ISAGUNDE, RICA JEAN MAY 12, 2021

BSED SOCSTUD 2A NEWS ANALYSIS

NEWS ARTICLE
CONTENT/ISSUE

The news talk about the International Monetary

Fund recommends that governments consider raising
taxes on the rich to cover expenses for Covid-19. It was
proposed that a temporary rise in taxation on capital or
high wages could aid in reducing inequalities that have
grown as a result of the crisis. It added in its fiscal report
that the move would make the pandemic's worst-
affected people feel more stable. Governments, on the
other hand, are advised to "carefully consider trade-
offs," according to the organization. Before moving to income taxation, the International
Monetary Fund (IMF) suggested reforming existing laws on inheritance taxes or land
taxes, for example. A wealth tax is usually imposed on a taxpayer's wealth, such as real
estate or shares. Its importance has declined in recent decades.

"Policymakers might recommend a temporary

Covid-19 recovery contribution, imposed on
high wages or capital, to help address
pandemic-related funding needs," the report
said.

"Domestic and foreign tax reforms are

important, particularly as the recovery gets
momentum, to accumulate the money required to increase access to social services,
strengthen safety nets, and reinvigorate efforts to achieve the sustainable development
goals," it said.

Last year, the UK's Income Tax Commission estimated that a one-time wealth tax
of 5% on wealth above £500,000 per individual would collect £260 billion in the UK. It
cautioned that an annual wealth tax would be difficult to implement because wealthy
people would adjust their behavior to prevent being squeezed. The head of the IMF's
fiscal affairs department, Vitor Gaspar, added: "The pandemic's negative effects have
been worsened by pre-existing inequalities. Covid-19 has intensified inequality as a
result. A prolonged spiral of injustice has the potential to
become a socioeconomic and political crisis." According to
the article, younger and wealthier people suffered the most
during the pandemic, as they were more likely to lose their
employment or wages. In its most recent economic outlook
update, the lender of last resort predicted a better economic
improvement than anticipated, both internationally and in the
UK, than it had predicted in January. However, it predicts that
recovery will be dangerously uneven both inside and within
countries. Countries with slower vaccine rollouts, less
economic policy support, and tourism-dependent economies
are more likely to struggle. For good cause, economic policy discussions are once again
focusing on inequality. A wealth tax isn't a cure-all, and it's certainly not the only way to
address that inequalities at the top. It does, furthermore, operate as a rational second-
best strategy in the absence of a better option. The concept does not, in the very least,
deserve to be labeled heretical.

ANALYSIS

Tax collections are decreasing globally. In an attempt to boost economies and

keep businesses afloat, governments have canceled or suspended certain tax
obligations. Opportunities to raise income and profit taxes, VAT, excise and import duties
are also diminishing as wages, commerce, and earnings continue to decline. For at least
the next two years, several governments will be investing much more than they expected
and earning much fewer. Most are amassing debts comparable to those incurred during
global wars. They would have a difficult time lowering their deficits by cutting government
spending. Businesses will continue to need assistance and financial assurance.

Unemployment is expected to stay

rising in the coming years. In order to respond
to the crisis, more social investment would be
needed. Most obviously, the pandemic has
resulted in significant, but mostly insufficient,
increases in direct financial assistance to the weak and
disabled. Cutbacks of such transfers would be socially
immoral and strategically difficult in the near future. As a
result, government would be required to raise additional
taxes. On the other hand, do they tax? And how can they
justify their decisions to their constituents in order to win their
support? These decisions can, of course, be influenced by
national conditions, but the problems are universal. Adopting a common solution would
greatly increase the odds of gaining advantage from the crisis.

There are a few options to think about. There are options to raise money to pay for
these bills that will preserve solidarity politics, gain popular interest, and lead to
addressing some of humanity's larger issues. The proposed tax agenda is based on three
principles: The poorer half of the population (or even the whole population) should not be
made to pay extra. A large portion of the increased tax burden should be borne by the
wealthy or those who have escaped economic hardship since the recession. Tax
proposals should offer a long-term roadmap, not only for raising taxes, but also for
addressing other significant social issues.

There has never been a wealth

tax in the United States. This prospect
has now become a defining topic in the
presidential election of 2020. Senator
Elizabeth Warren, one of the
Democratic Party's leading contenders
for president, has made wealth
taxation a centerpiece of her bid.
Emmanuel Saez and Gabriel Zucman,
both of the University of California, Berkeley, contributed to her initiative. In their latest
novel, The Triumph of Injustice: How the Rich Escape Taxes and How to Make Them
Pay, Saez and Zucman have made the notion of a wealth tax a central theme.
 Economists are hesitant to draw theoretical decisions on income inequality
because theory does not provide them with a suitable standard. If innovators became
extremely wealthy, it is most likely that their invention was extremely profitable in which
case their fortune is well-deserved or because they have successfully turned their concept
into a monopoly income, which can be handled by competition policies rather than taxes.

IMPLICATION

To begin, wealth should be taxed. The South

African Revenue Service will concentrate on this. For
decades, money has accumulated in the hands of a
select group of people around the world. Even the
International Monetary Fund has issued a note about
the potential for negative economic and political implications. Wealth taxation would have
little or no effect on motivation to spend and innovate. Wealth-generating money will be
taxed more heavily. For decades, inheritance taxes have been gradually reduced. Efforts
to unearth vast sums of secret money should be stepped up both domestically and
globally. Property taxes are underutilized, especially in developing countries, and could
be easily increased.

Second, impose temporary service

fees on prominent people and companies
whose earnings have been untouched – or
even boosted – by the epidemic. These
proposals, which the IMF refers to as
"solidarity surcharges," have been
supported by the IMF and the OECD. They
embody a basic political logic: in the face
of a global recession, we can all bear a
portion of the burden. Third, the crisis has intensified the transition away from face-to-face
encounters and toward online interactions. Most major (and mostly American and
Chinese) technology platforms that profits from powerful network effects can see their
revenues rise much further as a result of this. Prior to the crisis, they became well-known
for their ability to delay paying taxes. It's now more necessary than ever to figure out
better ways to tax them – and online purchases in general. Fourth, in order to fight global
warming, taxes should be raised. Taxes on harmful carbon dioxide and other
contaminants have been delayed for a long time. And such taxes may be structured
simply to generate new income for governments while also reducing expenses for more
needy households or enterprises by subsidies or other forms of assistance. Covid-19 has
provided us with a taste of cleaner skies. It would be unforgivable if you did not take
advantage of this chance.

Finally, for companies, fill the void.

This is not the time for a broad tax hike;
rather, it is the right time to address clearly
inefficient tax losses. One example is
interest charges are tax deductible, which
allows businesses to use loans rather than
equity funding. This, in particular, adds to
financial uncertainty and over-leveraging.
The federal government of the United
States has now taken the initiative. In 2017, it set deductibility thresholds. Another void is
caused by ambiguous tax breaks for businessmen, who are driven more by politics and
greed than by economic policy. They are particularly prevalent in low-income countries,
where they consume a large proportion of potential tax income. Almost everybody will
reap from a successful harvesting. More generally, a “new deal” on international taxes is
needed, one that simplifies international law and improves coordination in ways that
benefit developed countries while avoiding further disruption of the international tax
system. Taxation is still a political problem. The politics surrounding the pandemic's tax
response could spontaneously erupt into a squabble, making effective policy intervention
impossible. It's probably time for a deep and unifying tax discourse about our shared
human needs in the face of risk, supported by a comprehensive set of tax policies.
REFLECTION

COVID-19 has indeed infected millions of people and destroyed the lives of almost
500,000 people. In terms of variety and pace, the abrupt halts in economic growth and
jobs are much greater than anything seen before. Cross-border disturbances in supply
chains, migration, remittances, and oil prices are wreaking havoc on developed country
economies. During economic downturns, the weakest and most marginalized people are
disproportionately impacted. This is intensified by the economic recession, when the
vulnerable have less opportunities for protecting their welfare and are subjected to further
public sector delays.

The current situation is a global problem that necessarily involves a global solution.
International tax collaboration must be part of a comprehensive package of multilateral
responses to the crisis that is both successful and well-coordinated. It is more important
than ever to work together to address fraud and corruption, including illegal financial
transfers, in order to improve
fiscal space. About the same
time, moving toward a fairer and
more equal taxation of
commercial activity on a global
scale will never be more
important. Vulnerability to
COVID-19 and to its economic
impact are very different across social groups. According to David Wearing, taxation will
further level the playing field. In the same vein, deliberate tax avoidance by big taxpayers
would become more unacceptable to civilization as a whole. In 2020, the average tax-to-
GDP ratio in developing countries is expected to drop significantly. After the global
financial crash of 2008-09, it took an average of eight years for earnings to return to pre-
crisis levels. During and after the crises' height, a lot of direct foreign financial assistance
and debt relief would be needed. According to David Wearing, stimulus must be well-
timed and proportional to obtaining the increased revenues needed to regain fiscal
balance after growth has been restored. Transparency would be crucial, including the
reporting of domestic taxes, assistance, and their expenditures. Significant efforts to
create tax capacity are essential to a growth agenda for this community of countries.

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PLAGIARISM CHECKER