Simon S Shaw says:
July 23 2021 at 10:27 am
“Tax is the mechanism used to prevent inflation”

Who gets taxed if inflation starts to rise?

And when? Interest rates have been used previously and can be raised every month if necessary. Are you suggesting we should move to a system under which income tax rates could be raised or lowered on a monthly basis? I’d have thought this unwieldy and politically difficult. Do you have an answer to those potential problems?

Richard Murphy says:
July 23 2021 at 11:06 am
As the IMF now agrees, an interest rate rise will nikt deliver the desired change in the economy: multinational corporations are interest rate and price immune to change. So tax is all we have

VAT can be changed at will

But more importantly, we need a financial transaction tax charged on bank accounts for precisely this reason: that would fairly mute or stimulate the economy as required and could be progressive too

It could also include negative tax rates

Just marvellous.

Certain, some few, corporations are sufficiently well – internally – funded that external interest rates don;t make much difference to their investment decisions. Apparently.

This does fail as a concept because of course a change in interest rates changes the return they can make on their cash piles. If they can earn 30% – just to have a number – on their $300 billion of Scrooge McDuck then why would they build factories to gain a 10% return?

That is, they still face the same incentives and investment hurdles even though they’re not limited by requiring access to outside finance.

But OK, leave that aside.

Inflation isn’t driven by the actions of some few dozen megacorps anyway. They’re such a trivial fraction of the entire economy that they simply could not be the cause. Apple might be – at the wildest estimation – 1% of the US economy or 0.2% of the global (a company share of GDP will be its profits plus wage bill, not turnover). That’s not going to be the root of inflation.

But because of this we must tax each and every movement in and out of an individual’s bank account?

19 thoughts on “Elynomics³”

  1. …we must tax each and every movement in and out of an individual’s bank account?

    He wants to do this because it’s fun and empowering. My objection to his power is slightly muted by the thought that the cashless society is thereby indefinitely postponed.

  2. “the cashless society is thereby indefinitely postponed.”

    I wouldn’t count on it. I noticed at the checkout of Leroy Merlin, our version of B&Q, that they’ll now longer accept more than 1000€ in cash from Spanish residents. Complying with the law of some such date. Once you have that established as a principal a cashless society’s just a matter of degree.

  3. Actually, I quite like things like that. Allows one to exploit people’s greed. I’ve ripped off the owner of a property I was renting because he was happy to accept cash & avoid paying taxes. Walked straight into a carefully prepared trap. You act illegally, you lose the protection of the law. Cost him a few bob to get out of that one.

  4. Interesting that VAT is one of Spuds immediate go to taxes for MMT inflation control purposes. If one suggested that the main tax in society should be VAT on a non-MMT day Spud would hit the roof at such a regressive and neo-liberal suggestion…….

  5. I have heard of the FTT but a Bank Account Transaction Tax – in a world of Electronic payment? I’d give him credit for ingenuity but in terms of feasibility unless you’re in a jurisdiction like North Korea where the state has absolute power I can’t see it being feasible? It would also lead to a huge increase in people being unbanked and a revival of cash as a means of payment. I mean the practical objections are so vast as to make it one of his more extreme notions, against stiff competition

  6. Any one who writes “on a monthly basis” when all he means is “monthly” should be scragged. Daily. Pompous, tin-eared ass.

  7. Van_Patten: Peru has such a tax, at 0.005% of total transaction value (doesn’t apply to transfers between your own accounts), the banks collect it and pay it monthly to the treasury. Easily compared with a person’s tax returns, the government now knows if you have any income you’re not paying income tax on, which is its real purpose. As you say, this leads to lots of cash transactions that never see the inside of a bank account.

  8. So, I get taxed when I get paid my wages, I get taxed when I move money from my personal account to my household account, and I get taxed when I move money to my pension, and I get taxed when I take money out of my pension, and I get taxed when I move money to my credit card account, and I get taxed when I move money from my mortgage account to pay my mortgage, and my leccy bill, and my gas, and my water, and when I buy food, and when I buy clothes, and when I buy petrol, I get taxed when I move money to the the council to pay my local taxes, and I get taxed when I move money to the HMRC account to pay my taxes!

  9. Dennis, On The Front Lines Fightin' Them Chlorinated Chickens

    …multinational corporations are interest rate and price immune to change…

    That’s the funniest thing I’ve read since yesterday. When I read something else Murphy wrote.

  10. Bloke in Callao

    I doubt very much Murphy even knows where Peru is but that is interesting – I think you’d need to set it that low for it to be politically acceptable. As I say, it’s genuinely an interesting proposal but if you discuss practical objections with Murphy you simply get accused of bad faith arguments and trolling so it’s not really worth engaging

  11. once again he displays his lack of real world experience of the real word and corporate accounting systems. A VAT change isn’t a trivial matter of just changing a value on a screen, there’s dates rules/logic, testing time and additional cutover monitoring also has to be factored in as well as complications doing the VAT return, then there’s re-pricing everything especially if you are a retailer. Admittedly one of the reasons systems aren’t designed to handle it easily is that it’s infrequent, but it would take time for system updates to accommodate frequent changes to get rolled out. And that’s just for U.K. when dealing with multiple countries all changing at different times. I suspect places that display prices including VAT like the U.K. would see pressure to change to not doing so.
    Anyone who suggest changing tax rates frequently has never had to deal with the consequences

  12. Covid has gone a long way towards setting up a cashless society, the disregard for rules about accepting cash as a form of payment has set a dangerous precedent. When someone refuses cash I alway use credit card rather than debit, in some cases for items under $1, as if they wanted to pay charges that was up to them. Did point out the cash was in a wallet in my pocket and the cloth of my trousers was substantially thicker than the face mask I was wearing.
    I heard of one coffee shop that did take cash but put all the change in the dishwasher every day and used UV lighting on the notes.

  13. The first stock control database I wrote in the mid-1980s I coded VAT as hard-coded *1.15. At the time I though “VAT” just by definition meant 15%, something like PI by definition is 3.1415etc. I had no idea it was a movable feast, I was too young to remember it being 7.5% seven years earlier.

    A few years later I was working in retail when VAT went up to 17.5% almost but not quite overnight and the hassle it caused us. Customers phoning demanding we honour 15% VAT on goods they’d not yet paid for (cheque posted on Friday, new VAT on Monday, cheque arrives Tuesday, etc.), trying to reprice everything a couple of days after our monthy product listing had been sent out to advertisers.

  14. Worked somewhere and they changed the entire basis of sales tax and a year later following an election reverted to the old system, we designed our changes so they could be rolled back as the writing was on the wall during implementation

  15. The Pedant-General

    Yup – the spudmonster has never had to implement a VAT change.

    Same argument was made by ex-HMRC bod in your select committee appearance ISTR Tim – “You just turn the dial and the money rolls in” was the quote or similar.

    Literally no idea of the hassle this causes.

  16. P-G: I suppose the ex-HMRC drone didn’t care, even if he did know. It’s obvious from their behaviour over decades that the extraction of tax from the populace and businesses trumps every other consideration.

  17. When VAT was introduced in 1973, computer systems were coded to hold it as a variable whole number of % (as per Treasury instructions). Then a year later the dim twat Healey introduced a 12.5% rate, causing a rapid rewrite, rather similar to Y2k (in Cobol it involved changing a V99 to V9999 field, happy overtime days).

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