Tuesday, June 30, 2009

Shadowing the G-8

How the mighty are fallen. G-7 was once the colossus that ruled the world. When Russians bigged-up on oil and gas wealth they were invited to the table. And then the financial markets went pear-shaped and suddenly the G-8 didn't look quite so clever any more. G-20 became the new kid on the block, and all the king's horses and all the king's men won't be able to put the G-8 together again. G-8 meets in Italy next week, under Silvio Berlusconi's presidency, and this is likely to be a major non-event.

Anyway G-8 has a shadow. Chaired by Nobel Laureate economist Joseph Stiglitz, a group of non-aligned civil society experts meets as G-N, and they have just issued their proposals for tackling the crisis and creating a more cohesive world. You will find their report here.

The group includes our colleague and senior adviser Valpy Fitzgerald from Oxford University, and it comes as no suprise to us that tax issues, and tax havens (mis-spelt here as heavens) feature prominently.

Here are some selected recommendations, but do read the report for yourself:

To reverse the trend in distribution, and hence to contribute to sustainingaggregate demand in the medium-to-long term, it is proposed as follows.

1- To increase the progressivity of the tax system, in particular for high and very high incomes. This should happen in a coordinated way to avoid excessive movement of highly-skilled workers.

2- Fight against tax heavens (sic) - in distinguishing between low tax cooperative jurisdictions and others - and, in general, increase the resources devoted to fighting tax evasion and lack of information sharing.

3- Introduce some sort of cooperation among countries to avoid tax competition, wage deflation and social dumping, the modern versions of beggar-thy-neighbour policies which were common in the 1930s.

@Silvio Berlusconi - if you aren't too distracted by your domestic political problems (and police women) pay attention to these recommendations. They apply to your country as much as any other.

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