No remittances without representation!

The June 8 news article "In Guatemala, Harris offers stern words on corruption" reported extensively on Vice President Harris's travel to Guatemala, where the United States, by offering financial cooperation, hopes to reduce the flow of illegal migration from Central America and stimulate better behaviors, e.g., less corruption.

Though those financial contributions are indeed important, they are peanuts when compared with the remittances sent home by the migrant workers. The reality is that what the migrant workers from many Central American nations earn abroad is often much more than the gross domestic product of their home countries. The sad reality is that their remittances help to keep in power those ineffective governments that made them immigrate and that keeps them from going home.

If the United States really wants to help, then look to politically empower as much as possible those migrants in their homelands. For instance, should they not have an important direct representation in their respective congresses? No remittances without representation!

http://theamericanunion.blogspot.com/

A letter published in the Washington Post 

My tax paradise (Nothing as powerful against tax havens as tax heavens)

My tax paradise is not, as some could think, a country where there are no taxes paid, but a country with a just, transparent and efficient tax system which, without weakening the citizen, allows for the fiscal revenue necessary for the government to undertake what the citizen considers it should undertake on their behalf… and nothing more. 

Currently such a fiscal paradise does not exist anywhere. In fact what dominates in the world is the existence of real Kafkaesque tax infernos. Countries capable of transforming themselves into tax paradises have all to gain. 

My tax paradise would be governed by the following two principles: 

1. Every person has the inalienable right to contribute to his country by the payment of taxes, no matter how poor he is. It is also unacceptable that citizens can be odiously divided by interested politicians and bureaucrats, in those paying and those not paying taxes.

2. The state must not receive any income other than those taxes paid directly by the citizens in their own name. It should be an inalienable right of citizens to have their governments work exclusively for them, without patrons or other interested parties, introducing confusion into such relation.

In this respect, in my tax paradise, any person who receives a single dollar in income, for any reason or from any source, pays taxes. The tax rate, progressive of course, could for example be between 10 and 49 percent. Never should the government be able to get hold of the largest portion of the income of any citizen, no matter how wealthy that citizen might be.

Companies would not be taxed at all, because their function is to create jobs and increase the taxable income of the citizens, something they can do much better without any distortions. Of course, companies would have to withhold and pay taxes on dividends paid to those who are not fiscally domiciled in the country.

All other revenue that may enter the state, such as the net oil revenues (Venezuela) and net import duties, should be distributed directly to citizens, in the extent that macroeconomic realities so permit, and will become part of their taxable income.

The tax revenues collected by the central state should be automatically distributed on a highly decentralized basis, which in our case (Venezuela) I visualize to be about 10 percent for the governorates and 40 percent to municipalities, 90 percent of these to be distributed based on population and 10 percent based on the territory. Municipalities may also collect their residential property taxes.

In cases of national emergency, and with the favorable vote of 80 percent of the Assembly, the National Assembly may also enact a tax on the value of financial assets up to a maximum of 1 percent per year, up to a maximum period of 3 years.

¿Could public services be privatized? Absolutely, but always allocated on the basis of minimizing user fees and not, as is usual, maximizing state revenues.

¿What about public debt? Not a penny more that 30 percent of GDP, and only long term debt.

I appreciate any suggestions you may have to help make even more paradisaical my tax paradise. 

Translated from Op-ed in El Universal

PS. Phrased in other words: Corporate taxes only dilute citizen's tax representation or... clearer yet... the corporations have hijacked the citizen's tax representation... to the delight of politicians.

PS. In order for the government to timely collect taxes on what derives from corporate profits, these profits, as shown on financial statements, should yearly be passed through to the shareholders, and the corporations, in order to assist the shareholders in the payment of those taxes, decree and pay some dividends.

PS. And of course, VAT and similar, beside being regressive do not give real representation, as there is not an identified citizen behind its payment.

PS. April 2016 "Panama Papers" Don't let redistribution agitation profiteers raise your expectations.

PS. Public borrowing capacity (or money printing seigniorage) is a valuable strategic asset that should not lightly be consumed or squandered.

Flashback: April 3, 1998 The taxes we have to pay! Daily Journal Please read it.

PS. Oh, how I dislike redistribution profiteers... let's diminish their franchise value with a Universal Basic Income

The World or Mother Earth lacks representation

Wolfgang Münchau in “This gentlemen’s agreement fails Europe too”, Financial Times July 9, makes a good case for why Europe by splitting up the European representation in international institutions such as the International Monetary Fund (he argues that it is to preserve many plum jobs) ends up in fact with having no real representation at all.

I understand and agree with his point of view especially since it goes hand in hand with my opinion that since all the votes, and all the Executive Directors, and the Presidents, and so many of its staff are assigned on pure local considerations, it is the “international world”, the global order, or mother-earth itself, whatever you want to call it, that ends up being the most under represented party in these global institutions.

If we are going to be able to manage the global challenges it is urgent we look for means to break away from our parochial local chains. What about splitting at least 50% of the chairs at the Board among varied constituencies such as migrant workers, multinationals, media, educators, environmentalists, NGO’s, accountants, farmers, manufacturers, entrepreneurs, service providers like nurses or plumbers, and so on? Just beware, diversity is much more about life experiences and mindsets than about gender or race.

The only constituency that has currently a representation in IMF, in fact a 100% representation, is the constituency of central bankers and this need to be changed. Europe, if you must insist on naming the next managing director in the IMF then at least do the world the favour of appointing some finance knowledgeable person that has never worked for any central bank. That would provide us with much more needed diversity than just appointing another central banker based on the local consideration that he is from Asia, Africa or Latin America.

And this is no joke, incestuous groupthink is about the most dangerous limiting factor when it comes to impede clear thinking and effective actions.

The Basel Committee is just a mutual admiration club of firefighters trying to avoid bank crisis at any cost - even at the cost of growth.

A fairly reasonable petition to the European Executive Directors of the World Bank

The World Bank and IMF, should give the whole world, Mother Earth and the Global Rovers, more voice at its Executive Boards.

Many seem to opine that if only the votes and the composition of the Executive Boards of the World Bank (and the IMF) reflected better current economic size, then global imbalances had a better chance to disappear, like magic. It might not be as easy as that, and just for a starter why would GDP or the market share of the world trade be more important than market capitalizations for assigning voting power. Also if we are at it, why should we not then go for a full Monty on democratic reform and use population as the basis?

If and when a possible reshuffling of the current 24 Executive Directors should happen, I hope it will be to give representation, perhaps not to Civil Society, which is sort of intangible, but to that very tangible piece of land, water, and air that we all know as planet earth.

Although we proudly name ourselves the World Bank, the fact is that we are more of a “Pieces of the World Bank”, with 24 Executive Director representing parochial interests. As a consequence I sadly had to conclude in that the World itself, call it Mother Earth if you want, in these times of globalization, is in fact the Bank’s most underrepresented constituency.

This needs to be fixed, urgently, as we need to be able to stimulate a profoundly shared ownership for the long-term needs of our planet, if we want to survive as a truly civilized society, worthy of the name civilization. As I see it, adding a couple of truly independent seven-year-term Executive Directors, whose role would be to think about the world of our grandchildren, way beyond the 2015 of the Millennium Development Goals—could be what the World Bank most needs now.

And, while at it, we should perhaps also ask one of the current Directors to give up his Chair for a new constituency—call it, if you will, the Constituency of the International Rovers, by which I mean all those workers, skilled or unskilled, legal or illegal, who nowadays represent jointly one of the largest economies of the world. By the way, the first thing that the Global Rovers’ ED would need to do is to make clear the enormous difference that exists between an immigrant with a long-term plan to emigrate from motherland and forever assume a new nationality, and, on the other hand, a temporary worker who just wants to make a buck in order to help his family to a better life, and who wishes with all his heart and soul to return home as soon as possible. Forcing temporary workers to swear allegiances to foreign flags, just so that they can have the right to a better income, cleaning toilets, seems only like a new generation of artificial trade barriers.

Currently we are too stuck in the geography of the non-globalized world to be able to see what is truly happening around us. For instance, El Salvador has about 2 million of its people working abroad, more than a third of its total workforce and so if to the current GDP figures of El Salvador we add what these workers are earning, gross, well then perhaps El Salvador’s growth rate could actually be higher than China’s. And you tell me, why should we not do it this way? Is not an El Salvadoran still a real El Salvadoran just because he or she is working abroad? The internal emigration in China from west to east might take a Chinese from 50 to 150 dollars per month, but the El Salvadorans going south to north go from 120 to 1.200, and no one is heard complaining about an over or undervalued currency.

(Extract from a presentation of Voice and Noise at InfoShop on May 16, 2006)