Posts Tagged ‘tax’


Friday, August 3rd, 2012

I am presently coming to the end of a holiday in and around Chamonix in the Alps (first time I have been outside the UK for several years) and this consists of some notes on interesting things I have noticed.

They drive on the wrong side of the road fairly consistently, this takes a while to get used to.

Many toilets consist of holes in the ground, many lack soap and some even sinks. The romans had better toilets well over 2000 years ago, toilet technology has made significant advances in the last couple of millennia why not consistently take advantage of this? They have special ceramic things to go around the holes in the ground, why not use one with a more useful shape?
This is not to say that they don’t also have perfectly good working toilets or even that the good ones are not in the majority.

There is much greater biodiversity on the Alps than on mountains in the Lake District or the Cairngorms (my more regular haunts) many of the flowers are familiar from their use in gardens but I don’t think there is a garden centre in the world large enough to fit all the varieties of beautiful plants that there are in the Alps. There are also many insects I have never seen before a few of which are a little vicious including the very large number of ants which one must take great care to avoid sitting near.
Some of this greater biodiversity might be due to the mountains being younger and so more fertile or due to warmer summers but I don’t think that completely explains it. I suspect the fact that the landscape of the Lake District and Cairngorms being an artificial one created by our destruction of the forests which would naturally cover them has some significant effect as will the grazing by lots of sheep. The beautiful mountain meadows in the Alps are I think more naturally occurring with the trees not covering them because of the ground being above the tree line rather than felling.

I am on holiday with my parents who were last here some 27 years ago which allows them to notice some of the more obvious changes that have occurred in that time. Chamonix is about 3 times larger than it was then. The glaciers have clearly retreated a long way in that time and there is much less snow on the tops of the mountains than there was at the same time of year. Here climate change is an obvious “I can see it just by looking” thing (though obviously this could be a localised thing but for that we know it is a global one). We climbed up to a glacier and touched it, in a “do the things your children might not get a chance to do” and a “pictures or it didn’t happen” frame of mind.

The public transport up and down the valley is free, regular, punctual and really rather nice rendering cars completely unnecessary for the tourist. (Apparently funded by a 1€ a night per tourist tax)

Bread and (real) milk won’t last more than a day necessitating regular shopping, bread purchased in the evening may already be stale :-(. Restaurants may not open until 19:00 which is tedious when you need an early dinner.

The Alps are much more work than British mountains, so much more up, so much more down.
The Alps can get far too hot and it seems for the end of July and early August they do so regularly so perhaps June/early July would be a better time to come. Fortunately they are covered in trees which provide welcome shade and relief from the oppressive sunshine. A few hundred meters above the tree-line it generally gets more reasonable as the temperature drop due to height gain combines with stronger winds.

Gorges la Diosaz is wonderfully cool and reasonably priced at ~6€ and a lovely train journey from Chamonix.
L’Arguille du Midi is extortionately priced ~50€ but you would be hard pressed to find a better view.
Mount Chiref in Italy is much less well signposted than the several mountains we climbed in France/Switzerland which were wonderfully well signposted, still worth the climb.

Carbon taxation

Saturday, January 14th, 2012

Under our present economic system we are reasonably good at minimising costs and finding efficiencies that save companies money. However we do not price negative externalities. So companies and individuals can do things that are bad for other people, or which only become bad when lots of people do them. There is no actual incentive for them to not do this except when there is legislation in place which provides that incentive.
Companies and individuals are good at acting in their own short term best interest but much worse at considering the longer term and the wider system of which they are only a small part. One of the primary duties of government is to ensure that this short term best interest lines up with the long term best interest of the country and the wider world.

Currently various places have carbon trading schemes. These just do not work. Companies are granted the right to produce a certain quantity of carbon dioxide, if they produce less they can sell the spare to other companies, if they produce more they must buy some. The problem here is that if companies can persuade their governments that they need slightly more right to emit then they can then sell this right at a big profit. This also results in the particularly tiresome behaviour where deliberately inefficient systems are built, and then made more efficient and large quantities of money obtained for the efficiencies that have been made (yey carbon offsetting).

Market systems do work but require things to be properly priced, carbon trading doesn’t do that. Instead a carbon tax where each tonne of carbon dioxide equivalent is given a fixed price by a certain quantity of tax being due for its emission. Here I mean tax in terms of the manner of its collection (imposed by government) but what it is is an encapsulation of the actual cost of the emission. The money raised could not just be used for arbitrary purposes but only those which help deal with the problems caused by the emission (investment in renewable technologies, efficiency, retrofitting insulation etc.).

Of course none of that is new, it has all been said before.

However normal schemes would fail as it is not in the best short term ‘economic’ interests of a country to impose an additional tax on carbon dioxide equivalent production. This is because foreign imports will have lower costs due to their emissions not being paid for. Hence to avoid shooting themselves in the foot by destroying their local industries and just relocate the pollution to other countries where it is harder to legislate for its reduction but with moral responsibility for it still lying with the importer. Hence import taxes based on the carbon dioxide equivalent in the country of manufacture and of the transport of it are required.

Such import taxes would as I understand it be illegal under international agreements through the WTO[1]. Tedious. However this is not a normal ‘tax’ it does not exist to raise revenue for a particular government (it should probably be focused on ensuring developing countries move straight to clean technologies without an intermediate dirty state) or to protect industries in a particular country. It is an enforcement of an actual cost, as long as it gets paid it doesn’t matter where. So it could be charged by the government in the country of origin and kept by them and then the importer would not need to charge it. This should hopefully mean that governments don’t get so upset with each other.

I envision three classes of countries, those fully into carbon taxation for whom all production inside their countries and for them in other countries is properly costed. Those countries who export to the first class ones and charge the cost for those exports in their own country. Those third class countries which don’t charge anything and if exporting to first class ones see the import tax charged but don’t get the money from it.
The main additional requirement for first and second class countries is what they do with the money they collect – they must not use it to subsides the very industries they are taxing though they could use it to provide loans for efficiency improvements etc. – as otherwise it would not have the correct incentiveising effect and would be anti-competitive.

That would of course require a huge quantity of political will and is fairly unlikely to happen, however when enough people start dying politicians will be forced to take notice. Unfortunately this will likely be rather late in the day.

The main difficulties are in calculating the quantity emitted and in fixing the cost. Calculation by “assume the worst possible method unless proved otherwise” should give pretty good incentives to provide good proofs of efficient methods and this becomes much easier when these things are priced in at the beginning. For example application when petrol is first petrol rather than misc oil then it is destined to be burnt so apply the tax then. When some coal comes out of the ground – going to be burnt so apply tax. An additional incentive for encouraging people to apply these things early in the supply chain when it is easier is to have a linearly increasing cost where each second it gets ever so slightly more expensive. So we start from 0 and run up to 1 over the course of a year so as to get the bugs out of the system before particularly large quantities of money get involved (10 per household is not much) then draw a straight line between 1 and 100 in price between then and 2050. Picking the currency to price this in is hard as its value is built on rainbows and not tied down to anything. Using the euro of the dollar might make sense but I am not clear as to what the best method would be for this.

[1] Though we do apparently have a tax on the import of components but not finished products which helps destroy our manufacturing industry, see petition to change that.

This begins my series of “ideas I have had”. Time for you to find all the holes in it :-)

“How do you think higher education should be funded?”

Saturday, October 16th, 2010

I am currently considering this question as the Peterhouse JCR is in the process of running a referendum and this is the first and most important question on that referendum the purpose of which is to determine how Peterhouse should vote at the next CUSU Council meeting.
The possible options are:

  1. Raised tuition fees
  2. A graduate tax
  3. Offer fewer university places / close down less well performing Universities
  4. Higher universal taxation
  5. Cuts to other public services instead
  6. Other / Abstain

However there are more fundamental underlying questions which need to be considered:
What are the purposes of University?
Why are those good purposes?
How well does University achieve those purposes?
What value to we place on outcomes beyond the simple increase in potential earnings such as on producing better adjusted individuals with improved support networks who are better able to play their part in society?
Should ‘Universities’ which are ‘rubbish’ and don’t actually provide ‘proper’ degrees be called Universities? (No clearly not: they should be called polytechnics or similar and not offer degrees but rather more flexible qualifications which actually fit the useful things they are there to teach)
Should these polytechnics exist? Should they receive government funding in the way that Universities do?
Is University the best way of teaching people the skills they need for work in areas such as Engineering and Computer Science? Does that matter?

Clearly a graduate tax is a stupid idea because it would mean that anyone we educated and who then left the country to work abroad would not pay for the cost of their education – and that many people would do this, particularly among the highest earners. It also does not provide the money directly to the universities which educated them and would instead go to some general pot and so not reward universities for how good they were at educating their students (from the point of view of earning potential).

Offering fewer university places / close down less well performing Universities… well to Cambridge students that seems like a rather appealing option (and it is the favourite to win the JCR vote). However it is important to ensure that we are not thinking that this is a good plan simply because it means that University funding becomes an issue affecting other people at other Universities rather than us which is easy to do on a subconscious level and to then justify on a concious one. One justification is that we know that our friends and fellow pupils at school did not always work as hard as we did in order to get where we have got and so why should they be supported at our expense? Clearly we put more work in than they did. However the question of what the value of University is to both society and individuals even if the University doesn’t manage to teach the individual anything is one for which I don’t have an answer. Putting concrete values on externalities is not something which we are particularly good at as a society. I should probably study some more economics in order to get better at doing so.
The problem with this point then is that while it seems appealing on a superficial level I worry that in the grander scheme of things it might not be such a good idea. For example how would reducing the number of university places be managed? Remove the same proportion from all universities? Clearly that would be a stupid idea as it places no value on the relative quality of teaching at different universities. We don’t want those who should go to University missing out due to lack of places in good universities while those who probably shouldn’t get in to the lower quality ones. How about making the number of places available on a course be dependent on how many people applied for it? So that for example if 200 people apply then a maximum of 100 places can be funded. However there might be problems with that if there are good courses which only appeal/accept candidates from a small pool of potential applicants and so most of those who apply should get a place as they are sufficiently brilliant.

Higher universal taxation? Well here we have to consider whether the benefit of university is for society as a whole than to the individuals directly as otherwise it is perhaps not fair to make everyone pay more. Here again I think we struggle to be able to make good decisions on what proportion of university funding for teaching should come from the students and what proportion from general taxation due to the lack of a function for determining the value of university and apportioning that to individuals and society as a whole.

Raised tuition fees? Clearly this is controversial for students as it affects us most directly and does cause real problems for students. It is thus perfectly understandable that many students and their representatives vehemently oppose tuition fees in general and their increase in particular. As per one of the CUSU motions “Education is a public good” which is true but to be able to weigh its value against that of other government expenditure we need some way of measuring relative worth of different public goods which I don’t think we have. At least not in a clear manner which allows decisions to be reached which don’t appear to be simply arbitrary. Instead long discussions are had and long articles written which skirt around the edges of issues and are dissatisfying in not being able to deal with these issues directly.[0]
However here it is perhaps useful to consider that compared with private secondary education University is still cheap even with increased tuition fees to £7,000. A private day secondary school could easily be charging in excess of £9,000 a year and at least in comparison to Cambridge not be providing nearly as high a quality of education. A private boarding school could easily be charging £26,000 a year per student. The cost my going to University per year is ~£10,000 including tuition fees, rent etc. this is significantly less than what my parents were paying for my sixth form education even with the 20% scholarship. My parents could still pay for the full costs of my university education if it was ~£14,000 instead and then I walk out with a degree and no debt… This only applies to a small minority of students though and somewhere around University children need to become adults and stop relying on parents for all supplies of funding. I suppose the point I am trying to make here is that there are students who have parents who could easily pay the higher fees (or even higher still fees) and not really be affected by doing so, however it is unfortunately probably not feasible to identify who these students are. Higher levels of debt are likely to put off students, particularly those from disadvantaged backgrounds from applying which is a serious concern as it is very important to find those people from disadvantaged backgrounds who have the ability to perform and give them a helping hand to make sure that they can perform to the best of that ability.

Of the CUSU motions a and c seem reasonable, b is poorly worded and says things which are blatantly wrong and d makes some good points but also some silly ones and some of its action points seem unrelated to solving the issues identified. E which the JCR as a whole is not voting on also appears to be reasonable.

Peterhouse JCR people: Vote. Everyone else: vote early, vote often.

Apologies for the unsystematic and poorly written brain dump, really I should go back through this and rewrite it…

[0]: Here I am thinking back to discussions I had last night relating to the difficulty of expressing and discussing truly important things compared to the ease and simplicity of discussing trivialities.