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With just a hint of schadenfreude, we note that, following our discussion of “how to destroy an economy”, India’s Composite PMI collapsed to 46.0 in July – its lowest on record (well below the kneejerk lows after demonetization in November) as the “mind-bogglingly inane” new tax system and demonetization efforts continue to crush the poor and feed the wealthy.

As Goldman Sachs notes India’s Nikkei Markit services PMI contracted in July after reaching a 8-month high in June, following a decline of manufacturing PMI on Tuesday. The fall was led by a significant decline in new business, suggesting a worsened business sentiment after the GST implementation on July 1.

Main points:

India’s Nikkei Markit services PMI contracted to 45.9 (the lowest reading since September 2013). Combined with the manufacturing PMI reported on Tuesday, the July composite PMI fell to 46.0, the lowest reading since March 2009.
Among subcomponents, the new business index fell the most to 45.2 (from 53.3 in June), reflecting disruptions caused by the GST.
As the press release from Markit Economics mentioned, “Most of the contraction was attributed to the implementation of the goods & services tax and the confusion it caused”.
The employment index for services fell to 48.9 (from 51.8 in June).
That said, the index for business expectations rose to a 11-month high to 62.3, suggesting optimism from services providers about the future once they have more clarity about the new tax system.
The output price index rose to 54.6 (from 51.0 in June), while the input price index moderated to 51.7.
Overall, PMI data for July suggest a significant drag on new business activity post the GST implementation. That said, optimism expressed by both manufacturers and services providers about the future is encouraging and suggest a potential improvement in activity once businesses adjust to the new tax system.

From 8-month highs to record lows… why does any one put any faith in the useless ‘soft’ surveys?

…click on the above link to read the rest of the article…

India: The Lunatics Have Taken Over the Asylum

July 24, 2017

India: The Lunatics Have Taken Over the Asylum

Goods and Services Tax, and Gold (Part XV)

Below is a scene from anti-GST protests by traders in the Indian city of Surat. On 1^st July 2017, India changed the way it imposes indirect taxes. As a result, there has been massive chaos around the country. Many businesses are closed for they don’t know what taxes apply to them, or how to do the paperwork. Factories are shut, and businesses are protesting.

A massive anti-GST protest in Surat [PT]

Increases in administrative costs have made economics of trading and manufacturing unfavorable for many. Most lack access to accounting and IT skills to implement the new system — India simply does not have that many skilled people. As many as half of all transportation trucks are not operating. The media have “decided” not to cover the demonstrations.

The new indirect tax is a value-added tax, but as can be expected from the Indian government, it is chaotic, bureaucratic, extremely complicated, and full of loopholes. If you pay GST to your supplier but if he fails to deposit it, you cannot claim it as an input tax, making a businessman not only a collector of tax but an enforcer — this kind of draconian VAT system likely does not exist anywhere else.

There are about 40 tax returns required each year for each province that a company operates in. While tax officers don’t know how the new system should work, failure to comply will lead to imprisonment.

A case of unforeseen complexities. Note: generally only four different levels of GST are advertised, but there are actually special rates for precious stones, gold and sugary drinks, so there are seven rates in total. [PT]

…click on the above link to read the rest of the article…

First India Bans Cash, Now It’s Targeting Gold

June 26, 2017

First India Bans Cash, Now It’s Targeting Gold

In November of last year, India banned certain cash notes in a bold move to force businesses into the banking system to better harvest more taxes from its livestock. Now, under the guise of “improving transparency” and forming a “common market,” India has begun targeting gold with new taxes, regulation, and incentives for citizens to turn over their undeclared gold to the financial sector.

Roughly 86% of India’s economic activity happened in cash at the time much of it was banned. Presumably that includes the $19-billion-per-year retail gold industry. Again, it appears that India’s government (central bankers) wants a bigger cut of the action and to better track the private assets of citizens.

Bloomberg has been reporting that India’s government is teaming up with crony gold dealers to plan a complete revamp of its gold policy – which is always code for “control, regulate and tax.”

Bloomberg reports:

India, which vies with China as the top consumer of bullion, is working on new policies to improve transparency and help expand its $19 billion gold jewelry industry, according to people with knowledge of the matter.

The plans being worked out by the finance and commerce ministries along with industry groups should be finalized by the end of March, the people said, asking not to be identified because they aren’t authorized to speak publicly….

The start of a spot bullion exchange, to make gold supply more transparent and help enforce purity standards, is under consideration, the people said. An import tax of 10 percent could also be reduced as the government seeks to eliminate smuggling, they said. The plans also include a dedicated bank for the jewelry industry, according to one of the people.

Greek Authorities To Launch Mass Confiscation Of Safe Deposit Boxes, Securities, Homes In Tax-Evasion Crackdown

May 22, 2017

Greek Authorities To Launch Mass Confiscation Of Safe Deposit Boxes, Securities, Homes In Tax-Evasion Crackdown

Last week, the Greek parliament once again approved more austerity to unlock withheld Greek bailout funds in Brussels: a symbolic move, which has little impact without any actual follow through, like for example, actually imposing austerity. And while Greeks have been very good in the former (i.e. promises), they have been severely lacking in the latter (i.e. delivery).

That may be changing. According to Kathimerini, Greek Finance Ministry inspectors are about to start seeking out the owners of all local undeclared properties, while the law will be amended to allow for financial products and the content of safe deposit boxes to be confiscated electronically. The plan for the identification of taxpayers who have “forgotten” to declare their properties to the tax authorities is expected to be ready by year-end, according to the timetable of the Independent Authority for Public Revenue.

What follows then will be a wholesale confiscation by the government of any asset whose source, origins and funding can not be explained.

The Greek tax authorities will receive support from the Land Register to that end, as by end-September IAPR inspectors are set to obtain access to the company’s database to draw details on properties. Any taxpayers identified as having skipped the declaration of their assets to the tax authorities will be asked to comply and declare them, along with paying the tax and fines dictated by law. Should taxpayers fail to do so, the asset will be “sequestered.”

Kathimerini also notes that the IAPR is also waiting for Parliament to pass regulations permitting the mass confiscation of safe deposit box contents and financial assets such as securities.

…click on the above link to read the rest of the article…

The Hunt for Taxes is Global

May 5, 2017

The Hunt for Taxes is Global

Taxes are the root of all evil for this is the confrontation against the people that historically leads to civil unrest and then revolution. The American and French Revolutions were over taxes. Historically, even the Roman Empire was forced from time to time to grant tax amnesty as was the case in 119AD. You even have Roman Emperors such as Trajan (98-117AD) engaging in social legislation known as the Alimenta, which was a welfare program that helped orphans and poor children throughout Italy. The Alimenta provided general funds, food and subsidized education for children. The funding came from the Dacian War booty initially. When that ran out, it was funded by a combination of estate taxes and philanthropy.The state provided loans like Fannie Mae providing mortgages on Italian farms (fundi). The registered landowners in Italy received a lump sum from the imperial treasury. In return, the borrower was expected to pay yearly a given proportion of the loan to the maintenance of an Alimentary Fund – a kickback so to speak. Taxes and social programs have been around a very long time.

Today, debts are never reduced. Consequently, governments only raise taxes continually. We see this in some of the richest countries in the world. Now Singapore is passing three amendments expanding the power of the Ministry of Finance (MOF) under the Property Tax Act. This new legislation is one that will hand the Inland Revenue Authority of Singapore (IRAS) more enforcement and investigative powers. Singapore government is using the law to force people to pay more in taxes. There will be no privacy. Under this legislation, the tax authorities will be able to summon people to appear personally before them and to provide all information. They will be interrogated orally for investigation be it their own taxes, or another person’s property/properties.

…click on the above link to read the rest of the article…

Stockman to Trump: It’s the Economy, Stupid

February 9, 2017

Stockman to Trump: It’s the Economy, Stupid

In a recent appearance on CNN, David Stockman suggested that Trump might best spend some time actually addressing economic issues instead of the administration’s travel ban for immigrants from Middle Eastern countries, which Stockman called “a giant misfire.”

Pointing out that Americans are far, far more likely to be struck by lightning than killed by a terrorist, Stockman asserted that it was really Trump’s opposition to Obamacare and other government regulation that got him elected. Employing the 1992 Clinton Campaign motto of “it’s the economy, stupid,” Stockman noted “Trump was elected because flyover America is hurting economically. The voters of Racine, Wisconsin and Johnstown, Pennsylvania are imperiled not because of some refugees, they’re imperiled because their jobs have all been disappearing for decades. The problem is far more the Federal Reserve, Janet Yellen, the bubbles they’re creating on Wall Street…”

Stockman went on suggest that the Trump Administration is showing decreased interest in “draining the swamp” employing a phrase Trump used when he claimed he would greatly cut federal power in Washington. Instead of doing that, Stockman contends, Trump is merely filling the swamp with ” “other creatures that will build up homeland security, border control, more money for defense, more money for spying and national security.”

Stockman might also have pointed out that the travel ban itself illustrates how the ban has nothing to do with national security given that Saudi Arabia and Egypt are not on the list of blocked countries, even though Saudi Arabia and Egypt were the two countries most closely linked ot 9/11. Moreover, the perpetrators of the 2015 San Bernardino shootings had been radicalized in Saudi Arabia and traveled there before the killings. Indeed, Trump’s list seems to be more accurately described as a list of Saudi enemies, including Saudi Arabia’s most bitter enemies Iran and Syria. Also on the list is Yemen, which is currently subject to a vicious war and starvation campaign launched by Saudi Arabia’s dictators.

…click on the above link to read the rest of the article…

2017: The Year When the World Economy Starts Coming Apart

January 11, 2017

2017: The Year When the World Economy Starts Coming Apart

Some people would argue that 2016 was the year that the world economy started to come apart, with the passage of Brexit and the election of Donald Trump. Whether or not the “coming apart” process started in 2016, in my opinion we are going to see many more steps in this direction in 2017. Let me explain a few of the things I see.

[1] Many economies have collapsed in the past. The world economy is very close to the turning point where collapse starts in earnest.

Figure 1

The history of previous civilizations rising and eventually collapsing is well documented.(See, for example, Secular Cycles.)

To start a new cycle, a group of people would find a new way of doing things that allowed more food and energy production (for instance, they might add irrigation, or cut down trees for more land for agriculture). For a while, the economy would expand, but eventually a mismatch would arise between resources and population. Either resources would fall too low (perhaps because of erosion or salt deposits in the soil), or population would rise too high relative to resources, or both.

Even as resources per capita began falling, economies would continue to have overhead expenses, such as the need to pay high-level officials and to fund armies. These overhead costs could not easily be reduced, and might, in fact, grow as the government attempted to work around problems. Collapse occurred because, as resources per capita fell (for example, farms shrank in size), the earnings of workers tended to fall. At the same time, the need for taxes to cover what I am calling overhead expenses tended to grow. Tax rates became too high for workers to earn an adequate living, net of taxes. In some cases, workers succumbed to epidemics because of poor diets. Or governments would collapse, from lack of adequate tax revenue to support them.

…click on the above link to read the rest of the article…

Greece Unleashes ‘Soft’ Cash Ban

January 3, 2017

Greece Unleashes ‘Soft’ Cash Ban

The spread of global cash bans continues with Greece unveiling their so-called ‘soft’ approach by which taxpayers will only be granted tax-allowances or deductions when payments are made via credit or debit cards. As KeepTalkingGreeece reports, the new guidelines refer to employees, pensioners, farmers, and also the unemployed.

Accepted expenditure will be:

purchases for food and supermarket products, electronic and electric devices, household equipment, footwear, clothing, fuel, furniture, cigarettes, drinks
Restaurants, cafeterias,bars and hotels
Services like by hairdressers and beauty parlors, gyms and dance schools, car repair, plumbers, electricians, painters, carpenters, lawyers and accountants.
For doctors and pharmacy the same practice will be valid as in last year. The tax office will accept the expenditure only if payments are made per credit card or bank transfer.
Expenditure for utility bills, landlines and mobile phones, heating, rent, loan repayments that in fact swallow the largest amount of monthly expenditure for private households will not be accepted. Also not accepted is expenditure for toll and transport tickets.

In its “wisdom” the Greek Finance Ministry has determined the amount the taxpayers will have to pay with electronic money in order to be able to get the tax allowance:

10% for annual income up to €10,000
15% for annual income €10,001-€30,000
20% for annual income over €30,001

The famous Greek wisdom in times of austerity, bailout agreements and economic crisis remains the same also in 2017 and as neoliberal as possible since 2010: crack the low and medium incomes, let the rich fly free

Find the Surrealism

income €7,000: expenditure per plastic money must be €700
income €10,000: expenditure per plastic money must be €1,000
income €30,000: expenditure per plastic money must be €4,500
income €60,000 expenditure per plastic money must be €12,000

Should a taxpayer not be able to spend the necessary percentage of the annual income according to the guidelines, the punishment will be a penalty of 22% imposed on the missing difference.

…click on the above link to read the rest of the article…

When Assets (Such as Real Estate) Become Liabilities

December 27, 2016

When Assets (Such as Real Estate) Become Liabilities

December 27, 2016

It will be the middle class that accepted the notion that “real estate is the foundation of family wealth” that will be stripmined by higher taxes on immobile assets such as real estate.

Correspondent Joel M. submitted an article that struck me as a harbinger of the future: In Greece, Property Is Debt:

“At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate.

Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden.

After many years in which only very valuable properties were taxed, many Greeks went from paying almost no taxes on real estate to not having enough money to pay.

In 2010, property taxes accounted for 0.26 percent of gross domestic product, while this year they are around 2 percent, according to state budget figures. ‘Suddenly, the state treated the Greeks as if they were rich, at the precise moment that they ceased to be rich.’

Among the many disruptions of the past few years, this one shows how traditional conceptions — and a sense of security — can be shattered. With a history full of wars, bankruptcies and rampant inflation, Greeks had always seen land as a haven.

But it is private debt — at 222 billion euros last year — that may prove an even greater danger. This shows in government revenues. With the unified tax, ownership of every kind of property is now subject to taxation.

…click on the above link to read the rest of the article…

$50 Oil Doesn’t Work

June 4, 2016

$50 Oil Doesn’t Work

$50 per barrel oil is clearly less impossible to live with than $30 per barrel oil, because most businesses cannot make a profit with $30 per barrel oil. But is $50 per barrel oil helpful?

I would argue that it really is not.

When oil was over $100 per barrel, human beings in many countries were getting the benefit of most of that high oil price:

Some of the $100 per barrel goes as wages to the employees of the oil company who extracted the oil.
Often, the oil company contracts with another company to do part of the oil extraction. Part of the $100 per barrel is paid as wages to employees of the subcontracting companies.
An oil company buys many goods, such as steel pipe, which are made by others. Part of the $100 per barrel goes to employees of the companies making the goods that the oil company buys.
An oil company pays taxes. These taxes are used to fund many programs, including new roads, schools, and transfer payments to the elderly and unemployed. Again, these funds go to actual people, as wages, or as transfer payments to people who cannot work.
An oil company pays dividends to stockholders. Some of the stockholders are individuals; others are pension funds, insurance companies, and other companies. Pension funds use the dividends to make pension payments to individuals. Insurance companies use the dividends to make insurance premiums affordable. One way or another, these dividends act to create benefits for individuals.
Interest payments on debt go to bondholders or to the bank making the loan. Pension plans and insurance companies often own the bonds. These interest payments go to pay pension payments of individuals or to help make insurance premiums more affordable.

…click on the above link to read the rest of the article…

EU Passed Tax ID Numbers for Everyone

May 29, 2016

EU Passed Tax ID Numbers for Everyone

The EU is laying the groundwork for everyone in Europe to be given a new tax ID number in preparation for moving to electronic money. They are using a National Insurance number pretense to disguise the real objective. This scheme was passed by the Economic and Monetary Affairs Committee last week. This is another step in the federalization of Europe and even the British will have to comply. Naturally, nobody will report this in Britain because it obviously calls for a European Taxpayer Identification Number to keep track of every EU citizen, which include the British. The actual the European Commission text reads:

“Proper identification of taxpayers is essential to effective exchange of information between tax administrations. The creation of European Taxpayer Identification Number (EU TIN) would provide the best means for this identification. It would allow any third party to quickly, easily and correctly identify and record TINs in cross-border relations and serve as a basis for effective automatic exchange of information between member states tax administrations.”

This covert maneuver calls for the EU to take over member states’ corporate taxation powers with a common corporation tax base for Europe as a whole. The British corporations are suddenly going to taste the bitter bite of Europeans socialism and watch their taxes sky-rocket. That should help increase unemployment in Britain at a far faster pace than expected. This new legislation is banning sovereign member states from increasing their competitiveness by cutting corporation tax below 15%. Brussels is eliminating independence within Europe on taxes and this enables Brussels to be handed the ability to track every EU taxpayer, laying the foundations for a new European tax and to prevent competitive taxation to lure in companies from other members to help reduce local unemployment.

The vicious spiral of economic inequality and financial crises

May 16, 2016

The vicious spiral of economic inequality and financial crises

There is compelling evidence that economic inequality is both a result of, and contributor to, economic crises. A contribution to the openGlobalRights debate on economic inequality.

With global inequality at extremely high levels and still rising, there is an emerging consensus that the international community needs to tackle this growing problem. In September 2015, the Member States of the United Nations endorsed 17 sustainable development goals, including a particular goal to reduce inequality within and among nations. And yet, there is one particular facet of inequality that has been frequently neglected: the links between economic inequality, financial crises and human rights.

In the report I presented to the UN Human Rights Council in March 2016, I argue that economic inequality can trigger financial crises, which in turn can entrench inequalities further. I explore in my report three broad questions: 1) Does inequality lead to more financial instability? 2) Does financial instability lead to higher levels of inequality? 3) What are the impacts of increased inequality on respect for human rights?

Inequality is both a direct and indirect cause of sovereign debt increase and financial crises. As increased levels of inequality mean that the income tax base of the state concerned is rather small—at least if income taxation is not progressive—inequality can exert a considerable direct influence on the structure and the level of government revenues and spending.

Empirical evidence clearly suggests that inequality, income tax base and sovereign debt are all connected.This is far more than mere conjecture; the empirical evidence clearly suggests that inequality, income tax base and sovereign debt are all connected. For example, researchers have found a negative correlation between income inequality and the tax base and a positive correlation with sovereign debt. Increased inequality also contributes to the degeneration of sovereign debt into sovereign debt crises.

…click on the above link to read the rest of the article…

Panama and the Criminalization of the Global Finance System

April 18, 2016

Panama and the Criminalization of the Global Finance System

shutterstock_401464987

dennizn | Shutterstock.com

Sharmini Peries: Within a week the 11 million documents called the Panama papers, published by the International Consortium of Investigative Journalists, has become a household name. The documents are connected to the Panama law firm Mossack Fonsesca that helped establish offshore accounts for some of the wealthiest and most powerful leaders to launder money and evade taxes.

On Tuesday the police in Panama raided the Mossack Fonseca law firm to search for more documents linked to illicit activities. But what are they expecting to find, since we have already known for some time now that offshore accounts are being used to evade taxes by the banking sector, essentially white-collar crooks, at institutions such as Credit Suisse and others? But who is really behind the creation of these mechanisms and loopholes for tax evasion?

Economist Michael Hudson says Panama was created as a tax haven by certain sectors of our economy for this purpose. Hudson is a distinguished research professor of economics at the University of Missouri, Kansas City, and he’s a former balance of payments economist for Chase Manhattan bank. He is the author of many books, and the latest among them is Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

Michael, let’s begin with a short history of the creation of Panama and how it was bought from Colombia by the United States, and its relevance today vis-a-vis the Panama papers.

HUDSON: Well, Panama was basically carved off from Colombia in order to have a canal. It was created very much like Liberia. It’s not really a country in the sense that a country has its own currency and its own tax system. Panama uses U.S. dollars. So does Liberia.

…click on the above link to read the rest of the article…

Avoiding the Issue

April 14, 2016

AVOIDING THE ISSUE

In the wake of the so-called ‘Panama Papers’ furore, the push-button issue of the One Percent being found able – OH! THE HORROR! – to shield some of its wealth from the taxman, regardless of the jurisdiction in which its members have chosen to set up shop, has predictably called forth bad economics, dubious legal opinion, and strident political point-scoring in almost equal measure.

All of this has been carefully marshalled to serve the deeper purpose of exploiting our outrage and of suckering us into calling for the ever-eager Revenue Man to be given even more power over the livelihoods and liberties not just of the Music Hall villain ‘mega-rich’, but also of those of us hoi Polloi who have been inveigled into brandishing our torches and waving our pitchforks against the cast-iron railings surrounding the mansions of the moustachio-twirling plutocrats whom we have been so readily prompted to revile.

So, in an attempt to redress the balance a little, let’s go right back to first principles and start with the shocking premise that what you earn honestly in free exchange is a sign that your efforts have added some quantum to the sum total of human happiness (or at least marginally reduced its burden of woe) – a contention which is proven simply by the transaction having taken place at all.

Let’s move to another radical concept: that what you so earn and what you have come to own is, in the first instance, yours and yours alone to dispose of as you see fit.

Next, let us imagine that We, the People, have agreed between ourselves that there are certain desirable activities which we (perhaps unimaginatively and usually at the cost of much efficiency) do not trust to the market mechanism – matters such as dispute resolution, the provision of security at home and at our borders, the co-ordination of large-scale projects, a smattering of welfare functions, etc.

…click on the above link to read the rest of the article…

$3 Trillion Black Hole Could Destroy Economy: “True Extent of Pension Problem Has Been Obscured”

April 12, 2016

$3 Trillion Black Hole Could Destroy Economy: “True Extent of Pension Problem Has Been Obscured”

Yet another reason why taxes are going up, cities and states are going broke, and the world is approaching financial implosion…

As if the world needed another dangerous and volatile factor in the mix of looming economic downturn.

Unfunded liabilities for pensions have been a problem for a while now, but as investors continue to face fleeting returns, many states and cities are facing the music… and when it stops, there won’t be enough money to go around.

Someone will lose their savings, their standard of living, their retirement and maybe their future. Others will be taxed to death to clean up the mess of the many places were the system is cracked, fissured and falling apart.

According to FT:

The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies.

[…] the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.

Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.”

Mr Nunes… added: “When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”

Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits.

The inevitable result is, of course, tax increases and spending cuts – potentially on important and vital services.

…click on the above link to read the rest of the article…

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