Several years ago we went on a family trip to Holland. Sitting in the front passenger seat of the taxi taking us south from Schiphol, I tried to keep the driver’s attention while the kids re-enacted the Second World War in the rear of the van. Observing that signs on the motorway to Uit appeared over a distance of several kilometres I suggested that Uit must be a very big town. The cabbie promptly asked me if I was sure I was not Belgian. I learned two things on that trip: firstly, that Belgians are to the Dutch what the Irish are to the English, and the Polish are to the Americans; and secondly, that “Uit” (pronounced “oot”) is Dutch for “Exit”.
The Polish are always on my mind as hot lazy August melts into cool vigorous September; the invasion of Poland on the first of the month in 1939 prompted the British and French – who couldn’t give a fig about the Poles but had to respect their pacts – to declare war on Germany.
Much as I have never shared the prejudiced view of the Irish concocted by the English (I believe the last century produced more Irish literary geniuses per capita), I never bought the American take on the Polish. That was, at least, until I encountered their kamikaze tax laws. Fortunately – for them – the knock-on effects of the Euro crisis (lucky Poland is not in the Eurozone) lead the Polish government earlier this month to re-embrace life and announce proposed amendments to the tax law which should serve to bring their law safely back to earth and increase tax revenue.
The most prominent proposal is, at first sight, the least bellicose. Until now, limited joint-stock partnerships (SKAs) have been transparent for tax purposes which should not cause the average reader of this blog to blink. It is now proposed that SKAs should be corporate taxpayers which, while being a far less common phenomenon, is by no means unheard of. However, this change is mushroom cloud-sized.
For several years, much foreign investment in Poland, especially in real estate, has been effectively tax free. Put in simple terms, investment funds that enjoy tax free status when they invest in securities, invest in SKAs. Despite being partnerships, the holdings in the SKAs are considered to be holdings in securities while the SKAs do not pay tax because they are transparent. As such, foreign investors in such structures can walk away tax-free in Poland which is, frankly, a bit stupid. With the change in status of the SKA, this planning device will be completely annihilated. Poland will still be attractive as its corporate tax rate is a mere 19% (and unlike its eurozone colleagues it does not need to beg for bailouts). As long as investors are coming from countries with electricity, running water and a worldwide tax system, if they plan themselves properly, other than timing differences they should be no worse off (or not much worse off) than now.
Talking of stupidity, today is the 70th anniversary of one of the major foul-ups-at-sea of the Second World War. On September 12, 1942 the British merchant vessel Laconia was torpedoed and sunk by a German U-Boat. At that point sea warfare was still “civilised” (it changed as a result of this incident) and, when the U-Boat commander realized he had hit a ship carrying civilians and Italian prisoners of war – as well as British and Polish servicemen – he brought the submarine to the surface. Many of the passengers were in life boats (the Laconia was an ocean liner launched a decade after the Titanic and the shipbuilders weren’t going to make that mistake again) and those in the water – many of whom were servicemen – were brought onto the deck or, in the case of civilians, into the interior. The commander even called for other ships to come to their aid promising not to attack unless they were attacked and two more U-Boats and an Italian submarine joined them. They then proceeded to start towing the lifeboats towards the shore of Africa to meet up with Vichy French ships. To ensure no mistakes, they draped Red Cross flags over the gun turrets of the submarines.
With Joseph Heller’s classic Catch 22 satire about the US Air Force still nearly 20 years away, on the morning of September 16 the flotilla was spotted by a US bomber pilot who could have been the prototype for Hungry Joe or Havermeyer. Radioing back to his base for orders he proceeded to use the Red Crosses for target practice as he attacked the U-Boats. The German commanders immediately cut the lifeboats adrift and submerged leaving all those on deck to drown. I pass no further comment on this incident other than to mention that among the dead servicemen was my father’s brother, Joe. He was 29 years old.
And finally, on a more cheerful note, Happy New Year to all those who choose to celebrate it in the middle of September.