Greece fact of the day we’re all going to die

by on April 15, 2010 at 8:25 am in Current Affairs, Data Source, Economics | Permalink

With the planned addition of IMF money, the Greeks will receive 18% of their GDP in one year at preferential interest rates.  This equals 4,000 euros per person, and will be spent in roughly 11 months. 

That's from Boone and Johnson.

1 ck April 15, 2010 at 8:41 am

This is one of the great headlines in the history of MR. It even includes some characteristically idiosyncratic”Cowen-esque” grammar! 😀

2 E. Barandiaran April 15, 2010 at 8:43 am

Tyler, let me say it again: Greece is just a minor problem, and so it is Portugal. In addition, you don’t have to waste your time with the IMF –it’s a dead organization that some economists are trying to revive while ignoring its terrible record everywhere, not just in Argentina (and not just in Argentina in the 1990s and the 2001 crisis). If you’re really concerned about the world economy, I suggest that you start to discuss California’s fiscal crisis –as the ongoing fight around the nomination of the Dems’ candidate for U.S. senator is showing, one of the terrible things happening in California is the dominance of Peronista-type labor unions, one of the main forces behind the fiscal crisis.

3 mgh April 15, 2010 at 9:57 am

Barandiaran,

“IMF –it’s a dead organization”
Correction — dormant, chastened, immobilized, shackled, but not dead. Just as the federal government could place constraints on Californian trade unions and politicians, so the world could benefit from some monetary governance or monetary constitution. The IMF could play a role. It was too soft on Argentina, because it was trying to be nice. After the ‘IMF riots’ of the previous decade it became too accommodating.

Anyway, I think Tyler was being sarcastic. Boone & Johnson get a bit carried away sometimes.

4 Bill April 15, 2010 at 10:57 am

No sympathy for countries unwilling to raise taxes for the services they claim want, or to have a mix of tax increases and spending cuts, or to have elimination of tax breaks given to elites or special interests, or to have some copay for government services.

Oh, wasn’t talking about Greece or Portugal.

How can Exxon not pay any corporate taxes?

5 dearieme April 15, 2010 at 12:38 pm

“How can Exxon’s customers and shareholders not pay taxes via Exxon?” And perhaps Exxon’s employees too?

6 Bill April 15, 2010 at 2:29 pm

You are right, I stand corrected. Exxon is not a taxpayer; Exxon does not use US goods and services in the operation of its business. I am a shareholder of Exxon stock, and I appreciate your contribution to my welfare and special treatment. Maybe I should buy more Exxon stock and dump the stocks of companies that are foolish enough to pay, Oh, I am sorry, collect taxes.
The incidence of corporate tax, by the way, also falls on foreign shareholders when the corporation pays taxes under your approach; so I guess you also do not want them to indirectly pay for the goods and services Exxon uses either.

7 John Thacker April 15, 2010 at 4:02 pm

In 2006, Exxon paid $28 billion in taxes.

Corporate taxes, because they’re paid on profits and capital gains and losses, swing much more wildly than other taxes.

8 John Thacker April 15, 2010 at 4:39 pm

John, in the article you quoted, those were not US taxes, but “worldwide” Exxon taxes.

Yes, but some of them were US taxes. For example,

According to Securities & Exchange Commission filings, Exxon paid an effective tax rate of 34% to the U.S. government in 2007, or $5.12 billion.

So the point remains that pretending like Exxon never pays US taxes is mendacious.

Exxon has a lot of foreign operations, and pays foreign taxes on those operations. How else would it work? Would you prefer that Exxon (and all other US companies) simply sell off their foreign operations to foreign companies? That’s what would happen if you insisted on double-taxation for the privilege of remaining a US company.

9 E. Barandiaran April 15, 2010 at 5:25 pm

mgh, let me say it again: the IMF is dead. It’s not buried but it’s dead and it’s very costly not to finish the job. To explain my position I’d have to write two long essays –one about the IMF’s history, particularly since 1971 when the old international monetary system collapsed, and a second about the relation between the IMF and my country, Argentina, since 1957 when Argentina joined the IMF and had already faced a few fiscal crises. There is nothing in the history of this relationship to suggest that the IMF can play a positive role in solving a fiscal crisis.

10 Bill April 15, 2010 at 6:54 pm

Yancy, no I wasn’t accepting anyone’s analysis, as I am not a tax expert, just a humble lawyer who has watched his multinational clients reduce their domestic tax burden by transfering IP assets abroad and relicensing to the US from a tax friendly jurisdiction, all without understanding the least bit what KPMG and Deloitte do. But, at the end of the day, taxes go from 30 to 20% over time; licensing revenues accumulate in the foreign low tax jurisdiction, and additional IP funding supports other R&D.

These things work if you are a multinational–but, what if you are not? Is it really fair to shove the tax burden to small business which only have domestic activities? Small business pays at a far higher rate than MNCs, even cosidering foreign sourced income.

I suspect small business creates a lot more jobs than MNCs who are quick to offshore everything. We tax burden small business and we tax advantage larger businesses who are much better also getting favorable tax rules than smaller firms, but that is a different story.

11 Dan H. April 16, 2010 at 12:23 pm

“Yancy, no I wasn’t accepting anyone’s analysis, as I am not a tax expert, just a humble lawyer who has watched his multinational clients reduce their domestic tax burden by transfering IP assets abroad and relicensing to the US from a tax friendly jurisdiction, all without understanding the least bit what KPMG and Deloitte do. But, at the end of the day, taxes go from 30 to 20% over time; licensing revenues accumulate in the foreign low tax jurisdiction, and additional IP funding supports other R&D.”

This is not the fault of business. The U.S. government has created the incentives for this kind of behavior by setting the base corporate tax rate to be much higher than the world average (2nd highest in the world as of now, I believe), and then filling the tax code with thousands of exemptions, loopholes, and tax credits. The result is that the average corporate tax rate in the U.S. isn’t much higher than in the world as a whole, but companies have to jump through many, many hoops and engage in all kinds of tax-avoidant behavior to get there. It’s inefficient, it drives outsourcing and loss of IP, and it creates a brain drain. But each one of those exemptions or tax credits was the brainchild of a politician seeking to be re-elected. Each one has a constituency.

The problem is going to get a lot worse before it gets better. The Obama administration is heavily engaged in complicating the tax code through health care, incentives for everything the administration thinks is good, heavier environmental regulation, and new proposed labor laws such as tax credits for hiring local or tax credits for hiring certain types of employees.

The U.S. would be much better off with a lower corporate tax rate coupled with the elimination of tax credits and incentives to keep the change revenue neutral.

12 John Thacker April 16, 2010 at 5:03 pm

Bill, I completely agree that it would make sense to avoid those silly loopholes and have a lower, fair rate.

I’m glad that you’ve conceded that your initial remarks about Exxon paying no taxes were hyperbole only true in one year.

Many of your complaints about Multinational Corporations can’t be resolved unless the statutory corporate tax rate is lowered to global average. If not, then just eliminating the tax breaks would cause US headquartered companies to either:
1) Sell off their international operations to foreign companies and become US-only corporations, or
2) Move their headquarters outside the US to avoid double-taxation.

Do you really prefer 1 or 2?

13 digital camera memory cards April 23, 2010 at 1:44 am

That’s what would happen if you insisted on double-taxation for the privilege of remaining a US company.We set charge small business and we set advantage large businesses who are such meliorate also effort approbation set rules than smaller firms, but that is a assorted story.

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