Search

How Much Money Does A Country Need to function?

Oil, Taxes and Pleasure: The Best Mirror a Country and Hold to Itself.

Taxes: Part 2

đź“ş If you prefer an animated post, kindly click here to access a 7 minute animation with music.


Hidden charges, Doubtful Currencies & Deprivation: Endless Down-Cycles or Failed States?


Why countries need to collect taxes… to sustain their population? However many countries are already rich with super-big GDPs… so why do they still need tax monies? 


GDP… is the wrong way to look at a country’s wealth. It is like mixing total estimated production with revenues of a corporate. Real revenue that matters is the tax collected… ! Often supplemented with debt but sometimes with doubtfully printed currency (quantitative easing).


True tax collection efficiency of a country is reflected in how many people a country can sustain per dollar tax collected… while offering a reasonable quality of life. 

Tax efficiency is not the proportion of people who pay or won’t pay taxes.

So let see how countries rank on how much tax revenue they need to support one person…? Kindly refer table below:

Thus countries like South Korea can sustain one single person at 50% of what developed countries like Germany take? And on top offer a better quality of life?

Why do some countries need more resources (taxes & debt) to support populations as compared to others? Is it due to the difference in the cost of living… ? No… thats a false metric… let get into what truly causes differences in the cost of living…?


While the global average tax rate is 15-20% of GDP or income, the resources needed to sustain the population of a country may simply depend on parts of “taxes” that are often not in sight.


Hidden “taxes” are those that have a cascading - not one-time charge - on the populations & people don’t often realise they are being “forced” to pay. Such as:

• Artificially low-interest rates

• Currency depreciation &

• Currency printing…

These taxes further feed… the real inflation through ever-increasing costs of healthcare, education & housing… while the reported inflation numbers continue to be low.

The reported inflation numbers are kept low due to linkages with Government debt & bond prices. The Governments don't want to pay more in interest cost having turned out to be the largest borrower. 

Further, the entrenched interest avoids paying inflation equitably across the economy contrary to the law especially in countries where inflation is automatically payable to everyone (inflation-indexed). 


While the reported inflation numbers remain low, we all have experienced doubling of most things we consume over the last 5 years that equates to 15% p.a. inflation not 2-5% p.a that is often reported. 


Let's work through an illustration of a middle-income G-20 country. The key aspects of the country are as follows: 

 • Per capita GDP: ~$8,000 to 10,000.

 • Tax revenue ~$700 to 800 bn p.a. 

 • Good public healthcare system & education.

 • No excessive defense or healthcare spending.

 • Rated ahead of China & Thailand on the Human Development Index.


While reported inflation remains at an average 4% over the past few years… poverty rates doubled from ~2.5% a few years ago, after decades of stellar declines.

The cost of staple everyday food (meat) touched an all-time high forcing most families to change their diet.


Let's take a money view of the “hidden” charges in the economy that cascade… over the last 3 years... $ 800 bn or over 100% of annual tax revenues have been provided as stimulus to the entrenched interest while...

education costs are up by >100% 5 years. Healthcare cost up by >80% up in the past 5 years. Real estate up by 30% in 5 years.


One person in every 6 is unemployed despite $800 bn allocated to the entrenched interest in the form of currency printing, low-interest rates & currency depreciation. 




So what are the options to bring back balance & fairness?

Should the Government issue bonds to third-party investors instead of making central banks buy them (print currency)and start paying the true interest rate on the bonds?

Should the markets and not central banks influence currency levels & interest rates… so that everyone pays a fair interest rate & real inflation starts acting as a natural check on everyone…? 

Doubtful currencies & other subsidies are now crossing annual tax collections… while our savings get eroded & we still face unending joblessness & debt…?


Rather than help it may cause dreadful inflation & stagnation together -stagflation.


Unstopped stagflation may lead to further increase in assets prices forcing upon us a higher cost of living… while wages and jobs plummet… can this lead to failed states never seen before?


Authored by: Mohit Arora and Vince Arnette for Beautiful Presentations | Studio

Disclaimer: 

We are not related to oil & gas or sciences or tax policy in any manner nor such any association is implied. Information not to be used without independent verification by users. 

Analyses based on publicly available information that is widely accessible on the internet. No accuracy assured or implied. 

18 views0 comments
  • YouTube
  • LinkedIn
  • Twitter
  • Medium
  • Instagram
  • WhatsApp
  • Email