http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.34Change: -0.03
R/$ = 10.68Change: 0.00
Au 1294.45 $/ozChange: 12.20
Pt 1460.50 $/ozChange: -0.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Sep 12, 2012

Consider tax regimes that favour industry over finance - Unctad

Back
Unctad economist Alex Izurieta on how a tax regime that favours industry over finance could be pursued. Camera Work: Duane Daws. Editing: Shane Williams. Recorded: 12.9.2012.
Johannesburg|Africa|Gas|Industrial|Resources|Systems|UNCTAD|Africa|South Africa|Income Groups|Mining|Oil|Progressive Taxation Systems|Social Services|Systems|Alex Izurieta
|Africa|Gas|Industrial|Resources|Systems||Africa||Mining|Systems|
johannesburg|africa-company|gas-company|industrial|resources|systems-company|unctad-company|africa|south-africa|income-groups|mining|oil|progressive-taxation-systems|social-services|systems|alex-izurieta
© Reuse this



A new report published by the United Nations Conference on Trade and Development (Unctad) argues that policymakers should consider taxing profits from productive entrepreneurial activity at a lower rate than those derived from financial activities as part of efforts to deal with the growing global problem of growth-sapping inequality.

The recommendation is contained within the 175-page ‘Trade and Development Report, 2012’, which was released globally on September 12 under the theme of ‘Policies for inclusive and balanced growth’.

Unctad economist Alex Izurieta, who presented the report's findings in Johannesburg, said the recommendation of differential tax rates was premised on the need to stimulate long-term growth and development by improving levels of employment, as well as employment conditions.

Various solutions were considered by the authors, including aligning tax rates to the creation of jobs. “In that way, you are discriminating immediately between the financial and the industrial sectors, because the financial sector doesn’t create as much employment,” Izurieta asserted.

Higher rates should apply especially on speculation and unearned capital gains, which “provide no benefits to the overall economy”.

“Taxation of transactions in equity, bond, currency and derivatives markets, applied internationally or nationally, may help check a further expansion of destabilising speculative activity,” the report stated, adding that taxing financial-sector bonuses at a higher rate than regular wage incomes could also reduce the incentive for excessive risk taking.

Besides considering tax regimes that discriminate in favour of industrial sectors, the report also calls for deployment of progressive taxation systems to ensure that high-income earners contribute more to government revenues.

Unctad argues that, while lower taxation on high-income groups and company profits was expected to lead to greater growth-supporting investment, the reforms actually fuelled inequality without providing better social services, higher investment and stronger employment creation and growth.

For resources-rich developing countries, such as South Africa, Unctad recommends that governments seek to appropriate “a greater share of commodity rents” to ensure that this wealth benefits the entire population and not only “a few domestic and foreign actors”.

“There appears to be considerable scope in many countries for collecting a larger amount of royalties and taxes, especially from companies active in the oil, gas and mining sector.”

Izurieta said commodity prices had supported growth in Africa, but warned that these prices had become more volatile, partly because of the growing presence of financial investors in commodity markets. The report notes that there was almost a 40-fold increase in commodity assets under management between 2001 and 2011.

There should also be a recognition that the terms-of-trade gains were likely to be temporary and, therefore, should not be relied upon to sustain government revenues.

“However, even if temporary, the higher rents and windfall profits in the primary sector can still be used to help accelerate productivity growth and job creation elsewhere in the economy. This requires special taxation of the windfall profits and channelling them into productive investments elsewhere in the economy.”

Apart from the progressive tax recommendations, the Unctad report also suggests greater public spending to reduce inequality, as well as active policy interventions to avoid further “wage compression”, as a tool for expanding employment.

In fact, the report argues that cutting wages in the context of a fragile recovery would be counterproductive as it would dampen demand even further.

By contrast, higher wages and lower inequality could stimulate demand and output growth, which could provide the basis for increased investment.

“If overall productivity grows without a commensurate increase in wages, demand will eventually fall short of the production potential, thereby reducing capacity utilisation, profits and investment.”

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Construction News
Updated 41 minutes ago Building materials firm Infrasors said on Friday that FD Marius Potgieter, who had occupied the position since July 1, 2009, had tendered his resignation and would leave the company with immediate effect.  Construction supplies manufacturer Afrimat FD and Infrasors...
Updated 3 hours ago Steel producer ArcelorMittal South Africa (AMSA) has confirmed that the reline project at its Newcastle mill, in KwaZulu-Natal, has hit snags and that the project, which was initially expected to be completed four months after the May 12 shutdown began, will be...
More
 
 
Latest News
Updated 41 minutes ago While the global economy continues to battle growth headwinds as it slowly emerges from a lingering post-recessionary phase, the greatest inhibitors to South African economic development are largely domestic and within government’s control, Finance Minister...
Updated 49 minutes ago Building materials firm Infrasors said on Friday that FD Marius Potgieter, who had occupied the position since July 1, 2009, had tendered his resignation and would leave the company with immediate effect.  Construction supplies manufacturer Afrimat FD and Infrasors...
Updated 1 hour 2 minutes ago Telecommunications group Telkom on Friday announced that, following extensive facilitated consultations and deliberations, management and organised labour had reached consensus that the company’s current restructuring process would proceed.  “The parties have...
More
 
 
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
 
 
 
 
 
This Week's Magazine
South African construction company Group Five says work on the rehabilitation of the 800 km stretch of the Plumtree–Mutare highway, in Zimbabwe, should be completed by the end of this year. Giving evidence before the Parliamentary Porfolio Committee on Transport...
SINGLE EXPERIMENT An artist’s impression of OCO-2 in orbit
The Space Operations division of the South African National Space Agency (Sansa) revealed on July 17 that it had supported the successful launch of the US National Aeronautics and Space Administration’s Orbiting Carbon Observatory-2 (OCO-2) satellite on July 2. The...
RICE TAG The real costs of operating Rea Vaya have become clear
Phase 1A of Johannesburg’s Rea Vaya bus rapid transit (BRT) system should carry around 42 000 people a day, while it was been expected that Phase 1B, rolled out last year, would add another 60 000 daily passengers. However, the entire system is currently carrying...
A stormwater project in Bedforview, east of Johannesburg, has stalled for eight months after project managers in the Ekurhuleni municipality resigned and municipal managers were placed on special leave without designating replacements. Construction to reinforce the...
The design of the Beit Bridge border post is the biggest impediment to efficient freight movement between Zimbabwe and South Africa, says Cross-border Road Transport Agency CEO Sipho Khumalo. Beit Bridge is the busiest border post in Africa. A research study on the...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks