Tax policy in a global economy.

U.S. Army Reserve civil affairs teams work in ...

Image by US Army Africa via Flickr

Whilst the Murdock and News Corporation scandal rages, despite my personal satisfaction at his discomfort, the story is obscuring another newsworthy item.

There is a devastating drought and subsequent famine in the horn of Africa, literally millions of lives are at stake. And whilst nominally this is an environmental natural disaster, it is not something that occurs without a degree of predictability. A commentator can easily point to climate change as a factor possibly influencing the reliability of the rains, and that this particular region seems particularly prone to drought and famine. But charitable concerns have poured millions into this region, often with reasonably well thought out plans concerning how to implement programs to minimise the impact of such events.

Yet here we are again. It makes me wonder if the entire approach might be flawed. Of course drought and famine are not  the only problem, facing the worlds poor, they are perhaps just the most obvious

It is almost axiomatic, in the current economic climate that despite all the economic difficulties and the calls for austerity measures in troubled economies such as Greece and Ireland, that the poor are the ones getting poorer whilst the rich are getting richer. The top 5% hold 95% of the world financial resources, and the gap is widening. It is almost as equally axiomatic that most of us blame the rich for creating the problem in the first place, ‘bankers’ (How often has the B been replaced by a W, I wonder) and their ‘bonuses’ being the first culprits that spring to my, and most other peoples, minds.

It occurs to me that one important theme in this issue is that, effective taxation of the rich in a global economy is actually quite difficult. When the issue of higher taxation of the wealthy is raised in Britain at least, it is rightly pointed out that, if they are expected to shoulder their share of the tax burden, that they will likely take their investment elsewhere, where taxation is more favourable to their personal accumulation of wealth.

Now I think I should be very clear that my biggest concern concerning the uneven distribution of wealth in the world, is not my own poverty, I am not rich, but life is not excessively difficult. For example I and my family have running water, an adequate supply of food, a roof over my head, a warm bed to sleep in, heating, gas to cook with, Electric lighting, TV Computer, washing machine, fridge, freezer, ect…. The normal acquisitions of a western lifestyle, the sort of things that most people in the west view as ‘essential’.

So when I think in terms of taxing the rich, it is not in terms of creating a better lifestyle for myself, or even for the majority of my immediate neighbours. Rather I think in terms of people who are struggling to find even water, as witness the current situation in the horn of Africa. Now in this context I am aware of the actions of Bill Gates and others to re-invent themselves as philanthropists, which is laudable and an admirable addition to an old and valuable tradition, witness the Nobel Prizes for instance. However I do not think relying on the good sense and generosity of the super rich is a viable path for the future.

Over recent months when this theme has come into my mind it has occurred to me that a solution, that would create a ‘level playing field’, would be a Global Taxation Policy. Not a outright dictation to nations about how they structure their overall tax revenue collections, rather a policy focused on the super rich, to ensure that they are subject to at least a minimum exposure to tax wherever they are in the world.

I can imagine various positive implications of this, not least that it would allow the richer nations in the world to fund their aid programs in ways which did not seem to place the burden on those of medium income.

It seems to me that it might also provide a stabilising influence, It seems logical to assume that if there was less to gain from moving to a less burdensome tax residence, that the other advantages of staying put might become more attractive.

It might also provide an opportunity for the creation of a global tax base to fund the United Nations, and it‘s programs to alleviate and reduce the suffering of the worlds chronic poor. A proportion of tax income say based on the proportion of global domestic product, a nations gross domestic product represents.

This last of  course raises one specific issue, taxation without representation. However I think this is a red herring, nations already contribute to the UN, through the auspices of governments, and where democracy prevails these are representative governments. Now naturally formulating and implementing such a policy would require possibly interminable negotiations, between nations with vastly differing views, political systems and agendas, so I am aware that it represents a huge and difficult task. Prehaps it is something that falls into the purview of the United Nations, perhaps it is something that the new head of the IMF, Christine Lagarde, should be raising and pursuing, perhaps it is both.

The real problem however as far as I can see is that no-one appears to be even talking about this option, perhaps this is just evidence of the lobbying power of the super rich, or just an artefact of the logistical difficulties such a proposal might represent.

Any which way, I think it is an idea worth considering, and having thought it, I wrote it down here. I find it hard to believe it might be an original thought, and would love to hear from anyone who has seen an outline or a similar proposal from history. Have a think about it discuss it with your friends. Perhaps you think I am a dimwit for even thinking it?

But surely it must be worth having a conversation about, and surely in a global economy, with global communication, it can’t be a complete impossibility, surely.

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About Transremaxculver

An entirely fictitious username I created for posting on 'alt.religion.scientology', Scientology is something of which I am highly critical. For those of you who don't know, the Church of Scientology have a habit of making life very uncomfortable for even the most legitimate of critics, which is why this username is completely anonymous. Anyway I have become quite fond of this username, and although it has to some extent outgrown it's original purpose, I think a blog is perhaps the right place for me/it to continue to grow and develop.
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6 Responses to Tax policy in a global economy.

  1. Pingback: The Art of Taxation is not to Tax | The Social Spectator

  2. wyndago says:

    Yeah, I see your point. Its an idea deserving a consideration.

  3. Pingback: Call To Arms « The New American Ideal

  4. Ang Tong says:

    FYI, the UN has in fact committed to your idea, to tax the world “based on the proportion of global domestic product.”

    The agreement for a .7% tax on global GNP, to be used for development aid, was passed at the UN General Assembly.

    In 1970.

    Not many countries are meeting this commitment. I’ve heard one calculation that puts the cumulative inflation-adjusted shortfall at USD4.1T. (I think this is in Banerjee and Duflo’s _Poor Economics_.)

    Whether aid to poor countries will really help is controversial. On one side are folks like Jeffrey Sachs (_The End of Poverty_) and his followers, who say poor countries are unable to sustain economic growth because they are in a “poverty trap”: it takes money to make money, but poor countries don’t have the money, so they’re stuck. A one-time aid effort (USD195B/year until 2015) will eliminate all poverty for all time.

    Others, like William Easterly (_White Man’s Burden_) think development aid just causes corruption and prevents the poor from finding their own solutions. They think the best way for rich countries to help is to mind their own business and set up fair trade practices.

    Determining who is right is a huge empirical question fraught with massive evidence problems.

    (Note that both sides draw a distinction between development aid and disaster aid. I don’t know of anyone who is opposed to aid efforts in response to earthquakes, famines, tsunamis, hurricanes, etc.)

  5. wyndago says:

    Your argument is made under the assumption that there will always be poor people in the world, and this will always be true if a global tax policy is put in place with a sole aim of ‘improving’ the lives of the wretchedly poor. This is not an original idea, its called communism.
    Think of it this way, wealth is created, the rich don’t have all of the world’s wealth. Some of it is waiting to be created. To help the poor once and for good, empower them by educating them on wealth creation. A global tax policy will only create a cycle of the rich giving and the poor losing it back to the rich.

    • I would dispute:

      a) That its communism, since I don’t belive that aspiration and ambition can be rewarded through a even distribution of wealth. What I propose is a more even distribution, which is something different.
      b) As things stand wealth is becoming more concentrated in fewer and fewer hands, this is not as a result of the intrinsic value of effort, but as a effect of the tendency of wealth to attract wealth. using a systemic perspective, this is a paralell to a black hole, as the wealth becomes more concentrated in to fewer hands it becomes impossible for it to escape and benefit anyone, ultimately even the posessor.
      c) I would apply a similar systemic analogy to the idea that wealth is waiting to be created, rather I would interpret wealth as simply the rescourses available so as such it is neither created nor destroyed, it is simply present, the question is then how can the wealth be converted into something that is functionally useful.
      d) If the logic of your argument were true, then there would be no purpose to taxation in any economic system.

      Think of it this way if the wealth present in the system is to be converted into something functionaly useful, it is far better to redistribute some downwards to create a cycle which drives the system more efficiently, creating an energetc system which ultimately recycles itself, rather than a system which creates only product, which will inevitably tend towards entropy. This highlights that the ‘education’ you identify has to be funded from somewhere

      In the context of this argument levelling the tax playing field, creates the mechanism whereby conversion of wealth into something functionally useful, creates the education which you interpret as the foundation of wealth creation, though to me that creation seems more like a conversion from one state to another.

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