Tax is a necessary evil. Tax is never popular. Most of us accept that we should pay some tax. We are willing to see money given to people who cannot fend for themselves. We accept some social insurance to help people going through a bad patch, or who have lost their job. We need some common defence. In the UK there is strong public support for state financed healthcare and education. All these things need paying for from taxes.
The state’s aim should be to spend wisely and effectively to keep the overall tax bills under control, and to raise the money in ways which do as little damage as possible to incentives and economic activity. People on high, middle and low incomes need to feel it is worthwhile working more or smarter and earning more. Business people need to feel it is worthwhile selling more and making more profit.
It is difficult making the case that paying more tax is moral, and paying less tax is immoral. If an individual takes maximum benefit of ISAs, pension tax relief and the like to save, he or she is saving the state lots of money in the future: they will not qualify for or need substantial state means tested benefits later in life. Why is this a less moral position than the person who saves nothing, pays more tax when at work, and then relies on state handouts in older age? Why is a company immoral if it uses all the legal ways to avoid tax, enabling it to create many more jobs in the UK than it would do if it had to pay the full tax rates? Couldn’t the UK state be better off as a result? Isn’t that why the UK state offers all sorts of tax incentives and exemptions to stimulate more business activity?
Someone is not immoral if they pay cash to a tradesman. The BBC got in a muddle talking about it yesterday, wrongly calling it avoidance. If the tradesman receives cash for a service provided and then fails to declare the income for VAT or income tax purposes, then he is committing an offence. That is tax evasion. If the purchaser of the service knows the tradesman has offered him a lower price because the tradesman intends to evade tax, then the customer is aiding the tax evasion. The Tax authorities can and do find people under declaring their income, and levy the tax owing with penalties.
As paying in cash is a legal way of settling your bill it is difficult to say that the customer has a duty to ensure the tradesman nonetheless declares all the income and pays tax on it. The main onus to comply with the law must rest with the tradesman, as it is he who will owe the VAT and income or profit tax, not the customer. It is best to keep morality out of the equation. The government itself encourages small businesses by allowing them to avoid VAT, complicating the position of the customer trying to judge whether and how much tax the tradesman should pay.
The government actively encourages tax avoidance by allowing and encouraging many ways of doing it. If you have high rates and are over the tax saturation point, as I think the UK now is, tax avoidance becomes necessary to many hard working individuals and companies who want to use the available reliefs.Tax evasion is against tax law and will be dealt with. The government itself relies on tax avoidance to help finance its own excess spending, by offering tax free National Savings.
July 25, 2012
Whatever you say you will do with the receipts of taxation, no matter how noble or necessary, you are basically saying “give me your property because I have the guns”
If the ideas are so good, why are they compulsory? Why not ask people to voluntarily fund them through free exchange?
Because you know they won’t, so use use or have the implicit threat of violence.
July 25, 2012
My own question is this:
Why aren’t they simplifying? Why are they making a labyrinthine system so very complicated with 652 more pages added to the tax book? I thought they were Conservative!
July 25, 2012
Mike
Exactly.
A more simple system would be easier to understand, easier to administer, would be less expensive to run, and would be easier to police.
It is only because successive Chancellors want ever more money, for ever more spending, and ever more pet redistribution schemes, from every possible revenue stream, that we have the present dogs dinner of a system which few understand, which means we tax the initial tax free element of your pay or savings, over and over, and over again.
Thus the true rate of tax is hidden.
July 25, 2012
When I was sent to America as described yesterday I kid you not it took about five minutes to learn everything I needed to know to fill in their tax returns (three of them – Federal, State and City) each of which was simplicity itself and just a very few pages long. Admittedly, my affairs weren’t too complicated but even so it is hard (I am an FCA) to get one’s head round what it is exactly that allows or causes the difference.
July 25, 2012
No one thinks Cameron is a Conservative now surely. He is clearly left of Bliar let is how he does not start any more pointless wars at least. That is the best we can hope for short of his replacement.
July 25, 2012
If you think the tax law in the UK is hard you shouldn’t look at the tax law in Germany. It’s impossible to understand unless you’re a tax lawyer.
July 25, 2012
We have a duty to resist paying tax; if we don’t, those high-minded people in Westminster will fleece us of every penny we’ve got.
Politicians will always be tempted to bribe us with our own money; it is only if we refuse to supply them with that money that they will be forced to be careful with how they spend it.
July 25, 2012
Resist paying tax? Wow!
July 25, 2012
Don’t worry –
all the very rich including the BBC have already got it under control –
as have the poor including those on benefits or operating entrely within the the black market –
and of course as have most of the Greeks amongst other European countries
who’s left?
July 26, 2012
There are only two mechanisms to control tax take one is the democratic process which is clearly so weak as to be virtually non existent the parties being in control of their MPs and MPs in the main being career politicians so toeing the line to keep their snouts in the trough.
The other is where we are at under socialist Cameron. They cannot tax more because if they increase tax rates they get less tax not more, people leave and it kills the economy further as we have seen.
Cameron clearly like this and does not want a “Greater Switzerland” for some bizarre reason (he has not given us – I assume an allergy to cuckoo clocks) so we are in this absurd position. Perhaps we could club together to send him there for a months to learn how Switzerland is organised and how an efficient and small state (relative to GDP) and a strong currency works rather well.
July 25, 2012
Shouldn’t we have a Ministry of Morality to aid us confused citizens with such difficult matters. Today on the way to work I stopped at the newsagents and bought a newspaper with cash.
Should I be worried?
As for a Minister of a government that is actively stealing wealth and private property produced by the labour of it’s citizens by printing money, that really is too rich. Or who worked for a tax avoidance firm. Or etc etc. I’m sure we’ve all laughed at all the stories surfacing over the last 24 hours.
What an imbecile. Perfect for Cameron’s cabinet.
July 25, 2012
Norman: “Shouldn’t we have a Ministry of Morality to aid us confused citizens .. ”
It used to be called the Church of England, but since that orginisation has fallen by the wayside, any old snake oil salesman is willing to step into the breach.
Norman: “What an imbecile.”
You mean Gauke? Lets hope his constituents take note of his comments come the next election.
July 25, 2012
Yes, I did mean him.
This government has gone from farce, to omnishambles, and now to laughing stock.
‘How to disillusion your core voters in 3 easy years’ by D.Cameron and G.Osborne.
At least it’s cheered us up (and helped bury) over the 0.7% fall in GDP.
July 25, 2012
Bravo, John, bravo.
I’ve been reading some of the comments on other sites. When such truths are put to them they harp on about that tax avoidance is against ‘the spirit of the law’ and therefore should be included as tax evasion.
July 25, 2012
An excellent and lucid summary of the muddle and hypocrisy surrounding personal and corporate taxation.
I would differ a little on the question of acres of corporate tax lawyers and accountants being OK, because the ordinary citizen and small SME cannot afford them. The result is that many of us pay three times the rate of large multinationals. But by and large this is the sound sense of a man who is wasted in opposition.
There remains only the question of not whether tax avoidance is immoral, but whether demanding more tax from us per se in the current environment might itself be ethically dubious.
July 25, 2012
Why is tax necessary, exactly? What does civil society want that can’t already be delivered voluntarily, but which requires threats of force? People in times past once claimed that tax promotes civilisation, but I ask you, sir, in what type of civilised society does the financing of education rely upon threats of imprisonment or monetary fines, rather than the free flow of information & voluntary payments to people famous for their wisdom? In what type of civilised society does the care for societies most disadvantaged rely on forced welfare, rather than voluntary charity? I don’t know any definitive answers to these questions, of course, but I would suggest that the only allegedly civilised society who requires forces to threaten people to finance education & a basic level of care for the worst off, would be a society that is only civilised in appearance, but not actual actions.
http://mises.org/journals/jls/3_2/3_2_3.pdf
Reply: Most people agree that a civil society requires some central organisation and a rule of law, which needs paying for by compulsory levy.
July 25, 2012
If you lived in a country without any taxes, I don’t think you’d like it very much.
July 25, 2012
I liked Andorra well enough and Dubai isn’t all that bad either.
July 25, 2012
The people of Dubai cannot hold the government and state to account. Great place to live, I’m sure…
July 25, 2012
Can you? Seriously, can you?
You get the added bonus of income and property taxes.
July 25, 2012
ACB, I thought I would be the only person in comments questioning the need for taxes and advocating non-violent voluntaryism. I suspect the message is spreading.
July 25, 2012
JR, the “most people agree” line is not an argument nor a moral position as you surely realise. Most people in the confederate states in the 1840’s agreed on the “need” for slavery etc.
Reply: Most people do want free at the point of use healthcare and schooling, and this is very relevant in a democracy.
July 25, 2012
It’s undeniable, I admit, the ultimate focal point in defence of taxation is the rule of law, the legal systems and social structures enforcing the adherence to contracts voluntarily entered into, whilst punishing acts of unsolicited aggression against person or property, but in this regard the Queen’s realm has produced some of the most formidable intellects in all of world history; people who, through their own hard work combined with the study of others have demonstrated that it need not necessarily be that underpinning every legal mechanism is a dishonourable act, namely a levy which is imposed instead of a solicitation that is more honestly suggested
http://mises.org/daily/5270
http://www.radicalsocialentreps.org/2012/05/taking-the-law-online-judge-mes-plan-to-build-the-future-of-legal-systems/
http://www.bbc.co.uk/programmes/b01ky5r7
July 25, 2012
When the Government is about to meekly hand over ANOTHER £350 million to the EU (on top of the billions we already pay) because a bunch of foreigners voted to say that we must; when the Government persists in handing out ‘Aid’ to countries which don’t need it – why should we feel obliged not to minimise our tax bills. It’s not being spent wisely or on public services here.
We never voted to be governed by the EU. Our PM is deliberately preventing us from having a say in the matter. THAT’s what’s immoral.
July 25, 2012
Good points.
July 25, 2012
Here here .
July 25, 2012
Its it moral to pay money to fraudsters?
Is it moral to pay money that doesn’t go on services, even your money for not working schemes?
Why should people fund your hidden off the book debts?
Still waiting for the link as to how much is owed for the state pension. Still even waiting for your full explanation as to why you think its not a debt. In other words for your excuse for not paying it.
Reply: I have given you a full answer and an estimate of the liability in the past, as you well know. Stop misleading readers, and stop personalising it! The State pension has been a pay as you go scheme under all governments since it was set up.
July 25, 2012
JR: “The State pension has been a pay as you go scheme under all governments since it was set up.”
So because it was wrong since it’s inception, that justifies continuing in the error?
Wouldn’t it have been prudent to create a legally segregated fund for new entrants to the job market?
Government could have let the old NI system die on the vine as the pensioners die off. Then as each new person joins the new scheme, they could be allocated an individual account.
Reply: I have not been justifying pay as you go, merely trying to explain it to you, and telling you the costs. I doubt any political party that can win an election is going to demand switching over to funded, as that would mean the current working generation paying twice, once to pay for their elderly relatives under pay as you go, and once to set up a fund to pay for themselves.
July 25, 2012
Secondly, why have you exempted yourself from tax inspection on your expenses?
Why have you passed a law that makes your expenses exempt from tax? Other people are subject to inspection by HMRC, why are you above us?
What need does an MP have that you’ve passed a law exempting yourself from full compliance with money laundering regulations?
Reply: MPs have to declare their expenses to the Tax authorities, and are subject to tax on any item which is not allowable under the general tax code.
July 25, 2012
Their expenses are not taxes on the same basis as the public. Could I for example subsidise my Canteen for my workers to the tune of £100 a day each. That is about what some get in pay!
I think I am allowed something like this ones a year for a Christmas Party! The expenses (in the Lords too with attendance allowance) do not have to be related to work or even actually incurred sometimes.
Reply: All Commons expenses have to be incurred and have to be necessary for the job of MP. Most people in jobs with secretaries/support staff do not have to declare the staff salaries as their expenses. Commons catering has been the subject of price rises to get rid of subsidies and rightly so.
July 25, 2012
What’s moral about forcefully taking our money away to give it to the wind farm con artists?
July 25, 2012
Indeed or killing people in pointless wars, or using to encourage and augment the feckless.
July 25, 2012
I find it immoral that the British government taxes English people the same as people from other parts of the UK and yet we English have to pay for prescriptions, university education, elderley care etc. when the Scottish Welsh and N.Irish get them for free.
July 25, 2012
Spot-on
July 26, 2012
The English are not as chippy and aggressive as these provincial types. Shout a bit louder or go and make life unpleasant for your local MP. They usually respond well to bribes and/or threats of or actual violence as the poll tax riots and last years anarchy in London demonstrated for example (I am not recommending either of these options of course).
July 25, 2012
I’d have no problem with paying my taxes, if I thought for a minute that my government was making the right choices and was as careful with my taxes as I am with the residue of my wages.
But then, I ain’t stupid, HMG has that all tied down.
Like – when they shower 11 billion in foreign aid – some of it spent on advising impoverished itinerant tribesmen on the benefits of solar panels and knowing most of this aid buys African genocidal despots new Mercedes.
£19 billion to the EU.
Or, the £34 billion a year that goes to the Quangos [our branch of the European government here in Britain],
£117 billion on welfare/social security……………
If you can get away with it, so be it – it gets funnier when you dress it [taxation] up in the ‘moral guise’ – that’s taking parody too far.
July 25, 2012
And of course non of the expenses fiddling, tax avoiding crooks inhabiting Westminster would ever offer cash to a tradesman………nooooooooo, No sir, no way, noooooooooooooooooooooooooooooooooo.
July 25, 2012
When you are a small business, sometimes those couple of little “cash in hand” jobs can mean the difference between being able to pay a bill or not, affording the new school uniform or not.
Morals most definitely come into the way governments demand taxation from the electorate. You are the ones that make up the rules between “avoidance” and “evasion”. Thus, you get away with calling your scam “legal” and a fifty quid cash in hand to a plumber, illegal, even though that plumber has paid his taxes on the bulk of his income.
David Gauke used his parliamentary expenses to ensure we stumped up for the cost of his stamp duty payments when he moved house. On the wages that he is earning, I call that immoral. It is the government that have made it legal, it is the government that have given themselves that privilege. The government could for example say, that any hours worked over 50 hours a week, are tax free. It is YOU that make the rules to suit you.
Of course, the only way to ensure that people pay their taxes is if you have a fair system. A fair system means that the people you ask to contribute to the running of the country have a say in how it is run. The British Government has ceased to do that so people will try to avoid it. I have often heard people moaning about how their taxes are wasted on big expensive projects that get shelved.
You give people no incentive to contribute, you waste our money and take “privileged advantage” of it. You throw our money at overseas aid when we have people queuing at food banks, you hand over billions of our taxes to a club that nobody wants to belong to and you unceasingly nanny, nudge, cajole and generally poke your noses into our lives and expect us to pay for that treatment!
And then you wonder why people don’t want to pay?
July 25, 2012
I would be happy to pay a hypothicated tax for health, education and defence. A small surcharge for admin and that should be it. Most of the rest of the money is for politicians ego trips. Pensions etc should be properly funded and administrated paid for byb a levy on contributions.
Politicians and morallity should not be included in the same sentance.
July 25, 2012
The issue is not whether it is immoral or not to try to pay less tax.
The problem is that the richer you become the easier it is to avoid more tax. The very wealthy do it on a massive scale. I think this, quite rightly, gets on the nerves of ordinary hard-working people.
Tax is evil. Lets cut to almost no tax then. Schools will close, but that’s okay because there are still private schools for those that can afford it. Not so good when the country runs out of educated workers. We’d have to scrap the NHS, but that’s okay because the private sector will take over. It will be very expensive though in insurance contributions going to shareholders (tax by another name). More people will die when they could be cured, but they will mostly be poor people and we can pay a blind eye to that. The roads will get into a bit of a mess except for privately funded highways with tolls (tax). The emergency services will rescue if you pay (tax). We couldn’t afford a police force, so we’d have privately run militia instead who will protect those who pay. Poor areas would have protectionist armed gangs mafia style, but that’s okay because we don’t live in those areas.
Then your health fails and you can’t run your business, you can’t pay the insurance for healthcare, you can’t afford to be protected and your children can’t go to school. Tax is evil.
Of course there should be sensible levels of tax and it should be spent sensibly and efficiently without allowing people to take advantage of the system.
When the very rich pay next to no tax or when tradesmen illegaly evade tax, the rest of us have to pay more and I personally think that is immoral.
July 25, 2012
Look at the mess of benefits traps: they provide huge incentives not to declare income, because doing so can result in very high effective tax rates – sometimes well over 100%, and often so high that the residual income wouldn’t pay for transport to the job. Even when we eventually get the universal benefit, the effective benefit withdrawal tax rate will be around 75% I believe, so £6 per hour minimum wage becomes just £1.50 net.
I’d rather see incentives for those on benefits to work. Indeed, making work a non-paying proposition is really immoral – and just the kind of thing that Gauke is effectively supporting by criticising cash payments.
July 26, 2012
“Tax is evil. Lets cut to almost no tax then. Schools will close”
No they won’t as people will still demand education and it will then be provided competitively. Watch costs plunge as more suppliers enter the market. Watch affordability sore as you aren’t raped by the government monthly.
North Koreans think they would starve (even more) without the state, you think kids would be uneducated without it. Why is education different to food, how come the market can provide one but not the other?
July 25, 2012
To quote Peter Hitchens:
People who can afford to do so avoid the wretched ‘services’ the state arranges in return for this legalised theft. What are these? Schools that teach sexual licence but not times tables or proper reading; police who are never there when you want them; hospitals plagued with inexcusable dirt and neglect; a welfare system that punishes thrift and encourages sloth.
Meanwhile, the real essentials – the absolute vital duties of any government – are neglected or destroyed. Our borders are abandoned, our roads potholed, our Navy sunk, our Army soon to be small enough to fit into Wembley Stadium. As for criminal justice, where do I begin?
July 25, 2012
Any chance you’d like to defend your government against this stinging (and truthful) criticism?
July 25, 2012
Nobody disagrees with you John, but the problem is that there is masses of OUR taxes wasted on pet projects and what many see as non deserving causes; taxes do not just pay for health and education which is the thrust of your initial paragraph.
Do I want my taxes sent abroad to enrich others? Do I want my taxes paid looking after foreigners in the UK when our home-grown elderly, and young, are dying through lack of care? Do I want my taxes paid out in handfuls to migrants, illegals,(etc), in policing, health and benefits etc.? Making sure Labour areas are well looked after? Subsidising wind farms when I even disagree there is a man made global warming problem? The same for all other green subsidies. The list is endless but most people won’t voice it in public because they will be labelled xenophobe, homophobe, racist, right wing, denier or whatever is the liberal elite criminal label of the day.
I want to choose how my taxes is spent; the Government knows what is and isn’t popular, from paying six pounds a day to keep prisoners fed while pensioners get one to sending billions abroad and pilgrims, and the more the Government denies us this or just wastes it, the more me and millions of others will resist paying it.
Not only that, but the Government, especially the last Labour bunch of incompetent crooks, make up ever more ingenious methods of screwing that last penny out of us, quite apart from income tax.
Make the whole system fairer and simpler and we might pay more, and stop whining about how immoral it is tp try and claw a little back.
The last parting shot too is this. Virtually any and every self employed person in the UK, probably most of the eight million of them, could not survive as self employed if they did not squirrel away a few bits of cash. That’s a real world statement.
July 25, 2012
Many businesses have not got any choice – make yourself tax efficient or go out of business. The morality is about how the money is spent. Outside defence, basic law and order and property rights it is nearly always spend better by the individuals rather than the incompetent and often even corrupt state.
Tax borrow and waste on green tosh, the pigis, carbon capture, Olympic stadia, Millennium Domes, transfers to the feckless, PV and wind, happiness indexes, an absurd legal system, jumped up sports days, Millennium domes and all the rest. That is what is truly morally repugnant. Perhaps Cameron could have a look at Switzerland or Hong Kong for a starting point. Government spending at about 30% of GDP rather than 50% and a sound currency.
A government working with the people rather than against them for once.
July 25, 2012
The immorality lies at the heart of successive governments who have increased the tax burden to an excessive degree. Furthermore they spend these same tax revenues, and more, on schemes and wheezes with which a majority of taxpayers do not agree. The minister`s misguided remarks about payimg in cash truly announce the arrival of the silly season.
July 25, 2012
Why not do away with income tax and put it all on a purchase tax.
July 25, 2012
There is a point on the other side of the argument.
I have to declare and pay tax & NI on my earnings. I don’t see why cash traders should get away with not doing so by lax legal enforcement. Why not make it illegal not to offer and accept receipts for transactions over say £10?
I have no objection to cash traders claiming all tax relief for their business.
Most people wouldn’t help a shoplifter steal from the supermarket so why help dishonest cash traders steal from the government and the rest of us?
July 25, 2012
Actually your last sentence is no longer true to any significant extent.
As mentioned here:
http://www.telegraph.co.uk/finance/personalfinance/9208978/National-Savings-and-Investments-the-Governments-funding-arm.html
National Savings and Investments are forbidden from taking in any extra money this year – “Net Financing Target” of zero for 2012/13 – and were only allowed to take in an extra £2 billion last year.
Not long after he became Chancellor Gordon Brown told them that their role no longer included encouraging people to save, but was restricted to borrowing money for him as cheaply as possible, and now it seems that even the role of borrowing money is limited to rolling over the existing £100 billion.
Reply: They are still rolling over retiring bonds, offering continued tax breaks to existing savers.
July 25, 2012
It is insulting for an MP, any MP, to try to lecture us on morality.
July 25, 2012
Morality and politicians are like oil and water they don’t mix.
July 25, 2012
I ask you: what is the calibre of a government minister who is so dim-witted as not to be able to see the idiocy of such an argument. We are being governed by such people as this.
July 25, 2012
There is no such thing as a “necessary evil”. Once you believe there is you will support any measure if the elites can brainwash you enough. Tax debilitates the economy by legalising theft, it corrupts by giving stolen money to those that do not earn it, it reduces charity because people consider it to be the duty of the state to look after everyone less fortunate than themselves, it undermines the price mechanism which is the ONLY effective method of regulating production and the use of scarce resources, it provides sustenance to a massive and entirely unproductive government and bureaucracy. it crushes enterprise and freedom with the dead weight of regulation.
A bare minimum of laws, police and courts would be the most that any truly free society needed. That would require a level of self sufficiency and also co-operation that is beyond the imagination of people brought up in a socialist, big brother society but would give freedom and wealth enough to make us wonder why we ever tolerated the gigantic state we have today.
July 25, 2012
I’d vote for that Pete.
July 25, 2012
What about the morality of the BBC forcing presenters to set up personal service companies so that they can be paid that way and thereby allowing the BBC to avoid the employers’ national insurance contributions?
July 25, 2012
the jobsworth who said paying cash is immoral does not understand the time value of money.
July 25, 2012
Verily the Conservatives have lost their way and apparently feel the need to prove it at every possible turn.
July 25, 2012
If anyone pays cash for a job knowing that that cash will not be declared for tax purposes then that should be illegal. It is about time someone was prosecuted for aiding and abetting tax avoidance. In particular it should be made illegal to ask for a discount for cash in the knowledge that the supplier would probably be avoiding tax.
There need to be some clearer facts published about how much tax can be evaded by paying cash through the back door. When income tax (20% or higher) and national insurance (12%) are evaded the supplier is making a huge profit even after giving a 20% discount. When VAT and corporation tax are the alternative or additional evasion the profits will be even higher.
July 25, 2012
Interesting that you used avoidance instead of evasion for the first part.
Cash discounts vary for multiple reasons.
1. Will not declare VAT (illegal unless exempt as some are)
2. Cards / cheques have more hassle and costs associated with them
3. It improves cash-flow which is rather important
4. Both parties are happy
in regards to 4, I prefer paying with something that is immediate – cheques can take multiple weeks before clearing since it may take a while before they are paid in. Also, having a small 1 man odd job man with the capabilities of cards and the payments associated is rare and so cannot be done that way.
Therefore, to ask for discount for paying by cash is a reasonable request, and may not be anything to do with evasion.
July 25, 2012
scottspeig: “Therefore, to ask for discount for paying by cash is a reasonable request, and may not be anything to do with evasion.”
Isn’t there a 10% handling fee the merchant pays for purchases on Credit cards?
If you pay by cash, isn’t it reasonable to ask for that 10% to be reflected in the price. That isn’t evasion or avoidance, that is common sense.
July 25, 2012
Wether it is right conduct or not to pay cash to a tradesman depends on (i) the morality of the tax system, (ii) the intention for paying by cash and (iii) personal circumstances of the two parties (is there a trump card in the argument)?
On the morality of the tax system:
(a) if property rights can be defended on moral grounds then if tax leads to a more efficient way to protect property rights then I think taxation is defensible. This then is expenditure related to law and order, defence, contracts, intellectual property etc., it isn’t entitlements, education, health etc. (the minimum defensible Govt expenditure).
(b) if (big if) the ‘good’ aim is taken as equity/equality, then ‘progressive’ taxation policy might be seen as moral. But equity/equality needs to be well-defined. For (bewildering) reasons the UK (and other countries) take an income based measure not a wealth based measure. Flow based taxing based on income, value add, increases to capital would seem less moral than stock based (wealth … so averaged over time) taxation. Even if a move to wealth based taxation were viable, which wealth is taxed becomes challenging – just because most of the world’s wealth is held by only a few people does not imply inequality, a vast amount of this wealth is capital that is productive and provides employment and salaries; is it the inefficiently/not invested wealth that Govt should redirect?
(c) Anyway (a) and (b) are more longterm – what do we want to be doing with tax, the short term questions are, does the system work and work well? The answer here is no – why should someone’s donation to a charity effect the flow of other taxpayers’ money, why should avoidance holes be created by complexity, why should tax bands have hard thresholds, why should tax be designed to discourage employment, why should mixing employment and self-employment be a NI pain? …. SIMPLIFY.
On the intention for paying by cash,
If we consider the system moral and yet pay by cash to receive a reduced price and in so doing transfer ethical responsibility to another, or transfer the cost of enforcement to society, then our own ethics might be questioned. But similar to the first case we transfer ethical responsibility to directors / bankers etc in demanding ever more competitive strategies, on the other hand in terms of enforcement costs we lock our houses/cars, don’t leave temptations on display. Essentially we are inconsistent.
July 25, 2012
The morals are on both sides of the tax equation.
Government has a moral role to ensure that taxes on income or assets are used for true communal benefits including and almost limited to:
-a decent education and training including apprenticeships up to say 24 yrs old
-healthcare for those who genuinely can’t afford proper insurance – the under 24 s, the over 65 s and those in between who are genuinely in need
-national defence and security including border police
-a support system for those who through no fault of their own are unable to feed or clothe themselves – to be helped in a communal way to get back on their feet
-certain infrastructure projects and organisations of universal value
Given that these would cover at most 50% of the current tax take, there is an equal moral obligation on the population to ensure that no more or less than this is taken by the government. This means voting for low-tax parties, which discourage waste and profligacy on unnecessary wars, pet projects, too-generous welfare and so on.
At the limits, it is about using the means which are legally available to avoid tax.
The alternative, presently in force, is basically turning the country into a tax black hole, where the producers in society are paying an ever greater amount to fund others’ casual lifestyles. As more people see the absurdity of working harder and harder to maintain their lifestyle and pay taxes to fund others, then more folk jump from being net tax producers to consumers until the whole system implodes.
July 25, 2012
I am one of the “squeezed middle”. I have worked hard and am ‘fortunate’ enough to be paying higher rate income tax. Until relatively recently I was a single man, claiming nothing from the state other than the usual provision of a healthcare system and rule of law/defence services etc. It makes me mad when I see others scrounging off the state. Why should I happily pay a large proportion of my hard-earned cash to subsidise the lives of others who often don’t even make a pretence of trying to better themselves?
To make matters worse, I am now engaged to a lady with a 2-yr old child. She has always funded herself but, when she split from her partner, she began to claim child tax credits and working tax credits to supplement her income and keep the roof over their head. When we moved in together, we quite properly declared this to HMRC and her benefits immediately ceased (apart from the usual child tax allowance). I understand the thinking behind this and agree with it in principle. However, as her child is not “my” child (despite the fact that my income is being used to assess her living standards) I am not able to purchase childcare vouchers. These vouchers are the one thing that I thought I would be able to claim as a little bit of legal tax avoidance, to off-set all the tax I have paid over the years, but it turns out I can’t. Ironically, the child’s father IS able to claim these vouchers, even though he doesn’t have “responsibility” for her during the week! In short, the whole system needs to be redesigned from the ground up. We need a radical, brave government to do so, but I can’t see one on the horizon…can you?
July 25, 2012
The problem with companies avoiding tax is that they usually don’t create more jobs. Instead they use the extra money to artificially inflate their profits and pay senior executives higher salaries.
July 25, 2012
I have commented before that I consider our tax collection system is unwieldy and far too costly . My experience in Bermuda during 1951 to 1961 and the tax regime there of paying tax if you bought something and nothing if you did not , was sufficient to prove that it worked , was not costly to implement and collected enough to pay for all the infrastructure . Why can’t we do the same ? It requires a library of books to understand the ins and outs of HMRC , and an accountant to handle your annual tax return . I assisted Sir Harold Mitchell who researched on behalf of the Bermuda Government whether a Direct Tax system should be employed ; at the time he recommended against it because for every £1 collected 1/4 would be eaten up by the administration and collection system .
July 26, 2012
There are three problems with this:
1) It would require a 60-70% VAT on all products in order to remove the majority of taxes. This will disproportionately affect the lowest paid.
2) The black market will be able to sell products for a fraction of the cost, making it very attractive.
3) Anyone who can purchase something from another country, such as the USA or EU, will save a fortune.
Thus it is doomed to failure.
July 25, 2012
Agreed.
July 25, 2012
Tax Relief on Pension Fund Provision
For most of my working life I took advantage of the tax relief available on payments to personal pension funds by paying the maximum permitted by the Revenue as a percentage of my income. Such relief on income tax of 25%, means that for every £3 saved, the Revenue contributes a further £1, which I felt was a bargain not to be missed. Now retired, I have spent most of my accumulated personal pension fund on buying annuities. Annuity payments are not tax free: the Revenue are now taking back the previous tax relief.
One has no say on how tax paid to the government is spent. Tax payers’ money spent on funding the Iraq war wasn’t well spent. Tax payers’ money spent on funding immigrants and asylum seekers annoys me. (etc etc)
July 25, 2012
If we simplified tax and taxed the economic reality not the legal fiction we may arrive somewhere sensible. Deal with the offshore/secrecy reality! How many of the great and good, should we suspect of having taken advantage of these dubious schemes or even HMRC amnesties.
If effective tax rates were similar and more transparent , we might indeed agree we were all in it together.
If our leaders didn’t seem to have such teflon like qualities except where money is concerned.
If we actually represented the public and demonstrably allowed them to choose priorities via referenda.
Serious errors would be corrected much sooner and the cabal of parties would have a regulator (the voters) so as to speak with real teeth to just say no..get back in your box.
Better border security or more diversity officers or similar non jobs?
Increased EU contributions or reduction in UK taxes on low incomes?
PFI deals or direct government borrowing?
Better MP pay versus much lower numbers? with pensions linked to national standard of living, excluding the outliers rewards at the top?
Too bailout the too big too fail or not.
July 26, 2012
I think it is funny when the Government talks about morality.
I pay tax which they used to give others housing that I cannot afford, which I think is immoral.
I don’t want the poor on the streets but no one should be given more than a flat in zone 4 in a cheap part of South East London (guess where I used to live).