Why we live in taxing times

Money
Money

The 17 th century French statesman, Jean-Baptiste Colbert, once described the art of taxation as “plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”.

In my business life, I am an accountant: it’s my role and my duty to ensure that the number of “feathers” collected is what is precisely owed, no more, no less, writes cllr Shaz Nawaz leader of the Labour Party on Peterborough City Council. No business nor individual should feel obliged to pay extra than what is due; my specialist skill is to figure out what this amount should be.

This is more challenging than it may sound. At the present time, the tax code of the United Kingdom is approximately 20,000 pages long. This creates a disadvantage for individuals and small businesses who have neither sufficient wealth (to hire accountants) nor time to pore over every detail to ensure accuracy. Rather, this complexity creates an array of ambiguities. These anomalies ensure that the tax system operates in favour of big firms; we have seen how companies like Amazon and Starbucks use the status quo to pay extremely little tax compared to the size of their businesses. If a new competitor to either of these two firms arose, they would suffer from a disadvantage: they would pay relatively more tax, if not more in absolute terms. This disadvantage diminishes their ability to offer products which can take on the big boys. The result is not something that could be called a level playing field: we see increasingly greater concentrations of market share in fewer and fewer firms. Similarly, we see increasingly greater concentrations of wealth at the top of the economic ladder.

The government isn’t particularly alive to these risks. To be fair, we have an Office for Tax Simplification. Its existence is rather absurd. On one hand we spend millions of pounds writing complicated rules; we’ve then followed this up by spending millions in simplifying them.

Surely, a sensible approach would have been to ensure the rules were clear, fair and easy to follow in the first place. For example, the tax man could take a look at a company’s sales in line with industry averages of margins and costs to assess what they owe: we have this information, it was collected via VAT.

One thing is for certain: without wholesale reform of the tax system, the key principle of paying what is owed and no more will be unachievable. Those who can pay the most, will pay less. Those who are paid less, will be unable to avoid paying more. The economy will continue to produce dire concentrations of wealth in the hands of individuals and firms which is no good for competition, for the consumer, and for ensuring that our public services are adequately funded.

Rather, the only means by which public services will be funded is via debt, paid by our children than their progeny, or they won’t be funded at all.

This cannot be right; it should not stand.