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IMF needs YOU

by on March 11, 2014

To help improve our tax system, the International Monetary Fund (IMF) has posted some general questions, which we are ALL invited to respond to. Send your thoughts to IMFconsultation@imf.org by the end of the month.

Beyond of course hoping that my responses (below) are useful, I’d love it if some people were nudged towards a better understanding of the questions …and maybe even inspired to come up with their own! Post a copy of your mail here, and we can see about crowd-funding “I told the IMF things they already knew, and all I got was this lousy T-Shirt.”

But seriously, folks: “The IMF (…) will review all comments” and “post a summary”!
For the full questions and introductory text, see http://www.imf.org/external/np/exr/consult/2014/taxation/

IMF questions in regular type (shortened, no. 7 adapted).
My responses in bold.

1.
How does the current system affect poor countries?
Badly. That’s almost a circular argument. A low-income country is unlikely to raise its income by lowering tax rates. More relevant to me is the question of why it pays to keep them poor: they give up their resources for less! Imagine the roles were reversed: Switzerland had resources, and Glencore was based in West Africa. What would we Swiss people charge for sending our kids into mines, and handing over our Gold?

What changes are needed?
Changes are a waste of time. Like the treaties themselves, they’d reflect the lopsided distribution of (tax-deductible) lawyers. (See also point 6 below).

Are bi-lateral tax treaties important for attracting international capital?
Sure. The real question: important to whom?
What is “international capital”? What are the implicit reasons for wanting to attract it? Is an AIDS epidemic good for attracting relief, even on intellectual property laws?

2.
Does unequal tax treatment contribute to unintended reduction in tax for individual countries, and the world’s overall taxable profit?
Let me respond by translating the question into Plain English: With “unintended”, you mean “contrary to the stated objectives”. If the real objectives are achieved, there’s nothing unintentional about that.
In an ideal world, all profit would be “taxable”. Corporations must stop playing the age-old game of divide-and-conquer.

What solutions would you prefer?
The ones we already agreed on: Human Rights! Once Article 25 is guaranteed, power will shift dramatically and for the better towards citizens, workers, consumers, i.e. HUMANS. Then the last point of question 1 is no longer “how to attract international capital?” But “how to attract humans?” I can’t shake this “crazy” vision of leggy hostesses lining the Swiss border with vendor’s trays full of passports and bars of chocolate, handed out to everyone prepared to share their time on earth with us. What’s really crazy: we already do this today – but only for corporations and rich individuals/tourists.

3.
Have you observed any shifts away from worldwide taxation?
No. I would be in favour of worldwide taxation. However, (a) I doubt taxation is meant to survive forever as a concept, and (b) am sceptical about a world-tax having any chances for the brief period it might be needed. Rather than live out their natural “local bias” (Ricardo/Smith), people are mislead about what constitutes foreign mingling. (Corporations are the real aliens, not immigrants, nor reptilian shapeshifters from the UN and of course the IMF, Word Bunk etc.)

4.
Would an end to deferral of taxation be beneficial for some countries?
You mean the system whereby people can decide for themselves when to pay taxes?
Isn’t it amazing how these questions answer themselves once you translate them into plain English!

5.
Do you have suggestions regarding the arm’s length pricing method that would benefit developing countries?
As amendments: tricky – see 1.
Shame “just do it” won’t play in court.

6.
Do you have views on formulary apportionment for developing countries? Other countries? International business?
Yes, yes, and yes.

If you support such a system, what allocation factors would you suggest?
Simplify, without over-simplifying. The same-sized/quality cup of coffee at an international franchise brings a fraction of the tax it would at the mom-and-pop cafe next door. How do you explain that to common citizens? What sort of framework does this provide for well-meaning politicians to operate in?

You’d already achieve a lot if all lawyers of the world were required to spend one tenth of their time working for public interests. Follow the money, and limit their actions to public interests at the source, and there’s your apportionment!

Also strongly support local currencies, notably ccc. See draft 2.3 for my thoughts on how ccc could be structured to bypass a truckload of legalese.

7.
How should we treat places where significant profits are funnelled for no good reason?
With empathy. What are they really gaining? I lived on Guernsey, and in Switzerland. Seen Private Banks, and smelled Sao Paolo.
Question: What’s the difference between a lush meeting room and a favela?
Answer: the latter isn’t even recognised by my wordpress spellchecker!*
I’ve prepared training notes for BIS, and explained to potheads how money is created. We’re really not all that different from one another, in our hearts. “Ode to Joy” (all men become brothers), “…you can’t eat money.”

That said, of course these guys deserve a right kick up the rear end, but what good is that? True wealth occurs when they realise they aren’t even helping themselves. Maybe one could accomplish this by giving them some EXTRA MONEY? This worked like a charm when my friend’s cousin cheated at cards. We just slipped him all the good ones while he wasn’t looking, and when he came back and noticed, that was the end of the game! Maybe if everyone just gave all their money to, say, BlackRock (not that far away, really), this shambles would be over by Friday. Just dump it all: “Here, that’s what you wanted, now run the show.”

If you’re reading this at the IMF, you must know first-hand how many people in the finance-funnelling business actually hate their jobs. The only reason they do it is because those activities are rewarded better in this lopsided meritocracy. Ask a Neapolitan, and she might accord a higher value to garbage disposal than to highbrow musings about the tax system.

Unlike the other questions, this number 7 is not just shortened, but adapted. I replaced “international tax architecture” with the word “we”. Why? Because an architecture cannot “treat”. Only people can. If you forget about human beings and human rights, you’re already lost.

If the world were democratic, and we had good, honest education (UDHR 26), this would take care of itself in about twenty minutes.

8.
In your view, does tax competition serve a useful purpose?
Sure it can, within limits: once safety is assured for environment and humans. Variety is important. A worldwide standard tax (and currency) would probably lead to a form of impoverishment. Remember the cybernetics guys: to have control, variety must match variety. The political and economic systems must “fit” the people, see Virtual Senate.

Can one identify particular forms of tax competition that are ‘harmful’?
Tax competition is harmful when it undermines our common points.

* Ditto externalities.

===

Q&A assembled by Michael K, citizen of the world, with UK passports (expired…I’m not paying for that, it’s a regressive tax!) and CH, e-mailed to the IMF, and posted as News at banksneedboundaries.wordpress.com – thanks for reading!

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