The EU has called on the Government of Cyprus to recover 5.8 billion of extraordinary taxes in order to receive the bailout of 10 billion developed by the technicians of the ECB. The suggestion of troika was to tax deposits exceeding 100,000 euro lying on Cypriots current accounts. In this way, not only would hit the richest, but most of all the deposits belonging to the Russians and of dubious origin. As you know, Cyprus is suspected of being a center of money laundering owned by the Russian mafia, and then, if you want to stay in Europe a minimum of decency must to be practiced . The Cypriot government, not to antagonize completely the rich Russians who have made the country one of the main bases of their deposits, have opted for a tax on all bank accounts, of 6.75% for less than € 100,000 and 9 , 9% for those above this threshold. In short, they did the discount to rich people, but they have very alarmed the people that we have seen a pull out from the pockets of the four coins he has.
Oh, God, is not that 65 out of a thousand euro deposit ruining someone. If you pay taxes the levy is much higher, but there obviously all are counting on cunning to hide as much as possible to the IRS. While there is little to hide on deposits, the money is there and take it is a snap. Of course, there have been hysterical reactions of every part. The most poignant are the queues to the ATM to withdraw a few hundred euro and subtract the compulsory levy twenty or thirty euro. The most incomprehensible, is the so-called critics of financial economy who shouted the robbery, the fraud and breach of freedom.
Here we have to agree. I argue that this suggestion and this measures are absolutely right, and on the other hand I wrote it in September of 2011, when I presented some ideas for a financial equitable measures. For once that the gnomes of Brussels think something reasonable, it may be the case to recognize. In fact, as I have written many times, is not that a stroke of genius came suddenly, but the problem is that taxes on the money and wealth, security, and especially on the financial position, are absolutely inevitable. To the ECB they are realizing it now and are adjusting the target accordingly.
Of course, there are different ways to do these maneuvers. What I had suggested a year and a half ago it was very easy and painless, and especially would not have caused the hysterical reactions that have been seen in Cyprus, nor the political crisis that may ensue. As I wrote the idea of a tax on financial wealth was gradual to finance a redistribution of income and replace any part of the taxes on labor. The tax on financial wealth was going to hit the money reserve in blocked accounts, according to the logic of the negative rate and in order to avoid the liquidity trap. In other words, the money still on the current accounts that generate interest income, is pure financial returns and for that must be hit. That tax, then, would be canceled when those affected sums were invested in productive activities, according to the mechanism that I drew in my previous articles on the matter.
In short, a tax on financial wealth and bank deposits is not an attack on the freedom of individuals neither a ploy to establish the great world order (I read this as well), but it is the quickest way to attack the financial speculation and redistribute wealth according to criteria of social equity. Because the issues are two: or we really start to hit the finance somewhere, with the Tobin tax, with an increase of taxes on financial income, a tax imposed on deposits lying, otherwise taxes have to burden the labor and production. Well, we know that it is no longer possible to live in a world where the financial people play in its casinos ten or fifteen times the wealth produced by the whole world, because it is free to do what he wants and substantially free from significant tax, the only way out is to try to hit the problem at its root. Otherwise, when it comes to talk about fighting against financial power we are saying meaningless words.
As you know, I advocate the idea of introducing the negative rate on the currency and to solve the problem in a radical way , but a tax on bank deposits is something that closely resembles the negative rate and a redistribution of wealth that does not kill the work and production.
The experiment of Cyprus is interesting for this reason, and I imagine that will be replicated in other European countries. The ideal would be to gradually introduce taxes of this kind in all European countries and at the same time reducing taxes on labor. We can do this and it is not at all difficult. A tax on capital deposited daily is something that no one notices, as would amount to 55 euro per day for a deposit of one million euro. I do not think we will witness for that the flight of capital to tax havens. Those who had to go have already fled. Nor will witness the flight of small savers to Switzerland or the Caymans to subtract five hundred euro to 10,000 deposited. The cost of the flight would be equivalent to several years of tax and perhaps all would agree to remain in the country, if at the same time, taxes on labor and production were lower in proportion. Just take the math to realize that. Rather, it is the case to start seriously thinking about creating a second currency in the countries adopting the euro, a currency with negative rate introducing a system of “dual currency”. It is not necessary that the Governments would do it because, as obviously, are otherwise occupied and especially takes too long compared to those of the crisis. Should be sufficient that associations, entrepreneurs and citizens bring up another coin with negative rate to raise the economy. It is now clear this is the way, and as I feel like for years, is the only viable one, it is to think about, doing things wisely and not under the wave of hysteria or fear. Now, come on, let’s go.
(translated in English by Victor Nicolini for Union Securities LTD newsletter)