lördag 11 oktober 2008

Lewes Pound

The Lewes pound is a new local currency with a picture of Tom Paine on one side. It demonstrates an important economic principle. The purpose of money is to avoid the inconvenience of barter. Nobody would normally want to swap, say, a sack of potatoes they have grown on their allotment for a pair of trousers. But they might do that because the value of the trousers would not have to be included on their tax return as "income". Sometimes people actually do exchange services in this way to avoid having to pay both income tax and VAT. Such exchange of services by mutual agreement, whilst not immoral, is of dubious legality. The Lewes pound will facilitate this kind of barter, but only until the tax authorities notice what is going on and insist that people declare, on their tax returns, income received as Lewes pounds. As they will of course insist that all tax is paid in ordinary Bank of England pounds, the Lewes pounds will then become pointless. This is one reason why all local exchange trading schemes have ultimately fizzled out. But until the Revenue intervenes, Lewes pounds will have more purchasing power than those with a picture of the Queen on them.

It will be interesting to see how this plays out. The lesson to be learnt is that the present tax system has a destructive effect on the economy and needs to be reformed.

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