We must live in the world as it is, not as we would like it
Some commentators are predicting ‘fiscal
ruin’ following the huge deficits built up by Western governments.
There is no point in us whining about it. It is done and
there is no undoing it now.
The real concern today is how it will impact on our
businesses and whether there is anything we can do to mitigate that impact.
The inescapable arithmetic of the situation is that bigger
deficits will, sooner or later, mean higher taxes – and the bigger the deficit
and the longer the delay, the higher the taxes will be, as interest must be
Those taxes will fall disproportionately on business.
Politicians prefer taxes for which most voters do not sign
Of course, the voters, in their role as customers and
investors, pay all business taxes in the end – but because they do not sign the
cheques, they do not know how much they are really paying.
These taxes drive business out. This begins a vicious
circle: high business taxes reduce the tax base, so taxes rise further, so the
tax base is reduced even more...
Plus, if the increased cost burden of higher taxes was not
enough, the inhibited economic growth that also results from both the higher
taxes and the reduced spending needed to bring the deficits under control, will
mean lower sales, and thus less revenue and less profits, for the beleaguered
businesses that find themselves in such jurisdictions.
Against this, the individual entrepreneur can do nothing –
except, perhaps, vote with his feet and emigrate.