Our governments insist they are doing all they can to tackle fiscal fraud and money laundering. They tell us how fiscal fraud is depriving the public coffers of unimaginable sums in uncollected tax. They say that money laundering is bringing dirty money from drugs and prostitution into an unregulated black economy, from where it percolates through into legitimate businesses. They insist that this is scandalous and we all agree without demurral.
They tell us why fiscal fraud is such a big problem for them and why money laundering needs to be stopped. The main reason for wanting to fix loopholes in fiscal regimes and better enforce existing legislation is so that more revenue will be collected. More revenue collected means more money to spend on public services that help the needy, the marginalized, the sick, the aged, more money that can go to public transportation, clean air, clean water, education and healthcare, more funding for the arts and sciences, better infrastructure for children and youth, the preservation of historical sites, cultural artefacts and the natural environment, etc.
So why am I riddled with doubt? Why do I have the feeling that the real target is not evasive billionaires nor gangsters with bin liners full of banknotes, but you and I, average citizens with average earnings? And why do I have the niggling suspicion that new financial regulation is not designed to create a more just and flourishing society, but to nourish the injustices that already exist, deepen the abyss between the super rich and the meek of the earth and generally help our elected pariahs line their pockets?
Take little Belgium, the prosperous land I dwell in. We have become a haven for foreign billionaires by exempting them from corporate income tax in a manner directly proportional to their personal investment of their own funds. Thus Mr Mittal was able to asset strip the Liege steel industry, lay off thousands and not pay any taxes on the profits he made for five years, so long as his own money was on the line. And the billionaires we cherish and succour are so wealthy that, even when some of their wealth can be proven taxable (which seldom happens as they have the best tax lawyers) our political class is too scared by threats of potential disinvestment to insist they pay their dues. Thus a tighter regulatory climate, such as the one being currently debated, only hits those who can be easily bullied: small businesses, middle class professionals and independent entrepreneurs. As long as there is a way to make the middle class poorer, that way shall be found. Meanwhile, through the impoverishment of the bourgeoisie, traditionally the best guarantors of economic stability, the poor suffer even more as what few jobs they might have had coming their way disappear eastwards, driven out by a tax regime so punitive and a grey economy so restrictive as to discourage any new jobs that might pay decently from being created in the first place.
The net result is a constant increase in the number of those who depend on government sponsored projects, work-for-training, job creation schemes and various other devices used to fudge the real unemployment numbers, make politicians look good and create a steadily growing clientele for all the new forms of social service dependence that keep young and eager politicos of the future in interesting management positions. The establishment sustains its own by ensuring ever-larger numbers of system-dependent citizens, regardless of cost, so long as its own bread is well buttered by placing its own drones in valuable party sinecures. And in European politics, when we say party sinecures, we mean multi-party coalition sinecures, for every possible agency exists in triplicate, as socialist, liberal or Christian democratic colour requires.
Yet even this heap of self-referential succubae is not entirely devoid of intelligence. They are smart enough to realize that the political Ponzi scheme that is their common meal ticket cannot last forever without new infusions of blood. Hence the much-trumpeted tightening of restrictions on cash transactions to limit money laundering and rein in the black economy as well as the urgency with which they are currently riding out to do battle against tax evaders. Phooey!
The cash transaction restriction is merely intended to help cash-strapped banks get a new lease of life. From the 1st of January 2014, it will be illegal in Belgium to carry out any transaction with cash beyond a 3,000 Euro limit. So if you want to get that second-hand car and have been saving up your Christmas money, lawn-mowing money and pizza delivery tips for the last few years, you will not be able to slit your mattress for the sum if it exceeds 3,000. You will be legally obliged to put your cash in a bank, accounting for its origin (Christmas money, lawn clippings and pizza delivery tips) on the paying-in slip, which may be subject to subsequent scrutiny, and then do a transfer to the vendor’s account. Ostensibly, by introducing this measure, the government is stopping you from profiting from the illicit marijuana you’re growing in your granny’s attic, while stopping the car-dealer from fraudulently declaring that he actually made 15% under sticker on the sale. In reality it is nothing more than a massive handout to the banks in return for their cooperation in securing the re-election of the droning classes and the refinancing of federal programmes.
Now, you might think that banks don’t get much profit from your little current account, as that is what they constantly like to tell us. You’d be wrong. Even if the charges are low, they are being raised on precious little material work and your cash nest egg represents the safest of safe bets for the bank manager. In addition, banks are permitted to issue credit in a multiple of the funds they currently hold, so your 3,000 allows them to advance expensive loans to the tune of about 30,000. So however much banks like to moan about current accounts and how boring they are, secretly they love them! And now the law is putting hundreds of millions, even billions into their hands from piggy banks and holes in the wall all over the country, money that will help them generate obscene profits with zero risk.
Meanwhile, the cash economy of small retailers, small traders, low threshold service industries like private cleaning staff, baby sitters, gardeners, music teachers, after-school tutors and the like, will have a great deal more trouble justifying their income as and when they forced to pay in to bank accounts they formerly did not even need! For those who, quite rightly, have taken the proverbial advice of neither borrowing nor lending to heart, not even to banks, this new ruling will mean the end of their autonomy and freedom. It may also be illegal, as it calls into question the sovereignty of the coin of the realm, or coin of the continent. In other words, by telling me that I may not pay a sum in cash the government is “devaluing” the currency in the most classic sense, undermining its credibility and legitimacy. How can 3,000 Euros transferred electronically be legitimate while thirty 100 euro notes are deemed illegitimate if I add one single brass cent to the balance?
Of course, the Belgian authorities will get away with this bit of illegality unless someone challenges it in the European courts, which is very unlikely, as the whole of Europe is moving in lock-step on this one. But be forewarned, what we have here is the first shot in the last great war between cash and virtual money, a war which the electronic realm is destined to win unless we can restore lost honour to notes and coins, now floundering in the marshlands of graft, slush funds and generally dubious dealings. The new mantra will have us believe that honest men, sir, use plastic! Honest me, sir, do not pay cash!
I hope I may be called honest, but I have never paid for a cent of Miranda, not her initial purchase, not her maintenance, neither her tyres nor fuel with anything other than cash … and until her bills exceed 3,000 I may never need to, but it is getting increasingly difficult to live this life of discrete untraceability. My garage is embarrassed by large bundles of notes and late night fuel stations are rare that take notes. I may soon have to bite the paper bullet and come in from the cold. We cash uncles are a dinosaur breed; doomed to extinction, if a trifle hard to extinguish.
The Italian restaurant across the valley, the one with the singing chef, is adjusting to the new legislation. A shiny cash register will not open without a command being issued and a sum encoded, either plus or minus, with an item number from the menu appended to it. It logs everything that goes out or in. Even tips are first logged in then calculated out. All labour and all purchases are traceable; all meals are accounted in and out of the service zone. This is one man in the kitchen and a waitress, sometimes two, out front. Any typical city establishment with a couple of wet-back workers and a sideline in unregistered sales of coffee or drinks is going to go south when the new black-box system is introduced. The same will be true of small corner shops. This has nothing to do with closing gaps in the cash economy and everything to do with making the horizon even safer for the big fast food and retail chains who have long since installed such tracing systems as a means to control their own personnel and for whom the new legislation poses no threat. The economies of scale they count on to generate profit are far removed from the kind of penny pinching and back scratching that small traders and restaurateurs are forced to stoop to in order to survive. The new robber barons of global branding are more powerful than any legislative body, immune to fiscal breezes, whether hot or cold, and set to profit from any regulatory climate, whatever its stated intentions.
The soon to be installed pan-European anti fraud and laundering mechanisms will be a bonanza for those who own banks or businesses that thrive on fast and easy credit. For the rest of us it will be death by a thousand cuts, cash flow dry gulch, bills paid ever later, all quite unintended consequences … or maybe not. So go and feed the birds, while you are still allowed to have your tuppence. For in a year or two you will only be allowed to feed them on credit, if at all, for feeding birds (as we all know well) is not at all a wise investment, Michael.
© Edwin Drood
, December 2013
"The Woman with the Sparrows" by the Danish painter Carl Heinrich Bloch (1834-1890).
ARoS Aarhus Kunstmuseum
, Aarhus, Denmark.