Part One
A GOOD old classmate of mine from Boston once told me that shed always wanted to ride the Orient Express, the celebrated train that traveled from London, England, to Istanbul, Turkey. The unwitting star of a particularly famous Agatha Christie mystery, the Orient Express was reputedly the last word in luxury train travel-take the Ritz Hotel in Paris, set it on wheels and place it on a track, and you’d have the Orient Express. No wonder my friend was upset when the Orient Express went on its last trip more than eight years ago, before she could finally fulfill her wish and ride arguably the most famous train in history.
The Orient Express aside, train travel has been one of the most efficient forms of transportation for more than a century, and many of the world’s great cities are crisscrossed by a network of trains. I remember spending countless hours on Boston’s Subway Red Line during my years at Arthur D. Little, the Law School and Kennedy School; eagerly stepping onto the Shinkansen train during a trip to Japan; and emerging from the Green Park station of the legendary London Underground to the sight of the equally historic Ritz Hotel. From the high-speed French Train a Grande Vitesse, or TGV, to the stuff- of-science-fiction-fantasy Maglev (or magnetic levitation) trains of Japan, Germany and Shanghai, trains have moved people and produce across many hundreds of miles, and have consistently become faster and more efficient. I’m told that a Maglev train in Japan holds the speed record for manned passenger trains, at a hairraising 603 kilometers per hour. I’m going to tell my friend—a Star Wars fan—to forget the Orient Express and take the Maglev. It’s probably the next best thing to riding Han Solo’s mythical starship, the Millennium Falcon.
That trains have ushered in progress for the cities and countries they traverse is a well-documented historical fact. There’s one particular “train,” however, that seems to be the exception to the rule. It doesn’t have wheels, like the Maglev train, but unlike the Maglev, this train seems set to be seen not as a symbol of technological progress, but rather, of a hindrance to economic progress. I refer, sadly enough, to the Tax Reform for Acceleration and Inclusion —or TRAIN law.
The TRAIN law, as many of us know, came into effect with the dawn of the New Year of 2018. Many were looking forward to its implementation, because it was being heralded as the instrument by which income-tax rates would be lowered, and give the man on the street a larger amount in
his pay envelope. However, life (and taxation!) is never that simple, and the rule of thumb is that, if you reduce tax rates—and therefore the amount of revenue to be generated—for one particular type of tax, you have to offset this revenue loss in some way. One option would be to encourage spending, which was probably the idea behind reducing the income-tax rates—give people more disposable income, and they will almost certainly increase their spending.
The problem, however, lies in the fact that, while the government did reduce income-tax rates—and give millions of salaried employees more disposable income to take home come pay day—it also increased the tax rates for value-added tax and excise taxes. Both of these taxes, however, are levied on goods and services, thus practically ensuring that prices of many commodities would start climbing inexorably. One of the first commodities to see an increase in prices is also the most crucial: fuel. In a country that’s still very dependent on oil to power our homes, industries and transportation, any increase in fuel prices is sure to be met with no small amount of anxiety by everyone. It is a sad fact that, when fuel prices go up, the prices of so many other items quickly follow in their wake. Unfortunately, it is also an even sadder truth that, even if fuel prices are rolled back—and often at a figure that’s much lower than the amount to which they were raised—there will not be a corresponding decrease in the prices of commodities, not while there’s a profit to be made.
To be continued
The author is on study leave from The Tax Offices of Romero, Aguilar & Associates and is currently on a Research Fellowship at Harvard University.
This column accepts contributions from accountants, especially articles that are of interest to the accountancy profession, in particular, and to the business community, in general. These can be e-mailed to boa.secretariat.@gmail.com.