I have an article in the Guardian this morning:
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Good article. Part of the problem is revolving doors – with ex-politicos ending up working for large corporations. My business partner noted that in Germany, a key question to ask is: where do politcos get their pensions from (this defining the attitudes to particular industries). All this contributes to a propensity to not regulate large companies – who the politicos hope will offer them a “job” afterwards.
“If all companies bidding for public contracts across Europe needed to have this label”
How would a new company cope? It could not obtain such a label and so, under your wishes, would not be able to bid.
This would be anti-competitive.
Do not dismiss this as being pedantic. This would be a real-world problem which you must have a real world answer to if you are to promote your scheme.
A new company can be awarded an FTM and at least one has been
“Tackling corporate tax avoidance is an alternative to EU austerity”
Yes we need to tackle corporate tax avoidance. We agree on that.
BUT, it’s still possible to do that and pursue austerity based economic policies as I’m sure you do know.
Saying things like “Collecting tax could become a viable alternative to austerity” reinforces the notion that governments with sovereign currencies have to be able to raise taxes to be able to spend. I knew the EU countries have the euro, and individual countries are constrained in that respect, but overall the euro is just like any other fiat currency. There is no need for any austerity in the EU beyond what IS necessary to control inflation.
In other words, austerity economics and tax collection from the tax avoiders/evaders/dodgers (whatever you like to call them) are largely separate issues.
Get real Peter: if you can’t collect tax printing more money creates inflation
And if you can’t collect tax equitably then that failure causes social unrest
So these issues are related. I buy the idea of spend and tax. But spend is not possible without tax even with sovereign money if the economy is to be managed
To say otherwise is just wrong
Richard,
I didn’t say “otherwise”! Yes taxes even with sovereign money are essential for the workings of a well managed economy.
But taxes are only possible within the jurisdiction of the UK where the taxman can get his hands on the money. If the net import bill is 5% of GDP that is money which is lost to the economy and out of the hands of the British taxman. The Government has then to run a 5% of GDP deficit in its budget just to keep things all square in the economy. To push towards a balanced budget in these circumstances is austerity economics at its worst.
Tax dodging is cheating. There’s no two ways about it. So important as it is to collect tax from everyone, for social reasons as you suggest, any failure to do that isn’t the reason for the austerity economics pursued by the government.
The numbers don’t stack up in any case. 5% of GDP is about £90 billion. That’s a lot of extra tax money to have to find to ‘balance the budget’.
Peter
This is just nonsense. Tax and the balance of trade are not substitutes or alternatives: they have different consequences. You cannot ignore that
And there is a loss of £90 billion – the shadow economy is 10% of GDP
Unless MMTers talk about the real world they have nothing to offer
Richard
Richard,
You seem to have gone off the idea of MMT? Yes, some of it is counter-intuitive (until you give it a bit of thought) but that doesn’t make it any less true or any less real world.
Just to take you at your word on the size of the shadow (that’s the same as the old black?) economy, we have £180 billion worth of untaxed transactions, right? So say there’s a net loss to the taxman of 20% VAT and something like 30% income and other taxes making 50% of the total. Say we could somehow capture that and raise £90 billion in taxes. Would that be an extra £90 billion and ‘fix’ George Osborne’s budget?
Well, no it wouldn’t. To think otherwise is to assume everything else stays the same in the economy except just the bit we’re interested in. That £90 billion is removed from the spending pool, by tax, earlier rather than later. In fact, it’s not there any more to be removed later, so George Osborne’s deficit will end up almost exactly the same as it was previously, and is governed by exactly the same equation as it always was (which is where the trade balance comes into it):
Govt Deficit = Domestic Savings + External Deficit.
So , yes, it IS unfair that some people are getting their cars fixed, and driveways paved VAT free and all the other things that undoubtedly happen in the shadow economy. BUT the shadow economy is not the cause of the govt’s budget deficit. It could be the cause of higher than necessary inflation which would otherwise allow a general reduction in taxation if the economy was functioning closer to full capacity though. That’s the right, and real world, way to look at it.
MMT has merits
But I always work with an open mind and if something is pushed beyond credibility I say so
And it is complete nonsense to say £90 billion is lost. In fact it’s crass
What will happen is one of two things. Tax demanded from honest tax payers will be reduced or government spend will increase
It’s you who is making bizarre assumptions
If you are going to do economics think things through rather than stopping before doing so
And in that case your conclusion is just wrong
And socially obnoxious
“And it is complete nonsense to say £90 billion is lost”
If the current account deficit is £90 billion, or whatever is the exact figure, that is money which net leaves the economy. Of course this is balanced by money entering the economy as part of the capital account. Possibly there are a few exceptions but, generally, the outgoing money would have been taxable by the UK taxman had it been spent in the UK so it that sense it is ‘lost’ to the taxman. It isn’t lost in the sense that it’s been wasted. If British Airways buys a few jet airliners from Boeing, for example, the money is spent in the USA which pays the US workers who then pay US tax which is of course fair enough.
I know that you know the internal government deficit is caused by the desire of those in the domestic economy to net save and also the desire of our overseas suppliers to not spend all they earn. So, in that sense they are savers too. You must also know this is what I’m saying so I fail to understand why you feel the need to use terms like “crass” and “socially obnoxious”. That’s way OTT.
I use the terms because you suggest that there is no tax gap
Now you are talking totally different scenarios
I increasingly feel MMT has a very weak understanding of tax
“Now you are talking totally different scenarios”
I don’t think so. I questioning what the tax gap actually is. If we could get more tax both from the big co-operations, and the guy who fixes computers for cash in his spare room that would of course be a good thing. There’s no disagreement there.
But we have to consider what the tax dodgers are doing with that income. In the first instance they are largely saving it. In the second they are largely spending it so both actions do present different economic consequences, which we have to accept as reality, even though we don’t like it, and factor them into our policy considerations.
I have factored them in
You suggested they were reasons not to address the issue