This post was not written for the blog.
It is criminal that the arguments of the high-tax left have been allowed to gain credence. Taxation should be about funding services that must be provided by the state. Most people in the UK agree upon the minimum that should be provided by the state and agree that it should be funded through taxation.
But what proportion of a UK citizen’s salary is spent on tax? If you’re a shop worker, office administrator or security guard your wages are taxed and then the Chancellor hands some back. The very act of taxing and refunding wastes money that could better be spent on services or tax relief.
Another argument that surrounds taxation — though perhaps not enough — is the use of tax as an incentive for citizens to behave in a certain way. A government adviser recently suggested to me that the Conservatives should support congestion charging as a use of the market to resolve demand on a limited resource. This sounds, on the face of it, like a reasonable suggestion, but what about those people who have no choice but to use a road for a particular purpose? Not only has the tax incentive failed but that person now has less money to spend on their business or on goods and services: The economy has been shrunk by a tax intended to affect someone’s behaviour.
It would be infinitely preferable if taxation were used solely as a method of funding government actions. The simplest way to do that is quite clearly with one tax that everyone pays. Should those more successful in society pay more than those who are struggling to get by? Absolutely. Should they pay less if they’re rich enough to afford the best financial advisers? No.
The simplest and fairest way of raising revenue to provide services to all in society is to take money from all those who contribute to the country’s economy. If you remove VAT, alcohol duty and fuel duty you have instantly provided significant and beneficial tax relief to those on the lowest wages. If you then levy a flat tax at 25% you provide an up-front tax cut to the vast majority of tax payers. Without wasting money on levying VAT, death tax, congestion charges, road tax and National Insurance and with the added income available from those who would normally avoid almost all these taxes, the UK would have a fairer, more flexible and more robust taxation system that absolutely everyone in the country could understand and judge.
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#1 by Dave on October 5th, 2006 - 12:00 am
Agreed, I bet you also are not too happy about Cam and the N.H.S judging by the way you normally complain about it.
He made a good speach, but it was not Conservative it was New Labour.
Cameron on tax: “We’ll only not take a huge chunk of your money when we can afford not to” !!!
#2 by mark adams on October 5th, 2006 - 9:45 pm
Why not remodel VAT as a flat tax at the point of consumption? It’s cheaper to levy because it involves collecting fewer receipts and avoids double taxation on savings and investments (and unless you consider that fair it is not regressive).
#3 by Gav on October 6th, 2006 - 10:17 am
VAT is a tax on spending. That means that it affects those on the lowest incomes more than those on higher incomes. It seems fairer, to me, to tax people on what they earn, not what they have to spend.
It also would damage tourism and require a continuation of the aggressive intervention and registration of companies with the state.
I would, personally, prefer a tax that was fair on the poor and rich, which could be collected without the risk of avoidance and which did not require intrusion on the part of the government in order to ensure collection. But I don’t think it’s possible to cover all those requirements… is it?
#4 by Simon on October 6th, 2006 - 12:51 pm
Maybe things will change soonish. It would have been to radical to support flat taxes this week.
#5 by mark adams on October 6th, 2006 - 4:32 pm
Gav, the incidence of a consumption tax is determined by the supply and demand for factor inputs such as labour and capital, not by the point of payment.
It is no different than a flat tax levied on incomes and corporate profits (or dividends) at an equal rate – both in fairness and in impact on tourism (which deserves no special treatment).
All businesses are already required to register by the state and the cost of compliance is lower with the consumption tax than with a flat income tax. It therefore requires less intrusion and produces lower rates of avoidance.