Your SlideShare is downloading. ×
Tax, Lies and Red Tape wrfy
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Tax, Lies and Red Tape wrfy

451
views

Published on

Tax, Lies and Red Tape is an insightful, easy-to-understand, highly opinionated book about economics by one of South Africa’s most experienced and controversial economists. Dawie Roodt argues that …

Tax, Lies and Red Tape is an insightful, easy-to-understand, highly opinionated book about economics by one of South Africa’s most experienced and controversial economists. Dawie Roodt argues that economics is not about numbers, graphs and statistics; it is about people, and about how they react to incentives. Unfortunately, our politicians seem to have forgotten this.

Using simple concepts and thought-provoking anecdotes, the book explains how ‘the market’ evolved with humanity, what was wrong with communism, what the global financial crisis is really about, the ways in which the state spends your money (and the ways in which it actually should), how tax is collected, how money and inflation really work, the ins and outs of trade, and the ups and downs of labour.

In the process, Roodt debunks politically correct thinking and current government policy, and suggests alternatives for a more effective system. Whether you agree with him or not, Tax, Lies and Red Tape will get you thinking about economics in a completely new way.

Find out why:
- It’s wrong to blame Wall Street bankers for the global financial crisis.
- The rhino-horn trade should be legalised.
- Exempting anything from VAT is a bad idea, even for the poor.
- Job creation is a fruitless exercise.
- South Africa’s problem is not poverty.

In this session of We Read For You, Prof André Roux presented a synopsis of this book. The session took place in Cape Town 13th of June and in Johannesburg on the 20th of June 2014.

Read more at www.usb-ed.com/wrfy/pages/Tax-Li…and-Red-Tape.aspx


0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
451
On Slideshare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
7
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. 1 Tax, Lies and Red Tape: Confessions of an unreconstructed Neoliberal Fundamentalist By Dawie Roodt, with Linette Retief Presented by André Roux Date: June 2014 Inspiring thought leadership across Africa
  • 2. 2014/06/09 1 1 Tax, lies and red tape: Confessions of an unreconstructed neoliberal fundamentalist Dawie Roodt, with Linette Retief André Roux June 2014 Inspiring thought leadership across Africa WE READ FOR YOU Main title:  Disdain for the recurring theme of state intervention; wishes and pipe dreams  Plan for the economy, based on simplicity and choice  Clear guidelines  Freedom … choice  To stimulate a Damascus experience; a paradigm shift Sub-title  “Old school”, free-market thinking
  • 3. 2014/06/09 2 FUNDAMENTAL PRINCIPLES AND BELIEFS  Conventional wisdom is neither necessarily true nor accurate…. often a major obstacle to new research, knowledge, or visionary thinking.  Private property rights in the very broad sense of the word (including over life and immaterial belongings) - right of movement - right to sign a contract with whomever, on any basis - right to trade  Therefore, firmly in favour of capitalism/ a free-market system….. The “invisible hand” allows people to ultimately look out for themselves, and through the trade and entrepreneurship that results from this economic self- centredness, society as a whole benefits more than it would have otherwise …. Government intervention often inhibits this invisible hand FUNDAMENTAL PRINCIPLES AND BELIEFS  Conventional wisdom is neither necessarily true nor accurate…. often a major obstacle to new research, knowledge, or visionary thinking.  Private property rights in the very broad sense of the word (including over life and immaterial belongings) - right of movement - right to sign a contract with whomever, on any basis - right to trade  Therefore, firmly in favour of capitalism/ a free-market system….. The “invisible hand” allows people to ultimately look out for themselves, and through the trade and entrepreneurship that results from this economic self-centredness, society as a whole benefits more than it would have otherwise …. Government intervention often inhibits this invisible hand Rhino horn “Solution” = allow farmers to sell horn for profit pp 12-15
  • 4. 2014/06/09 3 PLAN OF THE BOOK Chapter Title 2 The history of mankind and markets 3 The problem with communism 4 What can we learn from the Great Recession 5 How the state spends your money 6 Our taxing regime 7 Central banks and monetary policy 8 Trade and tribulations 9 Why is labour not working 10 What the future holds THE HISTORY OF MANKIND AND MARKETS  Discovery of fire (cooking) = more energy = more strength = creation of a surplus of time  Strength and time enabled humankind to invent and develop major economic breakthroughs - wheel - taming and domestication of animals = property, which man wanted to protect = significant surpluses = change in values … respect for others’ property - domestication of plants - specialisation … commerce and trade … rules, laws and property rights
  • 5. 2014/06/09 4 THE HISTORY OF MANKIND AND MARKETS Other hallmarks of civilisation  Organised government  Organised religion  Job specialisation  Social class  Writing and record-keeping  Arts and architecture Human development did not progress linearly – backward steps were also taken, eg communism … THE PROBLEM WITH COMMUNISM Main goals of communism  No social class  No money  No state !!!!!!!!!!!! Local communists don’t understand their own ideology, yet these are the very people who have the power to make decisions about the country’s economic policy.
  • 6. 2014/06/09 5 THE PROBLEM WITH COMMUNISM Zwelinzima Vavi (2012) The creation of the CPSA was also a great breakthrough in non-racialism CPSA was created in 1921 under the slogan Workers of the world unite and fight for white South Africa THE PROBLEM WITH COMMUNISM The root of the problem= resource allocation:  Fixation on fixed prices  Trying to anticipate the needs of the economy  Allocating resources to achieve some or other political objective (not to serve the inhabitants of the land)  Micro-management of every aspect of the system Scandalous surpluses
  • 7. 2014/06/09 6 WHAT CAN WE LEARN FROM THE GREAT RECESSION? Three sets of reasons why the credit bubble burst:  Emotional arguments – values, greed, excessive risk-taking  Technical – insufficient capital reserves, incorrect pricing of assets and risks, warped credit ratings  Fundamental considerations – too-low interest rates, an overly accommodating fiscal policy approach, and other measures that encouraged the accumulation of private and public debt …. And ultimately all bubbles burst X X √ WHAT CAN WE LEARN FROM THE GREAT RECESSION? Two approaches to fixing the mess USA – move private sector debt to the public sector; printing money Europe – austerity – impact on growth? Euro?
  • 8. 2014/06/09 7 HOW THE STATE SPENDS YOUR MONEY What (core) functions should be provided by the state? Collective goods … the state should provide those things from which its citizens cannot be excluded Defence Law and order Independent judiciary And arguably infrastructure HOW THE STATE SPENDS YOUR MONEY However, in SA secondary functions dominate …the social security tail has started to wag the fiscal dog Item Rbn % of total Education 212 21.0 Health care 132 13.1 Social develop- ment 164 16.2 Housing 97 9.5 TOTAL 603 59.8 Item Rbn % of total Economic services & infrastructure 112 11.1 Defence 38 3.8 Justice, crime prevention & security 99 9.8 TOTAL 249 24.7 Secondary functions Core functions 2012/2013
  • 9. 2014/06/09 8 HOW THE STATE SPENDS YOUR MONEY Thus, the redistribution function of the state is growing in importance … Problem!! Recipients of this largesse are not the major contributors to the state, but they are in the majority… will therefore continue to vote for a bigger tax burden on the minority until, theoretically, everybody’s income will eventually be the same More state spending now to be funded by more taxes and more borrowing … debt explosion/ default/ economic collapse – is this a fundamental flaw of democracy? HOW THE STATE SPENDS YOUR MONEY Education: Spending > Outcomes Solutions  SADTU  Teachers (paid to do a bad job) and children (don’t have to work hard to pass) are in cahoots to preserve the status quo … thus break this cosy relationship Different education systems and curricula Increased autonomy for schools Allow schools to generate own revenue Vouchers – present to any school of their choice Incentivise children with lots of money to gain, eg, a distinction in maths or science
  • 10. 2014/06/09 9 HOW THE STATE SPENDS YOUR MONEY Social grants: Unintended consequences e.g., culture of dependency, artificial stimulation of economy (inflation, weaker currency) Thatcher The problem with socialism is that at some point you run out of other people’s money Solutions  Introduce more means tests  Parent must prove that child goes to school, has been innoculated, has a certain mass in line with its age HOW THE STATE SPENDS YOUR MONEY The three great evils  Unemployment: the real problem is barriers to entry  Poverty: the real problem is we have too few rich people  Inequality: the real problem is a perception problem - inequality allows the rich to save more for future investments - in a system of unequal distribution entrepreneurship, hard work and good skills are rewarded… incentive for others to become wealthy Inequality only a problem when associated with other “differences” (race, political insiders vs outsiders)
  • 11. 2014/06/09 10 HOW THE STATE SPENDS YOUR MONEY Growing concern about budget deficits and rising state debt  Thus, create a statutory fiscal council that plays an independent evaluative and directional role in fiscal policy (c/f monetary policy)….  VAT can be adjusted up or down to ensure that a fiscal surplus is achieved at all times over the economic cycle  This could make voters realise that they cannot simply demand more – the money has to come from somewhere OUR TAXING TAX REGIME The characteristics of a good tax system  Fairness  Cost-effectiveness  Simple and easy to understand  Enables state to collect sufficient revenue  Neutral  Aim to diminish the individual tax burden by spreading the tax load SA does not fair very well in respect of the above – especially load spreading – every individula taxpayer supports 9 people who do not pay tax
  • 12. 2014/06/09 11 OUR TAXING TAX REGIME Improving SA’s tax system to ensure fiscal survival  Simplify  Reduce the number of personal income-tax brackets  Let small and large companies pay the same (much lower) income tax (on turnover, not profit)  Increase VAT (no zero-rated items)  Abolish taxes on dividends and CGT  Simplify sin taxes  Implement more user charges OUR TAXING TAX REGIME Another word on inequality SA has  “have-lots”  “have-littles”  “have-nothings” The have-littles are refusing to share with the have- nothings …. … labour laws act as barriers to entry for the have- nothings
  • 13. 2014/06/09 12 CENTRAL BANKS AND MONETARY POLICY Crash course on money and monetary policy Role and autonomy of central bank Money creation Inflation and exchange rates Gold standard Quantitative easing TRADE AND TRIBULATIONS  Why do we trade? - to obtain things that we would not otherwise be able to get our hands on  Why is it better to encourage trade than restricting it? - specialisation; comparative advantage  Where does competition fit into the picture? - consumer welfare is the unintended and coincidental by-product (result) of competition; you cannot create more welfare by instructing competition - Competition Act, Competition Commission a waste of time and taxpayers’ money!
  • 14. 2014/06/09 13 TRADE AND TRIBULATIONS In fact….  Companies do not compete to give consumers a better deal  Companies try to kill the competition  Capitalists don’t like competition; everything businesses do is anti-competitive (eg, advertising, moving closer to the market)  Collusion often works to the benefit of consumers TRADE AND TRIBULATIONS Competition Act: Reservations and anomalies  Price fixing often attracts competition (prices are almost always fixed at a high level)  The Act actually includes alist of fixed tariffs for 1000s of different medical, dental and allied treatments  The prices of petrol and oil products are fixed by government Moreover, greed is good; it works; and because it optimises the use of scarce resources, it minimises wastefulness
  • 15. 2014/06/09 14 TRADE AND TRIBULATIONS  Converging prices are not the result of collusion, but actually the consequence of competition  How could the Competition Commission and Competition Act brighten our economy? - tackle Eskom, the regulated fuel price, anti- competitive import tariffs on clothing - help SA take advantage of the ICT society by addressing the heavily protected telecommunications industry - distinguish between anti-competitive practices (behaviour of protected cartels) and competition itself (aggressive rearguard action by large incumbents hoping to save their businesses in a fast-moving, dog-eat-dog market) WHY IS LABOUR NOT WORKING?  The flaw in the idea of job creation is the very notion that jobs must be created … entrepreneurs do not employ people because they want to do so; they employ people because they don’t have a choice – it’s the only way in which they can capitalise on their economic activities.  Jobs happen - if the circumstances are right  Workers are not being exploited (the only way in which workers can be exploited is when they are slaves with no choices or options)  Small business owners are being exploited – greedy taxman, aggressive workforce, regressive legislation
  • 16. 2014/06/09 15 WHY IS LABOUR NOT WORKING?  Fig 9.1 WHY IS LABOUR NOT WORKING? The state as an employer Year No of emplo- yees % of total employ- ment 1999 1.008m 9.7 2005 1.089m 8.7 2011 1.3m 9.9 Central & provincial governments All levels of govt, SOEs, statutory institutions: 2.8m = 21% of total workforce Average civil servant’s remuneration is 30-40% higher than private sector counterpart
  • 17. 2014/06/09 16 WHY IS LABOUR NOT WORKING? Solutions for labour law restrictions  State should employ as few people as possible AND improve productivity or cut wages to levels comparable with private sector  Liberalise labour legislation (make it easier to hire and fire)  Get rid of laws that affect employment (eg, required registration for UIF; or proposed law on licensing all businesses) WHAT THE FUTURE HOLDS Can SA expect a demographic dividend? If not, can we generate one? If the wave arrives, are we ready to capitalise on it?
  • 18. 2014/06/09 17 WHAT THE FUTURE HOLDS Daniel Stelter  Deal with the debt overhang, immediately  Reduce unfunded liabilities  Increase the efficiency of government  Prepare for labour scarcity  Develop smart immigration policies  Invest in education  Reinvest in the asset base  Increase raw material efficiency  Co-operate on a global basis  Remove the next Kondratiev wave WHAT THE FUTURE HOLDS Daniel Stelter  Deal with the debt overhang, immediately  Reduce unfunded liabilities  Increase the efficiency of government  Prepare for labour scarcity  Develop smart immigration policies  Invest in education  Reinvest in the asset base  Increase raw material efficiency  Co-operate on a global basis  Remove the next Kondratiev wave There is still time to act, provided leaders from all social sectors – government, business, organized labour, environmental and other stakeholder groups – [take firm and swift action] … to secure future economic prosperity, social cohesion, and political stability

×