Wednesday, February 01, 2006

Peter Drucker : tax evasion leads to cynicism

Dear Sir,

While chatting you had mentioned about the connectionbetween tax evasion and cynicism. The following is from P.Drucker's 'The New Realities " (pp69-70)'....once the govt take, especially if collected thru taxes, exceeds a certain percentage of gross national productor personal incomes - the fiqure seems to be around35-40 percent or so - a silent but highly effective'tax revolt' starts. People stop working ; what is the point if the additional income is being taxed anyway ?Worse, people begin to cheat. A 'grey economy'develops. In the US there was almost no tax cheating before 1960...

'...Attempts to stamp out or even to curtail the graye conomy are ineffectual as long as tax rates remainhigh.In fact, while everyone loudly condemns the greayeconomy, most people not only participate in it but consider it morally justified and, in fact, 'clever'.But this undermines the moral cohesion of scoiety, Itproduces a dangerous political poison, cynicism.'

Seventy years ago Schumpeter warned that inflationwould destroy free society. After WW 1 , the inflations in Europe, esp in Germany amply bore out Schumpeter's warning...'


No comments: