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Impact of covid19 on taxation. (inc wealth taxes)

including Budgets
ursaminortaur
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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329231

Postby ursaminortaur » July 28th, 2020, 5:23 pm

1nvest wrote:
ursaminortaur wrote:
1nvest wrote:There's no need for internal (UK) taxes at all. Useful to tax external facing as fundamentally its only the deficit that matters. The BoE printing/spending money is a form of micro-taxation, each new note added devalues all other notes, as such much of the excessive tax rule book and collecting/recording systems could all be thrown out of the window - which would promote economics rather than the present system of hindrance. Parliament also is in need of reform, its usually good to periodically cut out all the dead-wood.

Policies whereby £'s can flow to China, whilst China as good as forbids its citizens from buying foreign ... will not ultimately end well. Taxes should target that, and not the situation we're actually in of how far the public sector can excessively drain the private sector (gold plated pensions for many in the public sector, hardship for many in the private sector ..etc.).


The fact that governments require their citizens to pay their taxes in the currency that they issue is the only reason that those currencies are accepted as having value. If government stopped all UK taxation but kept creating money so that it could continue spending then because of how much the government spends you would end up with hyperinflation in that currency and since the citizens didn't need it to pay taxes they would switch to using a more stable currency.

Yes taxation is a form of destruction of some of the money printed. Without such destruction indeed inflation would rage into hyperinflation. However if the state takes part ownership of businesses operating within its realm i.e. buys stocks, then it receives revenues from those businesses. Similar destruction of previously printed money. Whilst also gaining influence in what/how businesses operate, in some cases perhaps a controlling influence (majority shareholder). That also directs government to work for the benefit of both the citizens and businesses. From a foreign perspective, sales taxes and dividend withholding taxes could be utilised. So for instance a large outfit/firm that was selling into the UK but otherwise paying no taxes into the UK treasuries coffers would still albeit indirectly be contributing; As would foreign holders of UK based businesses be paying via dividend withholding taxation.

£600Bn of taxes collected under the current arrangement.
Around £8Tn of UK assets value held by foreign, say paying 4% dividend/benefit, £320Bn, presently with 0% withholding tax, being revised to withholding 30% (as per the US). £100Bn of replacement revenue.
Foreign sales into the UK, £500Bn, 20% tax, £100Bn of revenue.
£4Tn UK stock market cap value, doubles as money is printed to buy up half of all shares. £8Tn market cap, lower dividends, half of dividends going to the treasury. Maybe another £100Bn.
In not paying taxes wages/costs/prices decline significantly. Such that former £600Bn of tax collections (and government spending) halve, and where withholding taxes, import tax and business share earnings are covering the £300Bn of money destruction.

In UK wages and cost of living having declined, foreign would be more attracted to employ/buy British, whilst UK standards of living would be much the same as before, other than it being cheaper to buy British stuff over buying foreign stuff. To dissuade that other foreign governments might impose withholding taxes - however they already do! The UK is one of the exceptions rather than the rule in that respect. They might strive to block their citizens from buying British products - but they already do, and none more so than China. The UK has been a gift horse for too long and at great cost to its economy and people. It should be looking to level up. For the UK the EU has been a disaster, but our cost has been their gain. UK assets have flowed out, whilst prior relatively poor EU countries have been raised up to the same/higher levels, at our expense.


Firstly many of the companies on the UK stock market especially those in the FTSE 100 are international or foreign companies and wouldn't react well to the UK government taking 50% of their business. (and foreign governments probably wouldn't react very well either).

Secondly do you really want the government to have such a large stake in all UK businesses ? Government intervenes enough already. Although you didn't propose the government taking 51% and thus having full control having 50% would probably be enough to exercise full control in most circumstances. Shareholders, pension companies etc would also probably react badly to the lower dividends.

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329239

Postby 1nvest » July 28th, 2020, 5:47 pm

Firstly many of the companies on the UK stock market especially those in the FTSE 100 are international or foreign companies and wouldn't react well to the UK government taking 50% of their business.

Would they even know? Obviously it would be a progressive thing, maybe just 1% initially, that expanded over time. And perhaps not with a HM stamp all over it but instead in a similar manner to Sovereign Wealth funds, a pseudonym that wasn't public. 25% would seem a reasonable average, enough so that printing to buy a further 8% of shares, 33% ownership, becomes pretty much 'control' against those that the UK deemed it would be appropriate to bring that business under control for whatever reason.
Shareholders, pension companies etc would also probably react badly to the lower dividends.

There were controls to prevent the US from printing to buy up bonds, set as part of breaking away from the gold standard and having the US$ instated as the reserve currency. The EU opted to print to first buy up bonds, then junk bonds, and more recently stocks. The US has had to respond to that and Congress passed permission for the Fed to print and buy up to 70% of each/any bond series now. A possible $8Tn injection. Fed bond buying has resulted in pension funds on seeing bond prices up, reducing bonds to buy more stock - so stock prices are up. Yields being inverse to prices are down. Yes many are complaining about lower yields, but that's offset by delight at higher (or less down than might otherwise have been the case) prices.

ursaminortaur
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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329350

Postby ursaminortaur » July 29th, 2020, 9:16 am

1nvest wrote:
Firstly many of the companies on the UK stock market especially those in the FTSE 100 are international or foreign companies and wouldn't react well to the UK government taking 50% of their business.

Would they even know? Obviously it would be a progressive thing, maybe just 1% initially, that expanded over time. And perhaps not with a HM stamp all over it but instead in a similar manner to Sovereign Wealth funds, a pseudonym that wasn't public. 25% would seem a reasonable average, enough so that printing to buy a further 8% of shares, 33% ownership, becomes pretty much 'control' against those that the UK deemed it would be appropriate to bring that business under control for whatever reason.

Since you said that the market cap would double I assumed that these were new shares which the companies had to issue to be bought by the government in which case the companies would obviously know. However even if it was a stealth operation buying shares in the open market then a player buying so many shares in so many companies would be noticed even if done over a fairly long timescale. Besides which such purchases would also have to appear in government accounts (and would I'd have thought also need approval by parliament probably in the government's finance bill).

1nvest wrote:
Shareholders, pension companies etc would also probably react badly to the lower dividends.

There were controls to prevent the US from printing to buy up bonds, set as part of breaking away from the gold standard and having the US$ instated as the reserve currency. The EU opted to print to first buy up bonds, then junk bonds, and more recently stocks. The US has had to respond to that and Congress passed permission for the Fed to print and buy up to 70% of each/any bond series now. A possible $8Tn injection. Fed bond buying has resulted in pension funds on seeing bond prices up, reducing bonds to buy more stock - so stock prices are up. Yields being inverse to prices are down. Yes many are complaining about lower yields, but that's offset by delight at higher (or less down than might otherwise have been the case) prices.


Yes QE has already hurt many pension funds doubling down on that by also reducing dividends - more permanently than covid-19 has already temporarily hit dividends - would mean the end of the few remaining private DB schemes, massive government support for funded public sector DB schemes such as the LGPS, and a lower income for those in drawdown.

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329423

Postby Lootman » July 29th, 2020, 1:35 pm

ursaminortaur wrote: QE has already hurt many pension funds doubling down on that by also reducing dividends - more permanently than covid-19 has already temporarily hit dividends - would mean the end of the few remaining private DB schemes, massive government support for funded public sector DB schemes such as the LGPS, and a lower income for those in drawdown.

If the government tried to maintain public sector and DB pension payouts by raising taxes on people who had private and DC schemes, who at the same time were seeing their own pensions slashed, there would be blood in the streets. Heck, I would man the barricades myself.

If we have a pensions crisis then everyone is going to have to pay.

ursaminortaur
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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329429

Postby ursaminortaur » July 29th, 2020, 1:48 pm

Lootman wrote:
ursaminortaur wrote: QE has already hurt many pension funds doubling down on that by also reducing dividends - more permanently than covid-19 has already temporarily hit dividends - would mean the end of the few remaining private DB schemes, massive government support for funded public sector DB schemes such as the LGPS, and a lower income for those in drawdown.

If the government tried to maintain public sector and DB pension payouts by raising taxes on people who had private and DC schemes, who at the same time were seeing their own pensions slashed, there would be blood in the streets. Heck, I would man the barricades myself.

If we have a pensions crisis then everyone is going to have to pay.


The cutting of dividends which would be a consequence of 1nvest's scheme wouldn't impact on unfunded pay-as-you go public sector schemes but would impact private DB schemes and funded public sector schemes like the LGPS. Since the government is the employer and guarantor of the LGPS scheme that would pretty much automatically mean extra government support - although the existing burden sharing provisions would likely also mean that employee contributions would also have to rise. Fortunately I don't see there as being a cat in hell's chance of the government adopting 1nvest's scheme.

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329477

Postby NeilW » July 29th, 2020, 5:00 pm

Dod101 wrote:Do you not think that you owe it to the IFS to let them know where they have got it wrong......and while you are at it let the Chancellor know as well?

Dod


The IFS are well known for being useless at Macro. Only those who venerate credentialism would ever listen to a word they say. It's all quite cleverly crafted propaganda (if the chancellor is to stick to his rules, then... Never questioning whether the rules make any sense). The Chancellor gets regular updates from MMT economists. Stephanie Kelton attended a virtual meeting at Parliament just the other week to explain the situation to a group of MPs - regrettably opposition ones.

Unfortunately quite a lot of people suffer from the same religious beliefs you do. Hence why they snipe from the sidelines rather than addressing the logic and accounting principles raised.

NeilW

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329495

Postby Dod101 » July 29th, 2020, 7:55 pm

NeilW wrote:
Dod101 wrote:Do you not think that you owe it to the IFS to let them know where they have got it wrong......and while you are at it let the Chancellor know as well?

Dod


The IFS are well known for being useless at Macro. Only those who venerate credentialism would ever listen to a word they say. It's all quite cleverly crafted propaganda (if the chancellor is to stick to his rules, then... Never questioning whether the rules make any sense). The Chancellor gets regular updates from MMT economists. Stephanie Kelton attended a virtual meeting at Parliament just the other week to explain the situation to a group of MPs - regrettably opposition ones.

Unfortunately quite a lot of people suffer from the same religious beliefs you do. Hence why they snipe from the sidelines rather than addressing the logic and accounting principles raised.

NeilW


You have not answered my question and I am not the one 'sniping' it is you that is producing the outlandish comments, not me.
Why do you not let the IFS know where they are going wrong?

Dod

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#329585

Postby NeilW » July 30th, 2020, 8:51 am

Dod101 wrote:
You have not answered my question and I am not the one 'sniping' it is you that is producing the outlandish comments, not me.
Why do you not let the IFS know where they are going wrong?

Dod


They have been told, but that is like telling the Catholic Church that the evidence doesn't support the existence of God or the infallibility of the pope. As JK Galbraith puts it "Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone opts for the latter."

There is nothing outlandish about what I have said. It follows from a simple application of logic to the institutional structures and accounting that actually exist. The sort of thing Bankers have known for a century or more.

If you wish to address the point I made in my post, then feel free to do so. I will try to show you how it works.

But remember argumentum ad populum and argumentum ad verecundiam are logical fallacies.

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#346783

Postby scotview » October 10th, 2020, 5:57 pm

I posted on 2nd April that I thought the higher tax rate might go from 41% to 50% (I'm a thrifty, Scottish, pensioner tax payer).

Since my post in April there has been more spending (by Boris and Rishi) than I had envisaged. Today Sadiq is demanding £23 billion for London and the Northern Mayors are saying support for their area is inadequate.

The winter is not yet upon us. NEITHER IS BREXIT.

I have grown more pessimistic for my pensioner, tax paying situation.

I should be greatly obliged if you smart guys and girls would give some feedback on the potential stress on the UK tax burden in the next, say two years.

Thanks in advance.

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#346789

Postby johnhemming » October 10th, 2020, 6:30 pm

All of this depends upon how damaged the economy ends up. Some certainty on Brexit will help. Also the GDP figure for August does not take into account the fact that the schools have started up again. That will produce a relatively meaningless increase in the GDP as a result of the way it is calculated.

We should see that in the September figures.

However, the government are going for more economic damage at the moment although not as much as earlier in the year.

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Re: Impact of covid19 on taxation. (inc wealth taxes)

#347073

Postby absolutezero » October 12th, 2020, 11:50 am

There's far too much IF... THEN... going on here and we don't know the IF parts.

Equally IF... THEN... but I thought this was interesting.
https://reaction.life/time-for-some-whiggish-economic-optimism-a-five-point-plan-to-restore-investor-confidence/

There is plenty of money

Third, shut up about tax rises. The actual cash cost of the Covid crisis, at around £300 billion, might sound terrifyingly expensive, but actually it is not. It is cheap. It will cost about the same as the Korean War – which saw defence spending temporarily spike from 7% of GDP to 11% of GDP between 1951 and 1954. It is true that the national debt has risen over 100% of GDP now (still trivial relative to the 250% it hit during the Second World War), but once GDP recovers that percentage will fall back.

The Covid crisis is exactly the sort of event that the whole institutional structure of the Bank of England and gilts market was invented to insure against and we will pay it off over 50 or 100 years, by the end of which it will be forgotten. Borrowing to get us through is the right thing to do and nothing to be embarrassed about.

Far from discussing tax rises – I assume the Treasury’s motive is to restrain No.10 spending – we should be planning for tax cuts. It was a mistake to cancel the Budget (as it was a mistake for President Trump to veto the US stimulus plan). We need a recovery package based on lower corporation taxes, reduced stamp duty, a cut in the usurious student loan 6.5% interest rate (believe it or not, that is accounted for as tax revenue) and a dynamic plan to rebuild and reform the economy.


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