If you haven’t seen the news by now, yet another small economy has fallen to the level of taxing money. Jamaica has announced that a tax will be imposed every time citizens access their own money. This means that every time a Jamaican uses an ATM, that transaction will include a tax.
Might this become the trendy new solution for dozens of countries facing economic duress? Before you dismiss the thought, look at what’s already happening. We’ve seen Cyprus tax people by claiming a significant percentage of all funds residing in bank accounts. Just last December, international news headlines trumpeted Brazil’s tax plan for ATM users — “Brazilians to Pay More to Shop Abroad as ATM Tax Surges 1,600 percent.”
Here in the U.S., one congressman took an equally interesting approach. Representative Chaka Fattah, D-Pa., introduced a bill, “Debt Free America Act,” that would have eliminated all federal taxes on individuals and corporations and would have replaced them with a revenue-generating system based on transaction fees.
Had it passed, it would have meant that any deposit you made would have a 1 percent tax charged. Any withdrawal you made would be hit with a 1 percent tax. Any transfer within your account, including a transfer to or from savings and checking, would have a 1 percent tax charged.
ATM transactions would be costly, too, with any withdrawal or deposit costing you that 1 percent tax. Any paycheck or Social Security check direct-deposited to your account would be slapped with a 1 percent tax, too. For people who still like to take their check to their bank or credit union to deposit, that simple act would mean … yes, a 1 percent tax.
I think you get the drill. Virtually any transaction would be taxed at 1 percent. This is no minimal tax, when you look at 1 percent tax every time you even pay a bill. Now, obviously, this legislation went nowhere, but we can only read the tea leaves and wonder what iteration of such a bill might ultimately get legs.
How do those running small businesses cope with such things? Imagine the small ATM fleet owner in Jamaica who will see transactions plummet because of the behavioral change that is likely to occur among consumers.
And what about Brazilians? The prognosis can’t be good. The immediate thought is that consumers will turn to a ‘black market’ economy to operate outside of the tax. One would think it is obvious that this will only serve to shrink the economy.
The opposite could happen as well. Depending on the law, there might be a loophole for Brazilians who use credit cards rather than cash. This, too, could drive a remarkable change in behavior, including more spending through more debt while savings rest untouched in the bank.
I’m sure there is an economic theory around this behavior — we seem to be using a portion of it today in the U.S. without limits — spending through debt without saving for a rainy day.
We’ve seen enough new economic directions around the world to believe that there is, indeed, a need for both cash and card payment products from ATMs. More people are turning to prepaid to manage their spending. More transactions are being done on the Internet where card payments work infinitely better than cash.
No, cash isn’t going away — and given events such as Jamaica’s new tax, it could be responsible for some interesting new scenarios. What is clear is that the ever-changing climate has created many unique needs and behaviors that are yet to be understood and explored.
From where I’m sitting, I think we’re all in agreement that we don’t need to be looking for new taxes. It is already enough to tax every corporation on its income, and to tax every purchase citizens make, and every dollar they earn.
But the politics of change might yet be the great equalizer.
Source: http://www.atmmarketplace.com/article/231744/Tax-every-ATM-transaction-That-s-your-solution?utm_source=NetWorld%20Alliance&utm_medium=email&utm_campaign=EMNAAMC04302014