tag:blogger.com,1999:blog-3120478448417742445.post643738291577511501..comments2024-03-24T06:35:14.281+00:00Comments on The Portuguese Economy: Fiscal devaluation, a PR failure?Editorhttp://www.blogger.com/profile/16779405217168307855noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3120478448417742445.post-37284262941335473832013-09-10T01:37:20.030+01:002013-09-10T01:37:20.030+01:00P.S.: Perhaps it is conceptually simpler to let em...P.S.: Perhaps it is conceptually simpler to let employers "offset" payroll tax and PAYG personal income tax against VAT; see "<a href="http://www.macrobusiness.com.au/2013/09/fiscal-devaluation-on-steroids/" rel="nofollow">Fiscal devaluation on steroids</a>".GRPhttps://www.blogger.com/profile/06135577155466413315noreply@blogger.comtag:blogger.com,1999:blog-3120478448417742445.post-68254164034662417052013-07-14T06:41:51.550+01:002013-07-14T06:41:51.550+01:00EXTENDING FISCAL DEVALUATION TO PAYG PERSONAL INCO...EXTENDING FISCAL DEVALUATION TO PAYG PERSONAL INCOME TAX<br /><br />Why merely REDUCE payroll tax? Why not ABOLISH it altogether? If the revenue were replaced by VAT, domestic retail prices of domestic products need not rise; embedded payroll tax would simply be replaced by embedded VAT. Of course retail prices of IMPORTS would rise due to the higher VAT. But domestic consumers would be compensated by better employment opportunities due to abolition of payroll tax.<br /><br />And why stop at payroll tax? The cost of labour for employers can be reduced further -- without reducing employees' "take-home" pay or widening after-tax wage inequalities -- by replacing Pay-As-You-Go personal income tax IN THE HANDS OF EMPLOYERS. Employees would continue to receive credit for the PAYG tax withheld by their employers (calculated on their "grossed-up" wages). But businesses, instead of forwarding the withheld PAYG tax to the government, would pay a higher VAT. In the aggregate, the withheld PAYG tax would cover the additional VAT, with no need to raise domestic retail prices of domestic products.<br /><br />Three advantages would follow from this combination. First, payroll tax and PAYG personal income tax would be completely removed from the marginal cost of labour as seen by employers. That means more jobs, hence more domestic demand for domestic products. Second, the additional VAT, unlike the tax component of the cost of labour, would not feed into export prices. That means more foreign demand for domestic products. Third, because the extra jobs would reduce welfare spending, not all of the lost revenue from PAYG tax would need to be replaced. That would allow a slight FALL in prices of domestic products.<br /><br />I have suggested this replacement of payroll tax and PAYG tax as a lifeline for indebted nations on the edge of the eurozone -- in particular, Ireland: http://t.co/u5BtJd5Nxi .GRPhttps://www.blogger.com/profile/06135577155466413315noreply@blogger.comtag:blogger.com,1999:blog-3120478448417742445.post-42421221292671252322011-11-14T21:16:15.333+00:002011-11-14T21:16:15.333+00:00I would answer your question with two ideas that y...I would answer your question with two ideas that you presented:<br />1) no one is talking about the alternative way, the increase in unemployment and the decline in nominal wages<br />2) the VAT has already been increased sharply, so a new and painful increase would be needed.<br /><br />Another idea, that you are missing, is the fear that in the non tradable sector, where competition is weak, a decrease in costs will only translate into higher profits.Pedro Braz Teixeirahttps://www.blogger.com/profile/07432877240393077557noreply@blogger.com