Having fallen so low, Venezuela should take that golden opportunity to try reach the stars.

Moisés Naím and Francisco Toro describe well the utter current horrors of Venezuela in “Venezuela’s suicide: Lessons from a failed state” Foreign Affairs, December 2018.  But they conclude in that: 

“Even if opposition forces—or a U.S.-led armed attack—somehow managed to replace Maduro with an entirely new government, the agenda would be daunting. 

A successor regime would need to reduce the enormous role the military plays in all areas of the public sector. It would have to start from scratch in restoring basic services in health care, education, and law enforcement. 

It would have to rebuild the oil industry and stimulate growth in other economic sectors. It would need to get rid of the drug dealers, prison racketeers, predatory miners, wealthy criminal financiers, and extortionists who have latched on to every part of the state. 

And it would have to make all these changes in the context of a toxic, anarchic political environment and a grave economic crisis.”

That mission impossible sounding reads like placing all responsibility on the government to fix it all by going back and repeat, this time differently, all that got Venezuela to where it is today.

That to me is unacceptable. After all the blood, sweat and tears Venezuela has had to spill during the last decades, it really deserves a brand new future.

Here are eight tweets that imbed my action plan and dreams for my country.

"So Venezuelans can eat, quickly, PDVSA must be handed over in payment in full to all Venezuela’s creditors quickly, so they put that junk to work quickly, so they can recover some money quickly, and so as to pay us citizens, not the government, royalties quickly"

“Let then the government tax those oil revenues received by the citizens (like with 10%), so that those in government are clear about who they work for, and let what the citizens have left, then flow through the market and help oil the economy of Venezuela.”

“The result will be a different and better Venezuela, freed from those oil revenue distributing profiteers that have always found ways to keep more for themselves or their crony friends. No longer will Venezuelans have to live in somebody else’s business”

“New government debt should be contracted only to help pay for investments needed by its core infrastructure; Guri’s hydroelectric dams and central transmission lines. Privatizations should be designed to provide good and low priced services to the public ” 

“Expropriated properties should be returned to original owners, and all efforts made to recover what has been stolen the last 20 years, including by paying a bounty on any money recovered.”

“The government employees should be reduced to a fraction of their current number. With their individual share of oil revenues, and not having to go to work, most of them would anyhow be better off than today”

“The government’s initially ultra low revenues should be used almost exclusively for law enforcement (not military spending). Make Venezuela’s streets safe again, and Venezuela’s citizens, including returning migrants, will take care of the rest”.

“The best way to eradicate forever that economic human rights violation of giving away gasoline domestically, would be to have all citizens to participate in the revenues generated by the sale in Venezuela of gasoline at international prices”

These tweets are not just based on current realities. In 1974, as a 24 years old recently graduated MBA, I was appointed to be the first diversification manager in the Venezuelan Investment Fund that was being created to manage the oil revenues from the oil boom of those days. I resigned after only two weeks, the same day my desk arrived, already convinced by outside pressures exerted, that oil revenues redistribution profiteers would never allow the Fund to have the independence needed.

Three decades later, as an Executive Director of the World Bank 2002-04, a chair that Moisés Naím had also occupied before me, during and after the Iraq war I tried to push for an oil revenue sharing scheme as best I could. No luck, the crony statism interest of concentrating these revenues in the hands governments, were they could be more easily exploited, proved much too strong for me. 

Now Venezuela has a golden opportunity to free itself from the most malignant part of its oil curse, the excessive concentration of power in its government. I pray it is able to keep away any neo-redistribution profiteers. Let us make sure that having fallen this low we Venezuelans will aim for the stars… that way we will, as the Chinese saying goes, at least reach higher than if aiming at something seemingly more reachable.

“Venezuela would need to get rid of [all] who have latched on to every part of the state.”  What better way than assuring there is much less to latch on?

Here are some of the articles I've written and that relate to my desires about Venezuela’s future.

https://www.carnegiecouncil.org/publications/archive/policy_innovations/commentary/000083

https://perkurowski.blogspot.com/2012/03/my-tax-paradise.html

https://perkurowski.blogspot.com/2017/06/a-simple-but-complex-question-from.html

http://unsustainabledebtsustainability.blogspot.com/2006/05/debt-sustainability-analysis-sdl.html
https://theoilcurse.blogspot.com/2015/07/cidhdenunciasoas.html

http://theoilcurse.blogspot.com/2016/05/the-last-thing-venezuela-needs-is-to.html

Don’t let redistribution profiteers raise your expectations. In offshore centers there are no shining treasures, only documents.

With relation to Panama, the Mossack Fonseca affair and offshore centers in general how many articles do not begin with something like “The wealthy conceal their cash”?

That gives the impression of an Ali Baba cave where fabulous unused treasuries are stored and that if only these could be recovered from the 41 thieves everyone would live happily ever after.

What devious bullshit! What exists in those offshore caves is a load of documents that gives the holders of these the ownership of a lot of assets, almost all of these to be found onshore... for instance stocks, property in London or municipal infrastructure bonds.

Granted, the ownership of some of those assets is incorrect, since in not so few cases they should belong to the governments… but that is another issue that has little to do with the assets as such.

And many of those assets are the result of loopholes… but who can throw the first stone holding that using loopholes is an odious behavior.

If you hate loopholes, I do, fight for their removal, by for instance making tax laws simpler, better and fairer.

But in the same vein we have corporations who, egged on by smart tax-lawyers, intensely exploit the opportunities loopholes provide, let us not forget that on the opposite side, we most often find redistribution profiteers waiting to lay their hands on new business opportunities.

For instance if we want to redistribute wealth and income, the most efficient way would be through a Universal Basic Income scheme, at a cost of 2 percent tops, but that leaves many of the redistributes asking "what’s in it for me?"... and so they oppose it.

If for instance we imposed a big carbon tax and distributed its revenues equally to all as a part of Universal Basic Income then we would align beautifully the fight against inequality and climate change, but a lot of the mercenary soldiers in the wars against climate change and inequality, would also ask… what’s in it for us?

Profiteers surround all wars, no matter the cause. It is impossible to avoid them, but let us at least try to point out their theoretical existence.

And please when I refer to “profiteers” I do not only speak of those who collect their profits in cash. Much much worse are those demagogues and populists who collect their profits in political power… like the late Hugo Chavez did.

PS. An interesting question is what represents more money deposited in offshore centers: that from tax fraud and evasion or that from stealing tax revenues?

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