The time has come for me to confess something to the left-wingers who post kind comments and send nice messages over Twitter. I’m coming out: I agree with the Taxpayers’ Alliance on the 50p rate of tax.
50% of your money is, to me, an unacceptable invasion into personal liberty. Yes, even only 50% of any capital over £150,000.
A big difference between the Taxpayers’ Alliance and me, of course, is that the TPA argues that tax avoidance is an inevitable consequence of high tax rates. I take the view that if tax avoidance was handled more sensibly in the first place, we wouldn’t need such cloyingly high tax rates. And that goes for everyone, not just the top 1%.
We have a terminology problem regarding tax avoidance. The term covers a whole range of practices, some of which are predominantly if not exclusively used by people on low to average incomes.
Some tax avoidance is not just technically legal, but is actually entirely reasonable; even a moral positive. Self-employed freelance workers and other individuals account for £13bn of the £25bn a year estimated to be lost through tax avoidance, and we should be careful about demanding that ordinary people pay more tax than they are actually obligated to, just because they happen to employ others instead of working for somebody else.
But it’s not all individuals and it’s not all small businesses who are avoiding tax. £12bn a year is lost by tax avoidance from the largest corporations in the country. And for many of them, it’s not a matter of getting an accountant to check your paperwork. It becomes a matter of actually negotiating your own tax bills. Many would not call that tax avoidance at all, but corruption.
Take Vodafone. Today it was reported that Dave Harnett, the HMRC’s Head of Tax, “did not follow correct procedure” in his dealings with Vodafone. A “settlement” was reached with the company, which – to take just one aspect of the alleged agreement which has caused anger – may not have even compelled Vodafone to pay interest on their overdue tax, something which to anybody else would quite unambiguously be an offence.
How can it be right that people on some of the lowest incomes in the country get threatened with court appearances, bailiffs, and even prison, for not paying their council tax on time, but a company which “slumped” to £46bn in revenue even in the middle of a recession get to pick and choose how much tax they fancy paying?
If this kind of so-called tax avoidance, as well as tax evasion – and tax evasion costs us a further £30billion a year, incidentally – could be stopped, and people were made to actually respect the laws of the country they choose to do business in, we could drop the top rate of tax along with the middle and lowest rates dramatically. Some figures even suggest the top rate could fall as low as 39%.
Taxes should always be as low as possible. All taxation is a necessary undesirable invasion into personal liberty – like stop and search or CCTV – that we need to collectively consent to, democratically, as a society. We need to make our economy more democratic but taxing the richest 1% in the country doesn’t do this. It just puts a plaster on the wound.
Am I cynical for wondering if Gordon Brown and Alistair Darling guessed the 50p rate of tax wouldn’t actually raise any cash, and guessed that the Conservatives would be under pressure both economically and politically to drop it back again? That it is not so much an economic policy as a political trap to make the Conservatives look like they’re cutting taxes for the rich while everyone else is facing belt-tightening of the harshest kind?
I hope this isn’t true. The economy is serious; much too important for political games. Taxes are to pay for the things we need, not to make us feel better about the inequalities we create and excuse.
Dropping the 50p rate of tax isn’t a top priority of mine, and I’m suspicious of anyone who makes it one of theirs – especially if they do so without having a plan to address the problem of lost tax money. But if independent studies continue to show that it doesn’t actually raise money – worse, that it actually costs Britain money – then the government has no justification, economic or moral, for keeping it in place for any long-term period. They shouldn’t feel nervous about scrapping it.