Discussed November 2016, review by June Simmons November 2016
The Joy of Tax – How a fair tax system can create a better society – Richard Murphy, Corgi edition, 2016
Richard Murphy , a self-confessed tax expert, condemns the UK tax system as outdated, inequitable and not fit for purpose while our barely accountable HMIT Customs & Excise is understaffed, and led by big business bosses and large accountancy firms who perpetuate inefficiency and inequality. Suspend disbelief and imagine Richard Murphy is Chancellor delivering his maiden speech demolishing current practices and introducing the revolutionary underpinnings of a fairer society.
The ‘New Chancellor’ declares:
It is government’s duty in taxing to create conditions of equality and prosperity for all by managed spending. Most people would willingly submit to a fair tax system. Insistence that social investment is unaffordable on the altar of balancing the books is untrue nonsense. Designing a fairer system first requires reappraisal of currently accepted thinking.
The essential truth, recognised by the Bank of England, is that banks create money by Lending, in debiting a loan account and crediting a current account and not, as popularly peddled, vice versa. Government can, therefore create money the economy requires since we own the Bank of England. Banks make money by lending, and government creates cash by spending. Banks control loans through repayment, and governments reclaim money by taxing. Government spending precedes taxation, so spending is Not dependent on tax.
It is government’s job to create and manage money, avoiding inflation or deflation – a responsibility too big for other hands than government. Just as banks risk lending to make profit, governments must risk spending to initiate reclaimable taxes with responsibility to decide how to recoup its spending. HMIT Customs & Excise is relatively unaccountable, headed by representatives of vested interests – big accounts firms, solicitors and financial advisors whose aim is to minimize tax and corporation tax on profits, income, gifts, gains, speculation and corporation tax which results in a system hitting lower and average earners disproportionately. Consultation will be spread much wider to include all taxpayers interests. Vested interest will no longer shape tax laws and practices.
Accountability for Tax will be ensured by a new Secretary of State for Taxation and a Department of Taxation with full structure and staffing to ensure tax owed is collected offshore or otherwise. Tax laws will be introduced or amended to reverse onus for Tax Collection to prove tax liability, but place onus on company directors, solicitors, accountants and advisors to prove if and why claimed tax concessions are valid, the default position will deem liability for full payment of tax. Unless proved otherwise, attempts to avoid or evade in any way, including shifting gains outside the UK of UK assets any individual, company or trust on behalf of anyone or any body attempting avoidance will themselves be liable to pay and risk assets in question being seized. Since land will be treated as taxable, owners, not occupying tenants, will also forfeit land ownership to the state for non-payment of tax. This should ensure building land or other land is used productively. All Land will be taxed based on land rental value on a progressive scale, above a modest threshold, and unused, vacant or undeclared ownership taken by the state. Unearned income which, astonishingly, bears a lower rate than earned income at present, will pay the same, progressive scale rate, simplifying the system. Wealth tax on properties and let property portfolios over £1M, other than a main residence, family farms or businesses. will counter house price inflation. As tax will be due on all income and wealth, stamp duty will be obsolete, so abolished. Tax relief on buy-to-let landlord mortgages which helped fuel increases in house prices, will also be abolished.
Disputes will be judged according to the Intention of tax laws. An office for Tax Responsibility will audit gaps, effectiveness, reviews and proposals for change with powers to recommend laws, amendments and repeals. The Chancellor will have overall responsibility including funding and staffing to ensure collection of taxes.
Full disclosure and accounts will oblige banks, businesses, companies and trusts to name all owners and directors on public record.
New domicile and residence laws, with country by country reporting, will ensure that income generated in the UK is paid in the UK with tax deducted at source from interests, dividends, royalties, management charges, insurance premiums, hedging expenses and profits when paid from the UK with reciprocity to other countries. A General Anti-Abuse Principle will replace General Anti Avoidance.
Bank of England loans to government will take the burden off taxation to meet infrastructure investment, including house building.
A New Investment Bank will provide loans for high standard, environmentally sound homebuilding to Not-For-Profit landlords, organisations and associations. Infrastructure investment will also create jobs around the UK.
REDISTRIBUTION of income with a Universal, Socially Just Personal Income Allowance at one base rate, at 60% of median earnings will require all reliefs to be phased out on savings (possibly excepting ISAs). NI will be phased out as regressive. Instead, a new tax on finance above a fixed sum (removing those on lower incomes) to be charged on bank transactions on personal and business accounts, and will also discourage excessive consumption fuelling global warming, as a Carbon Usage Tax.
Companies controlled by five or less people will no longer count as one entity, but each will now pay their share. Those distributing less that 50% of profits will pay double corporation tax but get full allowance on capital spending. Large companies will pay increased Corporation Tax to compensate for their toll on society and their privileged limited liability cushioning risk.
A MINIMUM GUARANTEED INCOME after a minimum UK residency will be phase in to include old, young, and disabled people, will be phased in. Interim measures will temporarily reintroduce child credits and welfare benefits until the universal payments for all, working or not, are rolled out countrywide.
In the financial services, alongside a tax on cash moving around, in and out of bank accounts, a new Financial Transaction Tax will be brought in at differential rates for shares and securities trading, foreign exchange, derivatives, and other futures. Responding to high volume trading, variable rates will help even out market trading, dampen trading, preventing excessive trading fluctuations, as well as gathering tax.
VAT will be retained as a Tax on Consumption but at a low level and compensated by Bank Transaction Tax on Consumption.
Air Transport Tax will be progressive according to use. Travel once a year will incur no tax, thereafter rising progressively with frequency. Data registered on passports will automatically charge tax collected on bookings.
Renewable Energy Tax will be abolished.
Government duty is to manage the economy, but balancing books is a false logic.
Government borrowing will fund social housing, infrastructure and investments creating jobs, generating tax revenue. A budget and taxation will be used to create Fairness and Redistribution. Workers and those who cannot work will be treated with respect as valued members of society. Businesses, communities and UK partners will be treated as equals. By reducing taxation on work but instead taxing excess consumption, and fostering all people’s potential, we set out to create a more equal society.
“This budget is about a common future and building it together. That is what I call the Joy of Tax.”