Categories
Economics

[1969] Of Obama’s offshore tax is a protectionist taxation

The Obama administration plans to tax US-based corporations for revenue not originated from the US as part of effort to create more jobs in the US.[1] This will help neither the US economy nor the world economy to recover.

There are of course legitimate concerns with respect to tax havens as money laundering tend to happen there more often than not compared to elsewhere. But Obama administration’s proposed action will punish corporations for operating in countries with low taxes as well. The administration thinks that by doing this, those corporations will relocate its foreign operations to the United States if they are faced with the possibility of being taxed for operating abroad.

Indeed, if passed by the US Congress, the proposal may force corporations to reduce or abandon its operations outside of the US, unless they are willing to pay those taxes. Under a scenario where these corporations do relocated into the US, the corporations will suffer higher operations cost due to  prevailing environment in the US, compared to places like China or India. It is worth noting that these corporations operate parts of their business out of the US to take advantage of low cost environment, especially if industries which those corporations are in are labor-intensive.

With higher production cost, higher prices will have to be charged and consequently, less will be sold.

If the proposal goes through, it will not only punish those corporations. It will also punish low-tax countries. Worse, such tax is likely to hurt trade volume in times when many countries including Malaysia are heavily reliant on trade to recover.

This of course will only happen if the tax actually convince these US corporations — in reality, multinational corporations — to relocate into the US. Given lower operations cost abroad, the other possibility is that these corporations may actually relocate more of its businesses abroad, avoiding being labeled as US corporations to avoid the tax altogether. This will be bad for the US economy.

So, the possibilities here are: one, the US bringing the world down together with it; two, the US bringing itself down. Either way, the US will lose out. The third and better possibility, of course, is for the US to not impose that tax.

The proposed move should not be too surprising to too many people. The Democrats since at least 2004 — the days of John Kerry and John Edwards — have wanted to somehow punish firms that they accuse as shipping American jobs abroad, either through outsourcing or offshoring. That thinking is protectionist and the Obama administration’s proposal should be seen as a follow-up to that protectionist tendency that Democrats are known for.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — May 4 (Bloomberg) — President Barack Obama proposed raising about $190 billion over the next decade by outlawing three offshore tax-avoidance techniques used by U.S. companies such as Caterpillar Inc. and Procter & Gamble Co.

Obama’s plan also would make it riskier for Americans to stash money in tax-havens. [Obama Seeks End of Corporate Tax Break to Raise $190 Billion. Ryan J. Donmoyer. Bloomberg. May 4 2009]

Categories
Humor

[1968] Of may the fourth be with you

Mr. Cohen: Thank you, Mr. Deputy Speaker. If that point of order was an allusion to me, I can tell the hon. Gentleman that I was here for the opening speeches, and for some of the speeches that followed.

May the fourth is an appropriate date for a defence debate. My researcher, who is a bit of a wit, said that it should be called national star wars day. He was talking about the film “Star Wars” rather than President Reagan’s defence fantasy, and he added, “May the fourth be with you.” That is a very bad joke; he deserves the sack for making it, but he is a good researcher. [Hansard Debates for 4 May 1994. UK House of Commons. May 4 1994]

Categories
History & heritage Liberty Politics & government

[1967] Of celebrating Margaret Thatcher

On this day 30 years ago, Margaret Thatcher became the Prime Minister of the United Kingdom, and a beacon to the whole wide world.

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And in 1990 on her last day as PM:

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Thank you Madam for everything.

Categories
Politics & government

[1966] Of and then there are the independents

The concept duality is helpful in understanding context a particular issue is set in. Without the idea of cold, how does one define the idea of hot? Without evil, how does one appreciate good? Without tyranny, how does one taste the sweet nectar of liberty? While such monochromic perception has its advantage in rationalizing the world, one must not take it too far lest one falls victim of false dichotomy.

To commit such elementary fallacy is especially easy in a highly politicized environment with heightened blind partisanship. Blind partisanship begins with prejudice taking over as the prevailing sentiment as trust and assumption of good faith vanish. With humanity’s amazing ability at selectively accepting evidence only when it is convenient to do so, our capability to confirm our prejudice even as we are unaware of our own effort at the confirmation bias should not be underestimated.

However fallacious the process is, the so-called evidence provides the foundation for paths to the mind be shut. So strong the foundation becomes that criticisms along with evidence to contrary become a squash ball to a wall. The ball bounces off and the wall stands so proudly, rightly or wrongly.

So strong they hold on to their prejudice — and emboldened by their confirmation bias — that everything now is colored in only black and white in the dullest of manner. But dullness is of no concern when one is right or rather, when one feels that one is right.

It is a kind of intellectual arrogance, except that intellectual arrogance is a property of those who are rigorous — slow perhaps for all evidences has to be considered objectively and mental model has to be set out right but rigorous nonetheless — in their thinking process. Intellectual arrogance is of no property of simpletons who resort to logical fallacies just because fallacies are easy to do. That arrogance is of no property of those who seek to merely confirm their bias.

As their colorful world turns monochromic, it is all about us versus them. The like-minded people versus the different others.

Close as I might come, fret not for I am here today not to burst into a raving recluse lunatic that I am sometimes as I sit in a corner embarking on a soliloquy amid a world which at times appears beyond saving. I am not here today to expound organic politics and to soil divine rights despite the enjoyment that I derive from doing so.

No. No.

I am here today to celebrate valiant individuals and to ridicule dronish collectives. I am here today to demonstrate as arrogantly as I find possible why my arrogance will trump monochromic arrogance. I am here today to admonish those who horrendously unjustifiably adopt arrogant monochromic worldview that there are only two groups in the world; that it is all about us versus them; that it is all about Barisan Nasional and Pakatan Rakyat.

Yes, today is not all about abstract idea while the mind wonders in the clouds. Today is about a very real issue.

While BN does exhibit some waning in terms of arrogance, only a blind cow would think BN is finally beginning to adopt a humble outlook. Ignore the slogans from the top echelon of BN leadership because the true measure of an organization’s sentiment is to be seen at the grassroot. No sincerity from the leadership in advocating change can supplant the unmoving signal from the grassroot.

The grassroot of BN, specifically UMNO, are unambiguous in its signal. As the Democrats in the United States used to say prior to November 4 2008, they want more of the same. The grassroot of UMNO still have not learned enough lessons to comprehend that globalization is here and that globalization is going to dismantle their precious affirmative action by hook or by crook. The time is up and to hide behind that crumbling wall is folly.

When Reagan said out loud in Berlin in 1987, ”Mr. Gorhachev, open up this gate. Mr. Gorhachev, tear down this wall!” the communists understood that the end was near. If somebody is to say the same thing to the grassroot of UMNO, do they understand it at all?

For them, what worked in the past will work forever.

Whatever arrogance BN manages to dust off its back, Pakatan accumulates. After a wild success, many in Pakatan feel that they are beyond criticism. Even if those criticisms are justified, they implicitly assume that voters really have no choice but to stay which Pakatan because Pakatan is the lesser of the two evils.

Oh, the arrogance is so suffocating that I just wish a general election to come quick for me to prove that Sophie’s choice is but an eroded disk brake of no use any longer. Pakatan does not get a get-out-of-jail-free card any more. The time for free ride is over. No more handicaps. It is time for free and fair competition that is the essence of a proper democracy.

For far too many, in BN and Pakatan as well as their sympathizers, this environment of heightened blind partisanship has encouraged them to adopt a monochromic worldview; a worldview of us versus them. So strong they hold on to their view and so paranoid at that that any opposition towards their position is automatically categorized as ”˜them’, ”˜the other’. It is all about us and them. The other is Pakatan if they are BN; the other is BN if they are Pakatan.

I say this from personal experience. Every time I criticize Pakatan, I am called a BN lackey and everything I criticize BN, I am called a Pakatan apologist, or something to the same effect.

I cannot accept this outrageous accusation for I am independent of Anwaristas and Umnoputras.

No. I will not take that for since when this country of over 26 million Malaysians is cleanly divided between BN and Pakatan?

There are those that do not belong to either party but care nonetheless about the country. To them, to fight for the country does not necessarily mean automatically aligning to either party. No party has a monopoly over the country and these people know it. These people are the independents.

The independents are known for swinging. They walk around for options and shop only they are satisfied with the goods, very unlike blind partisans who will continue buy the same old good from the same vendor, regardless of quality of the good.

Yes, sir. The independents shop around and the independents are no blind partisans.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

First published in The Malaysian Insider on April 29 2009.

Categories
Economics

[1965] Of Malaysian recovery began in February?

Some concrete evidence that the economy may have recovered faster than expected:

The Coincident Index (CI) rose by 0.5% in February 2009. The increase of the index was mainly contributed by real sales in manufacturing sector (0.5%), real salaries & wages in manufacturing sector (0.2%) and real contributions in EPF (0.2%). The six-month smoothed growth rate of CI showed a slight improvement to -9.8% from -11.9% recorded in the previous month.

The Leading Index (LI) which monitor the economic performance in advance also increased in February 2009. The index grew by 1.1% to 158.2 points in the current month. These were attributed by real total trade of eight major trading partners (0.5%), number of new companies registered (0.5%), Bursa Malaysia industrial index (0.1%) and number of housing permits approved (0.1%). The six-month smoothed growth rate of LI improved -0.7% in February 2009.

The six-month smoothed growth rate of Leading Index (LI) and Coincident Index (CI) showed a slight improvement in February 2009. However, it is too early to conclude that the improvement of these index provide signal of the slow economic growth to be over in the near term. [Malaysia Economic Indicators – Leading, Coincident And Lagging Indices February 2009. Department of Statistics. April 29 2009]

If indeed the economy began its recovery in February, it would provide a damning evidence proving the worthlessness of fiscal stimuli announced earlier. Why?

By February, there was no real spending with respect to the first fiscal stimulus and money only beginning to be distributed among various ministries. That is of course with the exception of the RM5 billion given to ValueCap but we can safely discount that RM5 billion because throwing money in the equity market is like hoping to raise the sea level by throwing is a pabble.

Furthermore, the second stimulus was yet to be announced.

In other words, the economy might be recovering even without the stimulus packages so celebrated by Malaysian Keynesians. But as mentioned by the Department of Statistics, it is still too earlier to confirm the worthlessness of economic stimuli. Let us wait for March first.

In the meantime, I am taking bets that March data is going to confirm February’s trend!