Should tax be more taxing? My talk at the RSA today

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I spoke at the RSA this lunchtime. I gather a video of the event will be available on line. The theme was  'Should Tax Be More Taxing?'. This is what I said (near enough):

We are told that every election is “about the economy, stupid" and yet, given that almost everything that the government can do about the economy comes down to tax in the end it is remarkable how little informed debate there is on the subject of taxation.

We hear, time and again, discussion of the details of tax, from the granny tax, the pasty tax, the charity tax and so much more and yet all such debate misses the most fundamental point, which is that tax is not and never has been an issue that can be considered in isolation or in pedantic, micro-focussed, detail, as these discussions suggest.

Tax is a part of our political economy. More than that, I suggest: tax is at the heart of our political economy.

The history of social justice in this country is written in our tax legislation. So, as the franchise extended so did our tax base.

As society's attitude towards women changed so did their tax status.

As the role of the family has changed so has the taxation of children.

As our attitudes towards the importance of inequality has changed so has the progressivity of our tax system and our willingness to tax capital.

On that same basis the current state of our tax system reflects the current state of our economy.

The richest in our society can go largely untaxed.

Most scholars agree that we now have, at least in the upper ranges, a regressive tax system in the UK.

Capital and wealth is now largely untaxed in this country.

Our major corporations hide their affairs from view in tax havens, showing contempt for their shareholders, the states that really host their activities, the tax authorities of those places and civil society alike.

Large companies, when they pay tax, pay less of their income to HMRC than their smaller, domestically based competition. This inequality, permitted and now even encouraged by our current government, induces an inevitable decline in employment, investment, training and manufacturing in this country.

Too often we have seen HMRC cutting a deal with what is called UK plc - indicating more precisely than those who use the term could ever imagine the capture of the state by powerful corporations and those who lobby for them. Nowhere is this more evident than in the creation of taxation policy, which is now almost entirely dominated by large corporations.

The result is a tax gap. I argue that large companies avoid £12 billion  of tax that they owe in the UK. HM Revenue & Customs say is much less than that, but as their senior staff say, when producing their estimate HMRC put their telescope to their blind eye.

In the economy as a whole I believe we suffer tax evasion of £70 billion a year. I repeat that: we have tax evasion of £70 billion a year in this country. This is an issue which, if addressed, would transform our economic prospects, our economic policy, and which would change altogether the policy of cuts that all our major political parties are now committed to. I put it as bluntly as this: tackle tax evasion and unemployment will disappear.

And yet that tax evasion happens with political sanction. I make that point explicit. In 2005 almost 100,000 people worked at HM Revenue & Customs. By 2015 just 54,000 people will work there. Tax evasion happens because we’re turning another deliberate blind eye to it. The mantra of “light touch regulation” and of liberating business from “unnecessary redtape” means that we have actually unleashed a wave of criminality.  The result is that our small businesses are now operating in what is not far from being a criminogenic environment where honest traders have almost no chance of succeeding against the cheats operating in our marketplaces.

And why does this blind eye get turned? It is because at the peak of the pecking order in society are the tax lawyers and accountants and most of all the bankers who make it their jobs to operate tax havens and to set up tax abuse schemes. And yet it is these very same people who are in the process deliberately and calculatingly undermining the democratic nature of our society by denying to our government the tax revenue it should reasonably expect to be due to it in accordance with laws it has properly passed in accordance with the democratic mandate they hold.

I stress, all this happens by choice.

But we can make another choice.

We could create honest, open and transparent markets in which people compete on the basis of their ability to supply goods and services that customers need, and not on their ability to cheat the tax system.

We could, through international cooperation, crack open the tax havens that threaten our democratic processes.

We could create progressive taxation that will address the inequalities in our society.

We could use taxation to address the failures in the market, and in particular its inability to tackle our environmental crisis.

We could use fiscal policy to kick-start our economy and get people back to work again, right now.

Put very simply, proper tax management has the ability that nothing else has to transform the economic prospects of this country, Europe, the developing nations of the world.

I stress – just and well managed taxes are, I think, the mechanism – and maybe the only mechanism - that can now deliver the economic and freedom in which we can all prosper.

But that can only happen if we choose to make it so. Low tax, tax avoidance, tax evasion, tax havens, the tax industry; those are the mechanisms opposed to freedom for the people of this country, and it is those policies, places and practices that are condemning us to poverty.

Tax justice, committed as it is to transparency, accountability, international cooperation, progressive taxation, the taxation of wealth, and all of it based upon a belief in courageous governments committed to intervening on behalf of their electorates to deliver prosperity for all could instead deliver real, sustainable growth.

But in that case, tax is not taxing. Tax is liberating.