Monday, July 27, 2015

On the Greek Crisis

A quick note - if the Greek Government introduced a Tax on The Use of Money, many of the current problems might be solved.

The tax would solve the problem of unpaid and uncollected tax revenue, at little extra cost.
The flow of financial information would alleviate the concerns of the lending banks.
The transparency of tax revenue would help plot the long term loan repayment schedules.

It is more than likely that the EU banks would view Greece as a much more secure investment and extend the loans.

Introducing the Taxing of the Use of Money

On the weekend I was asked about how a government could introduce a tax on the use of money.
The view was that it would be politically impossible, and a bureaucratic nightmare.

If you think of it only as a revenue source - yes.

But think of the information flow back to the government. The tax is based on all transactions.
So once in place, no matter how small the revenue, it is possible to extrapolate back to the streams of money flows in various regions and industries.

So the first step is to legislate the tax at a very very tiny percentage - just sufficient to get the data flowing and for the banks to implement the collection and transfer to the government tax accounts.

Then once the tax is in place, Treasury can start to calculate the revenue flows from incremental percentage increases. And public education programs can be started to explain which taxes are being abandoned in exchange for what percentage increase, until the point where all other taxes and imposts have been removed.

The time scale and rate of change is a matter of bi-partisan and public support. But the increase in timely financial and economic information should make it attractive to all parties.