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terça-feira, Dezembro 20, 2011

Tragedy of Errors - the Troika and the Madeira Offshore

The decision to impose corporate and income taxes or the banks and clients operating in the Madeira banking offshore is one more of the policy errors which are turning this Eurozone financial crisis into a disastrous crash with yet unforeseen consequences.  It's as if the IMF has failed to adapta their usual remedial programs  to account for the new constraints of adjusting for Balance of Payments deficits within a Single Market and the Single Currency. 

In order to satisfy the Troika, the Madeira Free Trade zone will loose most of the tax exemptions that made it attractive to non-resident depositors and other clients, including the absence of the WHT withholding tax of 21.5% on interest income which applies in Portugal. 

As a result, even the Portuguese banks are shifting their business to other, less regulated, offshore financial centers.  Thus Portugal will lose the non-resident deposits which played such an important role in the Balance of Payments recoveries in earlier periods such as the 1980's.   In the 1990's, non-resident deposits, most consisting of emigrants' remittances from Portuguese workers abroad, amounted to about EUR 2.7 billion/year, and consistently represented about 30% of the total banking deposits in Portugal, thanks to a positive real interest rates and good tax benefits. 

No such help can be expected this time around, as policy errors work to promote capital outflows rather than capital inflows. 

We know, from McKinnon and other authors, that promoting savings and capital inflows is not just necessary but essential as Portugal struggles to cope with the financial crash. 

What are they thinking?

Mariana Abrantes de Sousa

Sources:http://economico.sapo.pt/noticias/futuro-do-offshore-da-madeira-nas-maos-da-troika_133310.html    ,  Emigrants remittances in Jornal de Negocios
See also Eurozone tests the limits of divergence and What the Troika overlooks
Emigrantes como parceiros previlegiados

Caixa Geral de Depósitos (CGD) está a transferir a operação que tem na zona franca da Madeira para o paraíso fiscal das ilhas Caimão, segundo noticiou esta terça-feira a RTP.
Em causa está o fim de alguns benefícios fiscais no offshore da região portuguesa, particularmente a tributação dos juros nas contas dos não-residentes a 21 e meio por cento.
A Caixa já informou os clientes da transferência para as Caimão. Na Madeira, a opção do banco estatal está a ser muito criticada, segundo o canal público de televisão.Fonte:http://dinheirodigital.sapo.pt/news.asp?id_news=172641

5 comentários:

PPP Lusofonia disse...

Uma historia em vários capítulos (FALHAS)

1. Taxas de juro demasiado baixas foi uma falha de politica monetária, não um a falha do mercado
2. A falha do mercado foi o "mispricing of risk", na medida em que os bancos, os investidores e as agências de rating igonoraram o sobre-endividamento de certos dedevedores e continuaram a promover o credito facil ate' ser tarde demais

3. Permitir aos bancos alemães atingirem alavancagens de 30 a 40 vezes para reciclar e alimentar o superavite comercial alemão foi uma falha da regulação prudencial a cargo dos bancos centrais nacionais

4. A falha de desenho institucional consistiu sobretudo em focar os "critérios de convergencia de Maastricht" no défice orçamental e não nos desiquilibrios externos

5. Agora temos a falha em recapitalizar os bancos

6. E sobretudo a falha em aliviar efectivamente a divida dos devedores sobre-endividados, na medida em que os "resgates" apenas permitem substituir os credores privados por credores oficiais...

E caso para dizer, o que, e quem, não falhou...

PPP Lusofonia disse...

It's not a comedy, it's a "tragedy of errors".
1. The main task facing the Eurozone decision makers is not saving the Single Currency, not even saving the European banks but rather rebalancing the unsustainable CAB Current Account imbalances made more intractable in the absence of the traditional adjustment instruments.
2. "Credible fiscal rules" will do little to save the Euro if nothing is done to reduce the divergence of fortunes evident in the massive, massive CAB supluses and deficits.
3. In the absence of restrictions on capital flows, little is being done to protect and promote local savers and depositors, and there is no European deposit guarantee fund that will guarantee the amounts deposited AND the currency of denomination.
4. Joint liabilities for debts, Eurobonds and other "big bazookas" might serve to bail out the foolish creditors who lent too much, without really helping the foolish borrowers.
5. Instead of dealing with the root problems, rebalancing the current accounts and recapitalizing the foolish banks, decision makers are wasting precious time designing ever more detailed "fiscal budget rules" which have proved to be ineffective and easily gamed, with the help of the self-same "foolish banks".

PPP Lusofonia disse...

Stress tests that expect LOCAL banks and other LOCAL savers to take haircuts on their own sovereign debt is a wrong-headed approach which turns the concept of "sovereign ceiling" on its head and only serves to promote capital flight, in the absence of capital controls.
Eurozone countries are facing EXTERNAL debt problems resulting from accumulating massive EXTERNAL CAB imbalances financed by imprudent EXTERNAL creditors.
It is these overextended external creditors and investors who must recognize losses and write-off bad debts, even as local savers need to be explicitly protected by a European deposit guarantee scheme that would guarantee not only the amount but also the currency of denomination of local deposits.
Having seen the disastrous consequences of penalizing local depositors in Mexico and Argentina, the IMF should certainly know enough to prevent similar policy errors in the Eurozone where the absence of the traditional policy instruments will make for disastrous consequences.

Garantia de depósitos vira permanente disse...

Finalmente, a garantia de depositos já é permanente:

"Atendendo a que, nos termos do artigo 12.º do Decreto-Lei n.º 211 -A/2008, de 3 de Novembro, o actual limite da garantia de 100 000 euros caduca a 31 de Dezembro de 2011, estabelece -se, de forma permanente, este limite", pode ler-se no diploma, que resulta da transposição de uma directiva comunitária.

PPP Lusofonia disse...

O caso do Chipre leva-nos a reavaliar esta decisão que quase acabou com o offshore da Madeira.

Os depositos de não-residentes e estranngeiros fazem parte do TSU-MONEY, parte do problema e não parte da produção.