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"Today, I would like to take Adam Smith into our modern time and talk about two ingredients of taxation for successful 21st-century economies.
The first one is the ability of countries to generate robust government revenue. This is, of course, the lifeblood of modern states. This is what allows governments to provide public goods that support strong and durable growth.
The policeman on the beat, the nurse who is attending to a patient, the teacher who is inspiring young minds, the scientist who is conducting cutting-edge basic research: these are only some of the people who could not do their work without reliable government income."
. . . . .
"The second ingredient of successful 21st-century economies is international taxation. This is an essential means by which governments mobilize their revenues in a globalized economy.
Recent headlines about Google, Starbucks, or Ikea have underlined that an international tax system needs to work for everybody. We need a system that discourages the artificial shifting of profits and assets to low-tax locations. And we need a system that discourages overly aggressive tax competition among countries.
In other words, we need a tax system in which ordinary citizens are convinced that multinational companies and wealthy individuals are contributing a fair share to the public purse, to the common good."
. . . . .
Conclusion
"Before we engage in these discussions, let me conclude by returning to Adam Smith, who wrote in the Wealth of Nations:
“Political economy…proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people…and secondly, to supply the state or commonwealth with a revenue sufficient for the public services.”
My main message today is this: creating successful 21st-century economies requires robust government revenues and an international tax system that works for everybody. These ingredients are essential for growth, fairness, and development.
They provide the fertile ground for the prosperity of nations. And we at the IMF are ready to play our part for the benefit of our membership."
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My added comments: This speech talks about a concept that many will view as being an attempt to "globalize" taxes. Critics will assert that this is a threat to individual national sovereignty while the concept would likely appeal to supporters of US Presidential candidate Bernie Sanders.
In practical terms, the US Congress is not likely to move forward with this concept in the US so long as the Republicans control the US House of Representatives. It's hard enough to get any kind of agreement on US tax reform much less some kind of international tax system.
This concept (an international tax system) is not likely to impact global monetary system change like we watch for here any time soon unless we do get another major financial crisis which results in solutions being implemented at a global level rather than at a national level. This is something that is more likely to evolve gradually over time, if at all.
The G20 meeting just held in China confirms that nothing major in terms of global policy action is on the horizon any time soon. Here are quotes from this ABC News article on the G20 meeting:
"Finance officials of the world's biggest economies promised Saturday to use "all tools" to shore up sagging global growth and to avoid devaluing their currencies to boost exports, but made no pledges of joint action."
. . . . .
"Companies and investors were looking to the Shanghai meeting for reassurance and action. But leaders from the United States, China, Europe and elsewhere had tried to squelch expectations that it would produce specific growth plans."
In addition the G20 meeting made it clear that policy makers do not think we are headed into a major crisis any time soon. In fact, US Treasury Secretary Jack Lew stated that directly in this Reuters article covering the G20. Here is the quote:
"Talking about further stimulus just distracts from the real tasks at hand," Germany's Minister of Finance Wolfgang Schaeuble said, rebuffing a recommendation from the International Monetary Fund (IMF) that the G20 should start planning now for a coordinated stimulus program. "We, therefore, do not agree on a G20 fiscal stimulus package as some argue, in case outlook risks materialize."
Lew (US Treasury Secretary) had a similar message, saying there was a great deal of economic uncertainty at present but no crisis. "It would not be reasonable to expect a crisis response in an environment that is not a crisis," he said told reporters.
This is what we have been reporting here on the blog. The sources I talk with who work in the system do not indicate to me they see an imminent financial crisis coming. -------------------------------------------------------------------------------------------
On Friday March 4th we will have an article covering a recent discussion (captured on video) on the potential for the SDR to be used as the new global reserve currency for the world. The discussion included both a current IMF official who works with SDRs right now and the former head of the SDR Division at the IMF (Dr. Warren Coats) who we have contact with by email. Dr. Coats even provided a great quote for our article that readers will want to see.
In the discussion it is clear that these officials do not see an imminent crisis coming at this time even though they do point out that the conditions for one in the future do exist.
Please watch for it and let others know about it as you will not get this kind of direct information from official experts like this very often. It will answer many questions I see from readers and in other discussion forums all over the world about the potential for the SDR as a replacement global reserve currency for the US dollar. Jim Rickards work on this is invaluable (they mention his book in the video) and now we will have direct information from both a current and former IMF official on what we can reasonably expect.
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