When I see articles on these subjects I have to wonder when governments will realise that they need to change their policies, and soon. The country’s tax base is being eroded because people who are tax payers are being replaced by robot technology which does not pay tax.
In addition, the cost to government of welfare goes up as people become unemployed.
It goes far deeper when it is noted that the end product of all business is the supply of goods and services to the community and robots do not consume these goods and services. It reveals that people need to work to have money with which to live, the alternative would be for people not to have to work but be given the goods and services they need with governments owning and running the means of production.
Glodal trade and free markets are all well and good but they are not the answer. The economy is not about business making money. Governments have to go back to basics. Their responsibility is to the community and they have a responsibility to ensure that people work and earn a living for one very good reason — they form the market place. Few people appreciate that recession as often as not is caused by a reduction in spending power and the cure is to increase spending power in the economy. Many businesses and governments will stop salary increments and have redundancies in a recession while the opposite is necessary.
Many businessmen do not appreciate that the overall market place for business is provided by the spending power of the community and although a business will supply other businesses and governments the end of the chain for the business sector and the government is the provision of goods and services to the community. It is difficult for the Mining Industry for instance to appreciate that their income is reliant on the market place provided by consumers. The mines will produce raw materials for industry and industry will manufacture and sell to other industries. Nevertheless at the end of the chain there are only consumers to buy the end products. Even the supply of goods and services to governments is in the end for the benefit of business and the community. It may be difficult for accountants and bankers to appreciate that their costs are recovered largely from business enterprises as well as people, but they must now realise that those costs are included in the price of the goods and services being provided to consumers.
Look at American history and find that the economy was strongest when the people were working and had a good standard of living. Look at Zimbabwe under full sanctions its dollar was once worth more than the pound sterling and the sanctions forced the country to develop its internal economy. Governments need to concentrate the country and business sector on self sufficiency, full employment and improving the standard of living of the people. To this end, taxation requires radical change. Income tax adds to the cost of employment as do all the other taxes paid by the people.
Everyone believes that they pay these taxes and few appreciate that the employer adds these taxes into his costs and they end up in the end price of the goods and services bought by consumers. These changes would allow Brexit to happen successfully. These taxes can be replaced through increasing VAT without increasing prices and would ensure that robots shared equally in the tax burden.
By taking away income tax the cost of employment will be reduced and by taking away other taxes and contributions paid by people it will further reduce the cost of employment. Free health and education further reduces the cost of employment. As the cost of employment falls it is vital to maintain and even increase spending power. The economy then works on the basis of increasing VAT to reduce spending power and increasing wages to improve the economy and to avoid such things as recession.
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Almost all taxes with the exception of VAT add into the costs of production and the end price of goods and services. So almost all taxes including company income taxes can be removed making investment into the country extremely attractive. How to do it is another story.
These changes are vital Cto ensure economic success.
Peter William Bailey
email: [email protected]/baileysneweconomics.com
