Friday, 15 February 2013

Smoke and mirrors with taxation

When Gordon Brown as Chancellor of the Exchequer reduced the tax rate for the first £1 500 of taxable income to 10% in 1999 there were mutterings from the tax collecting experts (then known as the Inland Revenue) that an additional rate of tax was not a good idea because it simply added to the complexity of calculating how much should be paid.  The accepted wisdom was "The fewer tax bands the better," so would it not have been simpler to abolish income tax on, perhaps, a slightly narrower band?

When I first heard, in the 2007 Budget,  that  Mr Brown was to abolish the 10p tax band I assumed that this meant that he had, albeit belatedly, learned the lesson and that  band of income would now be free of tax.  However, more detailed explanations in the papers the following day revealed that what was actually to happen was that band of income would in future be taxed at the standard rate of 20%.  In other, and simpler, words, not abolished at all but doubled.

Today  Ed Miliband is being lauded  for promising that a future Labour government would re-introduce the 10p band.  Why this receives applause, whilst the Liberal Democrat policy, now being implemented, of actually raising the tax free allowance, ie increasing the 0% band, goes almost unnoticed by the press, beats me. Smoke and mirrors indeed.  However, we must welcome Labour's support for Vince Cable's Mansion Tax, though an increase in the number of council tax bands would be far more sensible and catch many more people.

However, I find all this obsession with taxation rather tedious, and I suppose matters will get worse as Budget Day approaches.  As a society we need to pay more attention to what we receive for our taxes and do less grumbling about paying them (though I am all  in favour of looking for fairer ways of paying, and making sure that the rich and corporations pay their whack).  The American juror Oliver Wendell Holmes put it rather neatly at the beginning of the last century: "Taxation is the price we pay for a civilised society."

We need to stop obsessing about the "burden" of taxation.  In my view it's not stretching credulity too much to regard paying taxes as a privilege.  I'm jolly glad that throughout my working life I always earned enough to pay income tax and am happy that my pension is sufficient to keep me in that privileged bracket.


  1. This comment has been removed by the author.

  2. It’s a good thing that you think that your ability to pay taxes is a privilege. I think the reason why people think of it as a “burden” is because they find it hard to let go of the money they worked hard for. It is normal to feel that way because every penny counts when you are providing for yourself and a family. However, it is also good to consider where your taxes go like provision of free education, medical privileges, and the maintenance and development of government owned properties.

    Sunday Hindman

  3. This comment has been removed by the author.

  4. People can say that taxes are a burden since they find the lost money a waste that could’ve been used for some of their more important needs. But then, it’s good to realize that the deductions serve as our investment for the future need and can be of use to many projects that we’ll be benefitting from. Though sometimes, we can’t feel the direct effects of the tax that we pay, we can be affected by it when it comes to financial situation of the whole country.

    + Wystan Dale +