Our present and future tax payments usurped by banks

Press conference by Algirdas Šemeta, Member of the European Commission, on a comprehensive package to strengthen the fight against tax evasion and aggressive tax planning in the EU. (EC Audiovisual Services).

Press conference by Algirdas Šemeta, Member of the European Commission, on a comprehensive package to strengthen the fight against tax evasion and aggressive tax planning in the EU. (EC Audiovisual Services).

According to Eurostat, the EU statistical service, tax payments in absolute terms, kept rising in the Eurozone after 2009 and surpassed the pre-crisis levels in 2011. Given that all along this period most of the euro area member states applied austerity measures, by cutting social spending, it is common knowledge by now that the extra government income was used to support the banking sector. Practically all Eurozone governments were forced during this period to save all and every Eurozone banking firm from its sins.

Eurostat also observes that, “the proportional increase in tax revenues was higher than the proportional increase in Gross Domestic Product, which has also resulted in an increase in the tax revenue to GDP ratio in both the EU and the euro area”. Unfortunately it was not only that. Apart from the extra tax revenues used to bailout the financial sector, Eurozone governments were forced to borrow huge amounts of money to recapitalise all careless lenders.

More taxes

During the crisis years, and mind you that Europe hasn’t seen yet the bottom of it, governments were obliged to borrow anything around 30% of GDP to recapitalise the banking sector. The Eurozone average sovereign debt to GDP ratio increased from 60% in 2007, to 90% in 2011. The most unfortunate case was Ireland. This country’s sovereign debt to GDP ratio rose from 25.1% in 2007 to 106.4% in 2011. All that unbelievable amounts of money were used to save the life savings of citizens, that the banking system has usurped. In Spain the sovereign debt to GDP ratio increased form 36.3% in 2007 to 69.3% in the year 2011. Again to bailout the banking sector.

It’s a pity to watch an entire continent to bleed for years now, because the banking system not only usurped the deposits of its customers, but also borrowed heavily to place risky bets, just to raise short-term profits for shareholders and fat bonuses for dealers and management. It is even more painful to watch now the banks to complain, because the European Union is about to introduce caps on bankers bonuses. The argument that the European banks might lose their ‘brains’, if bonuses are capped, it’s at least nerve-racking, because those bank executives take the rest of working professionals as completely morons.

Let’s return however to the taxation minefield. According to Eurostat, “The effects of the economic and financial crisis on tax revenues from 2007 onwards are apparent. From its last spike in 2006 in the EU-27 the ratio of tax revenue to GDP decreased by 1.1 percentage points to 39.6 % in 2010, while the ratio for the Eurozone 17 also decreased by 0.9 percentage points of GDP from its peak of 41.2 % in 2007 to 40.3 % in 2010. In 2011, tax revenues in terms of GDP increased substantially, which was due to absolute tax revenues increasing along the same path as in the previous year, but nominal GDP growth being lower. This reflects pro-active tax measures taken by Member States during the last years to correct their deficits”.

In this way Eurostat substantiates with solid facts the allegations that the banking industry absorbs an increasing part of our present and the future tax payments. The previous paragraph can support the allegation that banks are absorbing more from our present tax payments. By the same token though, the fact that almost all Eurozone governments borrowed heavily to bailout the banking sector, substantiates the dreadful prospect that the financial sector of the economy will continue in the future to suck the blood of sweating people through usurping their future tax payments.

 

 

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