Daily Review 14/12/2018

Written By: notices and features - Date published: - 46 comments
Categories: Daily review

Daily review is also your post.

This provides Standardistas the opportunity to review events of the day.

The usual rules of good behaviour apply (see the Policy).

Don’t forget to be kind to each other …

46 comments on “Daily Review 14/12/2018”

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  1. 1

    With over $1.2tn going through the financial markets every year, a financial transaction tax of 1% will give the govt an income of $120bn a year.

    The current raft of taxes generates just $85bn a year.

    It is not hard to see that scrapping all forms of taxes and implementing an FTT of 1% will lead to higher govt revenue and more money for consumers to spend as they see fit.

    3. 1.3

      Your view is too static. Adding a new tax will always decrease the tax base it is levied on, sometimes drastically.

      A.

        1. 1.3.1.1

          My point is that if an FTT is introduced, then the number and size of financial transactions will decrease. Because now a transaction is essentially free, there is no reason not to shuttle money back and forth. But if a transaction has a cost, people will find ways to avoid doing them or to reduce their size or to take them outside the taxed region. It would be naive to think this would not happen.

          A.

          1. 1.3.1.1.1

            Think of it this way. Many financial dealings take the form, A pays B, B pays C. If there was an FTT, then B could simply arrange for A to pay C directly – halving the tax liability.

            Then, of course, it frequently happens that A pays B an amount of $X, and at some later time B pays A an amount of $Y. If there was an FTT, then either B could simply pay A an amount of ($Y – $X) (perhaps adjusted for interest on the $X), or they could simply keep score and settle up at some later time. Again, the tax liability would be reduced or avoided entirely.

            If you think that rich people and corporations wouldn’t bother to do these kinds of tricks, then you don’t know rich people or corporations.

            A.

            1. 1.3.1.1.1.1

              Because now a transaction is essentially free, there is no reason not to shuttle money back and forth.

              Which invariably lumbers its own cost on society. See NZ 1987, the Asian Tiger collapse and the GFC.

              If there was an FTT, then B could simply arrange for A to pay C directly – halving the tax liability.

              Wouldn’t that be, like, a Good Thing? You know, increased efficiency and stuff.

              Then, of course, it frequently happens that A pays B an amount of $X, and at some later time B pays A an amount of $Y. If there was an FTT, then either B could simply pay A an amount of ($Y – $X) (perhaps adjusted for interest on the $X), or they could simply keep score and settle up at some later time.

              I’m pretty sure you’ll find that that already happens. IMO, you’ll find that’s why businesses invoice for the 20th of the month.

              1. 1.3.1.1.1.1.1

                >> If there was an FTT, then B could simply arrange for A to pay C directly – halving the tax liability.

                > Wouldn’t that be, like, a Good Thing? You know, increased efficiency and stuff.

                Nah. Because electronic transactions are very cheap, in reality. Cutting out one transaction is of no real economic benefit. If you have to take the time to make special arrangements to make it happen, it will be a real economic loss.

                >>If there was an FTT, then either B could simply pay A an amount of ($Y – $X) (perhaps adjusted for interest on the $X), or they could simply keep score and settle up at some later time.

                > I’m pretty sure you’ll find that that already happens.

                It happens sometimes, but not always. It would happen more often under a FTT.

                For instance, if I have a transactional account, savings account and a mortgage at once (such things are not unknown), my bank will charge me several fees, pay me interest and charge me interest – separately. Under the FTT, I would expect the bank to save us money by lumping those transactions. To no real economic benefit.

                A.

                1. 1.3.1.1.1.1.1.1

                  Nah. Because electronic transactions are very cheap, in reality. Cutting out one transaction is of no real economic benefit. If you have to take the time to make special arrangements to make it happen, it will be a real economic loss.

                  What if it’s removing an entire middleman that’s just not really needed? I’d say that would be a huge saving.

                  It happens sometimes, but not always. It would happen more often under a FTT.

                  I’m pretty sure you’ll find that businesses that have strong bilateral business do it all the time. It’d save them in administration and transaction costs.

                  For instance, if I have a transactional account, savings account and a mortgage at once (such things are not unknown), my bank will charge me several fees, pay me interest and charge me interest – separately. Under the FTT, I would expect the bank to save us money by lumping those transactions. To no real economic benefit.

                  You do understand that lumping those transactions together means that the government would still get the same tax right?

                  1% of five transactions @$1 each is going to be the same as 1% of one transaction of $5.

                  1. 1.3.1.1.1.1.1.1.1

                    > What if it’s removing an entire middleman that’s just not really needed? I’d say that would be a huge saving.

                    ‘Huge’ seems like a stretch? Besides, in my example the middleman B is still needed to connect parties A and C together so they can transact with each other.

                    > I’m pretty sure you’ll find that businesses that have strong bilateral business do it all the time.

                    Some do, but not all, and not all pairs of businesses have strong bilateral business.

                    > You do understand that lumping those transactions together means that the government would still get the same tax right?
                    > 1% of five transactions @$1 each is going to be the same as 1% of one transaction of $5.

                    You are forgetting that some of the transactions are me paying the bank, some are the bank paying me. We only pay tax on the net transfer, which (in your example) can be as small as $1 (pay $3, get paid $2).

                    A.

                    1. 1.3.1.1.1.1.1.1.1.1

                      Some do, but not all, and not all pairs of businesses have strong bilateral business.

                      That’s what I’m getting at. If some businesses already have strong bilateral connections then they’re already doing it. If they’re not already doing it then the tax will make no difference because it’s not worth doing it in the first place.

    4. 1.4

      Won’t this add 3% to the cost of purchasing a home; i.e. 1% when you borrow the money, 1% when you purchase the house, and 1% when you repay the mortgage. Not to mention a further 1% on the interest.

      2. 1.4.2

        I bet I can think of innovative ways to avoid at least two of those 1%s occurring (or at least being seen by the NZ taxman).

        A.

            1. 1.4.2.1.1.1

              See e.g. https://www.ici.org/pubs/faqs/faqs_ftt#_q12:

              A transaction tax could be difficult to avoid or easy to administer, but it is unlikely to be both.

              The tax could be avoided simply by not trading. Indeed, one of the rationales for the tax is that it would reduce trading. However, the tax could also be avoided by changing the venue of the trade or the nature of the securities traded, as explained in the answer to Question 8 above.

              To minimize avoidance, the base of the transaction tax would need to be as broad as possible. However, broadening the base would make the tax harder to administer. To discourage transactions from moving offshore, both transaction tax rates and tax compliance would need to be coordinated internationally. Enforcing the tax on private (off-exchange) transactions would require much more reporting than currently occurs. Similarly, no system tracks exchanges in nonregistered securities. In addition, developments in financial markets would need to be closely monitored, as there would be an incentive to devise new ways to avoid the tax, such as designing new financial instruments.

              A.

              1. 1.4.2.1.1.1.1

                Would it be just easier to ensure all citizens pay a genuine fair share of tax on any personal gain. Realised capital gain. Dividends. Interest, buisinesses profits, fees, contracts, withdrawal of funds from speculator websites, wages.

                Obviously all done in fair ways. Focused on the individuals responsibility to paying tax.

                If you try and tax imaginary transactions on the internet your dreaming. What happens to the losses in a trade. I think the tax on transactions is in the category.

                Milking : To remove liquid gold sustenance from a mammal.

                1. 1.4.2.1.1.1.1.1

                  > Would it be just easier to ensure all citizens pay a genuine fair share of tax on any personal gain

                  Well, maybe it would, but this is no longer the FTT that James proposed.

                  A.

              1. 1.4.2.1.1.2.1

                You got it. This is why James Thrace’s estimate of the revenue the tax would generate is too high. I suspect at least 2x too high, maybe 10x.

                A.

          1. 1.4.2.2.1

            Well paying your staff is one area where little or no avoidance is possible, I think, over and above what is already done to avoid income tax.

            A.

      3. 1.4.3

        Nope. The FTT only applies once money actually leaves the holder. So in this case the FTT would only be charged on the borrower’s account when the funds are transferred to the vendors.

        FTT doesn’t get applied to every transaction – just the transactions which have an exit point.

        So if you’re transferring money between your own accounts, at the same bank, i.e. from your everyday account to savings, that doesn’t incur an FTT as the money doesn’t have an exit point as it’s still with you.

        But if you transfer money from your account to another account entirely, with either the same or different banks, then an FTT is charged as there’s an exit point.

        The $1.2tn figure is actually the entire value of all electronic transactions that have an exit point. The total value of money moved in NZ is closer to $5tn a year. The majority of that is just money moved between accounts which wouldn’t have an FTT applied.

        So Antoine’s argument is somewhat misleading

    2. 2.2

      Ahh the petty is strong in this one. You bring her up so much I think there’s a little bit of a crush going on. Careful Judith will ride over on her broom to scold you.

      1. 2.2.1

        “Careful Judith will ride over on her broom to scold you.”

        That’s not really the best argument to use if you want me to stop, in fact its likely to encourage me 🙂

    3. 2.3

      Are you seriously suggesting that the baby wouldn’t have been trotted out in the lead-up to Christmas regardless? Seriously?

      1. 2.3.1

        Certainly not, I’ll expect Neve to be trotted out at Easter, Halloween and every other holiday that comes along and especially when the PM is under the pump

      1. 4.1.1

        .. so which is yours ?

        UK has been part of EU for 40 years and suddenly faces high tarrifs potentially crashing the economy in short order with unpredictable consequences.

        You do not seem to to have been involved in negotiation.

    2. 4.2

      Are you kidding? EU will go out of their way to make life miserable for a Corbyn-led UK. He would be much better served hard Brexiting. That’s even worse a nightmare for the EU if Corbyn’s policies were successfully implemented…

  5. 5

    I look forward to seeing how Jeremy Corbyn stops the neo liberal economic train wreck that is clearly unfolding before our eyes in real time.

  6. 6

    From Kiwipolitico
    From a rules based order to a state of nature.
    Posted on 14:11, December 15th, 2018 by Pablo

    Once again, might makes right in international affairs. Once again, the strong dominate the weak. Once again, power is truth and there is no speaking contrary to it. We are sliding into international anarchy

    Policy-makers in Wellington can speak to the need for multinational norms and the importance of being an honest broker in a contentious world. But those claims hark to an international system that was stable and in which rules and norms were adhered to in the main rather than the exception.

    The big picture looks murky.

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