Discussion of the role of taxation in our society

This debate followed on the discussion about group business which took place on 17 December 2016 and was initiated by Brian.  His thesis was that tax is an efficient way of collecting funds for essential services yet was always treated as essentially ‘a bad thing’.  Almost all politicians will claim they wish to lower taxes and they sell the idea that lower taxes mean that people are better off and they will have more money in their pockets to spend.   There was never a mature debate about tax and the very notion that tax could be ‘a good thing’ seems an almost absurd concept.  Surely, lower taxes must mean we are better off?  Isn’t it obvious?

There was a spirited debate on the subject and the following were some of the points made:

  • tax was an economical way of raising funds especially for goods and services which we all use.  The difficulty with other methods is the cost of collection and how to exclude non-payers.  Toll roads for example work in large countries but in a tightly packed one like the UK were largely impractical
  • the neoliberal belief – a key policy now for some 40 or so years since the days of Mrs Thatcher – is that privatisation is a more efficient way of running things.  Yet experience is showing that that is not always so.  Private firms can be inefficient or just corrupt and can result in money which should be invested in the service itself going to shareholders or to the directors.  Southern Rail is perhaps a case in point currently
  • there was a discussion around directing tax to those services which people value – so called hypothecation.  The problem is that just because a service is popular doesn’t make it necessary and what about valuable services that are necessary but that people don’t know about?  How do you handle changes in demand or need?  Road tax was originally brought in as a tax to build roads but has long since lost this link.  National Insurance likewise.  The idea being put forward was that people might not mind paying tax if they knew it went to something they valued.  But not everyone values the same things.  Do people without children value education for example?  Would people who do not like sport want to pay for sports fields?
  • What about a flat tax?  The problem with this is that the poorest pay the most and the wealthiest the least.  It was regressive.  This was the problem with VAT
  • there was discussion about whether to tax assets such as land rather than income.  Land ownership was untaxed although it used to be.  It would be harder to avoid tax on a physical asset although there were many properties in London which paid no community charge because they were foreign registered.  It prompted the whole question of tax avoidance which was a massive problem running, by some estimates, at over £30bn a year
  • it was pointed out that many companies and individuals were able to move themselves and their operations around the world at will to benefit from advantageous tax regimes.  HSBC bank for example were threatening to relocate to Hong Kong and there were other examples of firms saying they will move to Dublin, Switzerland or some other allegedly more favourable regime.  If they did so, it meant a loss of jobs and income to the country.  There does not seem to be any sign of a tidal wave of such moves however and since the top 1% in the UK so organise their affairs that they pay little or no tax anyway, it seems unlikely that it will happen
  • is the media a problem?  It was noted that any increase or cut in tax receives banner headlines in the tabloid press at least so trying to sell the idea that there were benefits to be had from taxation seem forlorn.  Chancellors of all parties were able to capitalise on this by offering headline cuts (a penny off beer and ciggies for example was always popular) knowing that it would gain them favourable headlines the next day.  How do you achieve a more mature debate about tax?

What to do?

One suggestion was to think about holding a meeting/event/debate on the day of the year when people have paid their proportion of tax?  This is termed ‘Freedom Day’ and occurs on May 30th.  The link in the previous sentence is to a Daily Telegraph article and one can see there the concept of the ‘burden of tax’ featured in it.  It treats tax as a wholly bad thing and offers a guide to reducing tax at the bottom of the page.   It automatically assumes that tax is a loss and that people and the economy are better off without it:

The outcome is that people have less income each year for themselves. At a time when the economy needs a kick start and people need to spend more, they are being left with less to spend  Daily Telegraph 30 May 2013

They are not alone in these assumptions.  There is thus a mountain to climb to persuade people that a more balance view about taxation is necessary.  But then as someone in the group noted, neoliberal ideas were novel and contentions once upon a time and now they are mainstream …  Just because it’s difficult doesn’t mean we shouldn’t try!