All the objections answered in one go

Tuesday, 10 February 2009 10:49
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All the FAQs answered at one in this comment by IanCb in the Guardian's Comment is free.

What we need is a fundamental rethink of the way tax is calculated. Basing it on something that the taxpayer has to declare is a recipe for avoidance.

1. We should abolish income tax. Since most of us never see gross pay its effectively a tax on employing people - how is this a good idea! Its a disincentive to work as well.

2. VAT should go as well. The complexity of the rules on VAT is legendary. All it does is create an immense bureaucracy, especially for small businesses.

3. Corporation tax should go. As your team has found it is effectively a voluntary tax, especially for multinationals who can practically create profit in whichever country they like. Again it is a bureaucrats dream.

If you got rid of these not only would you not need HMRC but you would do away with most of the accountancy profession. The proportion of businesses who actually need to produce accounts for anyone other than the government in this country is negligible. The banks are happy as long as they have the security on your house.

What we need is a tax system which is based on wealth rather than income.

It is obvious that the one thing people with money spend it on is the one thing you cant avoid saying you have. That thing is land. The government can confiscate it if you dont pay - that should make banks think twice about who they lend to.

If you based your tax on a percentage of the rental value of land owned you will create a simple system which is impossible to avoid. Every bit of land is owned by someone.

I can hear the objections already so let me deal with five obvious ones

1. Everyone will rent.
A The landlord passes on the cost of tax in the rent.

2. The well off will avoid tax by spending money on things other than property.
A. Really! I cant imagine a world where the first thing people do when they have a bit of money isnt move into a bigger house in a better area. Since most of the value of a home is the land (location, remember) it manages itself.

Anyhow the cost of everything you buy, as now, will have some element of tax built into the price. Sure, they arent paying directly. But all those luxury goods sold at Bond Street shops will have a good whack included.

3. Businesses not requiring much land will get an unfair advantage.
A. You mean the ones who employ wealthier people in prime locations! It may take time but the market will correct any imbalances by altering the value of the land. This is why youd would need a long lead in period.

4. It will discourage people improving their homes.
A. Lets be clear here, we are not talking about a super Council Tax. You pay the same for a plot of land it its empty or has an office block on it.

5. Isnt it unfair on pensioners.
A The classic point that has been made for years about rates. One of the biggest issues of policy debate for years has been how to fund government from a shrinking proportion of taxpayers ie people of working age. Isnt it only fair that those who can afford to pay should. After all, it has been the case for years that middle class parents have subsidised their children. This would just formalise this and stop inequality becoming entrenched.

I could go on (about automatic correcting mechanisms against property bubbles and reducing vacant property/housebuilder land banks) but instead will just let you type Land Valuation Tax into Google and you will see the long history of this idea and its famous exponents.

The reason it has never been adopted of course is because it is those who already have the wealth who control the government.

 

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