Save content
Have you found this content useful? Use the button above to save it to your profile.

The balance of tax

6th Jul 2015
Save content
Have you found this content useful? Use the button above to save it to your profile.

There has been discussion of late on the ideal structure for a tax system, but it seems to me that this cannot be discussed in purely technical terms.

The first question is what you want the system to do, whether you see it as extracting the maximum of feathers with the minimum of hissing or whether you regard taxation as the price we pay for civilisation, you may come up with different answers. Do you consider the equity or fairness as you go?

While the Romans had developed a sophisticated system (with “welfare” mainly consisting of the odd distribution of bread and circuses to the mob), the main point of national taxation was to pay the ruler’s expenses in foreign wars, building palaces (in the case of Ludwig II of Bavaria to the point where it bankrupted the state), and maintaining the court (though medieval courts tended to tour the country imposing themselves on the hospitality of the nobles). Much of this was imposed costs (of providing troops, for instance) rather than money.

In Britain it was often the case that the biggest expenditure was on the Navy (true for most of the time from Alfred the Great to the building of Dreadnoughts before the Great War). The liability was (to use a modern expression) cascaded down through the nobility to the other ranks (most obviously in France where of course the nobles and the clergy were exempt from taxation – and the third estate really couldn’t shoulder the burden)

The nineteenth century saw a considerable expansion in what governments saw as their responsibilities. “Welfare” of course does no derive simply from motives of charity but from the perceived need to find soldiers tall and fit enough for service. It was no use having citizens who were too feeble even to be cannon fodder. Unsurprisingly, Bismarck’s Germany was the pioneer.

At the same time the notion developed that the state should ensure a reasonable balance between different segments of society – it was not seen as being in anyone’s interest that too small a part of the population should control too much money and power. Many politicians felt that the growing trade union movement had to be kept reasonably happy to keep the chances of revolution at bay.

We now – for the first time in over 100 years and with the unions beaten to the ground – have a government ready to ditch all that in the name of encouraging “aspiration” and reduce the role of the state to the armed forces and, strangely, massive interference in people’s personal lives (what to eat and drink and what not to smoke, even what to think – no extremists here please).

Everything else the market can provide, and indeed as Haliburton shows, even the armed forces can be privatised. Of course, while the state gives up on managing schools and railways it still pays for them and people have to be taxed to hand out enormous subsidies to private business, whether agencies providing nurses or the firms running academies.

“Lower taxes, higher wages” is the cry but while taxes can be lowered there is no suggestion the state should intervene in requiring businesses to pay a living wage. What is going on?

Tags:

You might also be interested in

Replies (10)

Please login or register to join the discussion.

avatar
By User deleted
06th Jul 2015 19:25

What socialists don't get ...

... is that if you inflict a "living wage", prices will rise and it won't be a living wage anymore, so you would have to fix prices too, and then you get Marxism, or may be that is what they want?

Thanks (0)
avatar
By User deleted
07th Jul 2015 08:06

Something to be said …

Whilst there is some merit in what is being said about a living wage the message loses its impact once one starts ‘banging on’ about ‘.. unions beaten to the ground ..’

There are very good reasons for having Unions to protect ‘the workers’ (as though no-one else in the country does any work!) – however, they need boundaries and a sense of realism in the same way as everyone else as well as changing their image and not being perceived simply as obstructive bullies

As an aside - wasn't it a Union that forced Labour to adopt the hapless, ill fated Ed Milliband instead of his brother - look how that turned out!

In an ideal world the State would be capable of running many of the countries core businesses, however, history has shown that the private sector often does things better and furthermoe, the State seems pretty much incapable of managing any business successfully

As @OGA says, you have a cycle of increase wages resulting in raised prices - so the whole thing is rather circular anyway.

However, what seems to have been missed is the other side of the equation whereby an increase in wages (to a living wage) also reduces the need for taxpayer support (credits) in order to top up wages to an effective living wage - ergo: the possibility of reduced taxes all round, although that probably wouldn't occur

It could be argued that any company not paying a living wage is ‘per se’ making a profit from the taxpayer by expecting them to bridge the pay gap with credits

One answer of course is to instigate a tax credit reclaim by the Government from company profits – broadly speaking this would entail any profitable company whose employees’ wages needed topping up by the taxpayer having a clawback from their profits to cover the taxpayer contribution

After all – why should profitable companies expect to have their staff costs underwritten by the taxpayer?

In fact has anyone actually determined the extent to which the likes of 'off-shore' companies such as Apple (one example - probably many others) pay less than a living wage - get wages topped up by UK credits - and then dodge paying UK corporation tax at the end of the day by remitting everything abroad. Win ... win for Apple and loose ... loose for the taxpayer - hence Apples $85bn off-shore cash stash

Thanks (0)
avatar
By User deleted
07th Jul 2015 09:50

I like ...
... The reclaim idea, well thought out and a fair proposal

Thanks (0)
Locutus of Borg
By Locutus
08th Jul 2015 01:13

Simon, the Unions are far from beaten down in the Public Sector
Four of them are going on strike on the London tube network. Roll on driverless trains!

I also find JC's reclaim idea interesting. I have never heard that before.

Thanks (0)
avatar
By User deleted
08th Jul 2015 09:49

Thinking further...
... define 'profitable'.
As a sole trade I make a profit, that is my living, who decides what is sufficient and what is 'excessive'?
And companies, low wage and dividend, is 'profit' before or after dividend, if after who decides what is excessive dividend after there is surprisingly no profit.
Seems to me on reflection this just opens up more scope for avoidance and a new market for aggressive schemes.

Thanks (0)
By ShirleyM
08th Jul 2015 10:51

I wanted to post a reasonable long post

... but my post got blocked, and I can't be bothered working out why. There wasn't anything spam like in my post.

I have previously PM'd AWeb about the problems and got a reply saying I shouldn't be having problems. So helpful!

I hate wasting all that time, so I'll be absent for a while until Mollom starts behaving more reasonably, if ever!

I'll still be here, but as a 'read only' lurker.

Thanks (0)
By k743snx
08th Jul 2015 13:18

Those beaten unions.....

The unions have been "beaten"?

By the most left-wing Conservative Govt. I've known?

Gosh, David, I've underestimated you :0)

 

 

Thanks (0)
avatar
By User deleted
09th Jul 2015 09:08

@ Shirley

my e-mail notification on this thread shows 2 posts from you, the one titled "a different kind of avoidance" is presumably the "blocked" one, weird I got a notification about it?

 

 

Thanks (0)
By ShirleyM
09th Jul 2015 18:29

That's right, OGA

That one got blocked and disappeared without a trace before I could try changing a few words. It's annoying when you have put a lot of thought and effort into a post.

However, AWeb have assured me I shouldn't have further problems, and as yet, I haven't.

Thanks (0)
avatar
By Knight Rider
10th Jul 2015 18:32

One could argue that the unions have done their members a disservice by electing the unelectable to lead the Labour party. But perhaps their members prefer lower taxes and less state interference in their lives.

Unrestricted immigration has forced down pay rates and increased working tax credits - it has also increased the demand for housing and payments for housing benefit. The beneficiaries of unrestricted immigration have therefore been big business and private landlords - no wonder Labour is so threatened by UKIP and the Unions only hold sway in the Public Sector.

Thanks (0)