Read on Twitter
1...
What is the role of Taxation and Social Protection in the Recovery?
Covid caused a recession. This will require a recovery. Particularly in developing countries.
Should we raise taxes? Should we create new taxes?
Shoud we change the design of Social Protection systems?
What is the role of Taxation and Social Protection in the Recovery?
Covid caused a recession. This will require a recovery. Particularly in developing countries.
Should we raise taxes? Should we create new taxes?
Shoud we change the design of Social Protection systems?
2... Let me begin with taxation:
In general terms, taxes should not be raised during a recession or its recovery.
Recoveries must be financed with public debt.
They payment of this debt may require some tax increases in a more distant future, but this is a different matter...
In general terms, taxes should not be raised during a recession or its recovery.
Recoveries must be financed with public debt.
They payment of this debt may require some tax increases in a more distant future, but this is a different matter...
3... By insisting that taxes should not be raised during a recovery I am not denying that developing countries, Latin American ones in particular, do not need tax reforms.
They do. They need to:
a) increase tax revenues
b) invert tax pyramids
b) substitute obsolete taxes ...
They do. They need to:
a) increase tax revenues
b) invert tax pyramids
b) substitute obsolete taxes ...
4... to me, an important lesson from Covid is that 'developing countries – if not all countries – should create sovereign social funds to fund counter-cyclical large scale social policies.'
The reasons are...
The reasons are...
5. Chances are that there will be new large-scale epidemics, large-scale environmental crises, perhaps -- hopefully not -- worse than Covid.
Large scale crises require large scale cooperation.
Covid reminded us of our common destiny. And of our common responsibilities...
Large scale crises require large scale cooperation.
Covid reminded us of our common destiny. And of our common responsibilities...
6. The existing social protection has difficulties to respond to large scale crises because it is
a. Cyclical: depends on yearly budgets, which depend on the projected economic performance and do not anticipate shocks
and...
a. Cyclical: depends on yearly budgets, which depend on the projected economic performance and do not anticipate shocks
and...
7...
b. Is either
i. formal employment-based (social security, unemployment insurance) or
ii. Chronic-poverty based (targeted assistance)
This makes it difficult to implement large scale protection against shocks in developing countries...
b. Is either
i. formal employment-based (social security, unemployment insurance) or
ii. Chronic-poverty based (targeted assistance)
This makes it difficult to implement large scale protection against shocks in developing countries...
8... So, my argument is that Sovereign social funds are a mechanism to ensure funding to large scale crisis without dramatic macroeconomic impact and without the need to large scale political mobilization to approve emergency funds...
People will be discussing this and many other important aspects of the Covid recovery in the @ODIdev conference, Jan 13, open to all, but requires registration, link below. https://www.odi.org/events/17664-inequality-time-new-social-contract
In the link inside this tweet you can find the program: https://twitter.com/marcelo_meds/status/1348326565839560706
