he Global economy is shrinking when it should be growing – why?
Because we have had politicians who have believed in Capitalism, Socialism or Communism and not fully understood how the economy really works. The Capitalist works around business and money while the socialist works towards equality of people in the community. Communism is a step further than socialism and wants business owned and controlled by governments. What is as bad if not worse is that over the years we have accepted tax systems that are totally inefficient and we do not truly know who pays and when.

Start with the fact that the ECONOMY ONLY WORKS ONE WAY.
Originally there were communities of people who had to work together to provide for them selves. They were organised by the Chiefs. Then came industrialisation which helped the community to produce more. Now appreciate that the end product of all businesses is to provide goods and services to the consumers (community), and there is nothing else. Business is about converting raw materials from the earth sea and air into goods and services for the community. Mining and such companies sell to manufacturers and the like and there are businesses selling to businesses and governments all over the globe but it all ends with the sale of goods and services to the people of the community.

Without the people there is no business and it follows that the higher the spending power of the people the more business there will be no matter what business you are in. However the higher the spending power the higher the wages and the less economical the business. Can we create more spending power with lower wages? 


TAXES

HERE IS THE TRUTH ABOUT WHO PAYS TAXES AND WHEN

We all believe that we pay our tax as Income Tax. All our lives we have been told this. It is a tax that is calculated and deducted from our income but in truth, that is NOT when we pay our tax. Difficult to accept? The truth is that our employers have to pay us more so that we can pay the tax and it would make no difference if the employer paid us our net income and paid the tax instead. He will still charge into his costs the same gross amount paid.
 
Further than that we all pay other taxes such as rates, TV and radio licences, refuse collection and maybe toll fees and these all come out of the income paid by our employers. So the taxes paid by us, the people, are absorbed into the costs of business and government who are the employers. The higher the taxes the higher the income required.
 
In the overall economy there is a business sector and a government sector and a community of people. The people will work for the government sector or the business sector and the government sector will collect taxes from the business sector and the community.
 
We have seen that all of the taxes paid by the people are absorbed into the cost of employment and now appreciate that all the other taxes are levied upon the business sector and absorbed into their costs. This means that all of the taxes are included in the price of the goods and services produced. Further, we find that all of the country’s taxes are included in the prices charged by the business sector. 

It remains to explain that the end product of the business sector as a whole is the supply of goods and services to the consumer. Production may move from one business to another or from business to government and from one country to another, but in the end there is only the community (somewhere in the world) to buy what is produced by the business sector.
 
As we buy our goods and services so we pay the taxes that are included in the prices as well as the VAT that is charged. Effectively all of the taxes are included in the prices charged by the business sector. We effectively pay our taxes when we purchase our goods and services. The strength of the economy therefore comes from the spending power of the community.  Nothing can change this.


LOOK AT WHAT HAS HAPPEND

As Technology has advanced people have been put out of work and have been replaced by machines and robots. The business sector now does not produce the taxes that were paid by the employees. The odds are that the manufacturing businesses contribute little in income tax because of the capital allowances. The business contributions to the fiscus have been reduced considerably by the advances in technology and this will continue.

Many British and American businesses closed and moved to China and India because employment costs were much lower. This was not helped when Margaret Thatcher had her confrontation with the Trades Unions and businesses closed and there was nothing to replace them. People became unemployed and became a burden on the state instead of being contributors.

China’s manufacturing sectors grew with cheap exports to America and Britain and Europe and other parts of the world. But as spending power diminishes so does the demand for goods and China’s exports are suffering as a result of the global unemployment problems.
We find that financial institutions in Britain are using India for their administration and British tax receipts further diminish.  

 Because all taxes are in fact paid in the prices of goods and services to consumers it follows that if consumption goes down so the tax receipts will equally go down. Britain has a welfare state which maintains spending power albeit at a lower level which helps to maintain receipts into the fiscus but at a huge cost.

The European Union has the same problems with Tax and have different policies and to some degree cultures but again does not have full employment policies with the result that people migrate from one country to another seeking a better life or better way of living with the result that Britain with its welfare state has many more migrants than it would wish.

CHANGE IS NECESSARY

THE CENTRELINE SYSTEM OF GOVERNMENT
We now need to make a change to the Centreline System of Government (A none political solution) which recommends removing all the taxes which add to the costs of operating the business sector and government.
 
Government would lose our PAYE receipts and company tax receipts but should save about 20% in government expenditure immediately in respect of the taxes they would no longer pay to themselves. This would include all government and local government institutes, NHS etc. However, we must add local government expenses because we have removed local government taxes as well. We should increase the rate of VAT to about 20% which would add to the VAT income to contribute to the local government expenses. Imported goods would also carry the higher rate of VAT so that imports would then carry the same tax burden as locally manufactured products.

With savings of some 20-30% in business costs and no income tax there will be a considerable inflow of investment capital and one would expect as much as a 20% increase in business turnover and in GDP and spending power as employment increases. As employment costs go down there may well be an improvement in wages paid and consequent improvement in spending power. As spending power improves so the demand for goods and services will improve.

In the change it will be necessary to consider exports and while most consider that exports should not carry VAT it would be considered prudent to maintain VAT on the exports because all of the other taxes have been removed particularly in high tech industries

It should be realised that the greatest tax return to government would be from the manufacture and sale of local products. The return on imports is the VAT but all the hidden taxes are for the benefit of the exporting country. The least tax is realised from the export sales of imported goods and services.

Now of great importance is that a 10% increase in incomes that may have cost say 100 will then only cost 80 but the increase in spending power and the tax it will produce will be the same. Increasing the lower paid workers pay would produce little in the collection of PAYE but a huge amount in VAT because that money would convert to spending power.

The objective is to reduce the cost of employment and to this end health and education would be free. It brings about a realisation that everyone should work and contribute to the economy of the country. It is far better to increase tax receipts through employment than go the austerity route.

There is no longer a problem with Tax Havens because the country becomes one and investments will flow and it would not be necessary to go to China seeking investments.


SUMMARY

Businessmen and governments have to realise the importance of employment and spending power in the economy. By the same token it is essential to keep the cost of employment down to compete with countries like China and Asia generally. These countries in turn have to realise the importance of developing their own internal economies and not be reliant on exports.

As technology advances the problems of employment will grow and business has to realise that in the end they will need employment income to maintain sales. It may well be that hours of work will need to be reduced because the market will be dependent upon numbers in employment earning an income.

Once one appreciates how the economy works then Politics may fall by the wayside. Capitalists may become Socialists. There is a question of government ownership of the business sector and I can only add that government ministers should be trained in administration and would not normally be capable of running business enterprises particularly in a competitive environment. Corruption also becomes a problem in planned economies with money. 

he Global economy is shrinking when it should be growing – why?

Because we have had politicians who have believed in Capitalism, Socialism or Communism and not fully understood how the economy really works. The Capitalist works around business and money while the socialist works towards equality of people in the community. Communism is a step further than socialism and wants business owned and controlled by governments. What is as bad if not worse is that over the years we have accepted tax systems that are totally inefficient and we do not truly know who pays and when.

 

Start with the fact that the ECONOMY ONLY WORKS ONE WAY.

Originally there were communities of people who had to work together to provide for them selves. They were organised by the Chiefs. Then came industrialisation which helped the community to produce more. Now appreciate that the end product of all businesses is to provide goods and services to the consumers (community), and there is nothing else. Business is about converting raw materials from the earth sea and air into goods and services for the community. Mining and such companies sell to manufacturers and the like and there are businesses selling to businesses and governments all over the globe but it all ends with the sale of goods and services to the people of the community.

 

Without the people there is no business and it follows that the higher the spending power of the people the more business there will be no matter what business you are in. However the higher the spending power the higher the wages and the less economical the business. Can we create more spending power with lower wages?

 

 

TAXES

 

HERE IS THE TRUTH ABOUT WHO PAYS TAXES AND WHEN

 

We all believe that we pay our tax as Income Tax. All our lives we have been told this. It is a tax that is calculated and deducted from our income but in truth, that is NOT when we pay our tax. Difficult to accept? The truth is that our employers have to pay us more so that we can pay the tax and it would make no difference if the employer paid us our net income and paid the tax instead. He will still charge into his costs the same gross amount paid.

 

Further than that we all pay other taxes such as rates, TV and radio licences, refuse collection and maybe toll fees and these all come out of the income paid by our employers. So the taxes paid by us, the people, are absorbed into the costs of business and government who are the employers. The higher the taxes the higher the income required.

 

In the overall economy there is a business sector and a government sector and a community of people. The people will work for the government sector or the business sector and the government sector will collect taxes from the business sector and the community.

 

We have seen that all of the taxes paid by the people are absorbed into the cost of employment and now appreciate that all the other taxes are levied upon the business sector and absorbed into their costs. This means that all of the taxes are included in the price of the goods and services produced. Further, we find that all of the country’s taxes are included in the prices charged by the business sector.

 

It remains to explain that the end product of the business sector as a whole is the supply of goods and services to the consumer. Production may move from one business to another or from business to government and from one country to another, but in the end there is only the community (somewhere in the world) to buy what is produced by the business sector.

 

As we buy our goods and services so we pay the taxes that are included in the prices as well as the VAT that is charged. Effectively all of the taxes are included in the prices charged by the business sector. We effectively pay our taxes when we purchase our goods and services. The strength of the economy therefore comes from the spending power of the community. Nothing can change this.

 

 

LOOK AT WHAT HAS HAPPEND

 

As Technology has advanced people have been put out of work and have been replaced by machines and robots. The business sector now does not produce the taxes that were paid by the employees. The odds are that the manufacturing businesses contribute little in income tax because of the capital allowances. The business contributions to the fiscus have been reduced considerably by the advances in technology and this will continue.

 

Many British and American businesses closed and moved to China and India because employment costs were much lower. This was not helped when Margaret Thatcher had her confrontation with the Trades Unions and businesses closed and there was nothing to replace them. People became unemployed and became a burden on the state instead of being contributors.

 

China’s manufacturing sectors grew with cheap exports to America and Britain and Europe and other parts of the world. But as spending power diminishes so does the demand for goods and China’s exports are suffering as a result of the global unemployment problems.

We find that financial institutions in Britain are using India for their administration and British tax receipts further diminish.

 

Because all taxes are in fact paid in the prices of goods and services to consumers it follows that if consumption goes down so the tax receipts will equally go down. Britain has a welfare state which maintains spending power albeit at a lower level which helps to maintain receipts into the fiscus but at a huge cost.

 

The European Union has the same problems with Tax and have different policies and to some degree cultures but again does not have full employment policies with the result that people migrate from one country to another seeking a better life or better way of living with the result that Britain with its welfare state has many more migrants than it would wish.

 

CHANGE IS NECESSARY

 

THE CENTRELINE SYSTEM OF GOVERNMENT

We now need to make a change to the Centreline System of Government (A none political solution) which recommends removing all the taxes which add to the costs of operating the business sector and government.

 

Government would lose our PAYE receipts and company tax receipts but should save about 20% in government expenditure immediately in respect of the taxes they would no longer pay to themselves. This would include all government and local government institutes, NHS etc. However, we must add local government expenses because we have removed local government taxes as well. We should increase the rate of VAT to about 20% which would add to the VAT income to contribute to the local government expenses. Imported goods would also carry the higher rate of VAT so that imports would then carry the same tax burden as locally manufactured products.

 

With savings of some 20-30% in business costs and no income tax there will be a considerable inflow of investment capital and one would expect as much as a 20% increase in business turnover and in GDP and spending power as employment increases. As employment costs go down there may well be an improvement in wages paid and consequent improvement in spending power. As spending power improves so the demand for goods and services will improve.

 

In the change it will be necessary to consider exports and while most consider that exports should not carry VAT it would be considered prudent to maintain VAT on the exports because all of the other taxes have been removed particularly in high tech industries

 

It should be realised that the greatest tax return to government would be from the manufacture and sale of local products. The return on imports is the VAT but all the hidden taxes are for the benefit of the exporting country. The least tax is realised from the export sales of imported goods and services.

 

Now of great importance is that a 10% increase in incomes that may have cost say 100 will then only cost 80 but the increase in spending power and the tax it will produce will be the same. Increasing the lower paid workers pay would produce little in the collection of PAYE but a huge amount in VAT because that money would convert to spending power.

 

The objective is to reduce the cost of employment and to this end health and education would be free. It brings about a realisation that everyone should work and contribute to the economy of the country. It is far better to increase tax receipts through employment than go the austerity route.

 

There is no longer a problem with Tax Havens because the country becomes one and investments will flow and it would not be necessary to go to China seeking investments.

 

 

 

 

SUMMARY

 

Businessmen and governments have to realise the importance of employment and spending power in the economy. By the same token it is essential to keep the cost of employment down to compete with countries like China and Asia generally. These countries in turn have to realise the importance of developing their own internal economies and not be reliant on exports.

 

As technology advances the problems of employment will grow and business has to realise that in the end they will need employment income to maintain sales. It may well be that hours of work will need to be reduced because the market will be dependent upon numbers in employment earning an income.

 

Once one appreciates how the economy works then Politics may fall by the wayside. Capitalists may become Socialists. There is a question of government ownership of the business sector and I can only add that government ministers should be trained in administration and would not normally be capable of running business enterprises particularly in a competitive environment. Corruption also becomes a problem in planned economies with money.