Hookers and Hash are not Tax-Free

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Photo Caption: David Cameron has pledged to push for substantial reform in the EU before putting the resulting deal to a referendum on Britain's continued membership. Yet, everything he tries pushes Britain further towards the EU's exit. Photo Credit: Peter Brookes (The Times)
David Cameron has pledged to push for substantial reform in the EU before putting the resulting deal to a referendum on Britain’s continued membership. Yet, everything he tries pushes Britain further towards the EU’s exit. Photo Credit: Peter Brookes (The Times)


NANJING — With the Eurozone economies still languishing in zero-growth limbo, and wannabe-Tsar Putin the Pretentious chipping and chiseling away at the post-Cold War international order, one might think that a billing row should be low on the EU’s list of priorities. Evidently, it is not.

The European Statistics Agency (Eurostat) has retroactively increased its estimates of the size of various EU economies by including drugs and prostitution in their GDP figures. This is in spite of (or, perhaps, partly because of) the fact that both of these things are legal in some European countries, and therefore already count towards GDP. Marijuana can be sold and bought in licensed shops in the Netherlands, as can the services of sex workers. Prostitution is also legal in Germany, where ladies (and some gentlemen) of the night are required to pay taxes and contribute to pension plans for future retirement.

“So what?” I hear you ask. Well, each EU member’s contribution to the EU budget is calculated according to GDP size and past growth. And since this statistical reassessment applies whether or not hookers or hash (or other drugs) are legal in any given country, the UK, the Netherlands, and Italy are all being ordered to provide extra, whereas the two largest European economies, Germany and France (whose economies have begun to contract), are due to get rebates in compensation for their poor economic performance. Britain’s comparatively robust economic growth – forecast to be 3 percent this year – means it must pay an extra $2.7 billion to the EU budget, on top of the annual net contribution of $13.8 billion.

As a British subject, I am incensed at having the UK’s membership fee for the EU boosted by 20 percent; but at least Britain’s relatively strong growth means the formula makes some sense. The added fee makes considerably less sense for the Netherlands, which already counts some drugs and prostitution towards its GDP and tax revenues. But this is harshest of all to impose on poor Italy, whose debt-laden economy came perilously close to a Greek-style collapse a few years ago, and which enjoyed stellar growth of 0.1 percent last year after drugs and prostitution (both illegal in Italy) are counted. But even Silvio Berlusconi’s modest contribution to Italian national prosperity doesn’t come tax-free.

Britain is obviously not alone in being angered by this surprise surcharge, but it comes at the worst possible time for Prime Minister David Cameron, who is currently fighting a by-election where the frontrunner (currently 9 percentage points ahead) is a former Conservative MP who defected to UKIP. The UK Independence Party is now the third largest party in Britain according to some opinion polls, and actively campaigns for a ‘Brexit’ from the EU. Cameron has promised a referendum on Britain’s membership of the European Union, but only in the event that a Conservative majority is elected in 2015; and even then, he plans to campaign for Britain to stay a member so that the EU can be reformed from within.

One can’t help but feel some sympathy for David Cameron. He has been fighting for Britain’s increasingly lonely corner for nearly five years now, and has shown admirable tenacity in the face of multiple diplomatic slaps in the face from Brussels.

The first slap came after Britain refused to sign onto an EU-wide fiscal and banking union because of the potential damage it would do to Britain’s banking sector. Before you wonder whether Cameron would defend the interests of ‘the bankers’, it is worth noting that financial services are to Britain what cars and electronics are to Japan. In fact, banking makes up over 10 percent of the UK’s economy, a far bigger contribution than hookers and illicit substances. The UK and the Czech Republic were the only countries who declined to sign on, and afterwards, one EU official after another lined up to castigate the UK, not for endangering the Eurozone’s stability, but for going against the principle of ‘European Solidarity’, i.e., not falling in line. That was back in 2012.

The next slap came on the June 27 this year when the European Council – composed of all elected EU heads of government – all voted to approve Jean Claude-Juncker as the next (unelected) President of the European Commission (also unelected, and not to be confused with the European Council), all except David Cameron, who rightly fears that the arch-federalist President “elect”, who will assume office on Nov. 1, will press ahead with integration without the reforms Cameron wants.

And now, slap number 3: a 20 percent surcharge on Britain’s stronger than average growth, stemming in part from its decision to stay out of the Euro. One has to wonder how much more Cameron is prepared to put up with before he finally throws in the towel. Two MPs from the Conservatives have already joined UKIP, one of whom I mentioned earlier, and the other who has already been re-elected as UKIP’s first Westminster representative. More are likely to follow if Cameron continues coming home empty-handed with red political welts on his cheeks.

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