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Tuesday 27 October 2015

The Joy of Tax

The Joy of Tax
by
Richard Murphy
(extracts)

- It has been said that the only two things in life that are inevitable are death and taxes. This is not entirely true; while death has been with us from the time life dawned on earth 3.5 billion years ago, taxes have a recent written recorded history - 4500 years ago.

- Top UK taxes in (£) 2013-14

Income Tax -                    155 bn - 27.3%
National Insurance -         106.9 -   18.8%
VAT -                               105.1 -   18.5 %
Corporation tax -                40.1 -     7.1%

- Oxford dictionary on tax:

A compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of goods, services and transactions.

This is misleading because; we also charge tax on income from invested savings, pensions and rent. We also charge tax on wealth and on inheritance as well as on occupation of property. The collective term for all this is 'the tax base'. The tax base is made up of things on which we want to charge tax.

There are major problems with the view that tax is 'a compulsory contribution to state revenue'. The whole history of tax, government and democracy is entangled precisely because those who have been taxed have demanded that their consent to taxation be sought before any such charge was imposed. In that case is it true to say that there is a compulsion?

Even if it is undoubtedly true that a great many people in modern democracies are disenchanted with modern politics they do have the right to vote in elections that result in the formation of the governments that set taxes in the countries in which they reside. Compulsion is hard to suggest in this case.

What follows on logically is that tax paid does not become the property of some alien body. It is the property of a government in which we have a stake and in which we participate i.e. the government is something that we want to exist and in whose operation we consent.

We also understand that the government is different from us; the democratic process creates the possibility that there will be governments and taxes that we would not have personally supported with our votes. We consent nonetheless because we recognise that within the democratic process there could be a will greater and different from our own.

- If we consent to the existence of government and willingly consent to its right to tax, the the favourite phrase of politicians, 'they are spending taxpayers' money' is not true. Tax is not taxpayers' money. It is the government's money and it is the government's rightful property.

This property right of the government has been created in exactly the same way as all other property in a modern democracy by statute law.

- Modern definition of tax

In a democracy with a universal franchise that provides every adult with a right to seek election, tax  is that property held in trust by an individual or a company that is due to the state whose rightful and legal property it is.

- Any attempt by an individual to reduce the property right of a state to claim the tax that is rightfully its property is an action like all others that are motivated by the desire to take away from someone something that is rightfully theirs. Conventionally they could be called theft, tax avoidance or tax evasion.

- Why does a government tax? Contrary to popular perception, no government has to charge tax to be able to spend on what it wants to do. The most obvious alternative to tax is for a government to print money to pay for its expenditure. Modern governments tax to meet the expectations they have raised among their electorate as to the services they will provide in exchange for their votes.

In reality the main reason to use taxation is that a tax lets a government reclaim the money it has spent into the economy, in order to stop the money supply from over expanding. It is just as necessary that the government has available to it a means of destroying the money it can create and spend at will into the economy, and that mechanism is taxation. Taxation literally counterbalances government spending by reclaiming all or part of it from the economy. But what it never does is pay for the spending in the first place because any government can spend without tax.

Another reason for demanding payment of tax is to make the local currency, issued, backed and controlled by the government, the only useful currency in that place. By creating a demand for its coins and notes to settle tax liabilities the state ensures that these same notes and coins become readily acceptable as payment for the goods and services the government itself wishes to buy within the economy it manages.

In countries where the shadow economy is very large, meaning that very little tax is paid, there is ample evidence that currencies other than that issued by the local government are often used as the preferred basis for trading.

Another reason for tax (as fiscal policy) is to reorganize the economy to ensure that it delivers the government's economic goals.

Yet another reason for tax is when the market price for goods and services do not reflect all the costs and benefits that result from trade in that activity.


- In brief the six Rs for tax:

1. Reclaiming money the government has spent into the economy for re-use.
2. Ratifying the value of money
3. Re-organizing the economy.
4. Redistributing income and wealth
5. Repricing goods and services
6. Raising representation. 

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