France on track for International Monetary Fund bail out

[EvangelicalAboutButteredToast]

https://www.politico.eu/article/francois-bayrou-france-bombshell-puts-debt-sustainability-back-on-the-agenda/

Sounds like bad news for Europe - particularly at a time when we need extra money for defence.

We do tax the rich, a lot.

Here is the marginal tax rate by earnings courtesy of the IFS

lol, the rich don't tend to be on PAYE, 😆

If the IMF provide a bail out, they send their staff into the central bank, and they re-regulate the banking system. (that's what happened in Ireland anyway). Ensuring borrowers are stress tested robustly and can make repayments. They also ensure the Finance Minister makes the budget cuts as per their requirements.

Care to define rich then?

Rich isn't just your income, someone earning 110k could be renting and paying a shed ton of tax. They aren't richer than someone living in an expensive house earning a low salary.

How would you define rich? Why do you think the rich are on PAYE?

A yearly income over £100k and/or assets over £2m.

Edit: Added "/or"

But someone earning 100k in a job doesn't have the same wealth as someone earning 100k from investments.

Agree with this. It's kind of crazy how much more tax you pay on income than e.g. CGT as well

Hence why 120k ish puts you in the top 1% of income earners but you need 3m in net wealth to be in the 1% of the wealthiest

Agree with this. It's kind of crazy how much more tax you pay on income than e.g. CGT as well

Yep, it's why a partner in a law firm on 2m a year will be a limited company.

France is deluded about its place in the world - at least the Brits have had our cold shower of reality with Brexit and Truss. France is refusing to reduce its spending by any amount - all of those lovely smooth roads and retirement at 62 are being financed by borrowing that is unsustainable. I think even Greece is doing better than France right now. France is about to lose another government because they can’t get spending reforms through, and their protectionism is not stacking up in the rest of the world or EU. Macron is a lame duck.

France and the UK are far more similar than we’d like to admit!

Yet when she tries to bring about change, for example in disability benefits, people are up in arms .

The UK benefits culture is absolutely out of control and if the IMF do end up stepping in , austerity will seem like a walk in the park.

It's not that I want any austerity to happen, far from it, however if things are as awful as we hear, then spending cuts and other austerity measures together with strict banking controls and taxation hikes are better coming from an outside body such as IMF.

Sitting governments are reluctant to bite the bullet too hard themselves, and all they end up doing is angering everyone for tinkering around the edges and targeting the usual suspects.

The Laffer Curve is not a piece of quantitative modelling. It was drawn on a dinner napkin by Arthur Laffer. It's a theory.

I'm aware of what it is. My question was about where the peak is, which can of course be modelled, and has been (see citation). Or are you proposing that laffer does not even apply in the UK right now?

So are we lol

I suppose you can look backwards at historical tax rate and revenue data and see if there seems to be a causual relationship between tax cuts and revenue rises and vice versa.

But the tax system is very complicated with all sorts of cliff edges and traps. Compliance can be as much social as financial.

I find the updated Adam Smith precepts of what makes a good tax more useful in thinking about this than post hoc justification of a supply sider's napkin jottings. Because that school of economics were always looking to justify low tax rates anyway.

To directly answer your question, no I don't believe the Laffer curve is useful as analysis in a tax system as complex as the UK's (well let's say England, to recognise the Scottish tax system being significantly different).

I don't believe the vast majority of taxpayers in this country even know what their overall tax rate is (it'd be v fiddly to work out the VAT part). They know what their take-home is and roughly what it buys and whether that's more or less than a year ago, I guess.

You think there is no sensitivity to tax rate changes?

Of course there is, but the Laffer Curve is so simplistic.

Our tax system doesn't raise as much from middle earners as that of other comparable countries, but our spend on public services is low compared to them too. Given the state of infrastructure and public services in the UK, I don't think middle earners are stupid enough to think that a significant reduction in e.g. income tax wouldn't lead to even more difficulty in accessing a GP appointment or even more holes in the roads.

And a tax cut in the current economy might unleash more inflation.

We need growth but as a pp pointed out, our borrowing costs have crept up.

We're going to be sighing over Truss and Kwarteng for a lot longer yet, I think.

if this happens to us, will it be the IMF setting tax rates and so on?

Yes, they set conditions for bailouts, which include taxation levels, public sector reforms, wage and pension cuts, etc.

@GCAcademic thanks

Seeing the amount of crap ‘food’ in the supermarkets and petrol stations ) cakes:biscuits: confectionary/crisps etc, I do wonder why governments don’t slap a huge VAT rate on it. And I wonder who wastes hard earned money on it…

I'm guessing if you're on the road a lot, travelling from job to job, probably working long hours, probably working a physical job, it's useful. The guy who fitted my mother's stairlift was an absolute expert in petrol station offerings! He turned up at 6:30 for 7 am job.

i'm not keen on slapping VAT on stuff like that. Can you tell? 😂