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Thursday's Top 10 with NZ Mint: A FAT tax may replace the Robin Hood tax; Why the Baby Boomers should 'pay it forward'; A BRICs bank; The Muppets sue Goldman Sach; Dilbert
Here's my Top 10 links from around the Internet at 3 pm in association with NZ Mint.
I welcome your additions in the comments below or via email to firstname.lastname@example.org.
I'll pop the extras into the comment stream. See all previous Top 10s here.
My must read today is #7 on Baby Boomers paying forward their good luck. I'm off on holiday now until early May. David Chaston will run Top 10 in my absence. Good luck to you and yours.
1. Move over the Robin Hood Tax - Hugo Dixon at Reuters' Breaking Views says the EU seems set to drop its original plans for a Tobin Tax or financial transactions tax, also known as a Robin Hood tax.
Instead, he reckons countries should impose a hot money tax on banks and that financial services should no longer be exempt from Value Added Tax (VAT).
Dixon also reckons firms should not be allowed to claim interest expense as an expense to reduce their tax bills.
He's talking very radically here.
And with a lot of sense.
Here's Dixon on his idea -- a FAT tax:
There are broadly speaking two solutions. One is to work through the technical complexities. The other is to introduce a financial activity tax, known as a FAT tax. This is applied to a bank’s earnings and the compensation it pays employees on the theory that the sum of these is just value added by another name.
The FAT tax has potential populist appeal, not just because of its name. After all, in the current environment, who would object to taxing banker pay and bank profit? One wrinkle, though, would need to be ironed out before FAT was an ideal tax. Some way would have to be found of giving business consumers a FAT tax credit.
There’s no disguising the fact that it would be complicated to revamp the way that banks are taxed. But given the havoc they caused in the crisis, the fact that the sector is under-taxed and the way in which the current system distorts economic activity, it is well worth the effort. The near-death of the Robin Hood tax provides a golden opportunity to do so.
2. What companies could look like - David Rohde at Reuters reports on a family-owned supermarket company in America that puts its customers before its shareholders, which turns out to be a great way to run a successful company.
Wegmans, which operates its 79 stores in New York, Pennsylvania and four other East Coast states, shows that a business can generously train its workforce and profit handsomely.
Privately owned by the Wegman family, the chain employs 42,000 people – 20 times the number who work for Facebook – and defies quarterly-driven Wall Street wisdom. Executives say their most important resource is their workers.
“Our employees are our number one asset, period,” said Kevin Stickles, the company’s vice-president for human resources. “The first question you ask is: ‘Is this the best thing for the employee?’ That’s a totally different model.”
3. Here comes democracy - The Wall St Journal reports half of Greece's voters plan to vote for extreme left and extreme right candidates who want nothing to do with the austerity packages their mainstream politicians have signed up to.
Hold tight everyone. The Greek crisis and the European Debt debacle is far from over.
The election, not yet scheduled but expected in April or May, is shaping up as a public revolt against Greece's political establishment, which has backed the austerity policies that are the price of financial life support from Europe and the International Monetary Fund. Mainstream politicians are increasingly painted as leading Greece into a debt trap, then impoverishing it in trying to escape.
As a result, Greece's major parties, which have promised Europe they will enact yet another round of deep public-spending cuts by summer, are struggling for support.
Half the electorate plans to vote for radical opposition groups, ranging from Soviet-style Communists to anti-immigrant neo-Nazis, according to recent opinion polls. That could lead to growing political instability even if the established parties cling to power, undermining Greece's ability to enact the drastic spending cuts and economic overhauls its creditors demanded.
Here's the key line.
George Vourtsis, a 30-year-old unemployed accountant, came to watch the parade but couldn't get close thanks to the metal barriers. He can't find work, forcing him to live with his parents. His father, the main breadwinner, has had his pension cut by 25% to €900 a month under the austerity program.
Mr. Vourtsis is among the one in four Greeks who say he or she wants to leave the euro and return to the old national currency, the drachma. "We who are unemployed and are already living a reduced quality of life have nothing to lose," he says: "It's the banks who have something to fear."
4. Irish corruption - The Guardian reports former Irish Prime Minister Bertie Ahern is set to be expelled from the former ruling party Fianna Fail after an official report found he was 'untruthful' when explaining large payments into his accounts.
During the decade-and-a-half-long inquiry into the connections between Fianna Fáil politicians and developers seeking to have land rezoned in Dublin, Ahern explained that several donations made by wealthy party supporters into his account were personal "dig-outs"; they were donations from friends to help him cover legal bills after his divorce rather than payments from developers who the party had helped out in controversial planning applications.
But the report rejected Ahern's explanation. It focused on a payment of €165,000 that passed through his accounts. The tribunal said Ahern had failed to "truthfully account" for how he had obtained that sum.
5. I wonder if this stuff extended to Sky TV - Neil Chenoweth reports in The Australian Financial Review (not paywalled) about how "Rupert Murdoch’s News Corporation promoted a wave of high-tech piracy in Australia that damaged Austar, Optus and Foxtel at a time when News was moving to take control of the Australian pay TV industry."
A four-year investigation by The Australian Financial Review has revealed a global trail of corporate dirty tricks directed against competitors by a secretive group of former policemen and intelligence officers within News Corp known as Operational Security.
Their actions devastated News’s competitors, and the resulting waves of high-tech piracy assisted News to bid for pay TV businesses at reduced prices – including DirecTV in the US, Telepiu in Italy and Austar. These targets each had other commercial weaknesses quite apart from piracy.
6. A BRICs bank - The Hindu reports the world's most powerful emerging economies, Brazil, Russia, India and China, plan to create their own IMF-style bank.
Which trade bloc would/should New Zealand choose if the world did break down along these lines?
Growing Chinese concerns about fluctuations in the U.S. dollar and a fresh drive to promote cross-border settlements in the Renminbi were behind Beijing's renewed interest in pushing forward the move, according to officials in Beijing.
If Beijing had its way, after leaders of the five countries approve the pacts for local currency trade and the bank on Thursday, the idea could be forwarded to other emerging countries at the forthcoming G-20 summit in Mexico.
7 'Pay it forward' - John Kay writes at FT.com that his generation of Baby Boomers should repay its good luck and 'pay it forward' to redress an intergenerational inequity.
Young people might reasonably ask their parents or grandparents why a much richer society cannot now provide the benefits it provided for an earlier generation. I am not sure I have a good answer. A university education that was once available to less than 10 per cent of the population cannot be offered on similar terms when half the age cohort is going to university nor, if higher education is so widely available, can new graduates expect the same job opportunities as the older ones. But, in the main, I would have to reply that whatever the sacrifices my parents and grandparents made for us, we do not intend to display similar generosity now that we are in charge.
The reality is not that we can’t pay, but that we won’t pay. Many people are nostalgic for their experience of university, but unwilling to provide funds to universities and their students that would make that experience possible today. Members of my generation won job security for themselves, and awarded themselves index-linked pensions, but we tell our successors they cannot expect such security either at work or in retirement. The companies my generation controls are no longer willing to assume the risks associated with defined benefit schemes, in large part because of the rules we introduced to ensure our own expectations would indeed be fulfilled. We recognise the need for more housing, but insist it is not built anywhere near us, which often means it cannot be built at all.
Intergenerational equity is an ugly phrase, but an important concept. And intergenerational equity is not only, or even mainly, about levels of government borrowing and debt. Most parents want to give their children opportunities to live a life better than their own. But when we act together, we aggressively pursue our own interests at the expense of our children and grandchildren: a bizarre paradox of perverse collective action.
8. Who would God vote for ? - Adam Curtis has a fascinating gallop through recent history in this piece on the BBC about the rise of religious fundamentalism in Iran and America over the last 50 years.
When you bring God into politics very strange things happen. You can see this now in both America and Iran - in their elections and also in the growing confrontation between them. But it wasn't always like this - in fact for most of the 20th century fundamentalist religion in both America and Iran had turned its back on the world of politics and power.
But in the 1970s everything changed. For that was the moment when religion was deliberately brought into politics in both countries with the aim of using it as a revolutionary force. And those who did this - Khomeini in Iran, and right-wing activists in America - were inspired by the revolutionary theories and organisations of the left and their ambition to transform society in a radical way.
I want to tell the forgotten story of how this happened - and how in the 1980s both the Americans and the Iranian idealists came together in a very odd way - with disastrous consequences.
9. How austerity worsens inequality - The Atlantic picks up on this chart below showing how public spending cuts in Ireland (rather than tax increases) hurt the poorest most and (bizarrely) help the richest.
This is what austerity looks like when the brunt of retrenchment comes from spending cuts rather than revenue increases. People who rely on the government the most suffer the most. People who rely on it less suffer less. And people who don't really rely on it at all don't really suffer at all. As a result, the poor get whacked, the middle class gets punched, and the rich get richer.
When Republicans and Democrats fight over deficit reduction, they're fighting over who gets hurt. Will it be the poor with safety net cuts, the middle class with tax and entitlement tweaks, or the rich with upper-end tax hikes?
If Ireland is any guide, a cuts-only approach like Paul Ryan's "Path to Prosperity" will have a very predicable short-term effect on family incomes. By cutting taxes for the rich, the rich will benefit. Meanwhile, the other 99% who depend on road, public schools, and FDA-inspected food, and even unemployment insurance will be out of luck.
10. Totally the Muppets vs Goldman Sachs - Here's the link to Funny Or Die. I can't embed it. See you all in a month or so.