By Lord Aikins Adusei (taken from Eurodad partner TJN Africa’s Quarterly NewsletterAfrica Tax Spotlight),
The article below looks at the current global economic and financial crisis, its impact on firms, governments and the poor. It argues the crisis has generated new kinds of tax policies in both developed and developing countries that in the long run will lower inequality between the rich and the poor. The article concludes that although the poor appear to have been badly hit by the crisis they will end up being the final beneficiary if the taxes and other policies being implemented begin to bear fruit.
Taxes play an important role in the economy of many nations. In many countries taxes paid include but are not limited to Personal Income Tax, Corporate Income
Tax, Value Added Tax (VAT), Fuel Levy and Windfall taxes. These taxes help build and maintain public goods and infrastructures such as roads and railway networks, schools and universities; pay salaries of teachers, nurses, doctors, police, and soldiers; maintain law, order, peace and security of the country; and improve economic and social wellbeing of citizens; and pay debts owed to creditors. In short, taxes are essential for the running of every country. Over the last three or four years, the world has gone through and is still going through tumultuous and painful financial and economic crisis. The crisis, which began in the United States and quickly spread to Europe and other Organisation for Economic Cooperation and Development (OECD) economies, was as a result of a combination of factors including under regulation and over supply of financial products; too much public and private sector debt; near-zero interest rates that
fueled cheap credit; and asset prices that boomed and then busted. The crisis has had devastating impact on ability of firms to secure credits as banks are unwilling to lend. In fact, a number of banks have failed and with it the assets of companies and individuals who did business or saved with them. Additionally, demand for goods and services produced by firms has gone down forcing companies to close down completely or lay off workers to cut down cost. The result is that many small and major firms have seen their profits slashed and so are their taxes to government. Governments’ bailouts and efforts by Central Banks around the world to stimulate the global economy by injecting additional
liquidity have not yielded the desired results. Governments’ efforts to raise revenue through taxation have also suffered severe setbacks. As exports and imports in advanced economies slow down and businesses collapse or underperform, governments are losing corporate income tax, personal income tax and other taxes that could help them maneuver through the storm. In a recent op-Ed titled “Globalization of Protest” Columbia University Professor Joseph E. Stiglitz put the impact of the crisis this way: “Around the world, we have underutilised resources – people who want to work, machines that lie idle, buildings that are empty – and huge unmet needs” (Stiglitz, 2011). Stiglitz was referring to the cost of the crisis on the poor. Governments’ inability to raise revenue to implement social and economic programmes has been borne largely by the poor, low wage and middle class workers. In both private and government institutions there is freeze on wage increase.
That not withstanding, the crisis has elicited positive responses from people around the Globe. In India, demonstration against corruption has forced governments to act to prevent corrupt politicians and their business associates from taking bribes and evading tax. The crisis has seen the United States, Franceand Spain acting in a coordinated fashion to stop corrupt African leaders from looting their coffers and depositing their loot in Europe and America. One illustration of such actions was the fact that Teodoro Obiang Nguema, son of Equatorial Guinea’s dictator, had his cars confiscated by French police. If auctioned the proceeds of the $5million worth of cars could help provide schools, hospitals and improve sanitation for the people in that country.
In 2007, a report prepared for South Africa Treasury, Dr. Zavareh Rustomjee and his team defined windfall profits as “excess profits, of which conceptually there are two possible types: those of a temporary or cyclical nature (called “quasi rent” or “economic profits”), or more structural or permanent (called “economic rent”)” (Rustomjee et al, 2007). Thus taxes on these excess profits constitute windfall tax. According to James Muyanwa (2011) windfall tax is a tax levied by governments on certain industries when economic conditions allow those industries to experience above average profits. Companies who benefit from massive profits due to a favourable economic condition are targeted. In October of 2011, the Reuters news agency cited Ghana’s Finance Minister Kwabena Duffuor as saying. Ghana is in talks with gold miners about extra taxes, including the possibility of a windfall tax. In May of 2011, media houses inNamibia quoted Mines and EnergyMinister Isak Katali as saying that the government was looking to introduce a minerals windfall tax to enable the state to benefit more from the country’s vast mineral resources. The Energy Minister said: “It is my view that as the custodian of the mineral resources, the state should also benefit in good times beyond normal taxes and royalties” (Dontoh, 2011). Algeria, South Africa,Chad, Gabon and Angola have already indicated that they would want to implement some kind of windfall tax that would target massive profits and use it to implement social and economic programmes to benefit the poor. Although the poor have been badly hit by the economic and financial crisis, there is hope that they will turn up to be winners if the policies begin to bear fruit
http://www.causes.com/causes/288492-africa-for-democracyDemocracy is not just a word. It is the wheel through which both the poor and the rich are given the opportunity to influence decisions that affect their lives including education, jobs, electricity, housing, transportation, and all the freedoms known to mankind. But recent developments in Libya, Tunisia, Egypt, Cameroon, Gabon, Ethiopia, Gambia and Ivory indicate that achieving democracy always come with a price. Since January protests have rocked the North African states of Tunisia, Egypt and now Libya. Similar protests have taken place in Gabon and Cameroon. The protesters have embraced jet fighters, helicopter gunships, armoured carrier assaults, water cannons, camel charge, tear gas and police brutalities.
Thousands have died. But we cannot remain aloof while thousands are massacred for demanding the right to elect their leaders, to speak their mind freely and to have access to basic necessities of life. Our silent means victory for the autocratic regimes littered across the continent. The people of Libya need our support and so are the people of Cameroon and Gambia. They need our prayers, and our encouragement. Let's us support them. Join Africa for Democracy now and let the world know how you feel about it.
Protest Message to the Politicians and Governments in Africa
You know I am crazy over you
THE ROT IN GHANA'S HEALTH CARE SYSTEM
Immortal Technique - The 3rd World
THE 4TH BRANCH
MYSTERIOUS GIRL BY PETER ANDRE
R TO A CJ LEWIS
POINT OF NO RETURN (IT)
Quote of the Day
"But history offers a clear verdict:governments that respect the will of their own people are more prosperous, more stable and more successful than governments that do not.No country is going to create wealth if its leaders exploit the economy to enrich themselves, or police can be bought off by drug traffickers. No business wants to invest in a place where the government skims 20 percent off the top, or the head of the port authority is corrupt. No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery".PRESIDENT BARACK OBAMA
HAVE YOU HEARD OF AFRICOM?
LIKE COLONIALISM AND IMPERIALISM, AFRICOM IS THE NEW US MILITARY PROJECT THAT SEEKS TO ESTABLISH MILITARY BASES ACROSS AFRICA WITH SOLE PURPOSE OF SECURING AFRICA'S RESOURCES FOR US CONSUMPTION.