• Tag Archives Greece

  • Can a Country Commit Suicide by Taxation?

    Posted on by Azrael Comment

    Greece has confirmed that a nation can spend itself into a fiscal crisis.

    And the Greek experience also has confirmed that bailouts exacerbate a fiscal crisis by enabling more bad policy, while also rewarding spendthrift politicians and reckless lenders (as I predicted when Greece’s finances first began to unravel).

    So now let’s look at a third question: Can a country tax itself to death? Greek politicians are doing their best to see if this is possible, with a seemingly endless parade of tax increases (so many that even the tax-loving folks at the IMF have balked).

    At the very least, they’ve pushed the private sector into hospice care.

    Let’s peruse a couple of recent stories from Ekathimerini, an English-language Greek news outlet. We’ll start with a rather grim look at a very punitive tax regime that is aggressively grabbing money from taxpayers with arrears.

    Tax authorities have confiscated the salaries, pensions and assets of more that 180,000 taxpayers since the start of the year, but expired debts to the state have continued to rise, reaching almost 100 billion euros, as the taxpaying capacity of the Greeks is all but exhausted. In the month of October, authorities made almost 1,000 confiscations a day from people with debts to the state of more than 500 euros. In the first 10 months of the year, the state confiscated some 4 billion euros.

    But the Greek government is losing a race. The more it raises taxes, the more people fall behind.

    in October alone, the unpaid tax obligations of households and enterprises came to 1.2 billion euros. Unpaid taxes from January to October amounted to 10.44 billion euros, which brings the total including unpaid debts from previous years to almost 100 billion euros (99.8 billion), or about 55 percent of the country’s gross domestic product. The inability of citizens and businesses to meet their obligations is also confirmed by the course of public revenues, which this year have declined by more than 2.5 billion euros. The same situation is expected to continue into next year, as the new tax burdens and increased social security contributions look set to send debts to the state soaring.

    The fact that revenues have declined should be a glaring signal to politicians that they are past the revenue-maximizing point on the Laffer Curve.

    But the government probably won’t be satisfied until everyone in the private sector is in debt to the state.

    There are now 4.17 million taxpayers who owe the state money. This means that one in every two taxpayers is in arrears to the state, with 1,724,708 taxpayers facing the risk of forced collection measures. Of the 99.8 billion euros of total debt, just 10-15 billion euros is still considered to be collectible.

    Here’s another article from Ekathimerini that looks at how Greece is doubling down on suicidal fiscal policy.

    Greece is defying the prevalent trend among the world’s industrialized nations for reducing tax rates in order to boost investment and competitiveness… According to the report, in contrast to the majority of OECD member states, Greece has raised taxes and social security contributions as government policy is geared toward reaching fiscal targets, even though this inevitably harms the crisis-hit country’s competitiveness.

    It’s hard to think of a tax that Greek politicians haven’t increased.

    Greece…is also the only one among them that increased taxes on labor and corporate profits. …eight OECD member states reduced rates in 2017 on an average of 2.7 percent…, in stark contrast to Greece, which…has the highest corporate tax rates in the OECD compared to 2008. Many countries also offered breaks and reductions on income tax, …also cutting social contributions in 2015-2016. Not so Greece, which in 2016 raised both, thereby increasing the overall burden on low-income earners by 1.5 percent. Greece was also the only country in the OECD to raise value-added tax rates in 2016.

    And what was accomplished by all these tax increases? Less tax revenue and recession. That’s a lose-lose scenario by almost any standard.

    …in the 2014-2015 period, 25 of the 32 countries for which data is available recorded an increase in tax-to-GDP levels. The report…mentions Greece as an exception to this trend as well, noting that the country was in recession in that two-year period.

    Even an establishment outlet like the U.K.-based Financial Times has noticed.

    Unemployment is at 23 per cent and 44 per cent of those aged 15-24 are out of work. More than a fifth of Greeks get by without basics such as heating or a telephone connection. …Sweeping new taxes imposed across the economy have already left communities scrabbling to survive. …this year will bring €1bn worth of new taxes on cars, telecoms, television, fuel, cigarettes, coffee and beer… New taxes have eroded disposable incomes still further. Value added tax has increased to 24 per cent on food, disproportionately hurting the poor, for whom living costs represent a far higher proportion of income. Most detested is the Enfia property levy, which brings in €2.65bn a year – roughly €650 from each of Greece’s four million households. …recent direct taxes like the new estate tax have affected households that have seen their income decline greatly during the crisis. The rise of VAT, meanwhile, only adds to the cost of life of poor families.” …this month, new levies will mean the taxes paid by his business will jump 29 per cent.

    Interestingly, the article acknowledges that profligate politicians created the mess, while also noting that the Greek people also deserve blame.

    …blame is laid on the politicians who spent the 27 years of Greece’s EU membership before the crisis loading the country with debt to fund increased defence expenditure, more public sector jobs and higher pension and other social benefit payments. …“The Greek people should be blamed. We voted for these people,” he concludes.

    The problem, of course, is that Greek voters don’t show any interest in now voting for politicians who will clean up the mess. Simply stated, too many people in the country are living off the government.

    In other words, even though it’s mathematically possible to fix the problems, the erosion of societal capital suggests that Greece may have reached the point of collapse.

    From a fiscal perspective, this chart from OECD data confirms that policy is getting worse rather than better. Measured as a share of economic output, taxes and spending have both become a bigger burden over the past 10 years.

    What makes this chart especially depressing is that economic output is lower today than it was in 2005, which means that the problem isn’t so much that annual tax receipts and spending level are climbing, but rather that the private economy is declining.

    Let’s close with an additional look at the moribund Greek economy and a discussion of how the bailouts have made a bad situation even worse.

    The Wall Street Journal editorialized on the impact of ever-higher taxes and a still-stifling bureaucratic business environment.

    …the bailout is not in fact working, if you think the goal should be to restore Athens to sound public finances and to offer Greeks economic hope for the future. The European Commission’s autumn forecast predicts eurozone economic growth of 2.2% this year, the fastest in a decade. But Greece is falling further behind. …Investment has collapsed in the country, to 11% of GDP last year from 26% of GDP in 2007. …The bailouts are creating a dangerous situation in which the government has enough cash to meet its debts but no one else in Greece can thrive.

    And here’s the scary part. What happens when there’s another global recession? The already-bad numbers in Greece will get even worse. Not a pleasant thought.

    P.S. If you want to know why I’m not optimistic about Greece’s future, how can you expect good policy from a nation that subsidizes pedophiles and requires stool samples to set up online companies? I’d be more hopeful if Greek politicians instead had learned some lessons from Slovakia or Latvia.

    P.P.S. Notwithstanding the constant stream of bad policy, I am capable of feeling sorry for Greece.

    P.P.P.S. Newer readers may not be familiar with my collection of Greek-related humor. This cartoon is quite good, but this one is my favorite. And the final cartoon in this post also has a Greek theme.

    We also have a couple of videos. The first one features a European romantic comedy and the second one features a Greek comic pontificating about Germany.

    Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations. Speaking of stereotypes, the Greeks are in a tight race with the Italians and Germans for being considered untrustworthy.

    Reprinted from International Liberty

    Daniel J. Mitchell


    Daniel J. Mitchell

    Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

    This article was originally published on FEE.org. Read the original article.




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  • The world’s oldest computer is still revealing its secrets

    Posted on by Azrael Comment

    Item 15087 wasn’t much to look at, particularly compared to other wonders uncovered from the shipwreck at Antikythera, Greece, in 1901. The underwater excavation revealed gorgeous bronze sculptures, ropes of decadent jewelry and a treasure trove of antique coins.

    Amid all that splendor, who could have guessed that a shoebox-size mangled bronze machine, its inscriptions barely legible, its gears calcified and corroded, would be the discovery that could captivate scientists for more than a century?

    “In this very small volume of messed-up corroded metal you have packed in there enough knowledge to fill several books telling us about ancient technology, ancient science and the way these interacted with the broader culture of the time,” said Alexander Jones, a historian of ancient science at New York University’s Institute for the Study of the Ancient World. “It would be hard to dispute that this is the single most information-rich object that has been uncovered by archaeologists from ancient times.”

    Jones is part of an international team of archaeologists, astronomers and historians who have labored for the past 10 years to decipher the mechanism’s many mysteries. The results of their research, including the text of a long explanatory “label” revealed through X-ray analysis, were just published in a special issue of the journal Almagest, which examines the history and philosophy of science.

    The findings substantially improve our understanding of the instrument’s origins and purpose, Jones said, offering hints at where and by whom the mechanism was made, and how it might have been used. It looks increasingly like a “philosopher’s guide to the galaxy,” as the Associated Press put it — functioning as a teaching tool, a status symbol and an elaborate celebration of the wonders of ancient science and technology.

    In its prime, about 2,100 years ago, the Antikythera (an-ti-KEE-thur-a) Mechanism was a complex, whirling, clockwork instrument comprising at least 30 bronze gears bearing thousands of interlocking tiny teeth. Powered by a single hand crank, the machine modeled the passage of time and the movements of celestial bodies with astonishing precision. It had dials that counted the days according to at least three different calendars, and another that could be used to calculate the timing of the Olympics. Pointers representing the stars and planets revolved around its front face, indicating their position in relation to Earth. A tiny, painted model of the moon rotated on a spindly axis, flashing black and white to mimic the real moon’s waxing and waning.

    The sum of all these moving parts was far and away the most sophisticated piece of machinery found from ancient Greece. Nothing like it would appear again until the 14th century, when the earliest geared clocks began to be built in Europe. For the first half century after its discovery, researchers believed that the Antikythera Mechanism had to be something simpler than it seemed, like an astrolabe. How could the Greeks have developed the technology needed to create something so precise, so perfect — only to have it vanish for 1,400 years?

    But then Derek de Solla Price, a polymath physicist and science historian at Yale University, traveled to the National Archaeological Museum in Athens to take a look at the enigmatic piece of machinery. In a 1959 paper in Scientific American, he posited that the Antikythera Mechanism was actually the world’s first known “computer,” capable of calculating astronomical events and illustrating the workings of the universe. Over the next two and a half decades, he described in meticulous detail how the mechanism’s diverse functions could be elucidated from the relationships among its intricately interlocked gears.

    “Nothing like this instrument is preserved elsewhere. Nothing comparable to it is known from any ancient scientific text or literary allusion,” he wrote.

    That wasn’t completely accurate — Cicero wrote of a instrument made by the first century BCE scholar Posidonius of Rhodes that “at each revolution reproduces the same motions of the Sun, the Moon and the five planets that take place in the heavens every day and night.” But it was true that the existence of the Antikythera Mechanism challenged all of scientists’ assumptions about what the ancient Greeks were capable of.

    “It is a bit frightening to know that just before the fall of their great civilization the ancient Greeks had come so close to our age, not only in their thought, but also in their scientific technology,” Price said.

    Still, the degree of damage to the ancient plates and gears meant that many key questions about the the instrument couldn’t be answered with the technology of Price’s day. Many of the internal workings were clogged or corroded, and the inscriptions were faded or covered up by plates that had been crushed together.

    Enter X-ray scanning and imaging technology, which have finally become powerful enough to allow researchers to peer beneath the machine’s calcified surfaces. A decade ago, a diverse group of scientists teamed up to form the Antikythera Mechanism Research Project (AMRP), which would take advantage of that new capability. Their initial results, which illuminated some of the complex inner workings of the machine, were exciting enough to persuade Jones to jump on board.

    Fluent in Ancient Greek, he was able to translate the hundreds of new characters revealed in the advanced imaging process.

    “Before, we had scraps of the text that was hiding inside these fragments, but there was still a lot of noise,” he said. By combining X-ray images with the impressions left on material that had stuck to the original bronze, “it was like a double jigsaw puzzle that we were able to use for a much clearer reading.”

    The main discovery was a more than 3,500-word explanatory text on the main plate of the instrument. It’s not quite an instruction manual — speaking to reporters, Jones’s colleague Mike Edmunds compared it to the long label beside an item in a museum display, according to the AP.

    “It’s not telling you how to use it. It says, ‘What you see is such and such,’ rather than, ‘Turn this knob and it shows you something,’ ” he explained.

    Other newly translated excerpts included descriptions of a calendar unique to the northern Greek city of Corinth and tiny orbs — now believed lost to the sandy sea bottom — that once moved across the instrument’s face in perfect simulation of the true motion of the five known planets, as well as a mark on the dial that gave the dates of various athletic events, including a relatively minor competition that was held in the city of Rhodes.

    That indicates that the mechanism may have been built in Rhodes — a theory boosted by the fact that much of the pottery uncovered by the shipwreck was characteristic of that city. The craftsmanship of the instrument, and the two distinct sets of handwriting evident in the inscriptions, makes Jones believe that it was a team effort from a small workshop that may have produced similar items. True, no other Antikythera Mechanisms have been found, but that doesn’t mean they never existed. Plenty of ancient bronze artifacts were melted down for scrap (indeed, the mechanism itself may have included material from other objects).

    Source: The world’s oldest computer is still revealing its secrets – The Washington Post


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  • A Lesson From the Greek Crisis: Safe Deposit Boxes Are Not Safe

    Posted on by Azrael Comment

    Last week the Greek government imposed capital controls to prevent cash from escaping from the Greek banking system, which is on the brink of collapse. These repressive financial measures, which were invented by “Hitler’s banker” Hjalmar Schacht in the 1930s, include the closing of banks, limiting cash withdrawals from ATMs to 60 euros ($67) per day, and the banning of all money transfers via credit and debit cards to accounts held in foreign countries. Despite these Draconian controls, Greek banks continue to hemorrhage cash and, after yesterday’s referendum, it is probable that the daily limit on withdrawals from ATMs will be tightened. Worse yet, the reeling Greek public suffered another shock yesterday when Deputy Finance Minister Nadia Valavani revealed to Greek television that the government and banks had already agreed that people would also not be allowed to withdraw cash from safe deposit boxes for as long as the controls were in place. This may be part of a fallback plan if the ECB ends its bailout of the Greek banks. The government with the banks’ connivance would seize the cash euros stored in these boxes and compensate their lessees by crediting an equal sum of euros to their increasingly inaccessible checking deposits. The cash would then be fed into ATMs to postpone the day of reckoning for Greece’s zombie fractional-reserve banks.

    Source: Mises Wire | Mises Institute


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