In reality, all discussions on “whether we need a land market or not” are meaningless, because the market has already existed for a long time. The multilayered and confusing legal concept of “property” nevertheless has solid economic-legal foundations—the same principle of “possesses and disposes.” That is, property in the real, and not purely legal, sense always exists, and it is always private; the problem is only in how precisely the owner can be identified in each specific case. And if there is property, then there also exists the use of this property in human activity—that is, the market.
Thus, in the USSR land was owned and attempts were made to dispose of it by state officials. In the late USSR, these were mainly the chairmen of collective farms. And so on. The whole question is how much the property of some people is actually recognized by other people. And here a huge problem arises, since these matters are regulated by the state. Poverty in Third World countries, such as Ukraine, stems from the fact that the real property of citizens cannot be properly used by those citizens except for extracting income “here and now.” It is worth quoting Hernando de Soto again, who writes that the wealth of the poor “is 40 times greater than the total sum of foreign aid provided to the world after 1945. In Egypt, for example, the wealth accumulated by the poor exceeds the amount of direct foreign investments, including the costs of building the Suez Canal and the Aswan Dam, by 55 times. In Haiti, the poorest country in Latin America, the total assets of the poor are more than 150 times greater than the amount of foreign investments received after 1804, when the country was liberated from French colonial rule. If the United States decided to bring its foreign aid budget to the UN-recommended level—0.7 percent of national income—the richest country in the world would need more than 150 years to pump into the poorest countries of the world the resources that those countries already possess.”
The wealth from this quote cannot be used because the property has not been properly legalized. However, the most important point is this. Does real legalization simply mean the existence of laws “regulating” the subject? Hardly. One can be certain that in most of the countries mentioned in the quote (and in most of those not mentioned, like Ukraine) these laws exist. However, they are such that using them is impossible, which in itself is very telling. Note that this situation is rather the rule for the world as a whole, while the situation of legalized property—that is, a situation in which state support of all consequences and obligations arising from property rights is so effective that society voluntarily accepts it—is rather the exception.
Real legalization means the existence of certain rules that would be voluntarily supported by the majority of participants in the process. Does legalization come about simply because a certain law is adopted that “permits” something to someone? Obviously not. Therefore, reasoning in terms of laws that are necessary to “create a market” is incorrect. The only practical sense is made by reasoning in terms of actions leading to full legalization of property, and it is obvious that these actions should consist rather in the elimination of various legal norms, not in the creation of new ones.
Income Tax Returns for Individuals are Harmful from Any Point of View
The tax authorities are planning to introduce “universal income declaration.” This means that each of us will fill out some paper in which we will have to explain where and why we got money, after which we ourselves will bring part of this money to the state.
The authors of this innovation put forward two reasons that compel them to take such measures. The first is the growth of budget revenues. Figures are named—instead of 7 billion, 21 billion. Is this good or bad? To begin with, let me remind that a tax is the extraction of part of your property under threat of violence, that is, an act classified by criminal law as “robbery.” But I think that the majority of Ukrainians are confident that robbery is not a problem if it is carried out for a noble purpose. Therefore, let us turn to economics.
Budget revenues are future state expenditures. And these expenditures are always and everywhere, in any country in the world, managed by officials. Unlike market entities, officials invent work for themselves, and we do not choose it, as on the market, but are simply obligated to pay for what they shove at us. Will it be good if the amounts on which officials can invent work for themselves become larger?
A tax means the destruction of part of exchanged wealth. We are all constantly engaged in exchange, and both parties benefit from exchange. That is, when the state reduces my income, say from 100 dollars to 50, then not only do I lose, but also those with whom I exchange, buying goods.
State expenditures mean the artificial creation of demand for goods and services on which, under normal conditions, demand is lower or does not exist at all. That is, resources are directed not where they would have been directed had there been no state and its taxes. Simply put, they are wasted.
In general, upon hearing that budget revenues have grown, a conscious Ukrainian should be sad, not happy.
The second goal of the reform is “detinization of the economy.” However, those who have studied this subject know that the shadow economy arises not from the absence of income declaration and other bureaucratic joys. It exists as a way to evade the violence and chaos that the state brings. Therefore, income declaration cannot do anything with the shadow economy by definition. And, by the way, if one understands this circumstance, it is not difficult to guess that the “growth of budget revenues,” even if one considers it good, will last oh how briefly. And again, if one understands the reasons for the existence of the shadow economy, it is obvious that citizens declaring income is an additional incentive to go into the shadows, not a means of fighting it.
All this we have said assuming that the reform will go in the best possible way, administration will be ideal, and side effects will not appear. However, in reality, of course, everything will be otherwise.
How will it be? Well, now each of us already has a “tax code.” It would seem such a purely instrumental thing, yet nevertheless, without it one cannot go anywhere now. It would seem that everyone has a passport, but in practice, as we see, the passport is insufficient to certify identity; in most cases one also needs a tax code. In a country where such an innocent thing as a gas meter cannot be “legalized” without having a “Form 3” from the housing office (those who know me will understand, and it is better for those who do not to never encounter this), the income tax return will be just another and often insurmountable obstacle in the peaceful activities of citizens.
There is only one scenario in which total income declaration by citizens and their paying taxes themselves will bring enormous and unconditional benefit—provided there is a complete abandonment of all indirect taxes and taxation of legal entities and a transition to direct taxation exclusively and only of individuals. Although, the current state will end with this. By the way, together with the current “political discourse,” entirely tied to the state budget. Something else will appear, and perhaps this is for the better.
In general, no other meaning can be seen in the innovation of income declaration, except to create a front of work for one’s own department and, incidentally, strengthen control, turning not only enterprises, as now, but also ordinary citizens into those forever guilty before the state.