All posts tagged 'De-Taxation'

Economic wealth creators and de-taxation: real economy vs service industry

When I started analysing the economic KPIs of my economic theory, the Sovereign Economic Model, I had a look at which industries create the wealth of a country.
I went back in history, and noticed that ALL countries became prosperous when the manufacturing industry was as its peak:
USA in post WWII as Europe, Japan, China, and Korea were ravaged
Europe: post WWII recovery in 60-80ies
Japan:  post WWII recovery in 70-90ies
Korea:  post Korean War recovery in 80-00ies
China:  post revolution in 1980-ongoing
India:  Upcoming

Feedback is often that US, Europe, Japan are rich countries, buy in fact their raw value creation has decreased, and are using the amassed wealth created during manufacturing peak to create little marginal value, the service industry pushing around money from that old accumulated wealth. Profits produced are often just margins from outsourced manufacturing and related services.

The Sovereign Economic Model proposes to de-tax all wealth creators, i.e. manufacturing business and the IT industry(software). The reasoning is to encourage investment and creation of value through manufacturing of real products.
Real products require an immense level of knowledge, science, skills, tools and organization, therefore add much more value to it ingredients (natural resources) than any service. Real products generate much more employment, therefore distribution of wealth, than services. 

Russia already has de-taxed the IT industry, now they should move to similarly de-tax all the manufacturing businesses.

I hope that many countries apply de-taxation to local manufacturing businesses, which can create and distribute wealth better than any other industry sector.

Export organization: special new legal (company) entity form is required

I touched on export organization on several blog posts

One can often see that many very export oriented companies like Nestle, LVMH and Kettering (French fashion conglomerates of many brands) condensate many brands below a single umbrella, even if single brands retain their identity. This facilitated the entry into new markets, because of their critical mass.

I was thinking why several independent companies could not do the same. While in a home market they fiercely compete, in international markets they struggle because they are just too small.

So, if they congregated into one organization solely for export? yes, surely it would lower costs of shared offices and sales reps in foreign countries.

Since export is very important to many countries, it would be useful to create a new type of company entity congregating many or most industry players into one organization, e.g. called EXP Ltd. This type of company entity should only be allowed to do foreign sales and should have a lower taxation.

This is also mirrored in the Sovereign Economic Model, which among other de-taxation policies, proposes to tax exports 50% less.

A more conveniently organized and less taxed export activity would benefit both the companies and the country itself.