Tuesday, January 21, 2014

On taxes, tax avoidance and real resources

Following the thread of thought that money are worthless for a government, but real resources are a Good Thing, both for the government and for the country at large, then that corporations pay tax, which might then drive them to manufacture stuff abroad, is very counter-productive. Manufacturing should be encouraged to stay in the country.

A general move towards consumption-based tax, like VAT, will also help, and place the tax more equitably and where it matters, as the tax is generally aimed at reducing aggregate demand to a level that government spending does not cause inflation.

Taxes also serve a social purpose, by applying them differently we encourage some sectors of the economy above others. To this end, maybe manufacturing should be receiving a lower tax rate.