FLASH
Shkruar nga Irena Beqiraj
The most difficult problem to address is the breakdown of oligopolies, which, unfortunately for us, is a structure that appears in every market, the banking, financial, hydrocarbon, food, etc. market.
In 2011, Warren Buffet told the Financial Crisis Inquiry Commission:
" The single most important decision in valuing a business is the power to set prices. If you can raise prices without losing market share, that is, if you own a monopoly or oligopoly, you obviously have a very good business."
"If you have a good business, you can buy a television with which you can influence the beliefs of the public. Meanwhile, your nephew, even though he is an idiot, can run it ."
Buffett, although ironic, is elegant and refined when defining the power of monopoly and oligopoly!
I hope the opposition reads these lines to understand that tax cuts do not necessarily lead to price reductions. Unfortunately, the economy does not operate according to universal laws, where two plus two make four and three minus one make two. Economic decisions are made by people and human behavior is the basic determinant of expected results. Nothing about human behavior is so simple and universal.
European empirical studies show that even in competitive markets (i.e. not a monopoly or an oligopoly), whenever there has been an increase in tax rates, 55% of this increase has been translated into a price increase in the first month after the change. Meanwhile, in the three-month period, the increase in the tax rate has been completely transmitted to the price. The opposite has happened when policymakers have decided to reduce taxes. Only 13% of the rate reduction has been reflected as a price reduction for the consumer. The rest of the reduction has been reflected in the increase in business profits. So the transmission to the price of the reduction and the increase in taxes is different, showing that in the economy 2+2 can also make 5 and 3-1 can again result in 3.
So even when the market is competitive, the tax reduction may be partially reflected as a price reduction. While the market is an oligopoly where few companies have the power to set prices, the transmission of the tax reduction to the price is negligible.
For the non-economist reader, the market has an oligopolistic form when 5 companies can hold more than 60% of the market.
Unfortunately, the data shows that the import markets for meat, flour, sugar, and oil are all oligopolies. For example, the meat market is concentrated in 5 companies that hold 85% of the market for 2024, a position that has increased compared to 2023 where these 5 companies held only 75% of the market. Moreover, the 60% limit is met by the first 3 companies. In this case, when 3 companies are price-determiners in the market, it is difficult for the mechanism of transmitting the tax reduction to the price reduction to function as the opposition MPs claim.
The most difficult problem to address is the breakdown of oligopolies, which, unfortunately for us, is a structure that appears in every market, the banking, financial, hydrocarbon, food, etc. market.
Tax cuts are morphine or a temporary painkiller, but by no means a treatment for the structural problem of the market.
I have no doubt that the government we have is well aware of the dose of morphine, but apparently even the opposition does not have the courage to propose more than morphine.....
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