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Category: Economics

The IMF suggests taxing those who have benefited from the COVID pandemic.

4 April 2021

So I guess that would be the companies that had just a part of their organisation drop 30% in turnover for a short period, and then claimed for the whole company for a long time- the people mentioned in Michael West’s article yesterday. Here is the article below from the SMH today. And yes, it is the IMF, hardly a Leftie organisation suggesting this, though the Greens did also.

Tax those who prospered during pandemic to repair budget: IMF

Shane Wright, 4 April 2021

Sydney Morning Herald, Senior economics correspondent

The International Monetary Fund has urged nations to consider using the Abbott government’s temporary budget repair levy to overcome the huge deficits left by the coronavirus recession, warning deep cuts to spending could lead to political instability.

Amid predictions Australia’s budget deficit could be $50 billion less than feared, the IMF has also suggested taxes on “excess” profits such as the abandoned mining resource rent tax.

Governments around the world have all been forced to run huge deficits to deal with the COVID-19 outbreak, with collective deficits approaching 13 per cent of global GDP. Australia’s deficit, forecast to reach $197.9 billion this financial year, is close to 10 per cent of GDP.

The IMF, in its fiscal monitor report ahead of this week’s world economic outlook, said that while governments had been forced to run large deficits there had also been an increase in income and wealth inequality because of the pandemic.

It said governments faced difficult decisions on how to cover their large deficits while also not exacerbating inequality.

Among budget repair options, the IMF said those nations with “robust tax systems” could look to increase top personal income tax rates, similar to the budget repair levy put in place by the Abbott government in 2014.

“Temporary increases in personal income tax rates (often restricted to the highest income brackets) were previously introduced during exceptional circumstances in Germany, Australia and Japan,” it said.

The budget repair levy, which was a 2 per cent impost on people earning more than $180,000 a year, ran between 2014 and 2017, raising more than $3 billion to help reduce the budget deficit.

The IMF said another option was to tax so-called “economic rents” or super-profits, targeting those sectors that had done well during the pandemic.

“Taxes on ‘excess’ profits, either in addition to or instead of the regular corporate income tax, can assure a contribution from businesses that prosper during the crisis (such as some pharmaceutical and highly digitalised businesses) and not affect companies (and their workers) otherwise earning minimal profits or incurring losses,” it said.

The fund warned trying to repair budgets by cutting expenditure on services or support to those left behind by growing inequality could lead to substantial political problems.

The Morrison government has pledged not to increase taxes, as the Abbott government pledged ahead of the 2013 election.

Very high iron ore prices, strong GST returns and a better-thanexpected economy are already reducing the budget deficit.

Deutsche Bank economist Phil Odonaghoe said it was not inconceivable the deficit could be half of what had been predicted in the mid-year update.

He cautioned everything would have to go right for that to occur, which would result in a deficit of about $100 billion. Even that would still be a record budget shortfall.

Mr Odonaghoe said a deficit of about $150 billion was more likely, which would set up the budget for future years. “The better starting point in 2020-21 also means smaller deficits across the forward projection period. On our revised profile, the federal budget could conceivably return to balance by 2025-26,” he said.

ANZ economists Hayden Dimes and David Plank said the deficit would be as low as $155 billion because of the better expected economic conditions.

But they cautioned some of this improvement was due to GST receipts.

Due to the way the GST is refunded to the states and territories, the better revenue this financial year could end up a shortfall in 2021-22.

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The Cost of Colonialism

27 February 2021

Most of the wealth of the West is built on the labour of countries that are paid less.

The British Empire was built on exploiting other countries. India the most, being the biggest, but the gold of Africa and the riches of Australia and Canada were not trivial.

Colonialism pre-1900 insisted that the coloniser took over, and in Britain’s case put their flag on the colony’s flag. After 1900, things became a bit more subtle. The financial arrangements were made, but not advertised on flags. The US in the Philippines is a good example, or its efforts in South America.

It is good that this is discussed as in the article below. It is the first step in change, though note that the article is from 2018, so the discussion is by no means inevitable.

As there is free trade since WW2 top level capitalists get stuff made in low cost countries then sell it in high cost countries. The rip-offs continue but there is still a gradual transfer of both capital and expertise to developing countries, as well as the transfer of jobs, that is squeezing developed country jobs.

The greatest challenge for the next generation is to have justice between nations without the West’s lifestyle being destroyed; you could call it a controlled climbdown. Some method of evening the wealth within Western countries might be a start.

www.aljazeera.com/opinions/2018/12/19/how-britain-stole-45-trillion-from-india?fbclid=IwAR0JosFy8foda9iCMA-arjrccEEgsNUeQVINetrH3PoILVAGutePbgNHEMo

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Housing Stimulus: More Middle Class Welfare 5/6/20

Successive governments have used the building industry to pump up the economy on credit.  How so?  For decades the tax deduction on negatively geared real estate has made housing a favoured investment. It has been the no-brainer way to make money. You borrow to own a property, and as long as it is your, all the capital gain is yours.  So the lesser fraction that you own, the greater the percentage rise in your total assets.  And since you save on tax and gain rent, it is far better than shares or other assets. If you ask to borrow 90% to buy shares, no bank would lend you 90%. They would fall about laughing, and you would be taking a big risk.  If you wanted to borrow 90% of real estate, no problem- all perceived as low risk.  How come?  Because Australia’s private debt is rising and is now the highest in the world.  This little Ponzi scheme has a cost. We have the best houses, which are the most expensive relative to our incomes, and we have a huge national private debt, which means that we pay interest to foreign banks and have no money to develop and own our own country.  Like all Ponzi schemes, it is OK as long as you sell out before the bubble pops.  The older generation are doing this, cashing out as the younger generation takes up the huge loans that are now necessary.

The tax department got less money to create this mess, so public housing was not built, and there is a huge shortage of public housing.  Because prices are so high there is also a problem in affordable housing as wages in the real world have stagnated as globalisation allows jobs to go offshore to be done more cheaply by third world people.  The negative gearing thing amounts to middle class welfare, where those who had one house were able to buy more, and those that did not merely saw rents and prices rise.  Labor tried to address this and lost the election.

Now we have a recession, worsened by the COVID-19 crisis and the taxpayer has to step in, making more debt for the future.  So what projects to spend the money on?  More middle class welfare! Those who already have $150,000 to improve their house get another $25,000 from the future taxpayer, the young people of today.

It is merely another example of the Morrison government’s lack of commitment to a fair go for all. This could be a huge opportunity to build social housing to help those who have been left behind.  Is the excuse that the projects are not ‘shovel-ready’?  The government could pay for the huge outstanding renovations and repair bill on the public housing, which has been neglected for 30 years.  Surely these repair lists on yellowed paper could be found and actioned.

Morrison governs for his voters, not for the country as a whole. His policies increase inequality, which stores discord for the future.  This last effort will further the Matthew Effect, named after the biblical quote, ‘For to every one who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away’.

— Matthew 25:29, RSV.

www.theguardian.com/australia-news/2020/jun/03/morrison-government-to-offer-25000-grants-to-help-build-and-renovate-homes

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Limits to the Market and a Solution for Australia? 15/5/17

Since the last two world wars were over markets, it was assumed at the conference at Bretton Woods that if there were free markets everywhere there would be no wars and countries who did well would prosper. It worked.  Germany and Japan traded in markets that had been denied to them pre-war and ‘won the […]

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Load-Based Pollution 24/12/16

Dr Ben Ewald from the Hunter, who has been working with Doctors for the Environment has been lobbying for a Federal EPA and wrote a submission on the load-based licensing system, which is another name for polluters paying a levy per tonne of pollutant that they produce.  There is some charge for each type of […]

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A Law is Coming to Get Ready for Negative Interest Rates 2/8/19

A Recession Alert!  A Law is Coming to Get Ready for Negative Interest Rates, but it being sold as just another move against the ‘black economy.  The bill is the ‘Currency (Restriction Use of Cash) Bill 2019’. Cash is used in the black economy to avoid tax. But when the GST came in, the obvious […]

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Capitalism-How Will it End? 1/2/17

Capitalism is so entrenched as the major aspect of social organisation that when anyone in the Greens questions it, this is assumed to be electoral doom. But there are intelligently argued essays about its limits and its problems. I recently discovered Wolfgang Streek asking, ‘How Will Capitalism End’ in a heavy but still readable essay […]

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Economic Ruminations on the COVID-19 epidemic 29/3/20

All governments are very concerned about the economic effects of the COVID-19 pandemic as well they should be.  The medical costs will be huge but as is being belatedly acknowledged the whole of society is to shut down.  Most industries will stop. Few will work; nothing will be produced and there will be much less […]

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Giving Out Money Problems

Giving Out Money is not easy. Many are worried about big charities- how much actually gets to the people who need it? The government has not managed to give out the Bushfire relief money and it seem that neither has the Red Cross. Now they are promising help for the Corona Virus epidemic- do they […]

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Saving Virgins

22 April 2020 Ansett Airlines collapsed in 2002 and nearly took Air NZ, its owner with it. It had 40% of the market at that time. It had had subsidies, but continued to lose money. Virgin Blue, a cheap carrier had just come into the market and may have gone broke had Ansett not collapsed […]

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