I recently returned from a trip to Italy which I've been visiting on and off for the past 35 years. Certainly the food, hospitality and history have made every visit thoroughly enjoyable. But the real joy has been meeting and connecting with local residents.
In the past, the topics that we discussed were generally diverse and light hearted. However during this trip, I was surprised on how often conversations drifted back to angst on Italian taxes – particularly among entrepreneurs and professionals. There is no doubt that this issue is widely top of mind.
Official tax rates in Italy have been high for some time, but evading them has been a game that all have played. And successive government after government turned a blind eye to the practice. But now, at the same time that incomes are being crushed with the European economic malaise, collecting taxes has suddenly become a political priority.
In its shift toward a consumption-driven economy, China has been embracing digital technology at rates that dwarf those of many developed countries. The Chinese have been scooping up smartphones, accessing the internet and consuming goods from online retailers at an incredible pace. We believe the world needs to quickly adapt to China becoming a major player in the digital marketplace, as this trend is in the early stages of exciting growth.
A few months ago, I talked about how a financial transactions tax can have significant unintended consequences. Using Hungary as an example, I said that when the government implemented a levy of 0.5 percent on banks' assets, bank credit growth rates plummeted. As a result, Hungary's household and corporate sector credit growth rates became anemic compared to other Eastern European countries.
Now it appears that Italy is going "Hungary" by introducing a financial transaction tax that became effective in March. For shares of Italian companies, investors are taxed an additional 0.12 percent of the value of the shares purchased in a regulated market or trading platform. For over-the-counter transactions, the tax is even more costly, at 0.22 percent, according to Reuters.
Would it surprise you to discover that China is planning to add 800 miles to its subway system over the next two years? That's the distance equivalent to building a network from Dallas to Chicago in less time than the U.S. Congress can resolve a budget!
In 2015, when the infrastructure build-out is complete, China's subway track alone will be a mind-boggling 1,900 miles, according to JP Morgan.
The Asian giant has been in the midst of constructing the world's largest transportation system, laying mile after mile of high-speed rail and subway track. According to the World Metro Database, Beijing and Shanghai currently have the longest metro and subway systems, with about 275 miles each. The city of Guangzhou in China also falls in the top 10, with 144 miles of rail, beating Paris' network length of 135 miles.
When it comes to the growing global worries about inflation, it looks like it will be ‘As goes China so goes the world’.
China is the 2nd largest economy in the world, and rapidly gaining on the U.S. Among other statistics, it’s the world’s largest importer of copper, steel, cotton, and soybeans, and the world’s largest exporter of goods - to say nothing of being the world’s largest owner of U.S. debt.
Inflation fears have been circling the globe in recent months, with many blaming the U.S. Fed’s additional round of ‘quantitative easing’, launched last fall to give the U.S. economy another boost.
However, the fears began in China a year ago. China launched a massive $585 billion economic-stimulus plan in the depths of the financial crisis two years ago. In relation to the size of its economy at the time it was considerably larger even than the huge stimulus plan launched in the U.S. All that easy money chasing a limited supply of goods, properties, and investments surged China’s economy and stock market into bubbles.
The problems began coming home to roost last year. After surging up with the rest of the world’s stock markets in the first half of 2009, the Chinese stock market rolled over into a bear market, in which it lost 33% of its value in its plunge to its low last July.
The easy money remained in the system, China’s economy continued to boom, and speculation shifted from its stock market to its real estate sector (sound familiar?).