Is tax a moral or a practical imperative?

by Sir Thomas Crapper

Let’s look at the argument for tax as a moral imperative.

Surely that can only work if we believe our government takes the money from us and spends it wisely and morally?

Do we believe that? Surely not.

Put aside bombing Syria. Put aside the mess we made in Libya. Put aside the Iraq war. Put aside extraordinary rendition. Put aside overseas aid to horrible regimes who just pocket our money and build palaces or blatantly deposit it in Swiss bank accounts.

On top of all that, there’s PFI and other enormous wastes of the money that Government takes off hard-working people. The amount of money wasted by our government is extraordinary. And still, we want them to spend more.

When Labour came to power in 1997, the tax take was just over £250bn. It’s now more than double that.

Have your wages more than doubled since 1997? Unlikely. Average earnings rose by less than 50% in the past 16 years. In real terms, the value of your wages probably decreased during the last 10 years. Inflation may be low, but it hasn’t been non-existent.

Meanwhile, Government spending is now three times more than the tax take 16 years ago.

What do you suppose Government is doing with three times as much money, taken from your hard work during a period when your real earning power has actually decreased?

One of the things it has been doing is servicing the debt created by Gordon Brown’s profligacy – at an interest rate of £250m per day. But the current government, far from reducing borrowing as it promised, has increased it dramatically.

Not only does government spend our hard-earned tax cash on foolish and immoral enterprises. It has also recklessly borrowed at such a level that our grandchildren’s children could still be carrying the debt.

So let’s go back to the moral imperative, and corporate responsibility.

As Google boss Eric Schmidt so succinctly told Ed Miliband a couple of years back, “Governments make tax law, not corporations.” Google, as far as we can tell, operates within the tax laws of each country it operates in.

But even if we could force every multinational corporation to pay 10% of its earnings (not profit, mind, but turnover) it still wouldn’t make a dent in our debt. If Google’s income in the UK was £10bn (which it isn’t; it’s less than half that) and they operated on a margin of, say, (10%, which most corporations only dream of) they would be paying tax on £1bn, which would be £200m. What earthly difference is £200m going to make in a £1,500,000,000,000 (yes, that’s £1.5 trillion) economy.

So, no, there is no moral case to be made for Google, Boots, Starbucks or any other international operation to offer more money for our Government to waste. Rather, we should leave them alone to do what they do best, which is create jobs and pump money into local economies through tax paid by employees and purchasing of local goods and services.

If politicians around the world can come up with a cohesive international set of tax laws that they all abide by, then good.

They won’t of course. Because countries, like corporations, are competitive. And some compete for tax business. That’s just the way of the world. UK corporation tax was recently reduced to 20%. Ireland’s was already 12.5%. Where are you going to go?

Practical economics says the UK government should halve the rate. Politics says it can’t.

But we still live in a world where political ideology rules the roost, rather than practical necessity. The left always ignores the fact that when high tax thresholds are reduced, the tax take goes up (there is a ‘tipping point’). It’s politically useful for the left to constantly whine that ‘the rich must pay more’, never allowing the fact that the rich do pay more to get in the way of the politics of envy.

In any event, if countries can’t uphold a moral imperative, why on earth should that be a problem pushed onto corporations’ shoulders? Left wing politicians, and for that matter George Osborne, should stop whining and get on with the job of putting our existing finances in good order so that we can all see we’re getting good value for our votes.

Don’t hold your breath.

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

http://www.ifs.org.uk/publications/5585

http://uk.answers.yahoo.com/question/index?qid=20100315071014AA4sFWm

http://www.guardian.co.uk/news/datablog/2010/apr/25/tax-receipts-1963#data

 

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