Forced loan

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A compulsory loan is a government bond which , when subscribing, certain economic subjects are forced to buy by law .

General

The forced loans not part of the standard bonds , because the investor can not autonomously decide whether or not to purchase it or not. Rather, it is subject to a state obligation to contract , which has the economic effect of a compulsory levy or tax that is repaid after the compulsory loan matures. There is a temporary confiscation of assets , so that forced loans represent a massive encroachment on property rights. When issuing these compulsory bonds, the state or its subdivisions ( federal states , provinces or municipalities ) assumes that investors will not voluntarily acquire these bonds because the bond conditions do not reflect current market developments and are less attractive . The main reason for issuing such bonds is the poor creditworthiness of the state due to high budget deficits in the national budget and / or high national debt .

history

Forced loan of the Kingdom of Westphalia on January 20, 1810

The Italian cities often issued forced loans ( Italian imprestiti ), but provided with solid collateral and therefore in an atypical form. The first forced loan is likely to be the forced loan issued by Venice in 1207 under Doge Pietro Ziani .

On the other hand, there was a lack of securities for the forced loans which the princes of the European late Middle Ages levied on their subjects. Louis XI. kept civil servants' salaries in France in the 15th century and converted them into loans. In the 16th century, Charles V obliged the Spanish nobility and clergy to subscribe for free loans. After the English Parliament had refused to extend the ship funds, the English King possessed Charles I in 1636 the payment of ship money as compulsory loan ( English forced bond ), knew about the everyone that they would not be repaid. Five nobles, including John Hampden , refused to pay this loan. In a trial before the Court of Exchequer Chamber , the obligation to pay the bond was confirmed and the five were sentenced to prison terms. The evasion of parliamentary budget rights through the forced loan was part of the conflict between the Crown and Parliament that led to the English Civil War .

Austria has tried compulsory loans several times, but mostly with little success, for example in 1705, 1760, 1794, 1806 or 1850. Prussia issued compulsory loans several times; the war loan of 1745 was a forced loan that had to be bought by magistrates , donors and large landowners . The coin notes from 1809 are also to be regarded as compulsory loans. An edict of February 12, 1810 ensured the distribution to districts and cities. In 1848 the Prussian finance minister David Hansemann presented the people with the choice of either voluntarily subscribing a bond at 5% nominal interest or having to buy a compulsory loan at 3.5%. The forced loan from Lombardy / Venice from 1859 could not be withdrawn in Lombardy due to the unfavorable turn of the war.

In 1922, during inflation, a compulsory loan was tied to certain taxes under the Compulsory Loan Act of July 20, 1922 . A curious example of a forced loan was practiced in Greece in 1922 under Finance Minister Petros Protopapadakis . In order to fight inflation , it was ordered that the banknotes should be cut in half. The right half remained legal tender (at half face value , which halved the money supply ) and the left half had to be forcibly exchanged for government bonds. In March 1942, the German Reich forced the Bank of Greece into an interest-free loan ( German compulsory loan in Greece ) in the amount of 476 million Reichsmarks as part of a government agreement , which was considered an advance payment on the occupation costs demanded by Greece . It is still controversial today regarding its legal basis , its validity and its amount.

The investment aid tax in the Federal Republic of Germany should be a supplementary tax of 5% on the income tax liability between 1983 and 1985 and repayable after 8 years (interest-free). This was not a levy, but rather a forced loan. The Federal Constitutional Court (BVerfG) declared the investment aid tax to be unconstitutional and null and void.

In November 2009, under Arnold Schwarzenegger as Governor of California , the US state of California levied a compulsory loan of 10% on all income taxes paid in its territory, which was repaid interest-free in April 2010 to combat an acute shortage of money . This forced loan ( English Employee's withholding allowance , "employee co-payment for income tax") was 1.7 billion dollars and had of individuals standing alone 51,000 dollars be acquired, earned annually. Technically, it was not a tax increase because a repayment was planned.

economic aspects

The German compulsory loan from 1922 is an example of such loans. A law stipulated that it had to be subscribed according to the size of the taxable assets of natural persons between 1% and 10% of the assets, other taxpayers contributed half of these tax rates. From the third year after the issue, interest was charged at 4%, from the sixth at 5%. All persons subject to wealth tax on January 1, 1923 with assets over 100,000 marks were required to subscribe. Those obliged to subscribe had to subscribe 1 percent of the first 100,000 marks of their assets and 2 percent of the next 150,000 marks. The maximum rate was reached with assets of 1,000,000 marks and a rate of 10 percent. A repayment was planned from November 1925. This did not happen, however, because the assets were completely destroyed by the German inflation from 1914 to 1923 . In fact, this forced loan had become a property levy.

Because the state exercises legal obligation to buy, it will be able to offer a lower nominal interest rate than the current market interest rate and its credit rating. Compulsory bonds are issued when the state cannot meet capital requirements through regular bond issuance because the capital market is unproductive or the state's creditworthiness is poor. Since the assessment basis for compulsory bonds is typically wealth , the fiscal effect is comparable to a wealth tax .

See also

Individual evidence

  1. ↑ Ernst-Günther Winkler, Tasks and Limits of Community Borrowing , 1961, p. 39 FN 29
  2. ^ Martin Körner, Public Credit , in: Richard Bonney (Ed.), Economic Systems and State Finance, 1995, p. 513
  3. ↑ Werner Buchholz, History of Finances in Europe in the Late Middle Ages and Modern Times , 1996, p. 66
  4. ^ Heinrich Kretschmayr, History of Venice: First Volume , 1905, p. 354
  5. ↑ Werner Buchholz, History of Finances in Europe in the Late Middle Ages and Modern Times , 1996, p. 52
  6. ^ Martin Körner, Public Credit , in: Richard Bonney (Ed.), Economic Systems and State Finance, 1995, p. 511
  7. ^ Giovanni Muto, The Spanish System: Center and Periphery , in: Richard Bonney (ed.), Economic Systems and State Finance, 1995, p. 252
  8. ^ Lujo Brentano, The Time of Mercantilism in England , Volume II, 1927, p. 448
  9. ^ Richard Cust, The Forced Loan and English Politics, 1626-1628 , 1987, ISBN 978-0-19-822951-3 .
  10. ^ Carl Julius Bergius, Principles of Public Finance , 1871, p. 675
  11. ^ Fritz Karl, 150 Years of Public Debt Management , 1970, p. 134
  12. ^ Carl Julius Bergius, Principles of Public Finance , 1871, p. 675
  13. ^ Fritz Karl, 150 Years of Public Debt Management , 1970, p. 63
  14. ↑ Ulf-Dieter Klemm / Wolfgang Schultheiß (eds.), The crisis in Greece: origins, course, consequences , 2015, p. 193 f.
  15. ↑ Heinz A. Richter / Reinhard Stupperich, Reconciliation without Truth ?: German war crimes in Greece during World War II , 2001, p. 79
  16. ↑ BVerfG, judgment of November 6, 1984, Az .: 2 BvL 19/83
  17. ↑ Los Angeles Times of October 31, 2009: California to withhold a bigger chunk of paychecks
  18. ↑ published in RGBl. Part I, 1922, p. 601 ff.
  19. ^ Fritz Terhalle, Die Finanzwirtschaft des Staates und der Gemeinde , 1948, p. 243
  20. ^ Karlheinz Müssig (Ed.), Gabler Bank-Lexikon , 1988, Sp. 2307