intervening within the "government debt system"

I guess the name speaks for its self.

intervening within the "government debt system"

Postby Andrea on Tue Jun 22, 2010 1:30 pm

I've been trying to get my head round the current dilemma with a few sign graph sketches e.g. http://www.diagrammr.com/edit?key=d0WsIqvAqkT

The UK government has to drastically cuts debt levels in order to prevent a reduction in its credit rating (which would in turn whack up debt interest rates and thus further contribute to debt levels). However, any drastic cuts in debt levels will lead to unemployment, and therefore a reduction in national cash flow, not only risking a double-dip recession, but also reducing tax receipts (which would further add to the debt).

Looks like the government is in a double bind -- you're damned if you do and damned if you don't!! It seems as if there is no easy way out of this current mess .... or is there?
esse sequitur operari
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Re: intervening within the "government debt system"

Postby jim_lewis1 on Tue Jun 22, 2010 2:26 pm

revolution, destroy property!
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Re: intervening within the "government debt system"

Postby Teiana on Tue Jun 22, 2010 4:41 pm

what i don't get is there seems to be an assumption being made that increasing V.A.T will produce a proportional increase in tax income. Nobody's considering people will just spend less. I think people won't have any more money, so if V.A.T goes up it only harms small businesses and people who can't make volume discounts. I think people will look at the cash in their pocket and spend what they have, and if it buys less they just have to put up with that.
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Re: intervening within the "government debt system"

Postby llamagirl on Tue Jun 22, 2010 10:44 pm

My understanding is that the government hope that the private sector will fill in the gaps left by cuts and are relying on this to boost economic growth. I think there could be potential for a mechanism other than government spending to stimulate growth, but the idea that the private sector will some how spontaneously solve the world's problems has surely been tried and tested and found wanting already.
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Re: intervening within the "government debt system"

Postby Andrea on Thu Jun 24, 2010 10:40 am

llamagirl wrote:My understanding is that the government hope that the private sector will fill in the gaps left by cuts and are relying on this to boost economic growth.


If that is what they are betting on, then we ought to start seeing a major shift in policy to facilitate private enterprise: deregulation; lower business taxes; control of unions etc. ........ watch this space.

But what if the augmented private profits aren't reinvested in the UK (either directly by the company or indirectly by increasing governmental tax receipts)? what happens if these profits are squirreld away and reinvested in emerging countries with much better growth prospects or used to augment foreign shareholder dividends? Not so much of a risk from SMEs, but a very real danger from multinationals.

This might very well be a strategy for bleeding the country dry from two ends: higher taxes on citizens by the government; exporting profits by multinationals.

I really hope that the government heeds Philip Blond's advice to rein in megacorporations and their very clever tax avoidance strategies:

What this issue highlights is the increasing difficulty faced by governments in taxing trans-national companies. Not only are global corporate taxation rates falling (in the UK it was reduced from 30p to 28p last month with more cuts promised), but countries are bidding against each other to lower the liability of the companies whose presence they court. Ireland is seen by other EU nations as an aggressive low-tax predator, and the Netherlands and Switzerland have been accused of similar practices.

Most corporate avoidance utilises the structure of transnational subsidiaries and takes the form of either non-compliant internal-transfer pricing or false invoicing. The former consists of artificially inflating costs in high-tax zones by charging for intellectual property or the services of an offshore vehicle, while offshoring the profits of that activity across international borders in tax havens or low-tax jurisdictions. With false invoicing, subsidiary companies artificially raise or lower the prices of imports or exports to minimise the tax liability of the holding group.

If transnationals increasingly avoid tax, the fiscal burden falls on employees as well as small and mid-range businesses that have not yet developed the structure that would enable them to offshore their profits. [http://www.independent.co.uk/news/business/analysis-and-features/transnational-tax-this-time-darling-shouldnt-back-down-833824.html]


Otherwise we're really done for!!
esse sequitur operari
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Re: intervening within the "government debt system"

Postby Teiana on Thu Jun 24, 2010 2:29 pm

But what if the augmented private profits aren't reinvested in the UK


that's not just about Uk people hedging their bets and hiding things abroad but about the way so much of our 'private' stuff is already owned by foreigners. They make chocolate oranges in Poland for goodness sakes. There's No incentive at all ( that i can see) for foreign investors who have bought slices ( or all of) most of our companies to invest into anything else in the UK, unless they are taking a big profit elsewhere. It's too late to save 'made in england' and it's too late to believe that the companies in england are 'ours'. they're all owned by big foreign firms.
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Re: intervening within the "government debt system"

Postby Andrea on Mon Jun 28, 2010 11:58 am

what I find perplexing is how a government that is desperate for cash, and has had both coalition partners promise a reorganisation of the business tax systemin in their election manifestoes, fail so miserably to implement a no-brainer:

The Liberal Democrat's committed in their manifesto to replacing the Air Passenger Duty (APD) with a Per Plane Duty (PPD), in a bid to encourage airlines against flying half-empty planes. The Conservatives had also indicated they were in favour of a PDD.

However, in his budget speech today, chancellor George Osborne said the government would only 'explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty, and consult on major changes' [ http://www.theecologist.org/News/news_r ... n_tax.html ]


back in 1998, people were stating that

we are witnessing a strange spectacle: the growing power of planetary business giants, against which the traditional countervailing powers (governments, parties, trade unions etc.) seem increasingly impotent. [ http://www.globalpolicy.org/component/c ... 47167.html ]


It seems that governments have now totally lost any capacity to push through even the most obvious of measures.......
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Re: intervening within the "government debt system"

Postby jim_lewis1 on Mon Jun 28, 2010 12:17 pm

Either option is less effective than a tax on airline fuel. Why we haven't got that, despite all the rhetoric regarding the challenge of climate change, I've no idea.

Without it, government is effectvely subsidising the status quo which distorts markets, leads to a dependency on air freight of food supply and contributes massively to climate change and CO2 emissions.
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Re: intervening within the "government debt system"

Postby Teiana on Mon Jun 28, 2010 1:44 pm

i saw a program the other day that said it was probably more energy efficient to fly stuff from south africa where it's hot than to import stuff from hot houses in the netherlands, because they use loads of power keeping the climate for the plants right..

it also said (which i hadn't realised) that most perishable foods come in on passenger flights..
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Re: intervening within the "government debt system"

Postby Dave H on Mon Jun 28, 2010 7:05 pm

It is difficult to find the correct words but I consider that aviation does not live in the real world.

Recently Ofcom tried applying pricing to the spectrum used by the aviation sector which resulted in a range of responses that it would affect safety, aviation was too important to pay for sectrrum, it would have no impact on spectrum usage etc. Most other industries accept they have to pay for the inputs so why should aviation be different.

Then look at Airbus and Boeing which both receive large sums of Government money to build aircraft and it seems more like job creation schemes rather than commercial enterprises.

The tax on aircraft passengers seems to be just another example of this strange thinking
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