drugs te criminaliseren is het als maatschappij beter ervoor te zorgen dat de schade door drugs beperkt blijft.'

Hoe anti-intuïtief het ook klinkt: de man kan wel eens gelijk hebben. Hij is alvast in het gezelschap van sp.a-politica en ex-politieambtenaar Jinnih Beels, maar ook van Vicente Fox, de voormalige president van het door drugsgeweld zwaar geteisterde Mexico, die tot de volgende conclusie is gekomen: 'Legalisering van drugs is de manier om de drugskartels aan te pakken.'

Tegenstanders zullen opwerpen dat de legalisering van de verkoop van cannabis in Nederland de drugsmaffia toch ook niet aan banden heeft gelegd. De productie was er echter nooit legaal, dus bevoorrading bleef zo een zaak van de georganiseerde misdaad. De burgemeester van Antwerpen, Bart De Wever, is een tegenstander van legalisering, maar geeft tegenover een Nederlandse onderzoeker nu toch ook voorzichtig toe dat - theoretisch gezien - legalisering "een optie [is] die men onder ogen moet durven zien", al noemt hij ze "afschuwelijk".

Hij merkte onlangs op dat ook in Canada, waar de productie van cannabis wel degelijk ook werd gelegaliseerd, de rol van de georganiseerde misdaad in drugs sterk bleef. In Canada lieten tal van restricties echter grote opportuniteiten voor criminelen. Zo is dat ook voor alcohol en tabak het geval, mede door de zware belastingen er op. In zekere zin verwijst De Wever daar ook naar, wanneer hij tegen de Nederlandse onderzoeker stelt over legalisering: 'Het enige waar ik dan voor pleit is: doe het rücksichtslos, doe het niet halfwas. Want dan geef je het crimineel-kapitalistische systeem een witte voorkant.'

In Luxemburg liggen momenteel de plannen op tafel voor een volledige legalisering van cannabis. We kunnen alleen hopen dat ze het daar verstandiger zullen aanpakken.

Vanuit zijn eigen ervaring pleit Peter Muyshondt er verder voor om niet enkel cannabis, maar ook andere drugs zoals xtc en heroïne te legaliseren, weliswaar 'met strenge controles door de overheid'.

Dit is minder extreem dan het klinkt, want sinds 2001 reeds werden het gebruik van zowel softdrugs als harddrugs gedecriminaliseerd in Portugal. Dit betekent niet dat men er handel in kan drijven. Het betekent enkel dat de overheid zich niet bezig houdt met crimineel vervolgen van gebruikers, buiten een lage boete dan. De ervaring in Portugal is zeer interessant omdat er gebleken is dat drugsverslaving niet is toegenomen. Men zag er integendeel een dramatische daling van het aantal overdosissen, HIV-besmettingen en aan criminaliteit gerelateerde drugs. Dit was een groot contrast met dertig jaar terug, toen het land geteisterd werd door een heroïneplaag. Men koos voor decriminalisering als sluitstuk van een beleid waarbij verslaafden niet als criminelen maar als slachtoffers worden gezien.

Niettemin moet men natuurlijk nog steeds misdrijven vervolgen, ook indien die door verslaafden worden gepleegd. De redenering dat men de vele problemen ten gevolge van drugsmisbruik aan de oorzaak moet aanpakken - door drugs te criminaliseren - valt uiteraard te begrijpen, maar in de praktijk kan die aanpak op zijn beurt juist tot meer criminaliteit leiden. Dit valt te vergelijken met de opportuniteiten die voor de georganiseerde misdaad ontstonden ten tijde van Al Capone en de drooglegging in de Verenigde Staten.

Ook vandaag horen we verontrustende berichten over de enorme financiële slagkracht van de drugsmaffia. In 2018 waarschuwde Stanny De Vlieger van de federale politie in een vertrouwelijk rapport voor het gevaar van corruptie en dan "niet enkel de corruptie bij de dokwerkers die ladingen cocaïne uit containers halen. Verschillende van onze dossiers tonen linken aan naar bijvoorbeeld douane en politie." Bart De Wever waarschuwde in 2018 zelfs: "in Antwerpen staan we op de rand dat men zich ook politieke invloed aan het inkopen is." Wie enigszins vertrouwd is met de HBO-serie "The Wire", zal dit allemaal heel herkenbaar vinden.

Een tweede belangrijk gevolg van drugscriminalisering is dat de gezondheidsrisico's van drugs heel wat kleiner zijn wanneer ze worden geproduceerd door legitieme ondernemingen dan door figuren zoals "Dikke Nordin van den Dam", een Belgisch-Marokkaanse drugsbaron, die onlangs in Dubai werd gearresteerd.

Meer en meer stemmen binnen de bedrijfswereld wijzen op het economisch potentieel en de voordelen om verdovende middelen bovengronds te trekken. Chris Burggraeve, voormalig topman van de bierreus AB InBev en investeerder in de Amerikaanse cannabis-industrie, pleit er voor om cannabis opnieuw volledig legaal te maken in België vanaf 2021. Dat zou dan exact 100 jaar zijn nadat het product illegaal werd. Het zou alvast een eerste goede stap in de juiste richting zijn, en is ook mogelijk zonder wijziging van de internationale verdragen nodig voor een legalisering van harddrugs.

In landen zoals Italië verdient de georganiseerde misdaad evenveel aan drugs als autobouwer Fiat aan auto's. Als het Portugese voorbeeld aantoont dat een legalisering de verslavingscijfers alvast niet doet stijgen, net zoals dat in de V.S. al 50 jaar het geval is, ondanks hun vermetele "war on drugs", moeten we ons toch eens gaan afvragen of het niet anders kan. De vrees voor meer verslavingen is vaak het argument om drugs te verbieden. Een legalisering zal niet alle problemen oplossen, maar zal drugs alvast veiliger maken en een immense financiële aderlating betekenen voor criminelen.

Wat geldt voor drugshandel, is evenzeer het geval voor andere sectoren van de ondergrondse economie. Allerlei goedbedoelde regelgevende initiatieven om sigaretten, gokproducten, alcohol, prostitutie en handel in wilde dieren strikt te omkaderen hebben, kunnen ook als effect hebben dat de ondergrondse alternatieven hiervoor goedkoper, toegankelijker en dus aantrekkelijker worden. Legitieme ondernemingen zien hierdoor hun inkomen afgeroomd door criminelen, die het als een welkome aanvulling zien voor hun dagelijkse activiteiten van mensenhandel, diefstal en oplichting. Die activiteiten zouden nooit volstaan om de georganiseerde misdaad een inkomen van 1 procent van het Europese BBP te bezorgen.

Volgens een rapport van onderzoeksbureau Euromonitor zorgde de coronacrisis, die tot heel wat extra overheidsinmenging leidde, tegelijk voor nog meer opportuniteiten voor de georganiseerde misdaad, aangezien deze "baat heeft bij een ineffectief regelgevend kader, aanbodtekorten, veranderde klantvoorkeuren en prijsverschillen". In het bijzonder de grote vraag naar medisch beschermingsmateriaal, leidde tot een veel hogere vraag naar illegaal geproduceerde producten.

Ook in de VRT Pano-reportage over het gebrek aan mondmaskers deze lente, kwam naar voren hoe mondmaskers werden afgekeurd omdat productienormen steeds maar werden verstrengd, in een goedbedoelde poging van de overheid om kwaliteitsmondmaskers te bemachtigen. Een half miljoen mondmaskers bedoeld voor de Vlaamse overheid bleek afgekeurd enkel omdat er op een aantal verpakkingen geen sticker was. Legitieme ondernemingen bleven achter met een onverkoopbare stock, wat hen weer een stuk minder competitief maakte ten opzichte van de concurrentie uit de informele sector, een patroon dat volgens de studie van Euromonitor maar al te vertrouwd is.

De les van dit alles is dat men twee keer moet nadenken voor men zaken zwaar gaat reguleren of belasten, al dan niet in de context van een crisis. Los van mogelijke voordelen zijn hier steeds ook grote nadelen aan verbonden, met als belangrijkste nadeel een versterking van de georganiseerde misdaad. De gerechtelijke diensten mogen nog zo veel hun best doen als zij willen, zolang ondoordachte regelgeving een markt creëert voor de georganiseerde misdaad, blijft het dweilen met de kraan open.

Thursday, November 12, 2020

Taking Stock of What a Joe Biden Presidency Means for Brexit Negotiations

 Published on the website of the Brexit Institute of  Dublin City University

The question of how the prospect of a Joe Biden Presidency will affect EU-UK negotiations has raised a lot of attention.

Opinions seem to differ. Former Brexit Party leader Nigel Farage writes that “Joe Biden is no friend of Britain”, arguing that therefore, the UK, “is now far more likely to do the deal that Brussels wants.” Columnist Wolfgang Munchau on the other hand, makes the case that “diplomacy does not work like a dating network”, dismissing that a Biden presidency would leave the UK more isolated, also because the UK’s position on China and Russia is closer to Biden’s stance than the positions taken by EU member states here. The UK government itself has stressed that a Biden Presidency does not make a difference to their approach to Brexit.

Any deal is supposed to enter into force on January 1st, so for international negotiations, this is all incredibly last-minute. Importantly, also the terms to implement the arrangements for Northern Ireland, laid down in the withdrawal agreement which entered into force early this year, when the UK legally left the EU, still need to be agreed.

Northern Ireland is definitely the priority for Joe Biden, who has Irish roots, with his ancestors coming from close to the current Northern Irish border, and who’s the first Catholic American President since JFK. Interestingly, his ancestors lived in Carlingford, which just a few miles from the border. It should therefore perhaps not surprise that Biden has warned that “any trade deal between the U.S. and U.K. must be contingent upon respect for the Agreement and preventing the return of a hard border”.

A U.S.-U.K. trade deal was always be going to be quite ambitious to achieve, given the UK public’s wariness to accept openness to U.S. agricultural products – and America’s own protectionist instincts, in this regard – no matter whether Trump or Biden is the American President. Even if also Trump’s trade negotiator has stressed that putting up a border in Northern Ireland is a “no go”, Biden has been more vocal on it. The mere prospect of a Biden Presidency means there is almost no room for political brinkmanship over the negotiations on how to implement the Northern Irish aspects of the withdrawal agreement. That’s regardless of the fact that his Presidency isn’t legally certain yet or that Trump remains in charge during the final course of EU-UK negotiations this year.

The question is of course whether, regardless of who is U.S. President, either the UK or the EU would ever risk the Northern Irish peace process for the sake of a discussion over proper border checks, especially given the fact that the main entry points into the EU’s single market are the ports of Rotterdam and Antwerp, which both are “leaking like a sieve”, according to Antwerp’s Mayor. It would defy logic to endanger the peace process over problematic control over a border, given the much more serious problems with controlling that border elsewhere.

Will Boris Johnson ultimately drop the controversial parts of the internal market bill, as part of some kind of horse trading exercise with the EU? There is a good case that can be made for this. 30 Conservative MPs already abstained during the second reading in September, meaning we’re not so far from a successful rebellion in case it would swell. Biden’s explicit concern, which he also voiced in his first phone call with Boris Johnson, may well reduce UK leverage here. Then, on the other hand, it may perhaps also prevent the EU from playing it all too hardball, in the discussion on whether it should allow some derogations of EU law for the sake of smooth trade between Britain and Northern Ireland, something which was requested jointly by arch rivals Sinn Féin and the DUP – out of concern for food consignments to NI supermarkets -but which has fallen on a cold stone so far in Brussels.

Joe Biden is certainly less concerned over future EU-UK trade terms than over the effect on Northern Ireland. That’s despite the fact that this may have a bigger influence on any UK-U.S. trade deal.  If the U.K. would somehow end up remaining in the EU’s regulatory orbit, granting more U.S. access to the UK market will get harder. Certainly, this is a trade-off the U.K. itself needs to make, and Joe Biden will not preoccupy himself with this.

What is clear in this regard is that the U.K. isn’t prepared to let go off “sovereignty” when it comes to being able to regulate as it pleases, and any “level playing field” arrangement here will only be acceptable if UK sovereignty is respected, even if this may hurt trade flows, and in a permanent way, unlike the economic damage done by Covid. In this regard, it will be very interesting to see whether the UK will sign up to the governance aspects also laid down in the EU-Ukraine deal, which retain a major, indirect role for the EU’s top court to interpret aspects of EU law. Issues of EU law may arise quickly in any disputes over the future terms of EU-UK trade related to goods and services. According to the latest rumours, the UK would have accepted “dispute settlement” on certain areas. If this is indeed the Ukraine-style arrangement with the big role for the ECJ which the Swiss continue to refuse, this would sort of keep Britain in the EU’s regulatory orbit through the back-door, with all implications for any UK-U.S. trade deal.

So is Tánaiste Leo Varadkar right that the prospect of a Biden Presidency is “positive news” for Ireland, also because the “Democrats watched our back on Brexit”? That’s hard to deny, but the Brexit train is very much on the rails, and London was never seriously contemplating not sorting out Northern Ireland as responsibly as possible, so ultimately, it probably won’t matter all that much.

The backstory to all this is that “Brexit” and “Trump” get conflated all the time; Of course they have in common that they both stem from anti-establishment sentiment, but we should recognize major differences as well. “Trumpism” was never about free trade, even if Trump’s tax cuts and deregulation were free market policies. Brexit on the other hand, was always sold as an opportunity for the UK to open up trade more, which isn’t something that Biden would want to obstruct.

Will the “special relationship” between the U.K. and the U.S. now suffer? Of course not. Even in its most Brexiteer days, the UK government has always kept channels open with the Democrats and if there’s one priority for a Biden administration, it is to improve America’s diplomatic ties, not worsen them.

Monday, November 09, 2020

From Russia to France, politicians discover higher taxes can lead to less tax income

Published in The European Post

Last month, an illegal cigarette factory was discovered in Brussels. Not less than 170,760 cigarettes and 11.5 tonnes of fine-cut tobacco were seized by the authorities, representing 2.2 million euro in excise duties and Value Added Tax. It’s already the third time a similar discovery was made this year in Belgium. The operation resulted from cooperation with Polish customs, highlighting the trans-border nature of these kind of ventures.

For organized crime, this is a lucrative business. High taxes on tobacco make it easy for illegal products to outcompete legal alternatives, but the new Belgian government does not seem to be bothered by this. It plans to increase tobacco taxes further and hopes to raise an extra 200 million euro with this, ignoring an experience in 2017 whereby such a tax hike actually resulted in less government income. This is the so-called “Laffer effect”, after economist Arthur Laffer, an advisor to U.S. President Ronald Reagan, who demonstrated that tax cuts could boost economic growth and tax revenue. For politicians, it’s counter-intuitive that higher taxes result in lower income.   

The Belgian government is not alone. Also the Russian government is considering to increase excise taxes on cigarettes with 20% next year, hoping to raise an annual 340 billion roubles, in a bid to tackle the budget deficit, resulting from low oil prices and policies like the support for the incumbent government in Belarus, which included a $1.5 billion loan to Lukashenko.  

Also in Russia, the Laffer effect is visible. The share of illegal products in the Russian tobacco market was estimated at 15.6 percent, according to the latest data for 2019, which is up quite dramatically, from around 1% before 2015 and is running in parallel with increased tobacco taxes. Revenue lost to illicit trade went from only half a billion rubles in 2012 to around 50 billion rubles in 2018, which is a 100-times increase. This year, the Russian government is projected to miss out on 100 billion rubles in lost tax revenues as a result. Increasing cigarettes taxes even more is bound to continue the dynamic of an ever bigger illicit market, with ever more lost tax revenue and consumers witnessing ever higher prices.  

However, it’s not just in the tobacco markets of either Western or Eastern Europe that we can witness the Laffer effect. 

If you thought taxes were high in Sweden, you should visit Norway. The Covid crisis has revealed that Norway’s government is losing out on a whopping 350 million euro per year due to its high consumption taxes. Those drive people to go shop in Sweden, which was suddenly no longer possible, due to Covid travel restrictions. The estimate was made by consultancy firm Menon Economics, who think that Norwegian retailers would enjoy extra sales of 1.1bn euro and that 8,200 jobs would be create in the absence of the punitively high consumption taxes. The question is whether the Norwegian Treasury will bear this in mind.

At least, Sweden did learn this lesson from yet another experience, when a left-leaning Swedish government decided to abolish both inheritance and gift taxation, a decision taken unanimously by the Swedish Parliament, back in 2004. 

This was a smart move, as it helped to attract entrepreneurs and investment capital back to the country, generating higher economic growth and therefore higher tax revenues. 

What followed was a pretty spectacular example of the “Laffer effect”. A study for the Confederation of Swedish Enterprise notesthat as a result, Sweden’s tax ratio declined from 51 percent of GDP in 2000 to 44 percent in 2014, while the government’s tax income increased by SEK 260 billion. It must be noted that abolishing the “death tax” was only part of an overall policy shift, which also included scrapping wealth taxation. 

Another example of governments wrongly assuming the tax base to be of a fixed nature could be witnessed in the Netherlands in 2014, when the government imposed a new tax on “classic cars”. One thing it had not foreseen was that owners of classic cars would decide to export or no longer register their car. As a result, the government did not even raise one third of the money it had hoped for: 35 instead of 120 million euro. Classic cars entrepreneur Eric Breed tells a Dutch newspaper that the government “has more destroyed than it has gained”, as “people have ended up on the unemployment payroll”, pointing at a number of businesses that failed as a result of the measure.

Even France, notorious for its leftwing economic policy consensus, has learned about the Laffer effect. In 1989, it re-imposed a solidarity tax on wealth, the “impôt de solidarité sur la fortune” or “ISF”, which had originally been the idea of French President François Mitterrand, when he was elected in 1981 on a hard-left programme. Even if reality forced him to moderate, this particular tax survived, before it was abolished in 1986 by Prime Minister Jacques Chirac, and again re-established in 1988, following Mitterrand’s re-election. In a 2008 report for the French Senate, French Senator Philippe Marini estimated that hundreds of wealthy French had left the country every year as a result of the tax, depriving France of considerable tax revenue, taking up 2.8 billion euro with them in a given year. He commented: “We need people here to invest, create jobs, wealth and ultimately also pay taxes”. It all led to current French President Emmanuel Macron abolishing the tax in 2018. With Covid, many governments across the world are struggling with budget deficits. If even French politicians can come to the conclusion that excessive taxation ultimately hurts the public purse, surely everyone can.