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Brexit & Customs Union – The New Brexit Deal?

by John Brian Shannon

UK Prime Minister Theresa May continues to reach out to the EU in order to obtain a workable Brexit deal for both sides. As of today, she’s planning to offer a Brexit deal whereby the UK would stay in a Customs Union with the EU for a specified time in order to give negotiators the time they need to iron out their differences on the Northern Ireland question and other Brexit matters.

Some genuinely admire Ms. May’s efforts in this regard but wonder if she has spent too much time and effort ‘pitching’ to the EU without getting anything in return. It seems for all her good intentions all the EU side says is, ‘No’, ‘No’, and more ‘No’.

Indeed, that’s all they’ve been doing — the more Theresa May offers, the more the EU wants!

And unless the EU side suddenly gets more reasonable it’s going to end badly for both sides.


Is Brexit + a Time-Limited Customs Union Agreement Brexit In Name Only?

For hardline Brexiteers, such a capitulation (for that is how they will surely see it) would be considered a so-called BRINO (a Brexit In Name Only) and is worth much less to them than a so-called Hard Brexit where the UK would leave without the benefit of an agreement with the EU and the UK would be free to embark on any path it chooses.

The EU’s intransigence feeds this feeling among Brexiteers and it seems to be catching-on with moderates in recent weeks.

But there are positives to such a Customs Union plan.

It’s worth noting at this point that negotiators on both sides have been working to create a workable Brexit deal for 2-years and 4-months and have precious little to show for it. The combined total successes are zero and the European default to ‘Low Ambition’ is on full display. Yes, very European.

Yet, responsible leaders continue to throw themselves into finding a Brexit plan that works for both sides. For which they get nothing but abuse and insults on both sides of the English Channel. Shameful.

In the end, obtaining a Brexit deal that results in the least amount of disruption to both economies is the best outcome. And if that means the UK continues on in a Customs Union with the EU for 2-years to give negotiators the time to arrange a suitable Brexit deal — one that includes a proper Northern Ireland agreement — it’s worth the effort.

In the case of failure to reach an agreement for Northern Ireland and other Brexit issues, then a Hard Brexit would remain the only option.

But at least the UK will have put its best effort into obtaining a workable Brexit and any blame for that failure will fall squarely on the European Union as the facts will show Theresa May has been working diligently on the Brexit file through her entire Premiership and has been bending over backwards to find a suitable deal over the past 2-years, while the EU side has been cross with Ms. May for having the temerity to listen to UK voters.


If May Presents a Time-Limited Customs Union Plan, MP’s Should Support It

As they say here in North America, if you give the Europeans a week they’ll take a year and still be a few days late, just on principle.

The same holds true with negotiations: Look at the CETA deal that Canada and the EU negotiated. SEVEN YEARS! (And it’s still not fully implemented)

If the Canadian government had allowed it to go on and on it might have been 2025 by the time it was ready to sign. It seems someone on the Canadian side got a little bossy with the Europeans. Thank you Chrystia Freeland! (Canada’s excellent Foreign Minister) Eight years on, CETA is only partially implemented and none of the EU27 have ratified it. Historic Low Ambition!

Under no circumstances should a UK government ever enter into non-time-limited negotiations with any party, especially with the European Union.

You see what Theresa May is up against?

If there isn’t a strict time limit, the wheeling and dealing will go on forever. And with Theresa May’s well-intentioned but naive personality if it isn’t strictly time limited, by 2025 she will have negotiated away every bit of UK territory, wealth, and rights to the EU — which still won’t be enough for the EU side.

And if that is true, what is the benefit of dragging out negotiations over many years when putting them on a strict timetable will either timeforce an agreement on both parties or allow the UK to get on with creating a better future for Britons free of EU constraints.


Related Article:

  • May agrees to curbs on trade to break Brexit deadlock (The Times)

Why the UK Should Match Canada’s 15% Corporate Tax Rate

by John Brian Shannon

Canada’s corporate tax rate remains at 15% and that low tax rate was one of the reasons the country essentially cruised unharmed through the financial crash of 2008 and its bloody aftermath.

Throughout the global financial meltdown Canada easily led all G7 countries in growth (although Canadian growth was curtailed as compared to pre-crash projections) and the country didn’t need to increase taxes, nor make major fiscal or monetary adjustments during that period.

Corporate Income Tax Rates for Canada in 2018.

Corporate Income Tax Rates for Canada in 2018. For active business income — includes all rate changes announced up to June 15, 2018. Information courtesy of www.EY.com

Although the country isn’t thought of as an offshore tax haven by any stretch, having a 14.5% corporate tax rate during the global economic crisis (it’s since risen to 15%) meant the country avoided the exodus of capital that other nations experienced.

That reasonable corporate tax rate as much as any other factor helped Canada to survive and thrive in the face of one of the most damaging economic meltdowns in modern history.

Money fleeing the country to low corporate taxation destinations is NOT what the UK government needs any time over the next decade.


Will There be Another Recession?

Of course there will be another recession. Recessions in Western countries occur every 25-years on average although unexpected economic shocks have been known to occur. Just because the average interregnum is 25-years, doesn’t mean recessions can’t also happen randomly — which means that the UK needs to begin playing it smart, now, to better survive the next global downturn.


Why Match Canada’s Rate?

Canada’s corporate tax rate just happens to fall within an economic ‘sweet spot’ — high enough that it doesn’t get named and shamed as an offshore tax haven (which tend to get a lot of bad press when a recession is on) yet is close enough to other developed nation corporate tax rates that it doesn’t get a bad reputation.

All else being equal, you want to go with what works. And Canada’s low corporate taxation plan worked wonders to help the country coast through the last recession — and it performed even better than expected, pre- and post-recession.

Sure, there were nervous moments here and there, nobody denies that. But that 15% rate combined with a steady hand on the economic tiller by Mr. Mark Carney then-governor of the Bank of Canada (now governor of the Bank of England) and the country under the steady leadership of (then-Prime Minister) Stephen Harper added gravitas and confidence to the Canadian economy at a time it was needed.

That’s all it takes to survive and thrive in recessionary times, folks.


Philip Hammond’s Next Budget

UK Chancellor of the Exchequer Philip Hammond should match Canada’s corporate income tax rates exactly, and publicly commit to that at Spring Budget 2019. Or even better, in Autumn Budget 2018.

Due to Brexit there is a real need to write both a spring and autumn budget each year, at least until the 2-year implementation period is complete.

Lowering corporate taxes could mean less revenue for HM government. That’s a possibility. But there are positives to a lower corporate income tax rate for the UK, particularly during the present economic uncertainty:

  1. More companies will move their headquarters to the UK to obtain a better corporate tax rate.
  2. More UK companies will decide to stay in the UK rather than leave it for (perceived) greener pastures during this period of economic uncertainty, although they could well have plans to return 5-years on from Brexit. (But can you count on that?)
  3. UK-based companies will have more money to invest in their UK operations, to increase non-labour purchases, and perhaps expand their existing factories, facilities, or number of retail outlets.
  4. UK companies that presently fear Brexit may hurt their business may find that as the UK corporate income tax rate falls to 15% it gives them a competitive advantage of 5% they didn’t have prior to this (proposal). Less fear and better after-tax profits. ‘Gotta like that’ said every CEO ever.
  5. Instead of the government needing to stimulate the economy, increased spending by UK companies flush with newfound cash will help to stabilize the economy now and through the 2-year implementation period via increased spending and hiring.
  6. Hiring more workers with a 5% tax savings means more revenue for HM government — as many of those workers will earn enough to pay an average 45%-55% personal income tax rate.

That’s just a short list of the benefits of lowering the corporate income tax rate to 15% and if the tax reduction announcement is timed correctly HM Revenue and Customs shouldn’t suffer any loss of revenue — and it’s possible that HMRC may receive slightly more revenue courtesy of additional personal income tax contributions if companies go on a hiring spree with their saved money.


Here’s a bonus graphic to show *what can happen* when you cut the UK corporate income tax rate…

UK Corporate Income Tax Rate drop

UK Corporate Income Tax Rate drop increased tax revenue by 50% from 2010-2016. Image courtesy Daily Mail.

Why the UK Should Tax Robots Post-Brexit

by John Brian Shannon

One point that never seems to get enough attention in the UK and other Western democracies is that there are always more job-seekers than jobs available.

It doesn’t matter which country, which decade, which party is in power; There are always more people looking for work than there are jobs available and it remains a permanent condition in Western countries, much like the cosmological constant that defines the universe remains a permanent condition.

Telling people to “Get a job!” to solve their poverty issue or quality of life issue isn’t the answer to handle a force majeure like an eternal shortage of jobs. If everyone who could be employed followed that advice there would inevitably be 10% of the population who would miss out on a job simply because there isn’t the level of demand necessary to employ everyone who wants to work (or who needs to work to pay the bills) in any Western country. (Remember, official unemployment figures show only the number of people receiving unemployment insurance payments, not those who’ve exhausted their UI benefits and still want to work, nor do official figures show those who gave up looking for work and returned to college, or became a homemaker or unpaid intern, etc. There are significant numbers of these people in every Western nation)

Indeed, our Western economic model is predicated on human redundancy which works to keep significant downward pressure on wages, and that helps business to control their labour costs and thereby contributes to the bottom line.

It’s not that companies are evil entities, everything they do in this sphere is legal and is considered normal practice in our economic system. So, if you’re blaming industry for this state of affairs, I’m sorry, you’ve missed the point.

Government regulation over many decades have produced this result and it’s only government regulation that can solve or mitigate the consequences of this unfortunate situation, which has evolved it must be said. Nobody would create such a system from scratch. The system has evolved in piecemeal fashion.

Yet as creaky and wobbly as it is, it works. But it’s costly and it underperforms compared to what could be done.


The Robot-Tax Tour!

With all of that in mind, let’s go on a little tour to show us what rolling all social welfare programmes into one streamlined entity can do for the UK and it’s citizens, and what a low-ish tax on robots could do to pay for that all-in-one social care system:

  1. Imagine a low-ish tax on robots in the UK that accumulates enough annual revenue to pay for the country’s welfare system, disability benefits system, Universal Credit system, is able to top-up the monthly income of poverty-stricken senior citizens to a minimal level, end the need for food banks, solve homelessness and homeless-related costs like policing, court, and incarceration, and do away with the need for many overlapping social welfare programmes at all levels of government.
  2. It’s important to remember that all these programmes are already paid for by various levels of government and that I’m merely proposing to roll all of them together into one super-streamlined programme and have a ‘robot tax’ pay for it.
  3. Let’s also say there is massive duplication of services (there is) in all of these present-day programmes and that such duplication is costly to the various levels of government and to the taxpayer who pays every penny of it through taxation.
  4. The prime beneficiaries of all that paying seems to be industry, which enjoys the benefit of a labour pool permanently mired in a state of ‘job insecurity’ that works to keep workers ‘hungry’ for work and working for wages lower than would otherwise be the case. Shareholders around the world admire your contribution to their annual dividend payments!
  5. At present, robots aren’t taxed in the UK. Yet, these job-stealing marvels produce many times the output of a human being. Which means that if “Robert the human” produces 100 widgets per day, a robot can produce 1000 widgets per day. This means that “Robert” and 10 other people like him can be replaced by ONE ROBOT. But that statistic doesn’t tell the whole story because ONE ROBOT can work much faster than “Robert the human” and it can work for the full 24-hours and produce 10,000 widgets daily; Meaning ONE ROBOT can replace 1000 “Roberts”. The ratio then, is likely around 1/1000. Each robot replaces 1000 workers. See the future more clearly now?
  6. So, if one robot can replace 1000 workers and thousands of robots are going to take almost all manufacturing jobs, almost all agricultural jobs, almost all call centre jobs, and almost all clerical jobs, how many people will become “redundant” by 2033? And the answer according to the highly respected PwC is; 50% of all workers.
  7. Yet, even with those changes on the horizon (remember, this is already happening, it isn’t going to suddenly start in 2030 and be completed by 2033) it’s happening now and not one word about it has been uttered by world governments. Or maybe they know enough to keep quiet about the fact that EACH ROBOT can replace 1000 workers, thereby improving profits for companies. And as long as taxpayers aren’t rioting about it then maybe taxpayers finally accept that they exist, in part, to subsidize corporations.
  8. Another major consideration is that for each 1000 jobs replaced by ONE ROBOT the government is losing the income tax revenue generated by 1000 workers! The government must also pay former workers unemployment insurance payments or Universal Credit / welfare payments, or pay them via other anti-poverty schemes. Perhaps politicians think taxpayers don’t mind paying for all those costly and sometimes overlapping social programmes to support people whose jobs have been replaced by technology? That’s in addition to paying mega-millions to cover the costs of homelessness (in cases of long-term unemployment) and the crime / policing / court costs / incarceration costs that are associated with homelessness, illicit drug use, and other medical and mental health related costs. To put numbers on only a small part of this problem, each UK prisoner costs the taxpayer £81,000 per year to house + free medical + free dental + free prescription medications. Wouldn’t you rather have it that robots paid poverty-stricken people £13,056/yr + free medical + free dental + free prescription medications to help prevent them from ending up in prison in the first place?
  9. It’s not about being a Luddite! It’s about helping industry hire as many robots as they want (guilt-free!) yet taking care of living, breathing human beings in the meantime. That way, UK businesses can thrive as never before, hire only the humans they need, and still have a large pool of human labour to jump-in on an as-needed basis to fulfil those functions that robots can’t easily perform, such as customized or highly specialized orders.
  10. By rolling all UK anti-poverty programmes into one streamlined single-payer system and paying for it via a reasonable tax on robots, human workers can continue to live, eat, and remain housed (and remain ready to work on an as-needed basis) and UK corporations can begin to reap unprecedented profits!

Tax robots in the UK.

2018 looks to be a good year for world’s top industrial robotics companies, with many of them innovating and simplifying the industry. Industrial robotics services are also benefitting, expecting an incremental growth of well over $4 billion by 2021. Image courtesy of Technavio.com


ONE SYSTEM INSTEAD OF MANY

How to accomplish all of that? By switching all anti-poverty programmes in the UK into one streamlined single-payer system that pays every unemployed adult £1088/mo + free medical + free dental + free generic prescription medication. (This option is limited to those earning less than £13,056 per year from all sources, according to their latest income tax return)

LOW-INCOME UNEMPLOYMENT INSURANCE RECIPIENTS PAID BY THE SINGLE-PAYER SYSTEM

Due to previously working at a low wage job, a person receiving unemployment insurance payments may receive less than £1088/mo. from their unemployment insurance plan, therefore in such cases the single-payer administration would simply ‘top-up’ their monthly payment to £1088/mo. + the healthcare benefits listed above.

It would become one step easier by having the single-payer assume full responsibility for payments to that person and the unemployment insurance administrator would simply reimburse the single-payer administration the monthly amount they would’ve paid to that unemployed person anyway. (Limited to unemployed adults earning less than £13,056 per year from all sources, according to their latest income tax return)

LOW-INCOME SENIOR CITIZENS PAID BY THE SINGLE-PAYER SYSTEM

To lift senior citizens out of extreme poverty and to allow them to live a more dignified lifestyle (in return for helping to build the great UK we see today!) and be better positioned to assist younger members of their family, any senior who reports less than £13,056 annual income would have their monthly income ‘topped-up’ to £1088./mo and receive the same benefits as anyone else on the single-payer system. (£1088/mo. + free medical + free dental + free generic prescriptions)

Again, a government or private pension plan is already paying those seniors a predetermined monthly amount. All the single-payer system would do is ‘top-up’ the income of seniors to the £1088./mo (plus the benefits above) and those pension plans would simply transfer those payments to the single-payer administration which would merely ‘top-up’ the difference in the monthly amount and pay the senior directly. (Limited to seniors earning less than £13,056 per year from all sources, according to their latest income tax return)

UNIVERSAL CREDIT AND OTHER ANTI-POVERTY PROGRAMME RECIPIENTS PAID BY THE SINGLE-PAYER SYSTEM

Instead of the many overlapping and inefficient organizations trying to cope with the needs of poverty-stricken UK adults, the single-payer system can work more efficiently to meet the needs of those who otherwise may fall into ill-health, depression, homelessness, crime, or any other poverty-related condition that results in real costs to the UK government and society in general. Those costs are already being borne by UK taxpayers along with a perceived loss of personal security and mobility freedom among the UK population.

All of these overlapping and inefficient social welfare programmes should be ended by 2020 and replaced by a streamlined single-payer system based on the social insurance number and the individual’s latest income tax return. This is commonly known as a ‘reverse income tax’ among economists. Every UK adult who earns less than £13,056 per year (from all sources) would automatically be enrolled in the single-payer system and begin receiving payments the same month they file their tax return.

When every unemployed adult or retired Briton is earning a minimum of £13,056 per year + free medical + free dental + free generic prescriptions (using the reverse income tax/single payer model) AND all of it is paid for by robots that create 1000-times more wealth for their companies than human beings will ever create, that will be the day that the UK scores the biggest win since the National Health Service was founded.

Among the ‘wins’ of the reverse income tax/single payer model would be the end of homelessness and its associated crime component and a corresponding reduction of property insurance rates, and the end of wasteful, inefficient and overlapping anti-poverty organizations (both public and private) for just a few examples of the benefits of the single-payer model.

And all of it paid for by a moderate tax on robots and other job-stealing technologies that (each one of them) can do the work of 1000 human beings — which means that even with the ‘robot tax’ UK businesses will profit as never before!

It would create a better future for individual Britons, for UK business and their bottom line, and for every level of UK government when compared to allowing the status quo to continue unchanged.


Related Articles:

  • New study shows nearly half of US jobs at risk of computerization (University of Oxford)
  • Will Robots Really Steal Our Jobs? (PwC)