Monday, 21 March 2011

Solving the Greek sovereign debt crisis in c.600 words

The notion that Britain could ever be another Greece was always utter bollocks and a clear sign whoever was stupid enough to say shite like that was a fucktard of the highest order given the fundamentally different nature of the British economy. Another difference I mind coming across was the insanely wasteful public spending the Greek indulged (indulge?) in. What I didn’t realise though was the extent to which this was matched by tax evasion on an industrial scale with doctors for some reason being singled out as particularly mad for it. Like according to this article more than half the doctors in one part of Athens declared an annual income of under EUR 30k, a wee bitty of a problem when that’s less than many pay just to rent their offices i.e. they’re lying big time.

To get some fiscal rules of thumb, say yer average Greek failed vet actually earns oh, Eur 80k p.a.. Converting 30k and 80k into Sterling at EUR 1.15 to the pound works out at £26k p.a. and £70k p.a. respectively, which in terms of UK tax and national insurance is the difference between an employee paying £6 grand a year in tax and NI and £22 grand a year. Crikey

Anyhoo, lets park all that for a mo because in this terribly serious article called “Can Greece pull it off?" , (Fnarr) the terribly esteemed Professors Giancarlo Corsetti, Michael P. Devereux, John Hassler, Gilles Saint-Paul, Hans-Werner Sinn, Jan-Egbert Sturm & Xavier Vives argue that for Greece “consequences can be mitigated only by the seriousness with which the Greek government tackles tax evasion”. Fair play to them except this article highlights the counter-productive reality, which is Greek governments have been tinkering with this for years without success.

Its kinda confusing when you think about it really – pull out someone’s bank account, take a note of how much cash has actually gone thru their account in this age of debit card payments for everything (i.e. cash in hand is dying out as an option for paying for anything), compare and contrast that with what they claim their earnings are on their tax return and bobs yer uncle and fanny’s yer aunt.

The reality though is that “Greeks could appeal tax levies — and that when they did, it routinely took 8 to 10 years before a case was settled..….. there were more than 300,000 cases backed up in the system” i.e. going after tax dodgers won’t generate much cash up front, but will piss a lot of money away on the legal system.

This is where a mate’s utterly brilliant, simple, straightforward and easy to apply idea comes into play and it’s this – don’t bother chasing tax dodgers, instead, introduce or raise annual licence fees. You’re a doctor? Brilliant, physician heal thyself, but in the meantime you need a license to operate that costs the £16 grand per annum difference in tax take between what you claim you earn and what we’ve a good idea you actually stick in your back pocket.

This principle could in turn be rolled out across every other profession and small business known to be a tad economical when it came to filling out a tax return. It could also be made subject to annual review depending on how honest people were considered to be. The other point of course is that without this license all professionals and businesses would be liable to all sorts of legal actions by their clients, insurance companies, the state and what not, making it clearly in their interest to cough up. I also like the fact the 7 terribly esteemed professors didn’t think of any practical ways of putting their exhortation into practice. Fannies.

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