Land Value Taxation Campaign

  • Increase font size
  • Default font size
  • Decrease font size

An essential book for a confused time

E-mail Print PDF

PROTECTION OR FREE TRADE? was written by Henry George in 1886. It is still in print and readily available. It rebuts most of the arguments being put forward by both camps in the Brexit debate, as well as the protectionist sentiments that seem to be at large in the USA following the election of Donald Trump. It has become essential reading, for it provides a guide to the morass of debate that has developed in the wake of the referendum result and the Trump presidential victory

The EU is founded on protectionist trade principles, as becomes clear when people express concern about losing access to the Single Market, which is not a free trade area but a customs union, sustained by an external tariff wall and the internal tariff that is Value Added Tax. Brexit supporters are divided between those who want to see a tariff wall around the UK, under the pretext of protecting British jobs, and a minority, who are in favour of genuine free trade.

Trump was elected partly on the populist belief that protectionism would somehow bring about a revival of industry in the US which has become obsolete as production has moved to other parts of the world. It seems as if he is intent on putting policies into effect with the intention of reversing this long-term trend. They can be guaranteed not to work, except in isolated instances. The overall result will be to do nothing but damage to the US economy and make most people poorer. A trade war with China also brings with it wider risks.

George demonstrates, wittily, with irony, and using the technique of reduction to absurdity, the fallacy of the protectionist arguments. Anyone who reads the book will realise that the best way forward for a post-Brexit Britain would be to open the doors to tariff-free imports and scrap the internal tariff of VAT. The prospects of the latter do not look good, unless the Chancellor takes the bold step of putting the tax under scrutiny. Tariff-free imports, on the other hand, are a more realistic proposition, if only because of the trouble and expense involved in blocking the import of goods by holding them in customs compounds at every port around the country while they wait for clearance.

However, unless we get rid of VAT and resist the temptation to replace it with some kind of purchase tax, people entering the UK will once again face the return of the "anything to declare" business, the abolition of which was one of the better aspects of being in the EU.

 

Il-informed comments epidemic

E-mail Print PDF

The latest revisions to the UBR have brought about a wave of ill-informed comments in the press, even in publications such as the Financial Times, where one would expect journalists to be on top of the subject.

The incidence of all property taxes is on the landlord. An increase in the UBR means that rental levels will drop, or rise less quickly than they would otherwise have done. This has been well researched. In the days when rates were set by local authorities, it was often the case that identical properties on the two sides of a boundary were subject to different charges eg low-rates Wandsworth and high rates Lambeth. The same situation arose with the Enterprise Zones. In all cases, as one would expect, TOTAL OCCUPATION COSTS WERE THE SAME. This is also the reason why small business rates relief is nothing but a gift to landlords. Business tenants gain nothing at all, since the availability of the rates relief is reflected in the rent, as should be obvious. One wonders whether the policy is not a cynical means of putting more money in landowners' pockets, whilst deceiving the public into thinking that the government wants to help businesses.

The real problem for businesses is that rents do not respond promptly, partly because tenants are locked into agreements which fail to take account of tax changes, and partly because of the prevalence of upwards-only rent revision clauses. Tenants should have the right to renegotiate under certain circumstances, and upwards-only rent revision clauses should be banned. Upwards-only clauses are an unreasonable and onerous condition which fails to take account of the reality that rental values can go down as well as up.

This study was done for the government HM Treasury and HM Revenue and Customs. If policymakers and journalists would study it, comment would be better-informed and misguided policies would not see the light of day. It is essential reading.

http://webarchive.nationalarchives.gov.uk/20090211195642/http://www.hmrc.gov.uk/research/report42.pdf

Postscript - this comment which came as response sheds some light on the issue...

"My friend's hairdresser biz has an upward only clause set to the RPI. If this is typical its also a feckless mistake - RPI fluctuates significantly between 1% and 25% and is only 1.7% currently and has averaged 3% over the past 20 years so is not a reflection of the actual rental value at all. It's been 40% too low for 20 years so if the theory stands UBR should have risen to take up the difference.

The premises had a rent of £8,400 in 2011, and rates of £2,700. Her new contract 5 years later is for £12,700. The RPI over that time has averaged 2.3% which going by the leases own upward only clause equates to £9,400- But... subject to recent changes in the UBR her shop is eligible for zero rating. 12,700 - 9,400 = £3,300 One does not need to be scientifically precise about this. The zero rating to encourage small business has been swallowed up completely by the privatised rent. Funny. Are our government administrators and operators aware of their actions? We do keep pointing it all out to them.

The other problem is psychic - my friend thinks by buying the business she is buying the location too. And further still, that the rent she pays is for the location and the building, where its obviously not because she has a Full Repairing and Insuring lease (FRI)All this shows why its a mistake to blame landowners and economists exclusively. "

 

Fee trade area

E-mail Print PDF

The Single Market is described as a free trade area. In reality, is very expensive. It means that if you want to trade with me, even if we are next-door neighbours, we can only do so legally over a 20% high tariff wall between us - Value Added Tax. In some EU countries, the internal tariff wall is even higher - 25% in Sweden. That is not much of a free trade area. Fee trade area, more like.

Green and Brown are neighbours. Green does gardening work for Brown at an agreed price of £200. Brown services Green's car for an agreed price of £200. There are three possibilities.

  1. They exchange their services and no money changes hands.
  2. They pay cash to each other.
  3. They bill each other and add 20% VAT.

If VAT is not a tariff barrier against legal trade, then what do you call it? What do you think they will do in practice? You could of course say the same about income tax. Why would Green pay Brown taxable wages when he could just pay cash under the table?

VAT and Income Tax are a pair of poisonous fruits.

 

What is government for?

E-mail Print PDF

In the aftermath of the referendum, it does no harm to take a step back from the present febrile mood. Conveniently, there was this piece asking "What are governments for?

I came across this about forty years ago.

Read more...
 
More Articles...
Page 3 of 4

We use cookies to improve our website and your experience when using it. Cookies used for the essential operation of the site have already been set. To find out more about the cookies we use and how to delete them, see our Privacy Policy.

I accept cookies from this site

EU Cookie Directive Plugin Information