A new group, called the Progressive Economics Group, has been launched to propose policy that might inform a future alternative government. The initial offering of six policy briefs covers themes such as:
- Publicly funded drug research
- Monetary policy
- Public sector debt management
- Basic income
- The future of limited liabilty
and my own offering on:
- A Ministry of Tax.
I recommend them as pithy policy notes. My owns says this:
A Ministry of Tax
________________
Tax is an effective tool available to any government to implement its social and economic policies. The current institution for collecting taxes, HM Revenue and Customs, does not allow effective use of the tax instrument.
How, then, should tax administration be administered to ensure accountability, transparency and effectiveness?
Analysis
HM Revenue & Customs is not directly accountable to the government. There is no minister with direct responsibility for taxation; nor is there a select committee on taxation in the House of Commons. These missing institutions leave tax administration without sufficient political over-sight and with too narrow a mandate, flaws compounded by an illusion that HMRC operates in an apolitical manner.
Under the present system in which HMRC feigns being apolitical and the Treasury manages the national budget in ways that in effect mean that tax functions as constraint on, rather than a facilitator of, social and economic policy. In addition, the absence of an Office for Tax Responsibility function is a serious shortcoming in Britain. To make the tax system democratically accountable parliament should allocate the resources to ensure effective monitoring of tax collection and its social and economic impact.
Policy Framework
To achieve a tax system adequate for implementing progressive policies the following changes are required.
First, the cabinet needs a minister responsible for taxation. This minister's role would be quite different from that of the Chancellor of the Exchequer whose principle function is overall economic management.
Second, given the importance of taxation the Ministry of Tax should operate in cooperation with, but independent of, the Treasury. The new ministry would set tax policy to meet the economic objectives set by the Chancellor, who would have overall responsibility for economic policy. The new Ministry would be responsible for delivering these policies in an accountable way now absent from the UK political process. This means that the Ministry of Tax would have oversight over the revenue collection. The division between the Treasury and Ministry Tax is important because it would emphasise that tax is a support function that assists achievement of economic goals but is not a constraint upon them.
Third, in order to ensure that the narrow task of tax collection is independent of political influence, the Ministry of Tax would devolve this function to a purely administrative agency. This is currently the formal task of HM Revenue & Customs, whose name needs to be reviewed. The pretence that this institution is a function of the Crown should end and the agency be made fully accountable to parliament.
Fourth, the tax minister and the Ministry of Tax must be politically accountable. This will require that Parliament have a select committee on tax.
Fifth, to ensure that the committee has the resources to do its job properly and transparently, parliament should create an Office for Tax Responsibility that reports directly to the select committee on taxation.
This Office for Tax Responsibility would have four responsibilities:
- it would act as the internal auditor of HMRC;
- it would audit the government's tax proposals to verify their credibility;
- it would review all allowances and relief in the tax system on a regular basis and recommend changes if any fail to achieve their stated purpose; and
- it would audit the “tax gap”, which is the difference between the amount of tax that should be paid each year and the amount actually collected and report to parliament on progress in addressing this issue.
The result would be that the UK would, for the first time, have an accountable tax system.
Richard Murphy is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics, and principal research of the Tax Justice Network.
This policy brief may be downloaded as a pdf here.
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Nothing at all about explaining the truth to the public, that taxes do not actually fund Government spending?
I would have thought that would be the first priority.
I tried…this is one of a series
“I tried…”
Well done, but were you over-ruled or something?
If so, that’s hardly “Economically Progressive”!!
My work was edited
Let’s see what happens
Interesting that your contribution was edited as the Statement of Purpose” for PEG states
“the proposals published and posted through PEG are those of the drafter, and do not (unless otherwise stated) imply that they are the collective view of PEG or its participants.”
What do you make of John Weeks PEG contribution “Public Sector Debt Management” and Jan Toporowskis “Monetary Policy: Beyond QE” ?
I have not had time to read them, to be honest
I assume it will be housed in the same block as the Ministry of Truth.
Richard would you do a piece on the pros and cons of Basic Income vs a MMT style Jobs Guarantee. (Assuming you haven’t already and I missed it!)
I’ve gone back and forth over this and currently I’m convinced that basic income is a bad idea. It allows the social safety net to be completely uprooted and replaced with a Basic Income that will be very much easier to remove or decrease in future than the original social safety net.
A Jobs Guarantee replaces most but not all of the social safety net so doesn’t work as a neoliberal Trojan horse like Basic Income. Another advantage of Jobs Guarantee are that it actually puts people to work doing something useful which is good for them and good for the economy. Also a Jobs Guarantee is effectively a much bigger and more effective form of automatic stabiliser. Finally Jobs Guarantee seems to me to get around all the BS that only what the markets say is profitable has any real value. JG allows us to democratically and locally decide what has value and thereby to correct market failures in a way a Basic Income never could. JG is personally and societally empowering, BI leads to societal dependency on the market and a personal sense of uselessness.
Your thoughts would be much appreciated.
Adam
I have hung on to this in case I found the time quickly
I have not as yet
I will try to do so
Richard
I agree with everything you propose Richard , but there are two elements to this :
1. Power
2. Fairness
These two elements do not sit easily with each other and never have done so far as I can tell . How are we to reconcile them ?
Democracy
What absolute bollocks. Any credibility, Mr. Murphy, that you used to have maybe ten years ago or so, is constantly, and continuously, being pissed up the wall.
I can assure you that ten years ago people said much the same of me
I ignored those saying so then
Wow!!
The winds of change?
I hope so.
I will be raising these issues with the progressive alliance group I am part of at our next meeting. We need to enthuse people about the possibilities it affords.
And for the free market detractors out there this has nothing to do with a the State being the only player – it’s about the State being actively involved with markets to promote fairness – something that markets have failed to deliver on their own as evidence by the emergent evidence of the ‘working poor’.
Agree with that PSR