HK - you might like this senator Vinick

[RV Pundit]

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He says high tax rate in Africa mean nothing get built.

[RV Pundit]

I like this comment though...
The Laffer Curve is a VERY real economic phenomena.  At 0% taxes the government gets zero revenues.  That makes sense.  At 100% tax rate the government ALSO basically gets zero revenues as people will completely substitute out of labor for which they pay taxes.  The SHAPE of that curve is complicated and tax economists put basically their entire careers in trying to figure out what the local maxima of a given tax curve is.  There are times where decreasing taxes can increase revenue and there are times where lowering taxes will reduce revenue.  One response is intuitive.  The other isn't necessarily as intuitive but it doesn't mean its not true.

[RV Kirgit]

Old economist get it all wrong. The purpose government tax is not to achieve revenue collection. It's basically a way for government to measure the pulse of the economy (like water meter) and throttle some sectors when necessary (e.g. cigarettes), control inflation etc.

Tax reduce unmeasured economic activity (lack of tax compliance) and make sure money printing counterbalance economic activity.

Majority of gov spending comes from money printing and duties delegated to commercial bank to lend to tom dick and Harry!

[RV Pundit]

It would be so easy if gov was just ordering money to be printed   Gov is financed through taxes. The debate is what rate of tax is acceptable. Do we go Nigeria kind of low taxes - zero gov infrastructure - or do we go for scandavian model - high taxes - high gov expenditure.

Then again what do you tax? Some sectors like Agriculture are hard to tax? Informal economies like in Africa even harder to tax? so you're left with a small formal sector that you have to tax to almost death.

Well you could have exclusive tax free zones - EPZ - geared exclusively for export - where global companies and enjoy the best and almost free everything - if they can provide employment to people - but then again - they will want slavish no-union labour like Ethiopia where companies pay 20 dollars a month.

It's not easy.

For me I would tax the current generation as much as possible - and borrow (to be repaid by the future generation) as much as possible - fix the infrastructure deficit - then everything will sort itself. Ultimately once you have fixed the brick and mortar issue - the hardware - software issues are easy to fix.

There has to be some sacrifices - made by current and incoming generation - for the future generations to really transition into better world.

Old economist get it all wrong. The purpose government tax is not to achieve revenue collection. It's basically a way for government to measure the pulse of the economy (like water meter) and throttle some sectors when necessary (e.g. cigarettes), control inflation etc.

Majority of gov spending comes from money printing and duties delegated to commercial bank to lend to tom dick and Harry!

[hk]

He says high tax rate in Africa mean nothing get built.

I agree with his sentiments about high taxation. The high taxation is the reason why we have large dominant informal or grey markets. The bigger problem in Africa in general is economic freedom. Regulations, bureaucracies and high taxation have constrained and stunted economic growth in Africa.  The freer an economy the more developed it is e.g Mauritius.
Laffer curve is real, after KRA slashed real estate income tax from 30% to 10% of gross, collection more than tripled. This clearly shows lowering, simplifying and broadening tax base is what's needed. 

[Arcadian_Dreamer]

For me I would tax the current generation as much as possible - and borrow (to be repaid by the future generation) as much as possible - fix the infrastructure deficit - then everything will sort itself. Ultimately once you have fixed the brick and mortar issue - the hardware - software issues are easy to fix.

There has to be some sacrifices - made by current and incoming generation - for the future generations to really transition into better world.

Remind me again why the are no great Kale businessmen and why Moi's 24 year rule ran this country's economy to the ground, destroyed its parastatals and hobbled its potential for a generation. You are an economically illiterate bunch, no GEMA would call for maximum taxation because they understand economics. They are involved in biachara, you can't run a small kiosk to save your life and you want to set the economic course for this country, fanciful. Only those tribes who have demonstrated their ability to run businesses should be made Finance ministers and treasury heads, we should have had a Muhindi one long time ago. Taxes should be low, broad based and predictable. Look what happened to Greece when the Troika ordered it to jack up its taxes to cover its debts, it brought the economy to a standstill. Laffer curve is real. Borrow and spend is not a viable road to prosperity.

Countries like Kenya where the informal sector dominates need Goods and Services Taxes (GST), it is good at capturing a vast swath of the population, is self policing, removes cascading effect of taxes, reduces barriers for business and eliminates tax evasion.

[RV Pundit]

That rich coming from a Luo lady. I think in business you rank lower than Kalenjin. Really get over the tribal nonsense. It always soil the important points you try to make.

For me I would tax the current generation as much as possible - and borrow (to be repaid by the future generation) as much as possible - fix the infrastructure deficit - then everything will sort itself. Ultimately once you have fixed the brick and mortar issue - the hardware - software issues are easy to fix.

There has to be some sacrifices - made by current and incoming generation - for the future generations to really transition into better world.

Remind me again why the are no great Kale businessmen and why Moi's 24 year rule ran this country's economy to the ground, destroyed its parastatals and hobbled its potential for a generation. You are an economically illiterate bunch, no GEMA would call for maximum taxation because they understand economics. They are involved in biachara, you can't run a small kiosk to save your life and you want to set the economic course for this country, fanciful. Only those tribes who have demonstrated their ability to run businesses should be made Finance ministers and treasury heads, we should have had a Muhindi one long time ago. Taxes should be low, broad based and predictable. Look what happened to Greece when the Troika ordered it to jack up its taxes to cover its debts, it brought the economy to a standstill. Laffer curve is real. Borrow and spend is not a viable road to prosperity.

Countries like Kenya where the informal sector dominates need Goods and Services Taxes (GST), it is good at capturing a vast swath of the population, is self policing, removes cascading effect of taxes, reduces barriers for business and eliminates tax evasion.

[RV Pundit]

I have lived in Switzerland. Taxes are high. The labour crazy. Everything pretty expensive. Yet you'll find billion dollar manufacturing conglomerate call it home. Suise is such a small country  - yet out of global 500 - 15 are based in Switzerland. Not just in banking but mostly in manufacturing. Led by likes of Nestles.

The same is true in Germany - and most of Scandinavian - their manufacturing is topnotch - yet the taxes are high - electricity the world highest at 35 cents usd - labour expensive - but yet Chinese or American manufacturers cannot compete with them.

I think it's not about being cheap. It's about predictability. It about stability. Business are able to factor high taxes, high labour, high electricity and all that - into their plans. What kills business and investment is unpredictability - this year taxes are zero - next year it's 50% - like our parliament does annually - almost like drunken sailor. The harder it is to predict - the future - the harder it is to invest, plan and whole shebang - and more risky it is to sink capital, to train staff, to buy machines and increase production - it become easy to become a merchant for chinese manufacturers.

Whatever African do - it must try to become a predictable and stable macro-economic environment - that mean tax regime - even if it's high - that almost never changes.

Like everything - there are trade-offs - high taxes - lead to higher social and infrastructure investment - leading to lower poverty and more social welfare - but lower taxes can lead to a few capitalist getting richer - than rest of country - like Brazil and South Africa - or close home Nigeria - leading to thriving business class - in midst of poverty.

But business are able to factor those trade-offs - just assure them - they won't be swinging left and right - every year.

People should never have to tune in every year to listen to BUDGET speeches - it should always be known - that tax will always be 18% VAT - 30% - corporate.

I agree with his sentiments about high taxation. The high taxation is the reason why we have large dominant informal or grey markets. The bigger problem in Africa in general is economic freedom. Regulations, bureaucracies and high taxation have constrained and stunted economic growth in Africa.  The freer an economy the more developed it is e.g Mauritius.
Laffer curve is real, after KRA slashed real estate income tax from 30% to 10% of gross, collection more than tripled. This clearly shows lowering, simplifying and broadening tax base is what's needed. 

[Arcadian_Dreamer]

That rich coming from a Luo lady. I think in business you rank lower than Kalenjin. Really get over the tribal nonsense. It always soil the important points you try to make.

You wish I was.

Sometimes Kenyans only understand things in tribal stereotypes, so I have to throw that in your face once in a while when you write howlers like that  Eti maximum borrowing, gai!

Economic facts/reality don't change either at personal or government level; prudence & discipline are bywords to live by. There is a reason Deutschland escaped the European financial crisis unscathed, that whole society internalized the wickedness of deficits, debts and financial recklessness. It is a beautiful place to be a finance minister who believes in fiscal discipline because the state and society buy into it already. In most of the world, you are going against the tide.

[RV Pundit]

So your tribal background give credence to your little points. They cannot stand on their own?

I think you did engineering but did not quite understand the power of a lever.

Nobody get rich by saving. The current germans are not growing richer than the previous generation. They are maintaining that life style. You get rich by investing. Chinese are getting rich. Germans are maintaining their richness - they are not becoming super-rich.

Now Africans if we were to adopt fiscal discipline and conservative policies...we will remain stuck in poverty. If you earn 10 bob and save 2bob..it unlikely to amount to much after 10yrs. Once you invest that money - it start to grow.

This is where borrowing from the future (leveraging) come in - and this is where sacrifices from current generations - to save future generation - come in. Ultimately our current generation will not grow rich, will not defeat poverty and the works. We have to work hard for next generation - and we have to build basic infrastructure - we have to pour cements and steel - and when they will come - they will be dealing with soft issues.

Germany is great because Hilter made them really work their butt in 10-15 years. They were forced to build roads, to dig canals, and name it. That infrastructure still exists - it just need a little greasing and oiling (maintenance) once in a while.

Kenya if it choose the fiscal discipline route will never amount to anything. Kenya need to MASSIVELY invest in basic infrastructure and social infrastructure - that naturally mean high taxes to build roads, to provide free education, and whole of it. Everywhere you see - should be a huge excavation site - the caterpillars should be everywhere - digging up and down.  This will not pay off now...it will mean we are ever broke...but in the future...it will pay off...it's a LEVER to the future.

You wish I was.

Sometimes Kenyans only understand things in tribal stereotypes, so I have to throw that in your face once in a while when you write howlers like that  Eti maximum borrowing, gai!

Economic facts/reality don't change either at personal or government level; prudence & discipline are bywords to live by. There is a reason Deutschland escaped the European financial crisis unscathed, that whole society internalized the wickedness of deficits, debts and financial recklessness. It is a beautiful place to be a finance minister who believes in fiscal discipline because the state and society buy into it already. In most of the world, you are going against the tide.

[Arcadian_Dreamer]

I have lived in Switzerland. Taxes are high. The labour crazy. Everything pretty expensive. Yet you'll find billion dollar manufacturing conglomerate call it home. Suise is such a small country  - yet out of global 500 - 15 are based in Switzerland. Not just in banking but mostly in manufacturing. Led by likes of Nestles.

The same is true in Germany - and most of Scandinavian - their manufacturing is topnotch - yet the taxes are high - electricity the world highest at 35 cents usd - labour expensive - but yet Chinese or American manufacturers cannot compete with them.

Switzerland has a debt brake. A modest sized government. Fiscal independence also means some cantons have ultra low taxes such as Zug are inundated with investment. It is always the little details.

[RV Pundit]

Why would they incur debt yet it a developed nation? Show us non resource dependent developing nation that is growing without debt or high taxes. Most of heavy debt items are to build heavy infrastructure projects - Swiss already did that.

Switzerland has a debt brake. A modest sized government. Fiscal independence also means some cantons have ultra low taxes such as Zug are inundated with investment. It is always the little details.

[Arcadian_Dreamer]

Nobody get rich by saving. The current germans are not growing richer than the previous generation. They are maintaining that life style. You get rich by investing. Chinese are getting rich. Germans are maintaining their richness - they are not becoming super-rich.

The first part is obviously not true, I will address it later.

Germans themselves will tell you they don't want to be rich  They are not flashy and ostentatious like the Chinese or Americans. German billionaires are obscure, they blend in with their population not trying to rock the boat buying huge tracts of land and what not, jacking up prices with their overspending. Look at the owner of Aldi for example. Germany's whole economic system is built for stability, they favor slow but sure growth. German SME avoid bank debts, instead they reinvest their profits, they own their assets. Moreover, most Mittelstand make sure they don't over rely on one customer so they limit them to just 10% of orders. Very sensible people.

[RV Pundit]

So Kenyan should maintain it's poverty by doing the same? Once you're rich - you have all the life comforts - you get into marginal economic return - however much you work hard - however much money you make - it won't change your life - and that is what all developed nations are. They are just there - everything works - nobody really has to invest and go crazy! - not people - not gov - not companies.

But developing nations are in a different stage.

Nobody get rich by saving. The current germans are not growing richer than the previous generation. They are maintaining that life style. You get rich by investing. Chinese are getting rich. Germans are maintaining their richness - they are not becoming super-rich.

The first part is obviously not true, I will address it later.

Germans themselves will tell you they don't want to be rich  They are not flashy and ostentatious like the Chinese or Americans. German billionaires are obscure, they blend in with their population not trying to rock the boat buying huge tracts of land and what not, jacking up prices with their overspending. Look at the owner of Aldi for example. Germany's whole economic system is built for stability, they favor slow but sure growth. German SME avoid bank debts, instead they reinvest their profits, they own their assets. Moreover, most Mittelstand make sure they don't over rely on one customer so they limit them to just 10% of orders. Very sensible people.

[Arcadian_Dreamer]

Why would they incur debt yet it a developed nation? Show us non resource dependent developing nation that is growing without debt or high taxes. Most of heavy debt items are to build heavy infrastructure projects - Swiss already did that.

Governments everywhere are irresponsible. Politicians want to be elected so they promise goodies to the public - free healthcare, free pension, free schooling, free this and that can only be done via deficit spending or debts. Look at America and the UK, up to their eyeballs in debt.

Let us look at the example of Singapore, Pundit. Here is a veritable model for low income countries not blessed with resources.

1. The first element is stable money. Singapore started with a currency board system — a simple, transparent, rule‐​driven monetary regime. Currency boards operate on autopilot, with automatic adjustments keeping the system in balance. Currency boards deliver discipline to the spheres of money, banking, and fiscal affairs. Currency board provide stable prices and free convertibility to hard currencies. This establishes confidence and attracts foreign investment. No stability = No economic prosperity

2. The second element was that Lee Kuan Yew ruled out passing the begging bowl. Singapore refused to accept foreign aid of any kind. This is a far cry from many developing countries, where, when you pick up the paper, all you see are politicians and bureaucrats trying to secure foreign aid from someone, be it an NGO, a foreign government, or an international financial institution, like the World Bank. By contrast, signs reading “no foreign aid” were hung figuratively outside every government office in Singapore. We are champions at begging.

3. The third element was that Singapore strived to have first‐​world, competitive private enterprises. This was accomplished via light taxation and light regulation, coupled with completely open and free trade — in short, policies that enabled Singapore to become one of the Asian Tigers.

4. The fourth element in the Singapore Strategy was an emphasis on personal security, public order, and the protection of private property.

5. The fifth, and final, element in the Singapore Strategy was a “small,” transparent government — a minimalist government that avoided complexity and “red tape”.

[RV Pundit]

Most importantly Singapore - a city country - sit on straits of mallacca - that joins Indian and Pacific ocean - and for that geographical reason - huge part of shipping lines must pass Singapore - to save money and time - and that is what port city country of Singapore milks.

Get us a large country that did not win a natural resource jackpot like sitting on the strait of mallacca.

Why would they incur debt yet it a developed nation? Show us non resource dependent developing nation that is growing without debt or high taxes. Most of heavy debt items are to build heavy infrastructure projects - Swiss already did that.

Governments everywhere are irresponsible. Politicians want to be elected so they promise goodies to the public - free healthcare, free pension, free schooling, free this and that can only be done via deficit spending or debts. Look at America and the UK, up to their eyeballs in debt.

Let us look at the example of Singapore, Pundit. Here is a veritable model for low income countries not blessed with resources.

1. The first element is stable money. Singapore started with a currency board system — a simple, transparent, rule‐​driven monetary regime. Currency boards operate on autopilot, with automatic adjustments keeping the system in balance. Currency boards deliver discipline to the spheres of money, banking, and fiscal affairs. Currency board provide stable prices and free convertibility to hard currencies. This establishes confidence and attracts foreign investment. No stability = No economic prosperity

2. The second element was that Lee Kuan Yew ruled out passing the begging bowl. Singapore refused to accept foreign aid of any kind. This is a far cry from many developing countries, where, when you pick up the paper, all you see are politicians and bureaucrats trying to secure foreign aid from someone, be it an NGO, a foreign government, or an international financial institution, like the World Bank. By contrast, signs reading “no foreign aid” were hung figuratively outside every government office in Singapore. We are champions at begging.

3. The third element was that Singapore strived to have first‐​world, competitive private enterprises. This was accomplished via light taxation and light regulation, coupled with completely open and free trade — in short, policies that enabled Singapore to become one of the Asian Tigers.

4. The fourth element in the Singapore Strategy was an emphasis on personal security, public order, and the protection of private property.

5. The fifth, and final, element in the Singapore Strategy was a “small,” transparent government — a minimalist government that avoided complexity and “red tape”.

[Arcadian_Dreamer]

So Kenyan should maintain it's poverty by doing the same? Once you're rich - you have all the life comforts - you get into marginal economic return - however much you work hard - however much money you make - it won't change your life - and that is what all developed nations are. They are just there - everything works - nobody really has to invest and go crazy! - not people - not gov - not companies.

But developing nations are in a different stage.

We don't have to make it complicated, there is no stage of development that makes it right/safe to gamble on a country's solvency by engaging in reckless borrowing to finance infrastructure.  Even the US that whose dollar is the reserve currency for the world can't get away with it.

[Arcadian_Dreamer]

Most importantly Singapore - a city country - sit on straits of mallacca - that joins Indian and Pacific ocean - and for that geographical reason - huge part of shipping lines must pass Singapore - to save money and time - and that is what port city country of Singapore milks.

Get us a large country that did not win a natural resource jackpot like sitting on the strait of mallacca.

Nope. Try again.

Singapore's main exports, particularly in electronics, chemicals and services including Singapore's position as the regional hub for wealth management provide the main source of revenue for the economy.

[RV Pundit]

No risk. No return.

We don't have to make it complicated, there is no stage of development that makes it right/safe to gamble on a country's solvency by engaging in reckless borrowing to finance infrastructure.  Even the US that whose dollar is the reserve currency for the world can't get away with it.

[RV Pundit]

Dubai does even better and yet it started as Oil producer. That is their lever.

Nope. Try again.

Singapore's main exports, particularly in electronics, chemicals and services including Singapore's position as the regional hub for wealth management provide the main source of revenue for the economy.