Podcast: How tax can 'heal' the country

In the latest podcast Tom Herbert is joined by a panel of tax experts to discuss how tax can be used to heal the divisions in this country.
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It’s fair to say that in November 2016 we are a nation divided. Leave or remain, Making Tax Digital or Making Tax Difficult, Ed Balls or, well, anyone else on Strictly, the divisions run deep.

But here at AccountingWEB we believe there’s one thing that can bring unity where there is division, and light where there is dark, and that is tax policy.

To discuss how tax can be used to heal the country I’m joined by a panel of tax titans. Rebecca Cave is consulting tax editor for AccountingWEB. Jolyon Maugham is one of the country’s most prominent tax barristers. Edwin Huang is a leading tax adviser for Argentum Consulting. And last but  not least Prem Sikka, who is Professor of Accounting at Essex Business School.

You can listen to the podcast by clicking play on the window above, visiting our Soundcloud page or subscribing to this podcast via iTunes, aCast, Soundcloud or your podcasting app of choice.

Disagree with any of the panellists? Have a tax policy that you feel will 'heal' the country? Let us know in the comments below...

About Tom Herbert

Tom is acting editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

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04th Nov 2016 10:43

what, no economists?

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to listerramjet
04th Nov 2016 11:13

With their track record on post-Brexit forecasting???

No, in all seriousness I was keen to get tax 'enthusiasts' discussing specific policies rather than making general economic points. Apologies if it didn't work for you.

Happy to listen to any ideas for future pod episodes you might have - leave a comment or drop me a PM.

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to TomHerbert
04th Nov 2016 12:09

The divisions in Britain's broken society can never ever healed by taxation: no radical social problem can ever or could ever be.

As perhaps the very best exemplar, consider the People's Budget, promoted by Lloyd-George (alter enacted by Asquith). The primary objective was redistribution of wealth, by taxation, as Churchill (then still a Liberal) crowed at the time, "We are going to tax the rich as they've never been taxed before!".

Didn't happen; surprise. Since the uber-wealthy aristocrats and post- Victorian nouveau riche industrialists, sheltered their wealth in trusts, tax avoidance schemes and etc.

The net result was to overtax the upper working class and lower to middle class. Which remains and indeed, has worsened, ever since.

Perhaps the most encouraging suggestions reference taxation, emerged a few days ago from The Institute of Economic Affairs.

See here: https://iea.org.uk/publications/taxation-government-spending-and-economi...

The main thrust of which is to cancel 12 major taxes and restructure the whole sorry mess and create, thereby, greater levels of equality and transparency.

As the authors point out, government spending expressed as a percentage of GDP has grown in an uncontrolled and profligate manner: and will continue to do so, unless stamped down.

Social Reconstruction, requires numerous significant quantum leap changes.

As Profs. Ted Cantle and Eric Kaufmann report, published 2 November 2016, amply demonstrates.

here: https://www.opendemocracy.net/chuka-umunna/foreword-to-is-segregation-in...

And these guys are supposedly experts in integration!

BTW: not all economists were wrong on Brexit; only the cheerleaders in the pay of the EU, Goldman Sachs, Soros, the Treasury, B of E, J P Morgan and Co, the OECD, the IMF and the usual ragbag of duplicitous charlatans.

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to Michael C Feltham
07th Nov 2016 18:00

The main thing that "the peoples budget" sought to introduce was a land value tax following the argument for it made famous by the then world famous (buried literally around 1897 he has since been buried metaphorically, see Mason Gaffney about that) political economist, writer and US politician Henry George. In this sense it would indeed have taxed the rich in a way they had never been taxed before and have still not been taxed since. As you say, Churchill and Lloyd George were Liberals, albeit under pressure from the nascent Labour movement, not socialists, so why were they saying that? Because the land tax was intended to become the central tax in the economy, not an adjunct to income or corporate taxes, but THE TAX in the economy. The house of Lord's being then, and still to a large extent, albeit that many of them are silent much of the time, a landowners assembly blocked the peoples budget.

What happened next was a messy fudge and has resulted in the system that we, and almost everyone else to some extent, have. The first world war meant that the aristocracy was much reduced - losing many inheritors, as the labour movement gained strength. The labour movement was, and still largely is, suspicious of the land value tax, because it's advocates mostly, though not all, say, or at least understand that, a 100% LVT would allow the removal or substantial reduction of most other taxes including those on the business class. So, the House of Lords was curtailed somewhat, they can no longer completely block legislation, though they did block "the peoples budget". Meanwhile the rise of Labour saw the introduction or extension of inheritance and capital gains taxes (unpopular taxes , the former in particular much eroded) and then income taxes arriving as we have now at the PAYE drone.

You're right, the intention was to soak the rich, and for a while it worked. However, the last 50 years has indeed seen the increasing overtaxation not by intention but by default of the incomes of the upper working and middle classes while the (mostly, still) land wealth (land being a catch all for resource wealth) of the very rich has remained more or less untouched as they define their income away with the help of the growing professions of tax accountant and lawyer (see Graeber and "b***s**t jobs").

LVT was and has remained more or less hidden from the mainstream ever since.

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to androo235
07th Nov 2016 21:10

I think Accounting Web need you two on for a history of tax podcast :-)

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to androo235
08th Nov 2016 21:10

For myself, Androo, the very best exemplar of the futility of the People's Budget, is exemplified by Grosvenor Estates (controlled until recently, until his demise, by Gerald Grosvenor, the Duke of Westminster).

https://en.wikipedia.org/wiki/Grosvenor_Group

https://www.theguardian.com/money/2016/aug/10/grosvenor-estate-structure...

How could and can, a company dealing in capital assets, simply avoid both CGT and IHT since 1677?.........

Perhaps the only one thing we can thank the Liberals for back in 1907 is the Old Age Pension.

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04th Nov 2016 11:38

Therein lies the problem Tom, experts. Look at what is happening in the world. people are fed up with experts and this will be best for you.
So although I agree that tax could help, you need to ask tax payers, Accountants, avoiders and evaders to get a true picture of tax reforms needed to help heal, at least, this country.
One thing "experts" should have learned by what has happened this year and that is "keep an open mind". We need new thinking to go forward. Having said that there is not much you can do to get people to contribute to running the country. You tax income, purchases or both. Unless tax is simple it will cause problems.

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to johnjenkins
04th Nov 2016 12:03

Thanks John. I'm 100% with you when it comes to tax simplification. However, I'm fairly sure what the majority of the population would do if given the chance to set tax policy, and that's to abolish it altogether. Does that mean it's right?

As for the experts, surely as an accountant people pay you for your expertise? This erosion of trust in experts should be a worrying trend for those who market their business as trusted advisers.

And what happens to the 'experts' whose opinions are at odds with popular opinion? You just need to see the front pages of the national press this morning to see how well it's going for them. Is everyone just meant to meekly agree with the prevailing mood of the public/national press?

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By Pygmy
to TomHerbert
04th Nov 2016 12:26

What on earth has taxation got to do with an existential divide between "experts" and popular opinion?

What level of "YES" vote do you think a referendum on the return of capital punishment would receive?

As an abolitionist I have previously taken comfort from the fact that MPs and rules associated with EU membership (the experts for want of a better word) have previously been able to frustrate popular opinion as powered by the Sun, Daily Mail and Daily Express.

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to johnjenkins
09th Nov 2016 23:11

Or you tax economic rents, the main one of which is land rental values, much, much simpler than income tax, which, as we know, isn't simple.

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04th Nov 2016 13:01

Tom and Pygmy have you buried your heads in the sand. The public are sick and tired of being passed over by "experts" telling us what we should be doing. There is no evidence that public opinion is any worse than "experts".
Yes of course some people will vote to bring back hanging (maybe that would deter a lot of crime - who knows).
Yes of course some people would vote for no taxation. What you and the "experts" are forgetting is that most of the people are quite aware of what is going on and now with the net available, are much more knowledgeable about current affairs and taxation and most of all are at the receiving end of what is decided.
Let's give you an example. Mr Carney,the Bank of England and the "expert" economists - need I say more.
Why do you think Trump is doing so well? It's certainly not his personality.

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By Pygmy
to johnjenkins
04th Nov 2016 13:35

How can you deny that there is a divide? Aren't experts people too? What about accountants?

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to Pygmy
04th Nov 2016 14:01

I don't consider Accountants as "experts". Some are more knowledgeable in certain industries etc. I consider someone like David Attenborough to be an "expert" on "life" but certainly not on Brexit.
I don't consider economists as "experts". Unfortunately some people become "experts" purely by way of "not a lot of people know that".
Let's look at the divide. Labour MP's said JC wasn't electable so they walked. The people decided he is (I totally agree with them).
MP's do not like the decision to quit Europe. The people decided they wanted a referendum, that's the main reason the Tories got in. When you have a referendum the power transfers from Government to the people, although not binding.
If we don't sort the crap out this year it will never get done.

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By Mike18
04th Nov 2016 13:49

Taxes have been imposed as a means of raising revenue in a haphazard fashion leaving us with a complicated array of rules with little modern relevance. We should realise that increasing income and wealth inequality is the biggest economic problem we face now and in the future, as traditional jobs disappear, the population rises and rewards are skewed to an increasingly wealthy financial sector.

Its increasingly clear, as people reject traditional politicians when they vote, that old fashioned fiscal policy doesn't work for the majority, and we need to combine tax and welfare in one system based on a universal basic income. Right wing economists like Milton Friedman, and philanthropists like Tim Berners-Lee have come to the same conclusion over the years.

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to Mike18
04th Nov 2016 14:16

Ah, Mike; However, Friedman was a Neo-Con and, eventually a Libertarian.

Now, whilst I like the Libertarian concept of making people responsible for themselves, instead of constantly and increasingly turning to Nanny Gubermint for assistance-which has bred a nation of feckless, idle unproductive ignorami - Libertarianism advocates minimum state intervention and self-sufficiency, where taxes are minimal and only raised for basic national necessities, such as the military.

Problem then is, the same self-serving venal scum, would become the nouveau Robber Barons!

In spades...

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to Mike18
04th Nov 2016 14:16

I'm nearly with you, Mike.
I think that we are seeing the demise of communism and capitalism, without a clear cut alternative. Dictatorships are vying with democracy and chaos is reigning.
China have nearly got it right by using capitalism to finance communism but there is a long way to go to get the balance right.
What has this got to do with taxation I hear you cry. Well taxation has to finance society. Without knowing what sort of society we want (both Major (back to basics) and Cameron (the big society, we're all in it together) didn't achieve it). you don't know how to finance it properly. As our tax system has been makeshift for many years it needs scrapping and a new model designed.
My way would be to forget taxation at source, except a nominal charge for the NHS, (Income) and just tax spending. One basic rate for everything. If Government needs more then the rate goes up and we can see what value we are getting.

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By Mike18
to johnjenkins
04th Nov 2016 15:32

John makes a sound transparency argument, but indirect tax is seriously regressive. I'm not a libertarian, at least in the American sense, or a neo con, but instead I give a priority to eliminating poverty above tinkering with or simplifying the tax system. Widening inequality threatens the breakdown of all societies that are not dictatorships.

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to johnjenkins
05th Nov 2016 09:26

John: mostly we agree on the majority of issues, herein discussed.

However, on this one I wholly disagree!

Quote:
Well taxation has to finance society.

The corollary to which statement being, before there were taxes then there was no society! Which is clearly and indisputably erroneous.

Worth, perhaps, remembering the history of UK taxation:

https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_Kingdom#...

Originally, taxes fell upon those who might best afford them; with the singular exception of the Robber Barons and liege lords extracting peasant's meagre possessions at the end of a sword; which was not taxation, per se, but rather, robbery with violence...

I agree, philosophically, with the basic concept of organised society having to pay taxes, to IMPROVE such society. Core problem today is it clearly is NOT being improved; rather, it is regressing at an accelerating rate.

Politicians are besotted by tax: any excuse for a new one! Neatly forgetting those already extant; and, more critically, the original purpose of a tax when first mooted.

Two main issues here: one, politicians' profligacy needs urgently reigning in, and; the muddled, arcane and stupidly complex tax systems need junking and new bases established.

Finally, tax revenues MUST be ring-fenced! And only raised and applied to the core objective which caused them to be created in the first place; rather than being sunk into the general public purse and used to prop up government incompetence. Examples: Land Fill Tax. Has it been used to develop environmentally friendly waste processing technologies and facilities? Nope.

Gordon Brown's tax on travel; introduced to restrict pollution. Has it been applied to directly introduce modalities for reducing pollution? Nope!

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to Michael C Feltham
07th Nov 2016 11:50

Ok Michael, let's look at it another way. If everyone in the world trusted each other you wouldn't need Government, Armies, Police Forces, money etc. etc. So why don't people trust each other to that extent? Society has evolved to enhance distrust. The more distrust the more complicated (and consequently more costly) society becomes. This only serves the rich and control freaks.
My point is made really well in the American election.

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to johnjenkins
08th Nov 2016 12:42

John; probably the core reason people don't particularly trust each other today, is BECAUSE of government! And our supposed democracy.

Social harmony and rules and regulations (social mores, customs and practices if you like), grew from the time mankind became gregarious. Living together in groups mainly for self-defence against other marauding hostile thugs, meant certain rules and regulations became essential. Same with any long established tribal system, even today: examples, South American Amazon Indians; bushmen (few left); Australian aboriginals etc.

Western societies, particularly UK and USA, have been destroyed and lack cohesion. Much of this problem can be laid at the doors of the Liberal-Left. Who increasingly encouraged louche behaviour as a "Right".

I will refrain from making what could be deemed a contentious list: those of us who think and follow such areas I'm sure already know.

Turning to to your points vis a vis Government, Armies, Police Forces, money:

All are in utter disarray: infrastructure is rapidly reaching the point of no return; water, sewerage, roads, everything. Police? Ask a policeman? Where can you find one? army: when soldiers are being prosecuted using legal aid, natch, what real incentive remains?

Money: both Tory and supposed Labour governments have allowed and even assisted venal City spivs to take over the nation's monetary system and effectively decimate it! Just consider Base Rate: if we are lucky, then we might gain a fraction of a percentage point on our hard won savings. If we wish to borrow money, however, totally different ballgame!

The socially disruptive problems, emanate from government's own organisational and fiscal incompetence.

Here is a very useful reference I use constantly:

http://www.ukpublicspending.co.uk/total_spending_chart

Let us consider some base reference points:

Between 1948 to 1964, government spend expressed as a % of GDP remained in the mid to upper 30% range.

Place this in perspective: Britain was recovering from WWII; was involved in The Korean War; Cyprus; Kenya; Aden; Suez: Malaya, etc. Developed an independent nuclear weapons system (thanks to Lord Penney); built the World's first commercial nuclear power stations; designed Concorde; The Hawker Harrier; etc.

However, after Wilson's Labour government came into power, then by 1966 state spending climbed....

What do we actually have to show for it?

Meanwhile: "After World War II the National Debt was exponentially reduced, year by year, getting down as low as 25 percent of GDP in 1992. Thereafter it fluctuated in the 30s and 40s until the financial crisis of 2008. The National Debt reached almost 85 percent of GDP in the aftermath of the crisis, but is forecast to decline to 78 percent of GDP by 2020. "

How will his be repaid? When?

Furthermore, who created this debacle? Bloody bankers in the whited sepulchre called the City.

Privatise the profit (lots of it): Nationalise the debts.

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to Mike18
09th Nov 2016 23:16

Freidman supported the land value tax - indeed saw that it was the only means of raising public revenue that could sustainably support a universal basic income.

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07th Nov 2016 11:16

With the Government conducting some of the most divisive policies seen in the modern age, "healing" seems desperately out of reach.
One only has to look at the constant and deliberate amalgamation of tax evasion and "tax avoidance" in HMRC's communications, which seems aimed at creating division amongs ordinary taxpayers to gain support for unjust laws - or is it a diversion from HMRC's inability to tackle the root of the problem for the past decade? Add to that the now almost casual recourse to retrospection (first APNs, now new "2019 contractor loan charge") and HMRc's increasingly autistic attitude towards its "customers" (recent "consultations" being little more than box-ticking exercices), and you get a pretty ugly picture which isn't exactly promoting trust in the tax system and those who operate it.
Maybe restoring some of this trust would be a first step - after all it makes sense to remove the dagger from the wound before dreaming about any kind of healing process.

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07th Nov 2016 14:02

Lets think now...
How about

Dividend tax...each owner manager puts £2k on average into the pot on 31 January 2017 lets call that 2m people x £2000 = £4bn

Withdrawl of tax relief on buy to let interest lets say thats £1500 x 100,000 people = £150m

Autoenrolement 15m people putting 10% of their 27k a year in a pension = 40.5bn

So Lets say £45bn of money is not in the Uk economy just as Brexit is triggered..... someone want to explain to me the effect on everything if that happens.

Personally I am not overly concerned that £3 = 1 as if Trump wins then there will be $5 = £1GBP so I will be in the carribean/ Aspen watching the UK/ Europe melt.

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to Tom 7000
09th Nov 2016 09:56

Bye Tom.

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07th Nov 2016 19:38

Having listened to the podcast I would say that, of these experts.

Rebecca Cave. I don't think she understands what an LVT is. It is not a wealth tax, at least it's not only a wealth tax, and, if she likes the ATED, then she ought to love LVT and should find out, properly, what it is.
Nor does Edwin - he seems to think the status-quo justs needs a tweak is my impression ("allowances should be looked at again".

I'm not sure whether Jolyon Maugham does. Perhaps, hence his comments about council tax. Though he wasn't clear that it is regressive because the better off are not charged enough, relatively or absolutely, rather than the worse off being charged too much (though that may be true too). LVT, although not a wealth tax per-se would do the job he requires a wealth tax to do (that is not the contradiction it seems) as well as replacing the council tax (and NNDR).

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07th Nov 2016 19:46

Seem to have posted multiple times, apologies, seems no way to delete....

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