James Mawdsley, former Conservative parliamentary candidate, author of the book The Heart Must Break about fighting for democracy in Burma, and Catholic blog Ecce Mater Tua, makes the case for a flat tax.
When it comes to solving poverty, love, friendship or education are better gifts than money. But that in no way justifies a government pole-axing the poor with punitive taxes—which is exactly what is happening in Britain today. You’re damned if you drive (stung by rocketing petrol prices) and you’re damned if you leave your car idle (because after spending so much on road tax, car insurance, M.O.T. etc it seems like madness not to use the car!).
As the financial pressures are becoming acute for millions, unbearable even, many see this as a wake-up call for how we treat the environment; or how materialistic we are; or how oil-dependent we are on oppressive regimes. Well can I add one more to the list: how unjust our tax system has become. It is time to face up to two massive problems—injustices—in our tax system.
1) tax evasion by the super-rich
2) complexity in the system...
John Battle MP (Lab), Andrew Selous MP (Con) and Danny Alexander MP (Lib Dem) have all pledged their support for the Get Fair campaign which, among other things, targets tax-avoidance as a cause of poverty. The Universe reports that John Battle:
"has contrasted the 0.01 per cent of tax paid by the top 54 billionaires living in Britain with the 20 pence in the pound that many of his constituents pay on the £13,000 they earn each year."
This is certainly part of the reason that the poor are being crushed.
But it is the second point which I think is most pressing. Britain urgently needs a radically simpler tax system. Whether taxes are high or low, and complex system is morally deplorable as well as economically retarded because:
- nobody in the UK knows how much tax they pay;
- nobody in the UK knows what their taxes are spent on;
- complex systems destroy transparency, allowing politicians to hide behind obscurity and lie to the nation;
- the self-employed and small businesses are unable to get on with what they are good at, what they love, their vocation, because they must spend so much time complying with bureaucracy, not only at great cost, but also in tax-return-induced misery!;
- complex systems give an inherent advantage to the fraudulent and the selfish, to tax avoidance and evasion;
- the fraud made possible by complex systems is expensive to uncover and prosecute, soaking up more of the tax revenue for unproductive costs;
- complex systems give an inherent advantage to the rich as they can employ canny accountants to dodge their share of the burden;
- complex systems give an inherent advantage to the well-connected because they know people who can advise them pro bono on tax avoidance;
- complex systems give an inherent advantage to the well-educated as they can find ways to reduce their tax burden;
- there is nothing wrong with being rich, clever or well-connected, but why design a system which rewards these characteristics? Why not have one which is neutral? That would be truly fair.
Solution: first we need a Prime Minister and Chancellor with great courage. Then need to start everything from scratch. Abolish all current taxes, then institute an income tax right across the board: 15% on everyone. No exceptions. Add a spending tax on everything: 15% on everything bought as retail. No exceptions. This in itself would bring in most of the revenue the country needs. It would also bring such a breath of fresh air to the country that GDP would soar and the 15% + 15% would soar with it.
Just imagine how many accountants and lawyers and bureaucrats would now be using their gifts, their brains and dedication, to work which directly benefits people (like teaching, or medicine, or law enforcement) rather than simply administering the system. The main opportunities for fraud in under this system would be undeclared cash payments for employees or goods and services. But this could only ever reach a tiny fraction of the modern economy, and it can be dealt with robustly by the courts. Make people realise it is not worth their while.
Certainly it would be necessary to consider a small number of additional taxes for social reasons, for treaty obligations and for workability. For example, we might want to keep taxes on cigarettes high, and lower them to 15% only very gradually, so that there is no sudden up-take in smoking. We might need to adjust customs and excise rates at a pace which will not distress businesses or foreign countries. And there are always arguments to be had over what the spending tax is applicable to, what constitutes adding value. Well even under the simplest of systems collecting taxes is like plucking a goose: painful and messy. But it need not be torture.
And at each year’s budget, instead of hiding behind numbers, the Chancellor could announce, “This year the tax rate, for income and spending, will rise to 17%”, or “21%”, or whatever he needs. And the opposition could pledge ahead of an election, “We will tax the nation at 16%”, or “13%”. And we will see who we believe, and who actually gives a bang for the buck. Most people wont mind giving 10% or 20% if it is spent well. But when you start taxing at 25% then the incentive to dodge tax becomes so great that too many cannot resist, increasing the burden on others, thus creating more temptation, until it becomes heroic to be honest.
Finally, nothing should be tax deductible. In the end this favours the dishonest, the rich and the well-connected. Charities would not be able to claim their 23% Gift Aid, but then the lower taxes on their donors would make them easily able to afford £6 where previously they gave £5, or £123 where previously they gave £100. One big problem though is whether churches should have to pay tax on what comes into the collection plate. I think they should not—the Church in England pre-dates the State by many centuries. But once one argues for an exception for the Church in a country which does not know what the Church is, then a million more groups will think they are entitled to an exception. Is this why Jesus told Peter to pay the temple tax?
