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article imageOp-Ed: Revenue systems in crisis — Adapt your revenue or die

By Paul Wallis     Jul 16, 2020 in World
Sydney - What’s not being said is that as business goes slow revenue is likely to crash, badly. That’s not good news for anyone, and the subject has been off-limits way too long. The need is to adapt revenue sourcing, not “tax to death”.
The big issue here is that revenue is under huge, unfamiliar stresses. The big government spending and stimulus initiatives around the world are absolutely necessary. Even big economies would grind to a halt, soon enough, without it. The stimulus checks aren’t “charity”. They’re to keep the machinery going, and without them, things would be a lot worse. In fact, there’s quite a lot of criticism that the stimulus checks aren’t enough.
That’s more than likely correct. The big economies eat cash fast. The problem is that the stimulus checks need to be funded, and with business going down and people losing jobs, revenue could be in big trouble soon enough. The jobs situation in the United States turns out to be a lot worse than anyone thought, too, by the way. Seems the base rate was miscalculated, so the “good numbers” (13% is good?) weren’t so good after all.
The revenue problem
The problem is partly that revenue is geared to “normal business”. This pandemic situation is nothing like normal. In case anyone’s forgotten, normality as it was is pretty expensive. Wages haven’t really grown, debt has gone through the skylights, and corporations are also laden with a lot of debt. The cost of money, to borrow and to lend, isn’t a given thing.
The fan gets hit when those debts are called. The massive hit to cashflow by the pandemic can set off a nasty chain of debt issues, affecting everyone from the Fed to Joe Credit Card on Main Street. Banks can fold. Hedge funds can evaporate. Corporations can go bust very fast indeed. Unless a working system of business and revenue is in place, the Looney Toons end credits theme will play.
Revenue funds a lot of business worldwide directly and indirectly. You can be as free enterprise as you like, but without government spending, there’d be a huge hole in every economy on Earth. No government contracts, no government supports, you name it; lose the revenue and you lose a gigantic slice of the economy. These contracts also support many big companies on the stock market.
(Makes you wonder why so many corporates think not paying taxes is smart. Those taxes pay for those contracts, but hey- When has reality had anything to do with anything much?)
Too slow to adapt = Sure to fail.
So if revenue depends on doing business, you can assume business being very slow to adapt to the new normal isn’t a good thing, and it isn’t. Businesses can cut their own throats in multiple ways, but the historically surest way is to not adapt to changing business conditions. (How’s that for a euphemism?)
To be strictly fair, a lot of businesses have done what they can as fast as they can to adapt. At business-to-consumer level (B2C) the services are running, shakily at times, but running. These more subsistence-level businesses are doing whatever they can to stay viable. Also note – B2C businesses which bail out are probably being realistic; the risks are high, and the rewards are low in this segment of the economy. Going broke on principle isn’t a great move.
A little further up or down the food chain, depending on your level of cynicism, at business-to-business (B2B) the story is different. The Sacred Office Space, where herds of imponderable and preferably unknowable things in suits graze so elegantly, hasn’t adapted well. The irony is that the Great Office Space is arguably the most cost-inefficient thing on Earth bar none. It’s an absurd luxury at the best of times. At the worst of times, it’s a 200% liability, 24/7/365.
Adapting to remote work, for example, seems to be some sort of bugbear. It’s cheaper, faster, manages time better for everyone, and allows for some realism in the real world. (What an innovation.) It could even be mistaken for sanity. So, are they adapting? No, they’re laying off people and demanding that someone gives them their very unsafe, overpriced playgrounds back.
That degree of non-adaption means revenue, incomes, businesses and everything else are affected negatively by what are basically irrational tantrums. Sound slightly familiar? The slowness to adapt is also costing businesses money directly, and probably reducing even the ability to do business as a result.
It also affects revenue. Governments can print money, sure. They can borrow money, sure. But if nothing much is happening, and the real economy is on life support…? You can see why revenue is so important.
The Holy Finance Gerbil conundrum
One huge irony here is the finance sector. This sector, which moved away from the real world decades ago, is designed to work in pandemic mode. Check out how the finance sector works sometime – Barely a human being to be seen on a sunny day. Almost fully automated, except for service sales and caterers to smugness on all levels.
The finance sector theoretically generates a lot of revenue, which then vanishes in the abysses antiquated tax systems. It generates a lot of money through debt, which then also vanishes in “losses” and non-existent loopholes, and/or parks itself offshore. Really credible system you got there, guys.
This Sacred Gerbil of the West gets away with everything. Not just tax evasion. Nothing is scrutinized. There’s so much identified fraud it’s crashing the ability of revenue to even check it. This situation doesn’t help governments much when they’re literally paying to keep the economy alive.
OK; few Western politicians will try to put this slopfest in order, for political reasons. The fact that it’s payable revenue that the economy desperately needs won’t be an issue for them. …And that’s the problem. There are, however, solutions.
Solutions
One thing governments can do is something they should have done at least 30 years ago – Automatic tax payments. These are auto-deductions, fully audited, and legally transparent. There are no real legislative issues here, just some general bitching to be expected. This type of taxation is simple, fair, and generates a lot of revenue based on doing business.
It's not as bad as it sounds. Cheaper, more cost-efficient ways of doing business, employment, sales and services can make revenue much less of a cost burden for those taxed. If businesses can do more business, more profitably, the tax burden can be safely reduced.
There’s another, critical, point to be made here. The pandemic is showing signs of being a real future mode of doing business worldwide. In a future where jobs and careers, sources of income, and ways of doing business will be very different, revenue must adapt or die. Now would be a good time to start putting the machinery together.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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