Tuesday, October 15th 2013 - 00:08 UTC

IMF shocks orthodoxy: tax the rich and target multinationals to fight budget deficits

Tax the rich and better target the multinationals: The IMF has set off shock waves in Washington by suggesting countries fight budget deficits by raising taxes. Tucked inside a report on public debt, the new tack was mostly eclipsed by worries about the US budget crisis, but did not escape the notice of experts and nongovernmental organizations.

“It’s clearly something finance ministers are interested in; it’s something that is necessary for the right balance of public finances” said Lagarde

“We had to read it twice to be sure we had really understood it,” said Nicolas Mombrial, the head of Oxfam in Washington. “It’s rare that IMF proposals are so surprising.”

Guardian of financial orthodoxy, the IMF, which held its annual meetings with the World Bank last week in the U.S. capital, typically calls for nations in difficulty to slash public spending to reduce their deficits.

But in its Fiscal Monitor report, subtitled “Taxing Times,” the IMF advanced the idea of taxing the highest-income people and their assets to reinforce the legitimacy of spending cuts and fight against growing income inequality.

“Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution,” the IMF wrote, noting “steep cuts” in top rates since the early 1980s. According to IMF estimates, taxing the rich even at the same rates during the 1980s would reap fiscal revenues equal to 0.25% of economic output in developed countries.

“The gain could in some cases, such as that of the United States, be more significant,” around 1.5% of GDP, said the IMF report, which also singled out deficient taxation of multinational companies. In the US alone, legal loopholes deprive the Treasury of roughly 60 billion dollars in receipts, the global lender said.

The 188-nation IMF said that it did not want to enter into a debate on whether the rich should pay more taxes. But it said: “The chance to review international tax architecture seems to come about once a century; the fundamental issues should not be ducked.”

IMF chief Christine Lagarde, kept up the sales pitch for a more just fiscal policy. “It’s clearly something finance ministers are interested in, it’s something that is necessary for the right balance of public finances,” said Lagarde a former French finance minister, in a panel discuss. “There are lots of wasted opportunities,” she added.

After the French Socialist government’s proposal of a 75% tax on the wealthy was overturned by the country’s highest court last year, France’s finance minister cautiously welcomed the IMF new direction.

“If the core idea is that fiscal policy is a policy that aims to reduce inequalities, I wouldn’t know how to protest against that,” Finance Minister Pierre Moscovici said at a news conference in Washington. The minister said it was a “positive development” but he downplayed that it marked a “significant change” for the IMF.

But the IMF Copernican revolution is still in the twilight stage. In its report, the IMF continued to push for a wider scope for value-added tax, a consumption tax that some say is inherently unfair, and on reductions in public spending.

“These proposals are heading in the right direction, but a lot remains to be done,” said Oxfam’s Mombrial, calling notably for the IMF to do more against illegal capital flows, which, according to the NGO, cost billions of dollars in fiscal revenues in the developing countries.
 

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1 Anglotino (#) Oct 15th, 2013 - 01:14 am Report abuse
I'm all for everyone paying their fair share and a true believer in income redistribution up to a point.

However in our globalised world, who do you tax when the “rich” people and multinationals have moved to another country with lower taxes.

Stroking the goose's head after it lays a golden egg is much more productive than wringing its neck afterwards.

My country has a pretty good balance that could indeed be tweaked but then again we don't have the debt problems that some governments have.
2 bushpilot (#) Oct 15th, 2013 - 02:04 am Report abuse
Maybe budget deficits could also be reduced by getting rid of the IMF.
3 Stevie (#) Oct 15th, 2013 - 06:27 am Report abuse
At last an idea to a solution that could help, field only for some time.
As much as I me this economic system we live in, I can't predict the conscequences of the dollar losing its value.
I”d love for this system to break, but not for the benefit of chaos, and one thing that is crucial for this system to work, is that the money needs to circulate with as little loss as possible. Rich people collecting money only makes the money prints run riot.

But still, this doesn't solve the problem by its root.

We can't have a financial system that is based on constant growth. Because that means constant consumption and constant production.

And we only have one world...
4 Captain Poppy (#) Oct 15th, 2013 - 09:26 am Report abuse
Man stevie....when are you up for the Noble Peace Prize in economists? And you're an engineering mate?
5 ChrisR (#) Oct 15th, 2013 - 04:15 pm Report abuse
3 Stevie

As Churchill said in response to the Labour party immediately after WW2:

“when you tax the rich and give it to the poor, very soon all you have are the poor”

This is still true today.

“We can't have a financial system that is based on constant growth. Because that means constant consumption and constant production.”

So, you are going to stop people having children? Good luck with that one in China, India and all the Muslim countries.
6 Briton (#) Oct 15th, 2013 - 06:10 pm Report abuse
Just think of how much waste, countries waste each year,

Incompetence, overspending, bad investments and decision making,

Surely the stoppage of waste alone would save billions per country..just a thought.

.
7 Stevie (#) Oct 15th, 2013 - 06:34 pm Report abuse
Chris
Overpopulation is indeed a future issue we will have to deal with, but that is an issue that exists regardless of our financial system.
I'm not sure where my post led you to believe that I wanted people to stop having children...
8 Anglotino (#) Oct 15th, 2013 - 09:55 pm Report abuse
Overpopulation is not an issue. The UN Low Variant (which is historically the most accurate) has China's population dropping to about 600 million by 2100. Indeed Australia is one of the few countries that will have an estimated higher population in 87 years than it does now.

The continual publications of estimates that are much higher than now are based on an unfounded assumption that birthrates will rise again to the magical replacement level of 2.1. However no such actual proof exists for this assumption.

UN Low Variant estimates for 2100 (millions):
India 905.2
Nigeria 644.1
China 607.6
USA 300.9
Russia 54.4
Japan 50.9
France 50.5
UK 49.6
Germany 33.9
Canada 33.8
Australia 28.2
Spain 26.1

Brazil 107.2
Mexico 77.8
Colombia 34.4
Argentina 29.3
Venezuela 24.9
Peru 23.3
Bolivia 11.7
Ecuador 14.6
Chile 10.9
Paraguay 7.1
Uruguay 1.8

World 6,750 (400 million decrease from 2013)
Africa 2,826 (1.7 billion increase from 2013)
South America only 266.5 (144.5 million decrease from 2013)

Increasing wealth and education have the exact same effect, no matter what the country or culture; a below replacement birth rate. Countries such as Australia, Canada, UK and US either will increase or drop less than others predominantly due to immigration. Countries such as Paraguay and Nigeria will continue to increase mainly because they have yet to advance through the demographic stages that countries such as Germany passed through decades ago.

China took 25 years to demographically transit what the US and UK took 100 years to do. Therefore there are some that believe that even the low variant might be too high for many countries in their early stages of demographic transition (or that have yet to start) as the birthrate drops even quicker.

Overpopulation is not going to be a problem. Indeed the world is going to have to find a new growth paradigm to deal with decreasing markets, not increasing.

Anyone aged about 40 years and under will live to see ‘peak population’.
9 A_Voice (#) Oct 15th, 2013 - 10:42 pm Report abuse
8
You are only quoting the low variant......

The United Nations “high variant” has world population growing to 28 billion by 2150; the “medium variant” has growth levelling off at 11.5 billion around 2075, and the “low variant” has world population growth ending at 7 billion around 2050 followed by population decrease.

If it were a weather forecast . . .

A weather forecast like that would have us preparing for a blizzard, rain, and a hot dry spell all at the same time. Which is most likely? The medium variant is usually considered the most likely because it is in the middle.

Haha I was going to look into this further.....but.....
Thank you US Congress.......Get your act together.....

Due to the lapse in government funding, census.gov sites, services, and all online survey collection requests will be unavailable until further notice.
10 Anglotino (#) Oct 16th, 2013 - 12:24 am Report abuse
A_Voice please reread my full comment!

Specifically the second sentence.
11 Stevie (#) Oct 16th, 2013 - 12:31 am Report abuse
Well, overpopulation was never the issue to begin with.
Overproduction out of need is...
12 A_Voice (#) Oct 16th, 2013 - 12:47 am Report abuse
10
.....second sentence
”The UN Low Variant (which is historically the most accurate) has China's population dropping to about 600 million by 2100. ”

......like I said quoting the low variant.....???

BTW.....all assumptions are unfounded ...a clue is in the word assume.
13 Anglotino1 (#) Oct 16th, 2013 - 01:16 am Report abuse
A_Voice

I clearly stated I was using the Low Variant and I clearly stated the reason.

I also clearly stated why higher estimates, than the Low Variant, estimate a much higher population.

“The continual publications of estimates that are much higher than now are based on an unfounded assumption that birth-rates will rise again to the magical replacement level of 2.1. However no such actual proof exists for this assumption.”

In your reply, as you are wont at times, you deliberately misconstrue.

Unfortunately for you, you chose to quote only selectively from this website (it's called plagiarism when you quote verbatim without referencing):
www.siue.edu/~rblain/worldpop.htm

You said:
“A weather forecast like that would have us preparing for a blizzard, rain, and a hot dry spell all at the same time. Which is most likely? The medium variant is usually considered the most likely because it is in the middle.”

The website you plagiarised said:
“A weather forecast like that would have us preparing for a blizzard, rain, and a hot dry spell all at the same time. Which is most likely? The medium variant is usually considered the most likely because it is in the middle. BUT THERE IS ANOTHER METHOD FOR FINDING THE MOST LIKELY PATH OF FUTURE WORLD POPULATION GROWTH.”

I have capitalised the part you conveniently left off.

Further down on the same website, after explaining his statistical methodology (least squares), the author clearly states:
“The least squares method is more likely to give us a reliable projection than the principal components method and that method corresponds most to the United Nations low variant.”

I was replying to Stevie's claim that “Overpopulation is indeed a future issue we will have to deal with” which he now seems to have back downed from in just under 6 hours.

And, of course, any prediction for 2100 will be wrong, however based on statistical trends it looks as if it will be closer to today's world population than any other estimate.
14 Stevie (#) Oct 16th, 2013 - 01:59 am Report abuse
Nah Anglolatino, you'll have to keep fishing, all I said is that overpopulation is a future issue, never said how far in the future or how a big issue it will be.
Now, you can guess and predict all you want, using all kind of methods and websites, but fact is, none of you have a clue as to how many children people will be having the next 50 years, or 100.
But by all means, keep guessing and making facts out of clouds, I'm still talking about overproduction, the one that introduced population growth was Chris...
15 A_Voice (#) Oct 16th, 2013 - 10:31 am Report abuse
13
heh heh! Skip
You have got it wrong....I liked the weather analogy that's all....the last bit was just another wiseguy spouting another mathematical model.....based on assumptions and guesswork. There are dozens of them Skip...the optimists.....
The only facts you can rely on is the graph that shows the human population taking thousands of years to reach a billon...then skyrocketing to 7 billion in no time at all.....haha it's almost like a flatline that goes vertical at the end...

“The world population has experienced continuous growth since the end of the Great Famine and the Black Death in 1350, when it stood at around 370 million.”

In other words ...it has not decreased at all since 1350....and we are to assume that trend will suddenly change and begin to fall.....??
Look at the facts.....or believe the guesswork.....my money is on the “increase”....the middle variant.....

.....did you think you got away with that sentence gaffe Skip?.....You should know the difference between a sentence and a paragraph. You meant second paragraph...;-))))

”(it's called plagiarism when you quote verbatim without referencing):“
.....you have made that up....

Ho hum....btw.....”Plagiarism is the “wrongful appropriation” and “purloining and publication” of another author's “language, thoughts, ideas, or expressions,” and the representation of them as one's own original work.“

Cut and paste that's all....I don't see a claim anywhere to them being original or my own.....and before you say it...there is no rule that says I need to enclose a quote in quotation marks ...
It's acceptable to use others words as long as there is no attempt to claim them as your own...
Are we there yet?.....

Oh dear.....”Are we there yet?”......a quote from a 2005 movie starring Ice Cube.....
Though I was using it in a different context to mean ...if you understand how ridiculous it would be to reference everything I write.....
16 ChrisR (#) Oct 16th, 2013 - 12:29 pm Report abuse
All three of you seem to have overlooked an obvious trend: when a country gets richer (China) the people have greater expectations and will no longer settle for a ball of rice three times a day (if they are lucky).

Even if the population of China drops 600 million the overall consumption will probably be greater than it is now.

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