Thursday, 17 May 2012
Sony Kapoor's growth compact
Sheila Killian: Sony Kapoor proposes a Growth Compact here - worth a read, especially Title III on taxes: Member states, particularly those facing unsustainable fiscal deficits, shall undertake to increase tax revenues from taxes that have the least negative impact on growth and preferably deliver a double dividend by penalizing activities that are harmful which would include An EU-wide increase in carbon taxes the revenue from which should be split between financing public investments, closing deficits and decreasing employment taxes at low levels of income particularly in countries that are facing very high levels of unemployment A Union co-ordinated but Member State implemented approach to implementing levies on bank balance sheets that are structured to discourage excessive dependence on short-term wholesale funding that was one of the major causes of the financial crisis A Union co-ordinated but Member State implemented approach to implementing Financial Transaction Taxes along the lines of the UK based Stamp Duty with a goal to broaden the tax base to include bond and derivative markets. Such a tax, it is noted, can be implemented at the level of individual Member States so unanimity is not required. The tax should be structured in a manner that particularly penalizes high-frequency trading and trading in financial instruments that are excessively opaque or complex A Union co-ordinated but differentiated approach to implementing / increasing taxes on passive wealth such as land value taxes, property taxes, estate taxes and wealth taxes
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I can understand the focus in this post on the taxation proposals - it's the usual "if it moves, tax it; if it doesn't move, tax it anyway". But there is certainly scope in Ireland to re-balance the focus of taxation and to increase revenues. For example, all developed economies - and not just Ireland - will have to re-think their approach to the taxation of corporate profits. It's simply pointless focusing tax on something that is so laughably easy to manipulate.
But, in general, when levels have been lowered and the tax base narrowed, it is politically damnably difficult to increase levels and broaden the base.
What is interesting, but nor surprising, in the document is the vagueness about Structural Reforms. Every one, of course, is, in principle, in favour of these. But these are always something that is done to someone else.
One area that should get much more attention, given the disaster of 'liberalisation' thoughout the EU, is the full gamut of infrastructure and utility services, but there are, unfortunately, too many powerful sectional economic interests involved.
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