tax and contribution

I was recently reading a book by Steven Pinker, the philosophical etymologist and he reflected on what would happen if the word tax, which is a negative term, were replaced by contribution, which is positive.

Imagine filling in your social contribution form rather than your tax return ? I.e. this is how much I should contribute to the welfare of my society rather than this is how much the government is entitled to confiscate. Food for thought !

a footnote on tax collection

Just a footnote on my report of the conversation with Mike Frear and in response to James' comments.

Mike Frear said, and quite correctly, that tax aversion is partly the result of public disquiet over how government spends the money. If it is going to 'benefit spongers' or dubious foreign military adventures etc., it is hardly surprising that they are reluctant to give hard earned money to policicians who 'waste' it. I did point out to Mr Frear that, the problem would clearly be solved under a Conservative Government and was delighted to see a gleam in his eye and a suspicion of scepticism.

Seriously I think there are two points to be made. The first is that, yes, there must be greater public confidence that their taxes are being 'well spent' and welfare reform - real welfare reform, not the rhetoric but little action under Labour - is the best place to start. The second is this. neo liberals, libertarians, T Party people etc. argue that the free market always uses resources more efficiently than government. There is an interesting argument to be had, but I think of this in a different way. If, for example, a premier league footballer earning £5 million a year avoids most of his income tax, what does he typically spend his extra money on ? From what I have heard and read, these guys typically spend it on various forms of conspicuous consumption of no intrinsic value. A certain British retailer who avoids tax through his wife's tax haven status has famously wasted vast amounts of money on lavish parties, over-paying celebrities to perform for him, vulgar yachts and the like. Is this money, spent in the free market, being put to any good use? 'Efficient' perhaps, but 'good' ? Well, employment is created maybe, but largely abroad and not particularly sustainable. I think, if I were in government, I could find better ways of spending a footballer's £million pound tax avoidance windfall than he himself can. One Portuguese star, I heard, bought two identical Ferraris on the basis that he was bound to crash one before long - which he did. I think he crashed them both actually.

I should be fair and report another of Mike Frear's comments which has some validity. I argue that the tax we pay forms part of our relationship with the state and should therefore be in the public domain, as are the wages of public sector employees (note the forthcoming publication of BBC salaries). He pointed out that the relationship was not a voluntary one, and he is certainly right, so there is ineded a civil liberties issue at stake in my idea of making our tax contributions available to all. . I would still argue, however, that the 'greater good' here is more important than the privacy issue. I repeat I would like to see a change in the culture regarding tax where we see it as our proud contribution rather than some kind of punishment.




http://www.hoddereducation.co.uk/Colleges/Government---Politics.aspx?mRef=CNM01.

The 50% tax band

It is an interesting question to ask : what are the earnings of the economists who have recommended the abolition of the 50% tax band ? We need to know to ensure their academic detachment.

We also need to know where in the world one can go in order to pay less than a marginal tax rate of 50% on earnings of over £150,000. USA obviously, but where else where one might wish to live ?

Of course they may well be right, but is it politically possible to abolish it, especially in view of the more common explnations of recent public disorders ?

Tax

Thanks, James for your remarks and for looking at the blog.

It is interesting why we can't seem to get to grips with tax avoidance and evasion. I think what you suggest is fundamentally true - that policy makers are frightened of driving away investment if tax is collected too effeiciently or at too high a rate. You are also right to mention what is, I think, called the 'Laffer Curve ' effect by economists. This is that, the higher the tax, the less is collected because people have a greater incentive to avoid high tax rates. It may work, though I am sceptical as I suspect the culture of tax aversion is too deep seated here.

How about, though, an idea that operates in Norway, I think ? The amount of tax each individual or compant pays each year could be publicly available. This might, just might, create a climate in which more people might be more willing to pay the tax due. I am not wealthy but pay a good deal of tax because I earn a good deal, and I am proud of how much tax I pay because I am contributing to the country's services and welfare. I don't like paying it, but recognise I should contribute. If I learned that a premier league footballer paid, say, £2 million income tax last year I might feel more kindly disposed to him and his ridiculously overblown salary. Sadly I suspect that most of them pay considerably less through legal avoidance schemes.

Finally there is the American system. We could do away with tax exile status. If you are a British citizen you should pay tax on what you earn in the UK, wherever you live. As soon as you set foot on British soil, the tax authorities wil present a tax demand and you cannot leave until you pay it.If anyone wants to avoid UK tax I think they should live abroad permanently.

There is here, by the way, an obvious link with events of the last week in our city centres, isn't there ?

Time to tax

In all the furore about Greece, the cuts, pensions etc., have we forgotten a key issue ?
This is the question of tax collection. certainly it has always been true that all 'successful' economies have efficient tax collection systems. Britain is among these countries. Greece, on the other hand, is notorious for tax evasion, especially among the wealthy. In Italy it is a national sport, and what price on tax evasion being an Olymic sport in Rio ?

The question we should now ask is - is the Government spending as much time and effort thinking about collecting more tax from those who evade and avoid as it is making cuts in public services and pensions etc ?

Without suggesting what solutions might work, I offer three ideas :

1. We could publish the amount of direct tax all British citizens (wherever they claim to live) and companies have paid (I wouldn't go as far as Norway where full tax returns are available on line). This would flush out the evaders.
2. Introduce more draconian tax laws, perhaps levying income tax on all citizens wherever they live and wherever they have earned their money (if one did this, any direct taxes paid in their country of domicile would be subtracted).
3. Introduce more tax collection 'at source'. It is clearly unequal that most people experience PAYE, wheres high earners are not taxed at source for various reasons.


Let's continue counting to three by identifying three consequences of widespread tax evasion or avoidance among the rich :

1. It is a clear moral issue.
2. It promotes inequality as it is the rich who are most efficient in avoiding tax and the poor who cannot (there are exceptions, notably in the building trade, but this is not on the same scale).
3. It has great economic consequences which are obvious, notably in cutting the budget deficit.

Time to look more closely at this issue, I think.