8/14/2019 The vexed question of taxation

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I read yesterday that quite a few wasteful schemes are simply there to be taxavoidance - this refers to big companies. To boil it down to two main issues:companies do not want to pay tax and rather destroy wealth than pay it on the oneside. On the the other side, the state provides goods and services necessary forall citizens and these are paid for by tax.(And if you do not believe that states should have tax to do so - well, live inCalifornia and start suffering, or experience what happens in many failed statesall over Africa where no stable government exists. Yet this is not the issue

here).What is needed, therefore, is a way for the government to receive tax andcompanies not being able to escape paying taxes. Cadbury's, for the InlandRevenue, is a business with headquarters in Dublin and the tax-take has shrunkaccordingly.One way would be to modify the Liberal's idea of the local income tax - eachbusiness that physically resides in the UK has to pay a local tax wherever it islocated once it, in real terms, is deemed large. Would make the City of Londonvery rich and many parts in Northern cities very poor. And would also mean thatbusinesses try to legally split themselves into smaller units to avoid paying tax.Another idea would be to tax not the business per se but its transactions. Everyproduct sold - be it goods or services would incur a tax. It would be some distantrelation to the Tobin tax.

Criticism could be that this would strangle economic activity - as passing on anything would be taxed. Yet this would not be an additional tax, this would be thebusiness tax. And, from this basis, the state could modify rates to steerbusinesses to do things it finds desirable. "Green" products could be taxed atlower rates. The production of high-polluting goods (big-engined cars, old-fashioned ship Diesels, coal-fired power stations) at higher rates. Likewise,socially useful services could be at lower rates - providing health-care andeduction, using larger man-power...This would be a key change and would not happen in an instant. Nor could it bejust in one country (for a start, it would need to be implemented within the EU sonot to breach competitiveness rules). I am not a tax expert either, yet I think,as an idea, it is worth a productive debate.This leaves aside the question of personal taxation. A flat income tax, used by

some new EU states may have looked attractive. Yet it is neither a solution for amature capitalist society (not just on the ground of favouring those who are onhigh incomes) nor has it proved viable, as these states were amongst the firstwho ran out off funds during the current recession. Every consumer-goods taxdisfavours the poor while any income that is taxed really is a "tax on work" andcan prevent job creation. The question, therefore, should be at what level ofincome taxation should start. One answer is, however, that Britain's scrapping ofthe 10 p entry tax rate for low earners was a mistake.