AltAusterity Digest #71 October 25-31, 2018

In an article for The Intercept, Jon Schwarz discusses how tax havens and other methods of tax avoidance allow corporations to steal $180 billion from the rest of the world each year. Schwarz differentiates between tax evasion by individuals, which is illegal, and tax avoidance by multinational corporations, which is perfectly legal. The findings discussed in the article come from a study titled “The Exorbitant Tax Privilege,” co-written by Thomas Wright and University of California, Berkeley economist Gabriel Zucman. Using the ratio of reported profits to wages paid, the authors find that non-tax-haven countries average a ratio of 36% – 36 cents in pre-tax profit for every dollar paid in wages. Conversely, countries known as tax havens range from 800% in Ireland and 1,625% in Puerto Rico. This is possible by moving money offshore. For example, Goldman Sachs has 511 subsidiaries registered in the Cayman Islands, but zero offices.

When Bank of Canada Governor Stephen Poloz raised interest rates last week, he also said that Canadian’s should get used to rates around 3% as the new normal. Poloz raised the benchmark rate to 1.75%, the fifth such hike in just over a year, bringing the highest interest rates in a decade. Future hikes could be announced sooner than expected due to the resolution of the updated NAFTA agreement, the USMCA, which has removed business uncertainties. While more hikes may be imminent, Poloz also added that the Bank of Canada will analyze how rising interest rates will be absorbed, especially amongst households who have amassed considerable household debt since the crisis.

The UK Conservatives have released their 2018-2019 budget. Some highlights from the budget include raising the threshold for the top income bracket, a £1.7bn boost for Universal Credit work allowances plus an extra £1bn for claimants transferring onto the scheme, and an additional £20.5bn a year used to roll out a mental health crisis service from the NHS. Despite the announcement that “austerity is over,” Chancellor Philip Hammond has said that there will be no real terms increase in public spending aside from the NHS. Prime Minister Theresa May has spun this by claiming that ending austerity is not just about government spending, but that “it is also about more money in people’s pockets as well.”

Malaysia’s new government is set to unveil an austerity budget after unearthing more debt than stated from the previous government. The ousting of Najib Razak and the United Malays National Organization represents a political shift from a party that governed for 60 years. With the newly calculated debt at $239bn and economic growth slowing, the government is struggling to make deficit targets. The new Finance Minister Lim Guan Eng has gone as far to warn that Malaysians should be prepared to make sacrifices in anticipation of taxes and spending cuts. Anticipated cuts to expenditures are likely to be in emoluments, pensions and gratuities, and infrastructure spending

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