Octávio Bulhões and the monetary tax: the history of an idea

The establishment of an independent church organisation and coin minting belong to the main attributes of European Christian realms. Looking from the perspective of the economic and social history, monetisation as a long-term process was not completed until the coin became available to the weakest segment of society. Monetisation was closely connected with the commercialisation. Monetisation is a many-sided process. This chapter focuses on two main methods of using the coinage as a monetary tax: the renovatio monetae system of periodic recoinages and coin debasement. Periodic recoinages had positive as well as negative sides: it secured steady currency in term of weight and fineness and prevented a long-term inflation because a number of coins before and after the exchange was the same. Recoinages always occur in a short-lived coinage system, but never in a long-lived system. On the contrary, debasement can occur in both systems.

Periodic Re-Coinage as a Monetary Tax: Conditions for the Rise and Fall of the Bracteate Economy

This paper considers the costs of reducing consumption of a good by making its production illegal and punishing apprehended illegal producers. We use illegal drugs as a prominent example. We show that the more inelastic either demand for or supply of a good is, the greater the increase in social cost from further reducing its production by greater enforcement efforts. So optimal public expenditures on apprehension and conviction of illegal suppliers depend not only on the difference between the social and private values from consumption but also on these elasticities. When demand and supply are not too elastic, it does not pay to enforce any prohibition unless the social value is negative. We also show that a monetary tax could cause a greater reduction in output and increase in price than optimal enforcement against the same good would if it were illegal, even though some producers may go underground to avoid a monetary tax. When enforcement is costly, excise taxes and quantity restrictions are not equivalent.

Scholars in the fields of archaeology and numismatics have long been familiar with the phenomenon of periodic recoinage (renovatio monetae), which dominated monetary taxation in medieval Europe for almost 200 years. However, this form of monetary taxation is seldom, if ever, discussed in the literature of economics or economic history. No economic theory has ever been proposed to explain periodic recoinage. The present study aims to make up for this absence. It examines the qualities that typically differentiate regions with periodic recoinage from those with other monetary systems and analyses how periodic recoinage was monitored and enforced. The principal example of frequently renewed coins is uni‐faced bracteates, which were often subject to annual or even biannual recoinages. Although bracteates were not the cause of periodic recoinage, their features facilitated frequent renewals. The study discusses the economic consequences of periodic recoinage and links the breakdown of this monetary system with the end of bracteates’ role as the principal coin in the fourteenth century.

This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.

ABSTRACTA specific monetary tax − called periodic re-coinage − was applied for almost 200 years in large parts of medieval Europe. Old coins were frequently declared invalid and exchanged for new ones based on publicly announced dates and exchange fees. A theoretical framework of how periodic re-coinage works in practice is tested on Swedish coinage. The theory suggests that economic backwardness, limited monetisation of society and separate currency areas facilitated re-coinage. The Swedish experience is extraordinarily consistent with this theory. It is shown that Sweden adopted coin types similar to those minted in Continental Europe during the Middle Ages and the corresponding coinage and monetary taxation policies. Periodic re-coinage was applied with varying frequency from 1180 to 1290. However, monetisation increased in the late thirteenth century, making periodic re-coinage more difficult, and long-lived coins were introduced in 1290. With the end of periodic re-coinage, Swedish kings accelerated the debasement of long-lived coins, which continued until the beginning of the sixteenth century.

This thesis examines three interrelated aspects around Frequent Flyer Programs (FFPs): the cash-equivalent value (purchasing power) of loyalty currency, the impact of FFPs on consumer behaviour and surplus, and the taxation issues surrounding FFPs. Unlike most previous research on FFPs, this research uses data from an actual FFP, specifically the Virgin Australia Velocity Rewards program, to examine these aspects. The focus on one specific FFP and using its detailed data is a contribution to FFP literature in itself. No prior research has investigated the impact of a specific FFP on its members. The first aspect investigated is the estimation of the cash-equivalent value of Velocity Points, the loyalty currency of the Velocity Rewards program. Using publicly available Velocity Rewards data the cash-equivalent value of a Velocity Point in 2010 is estimated to range between AU$0.0066 and AU$0.0084. This range excludes the value of status benefit to the status member. The Velocity Points gained by a FFP member per flight equate to an in-kind discount on an average airfare of 3.3 per cent for Red members, 3.96 per cent for Silver members and 4.63 per cent for Gold members. The second aspect under consideration is whether the Velocity Rewards program can impact its members such that they fly more and/or spend more with Virgin Blue. This aspect is investigated with a proprietary stated-preference dataset from the Velocity Rewards program spanning three years from 2006 to 2008. A particularity of this dataset is that the FFP changed in 2007 from a simple bulk discount program to a complex status-tier program. By taking advantage of this ‘quasi’ experiment provided by the dataset across two very different program structures, it is shown that members change their consumption behaviour particularly when close to the next status tier threshold in order to achieve higher tier status. This is an expected reaction to frequent flyer programs and is what the airlines aim to achieve. Members buy more airfares and at higher prices. This thesis shows that under the new status-tier structure, the consumer surplus of FFP members has decreased by around 6 per cent. This implies that the introduction of the status-tier structure has been a successful strategy for Virgin Blue. The status-tier structure has allowed for a noticeable increase in the efficiency of Virgin Blue to extract additional consumer surplus from Velocity Rewards members. A detailed survey undertaken in 2010 among a representative sample of over 3300 Velocity Rewards members confirms the impact of the FFP on consumer behaviour. The most interest finding of the survey is that a large proportion of leisure and business travellers admitted a willingness to pay a higher fare – a FFP premium- to fly with Virgin Blue because of their Velocity Rewards membership. The average FFP premium is estimated to be around 8 per cent and is statistically different between leisure and business travellers. The cash-equivalent value of a Velocity Point as encapsulated in the FFP premium is estimated to range between AU$0.0108 and AU$0.0153, depending on the FFP status of a member. The final aspect considered in this thesis is the taxation of FFP rewards in Australia. Although it has long been recognised that FFP rewards earned on employer-funded business flights should be subject to taxation, this is currently not taking place. One of the main arguments against the implementation of taxation is the lack of a monetary tax base. This thesis argues that the cash-equivalent value of loyalty currency can be estimated with public data and is appropriate as a tax base. The legal hurdles to FFP reward taxation in Australia are also addressed. This thesis makes the following contributions to the knowledge on FFPs: • It is shown that a cash-equivalent value of loyalty currency can be estimated. • It is shown that Velocity Rewards impacts consumer choices, willingness to pay and consumer surplus. • It is shown that Velocity Reward members admit paying a FFP premium and that the magnitude of this premium can be estimated. • It is shown that taxation of FFP rewards in Australia is possible. Finally, the majority of these insights were gained with data that have not been available to researchers previously.

Germany in the fifteenth century was the scene of an extended struggle over the nature and scale of imperial institutions, and much of this conflict boiled down to the question of who was to pay taxes and how much. In the first half of the century, two alternative methods of financing the Reich emerged, and in the years around 1500 only one of these two methods proved to be politically practical. The style of imperial taxation which won out, the Matrikel, has long been studied in detail, and its workings are well known to any student of imperial institutions.1 From the first Matrikel in 1422 until the end of the Old Reich in 1806, negotiated quotas were the basis for payments to the Reich made by each of the three-hundred-odd estates. Paying the listed quota in men or money fell in principle on the government of the individual estate, which had to find its own way of raising the money or of passing the costs on to subjects. This method of raising public revenues was not, however, the only system of taxation which contemporaries thought to be possible or desirable. The Matrikel won out only after princely estates tried and failed to gain the adoption of a monetary tax paid directly by the population in proportion to individual wealth or income. I will first consider the development of imperial direct taxes in the fifteenth century, and then I will show that the defeat of that tax helped to determine the structure and scale of Reich institutions throughout the early modern period.

Tax Simplicity and Heterogeneous Learning

This chapter investigates the colonial tax system in Indonesia under Dutch rule. It demonstrates how in contemporary colonial logic, taxation, socio-economic development, and equality were seen as intrinsically connected. Taxation, and integrated systems of coerced labour, were presented as important pillars in colonial ‘civilisational’ projects of state formation, governance, and bureaucratisation. Far from simple extractive instruments deployed to fund empire, taxes were seen as integral administrative and disciplinary instruments to enhance economic centralisation, equality, capitalisation, monetisation, and the political transformation and reorganisation of colonised societies. The monetary tax system was designed to curtail the exploitative character of previous systems of labour exploitation and distribute the tax burden more equally among colonised populations across the archipelago. However, the limited capacity and considerable dependence of the Dutch administration on local rulers obstructed the supposed transformative power of taxation. Tensions between colonial policy and practice were resolved on the spot through negotiation, rendering a weak institutional infrastructure and preventing the emergence of a transparent and just bureaucracy, which ultimately only enhanced political and fiscal inequality.