I wrote a peer reviewed paper on flat taxes for the ACCA in 2006.
If you think flat taxes are the answer, download it here, and think again.
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I thought you disapproved of peer review? Or do you only disapprove on the (many) occasions when no-one will go near your stuff?
I don’t disapprove of peer review except when,as in economics, it is used to suppress dissent
Such an attempt was made on this paper
Thanks Richard, I shall read with interest.
I presume you meant to write “If you think FLAT taxes are the answer …” ?
I know you are busy (and not good at proof reading!), but maybe worth correcting this one – it sounds at first read as if you are against taxes (of any sort).
Thanks!
I have red your paper Richard, but cannot find any ‘conclusions’. Indeed, the strongest impression I received was the sentiment expressed in a quote from the Tenon Group 2005 at the bottom of the left column on page 6 – ‘No one knows yet exactly what a flat tax system will look like . . . ‘.
It seems to me that, without a more focussed definition of the flat tax concept, one could consider all and every tax to be flat – except for the bits which aren’t flat! The paper comes across to me as a very professional and competent exposition of the range of spurious complexity which politicians (and accountants) always overlay any attempt at simplification. The devil (as always) is in the detail, and in the absence of a more focussed definition of the flat tax concept, and a ‘best of breed’ specific proposal, it is impossible to form a coherent view as to the merit of the flat tax concept.
It seems to me that what is lacking here is an answer to the much more fundamental question ‘what is it that a tax taxes?’ My answer to that question is ‘profit’.
Irrespective of the ADMINISTRATIVE alignment of current tax processes, I would argue that ALL taxes are ALREADY levied in ECONOMIC terms out of a comprehensive definition of Gross Enterprise Profit; the profit gap between the consume value of the utility created/added/enclosed by enterprises (for which read gross prices), and the disutility of the labour input to enterprises (for which read net wages).
However, taxes are levied out of that Gross Enterprise Profit in one of two different ways:
1. In the UK at the turn of the millennium, PAYROLL-UPLIFT taxes (on Gross Enterprise Profit) included Income Tax on employee earned income, employee National Insurance Contributions, employer National Insurance Contributions, and Value-Added Tax on the value added through payroll costs. Payroll-Uplift Taxes are levied in proportion to payroll costs, irrespective of the profitability of those payroll costs. Indeed, for an enterprise to break even, that enterprise must be able to charge almost £2 as the gross price for the value added by each £1 of net wages. Thus, Payroll-Uplift Taxes pre empt propositions which cannot create/add/enclose almost £2 of utility for every £1 of net wages, and impose a (relatively) penal rate of tax, and risk of tax-induced loss, on high-employment enterprise.
2. In the UK at the turn of the millennium, NON-PAYROLL taxes (on Gross Enterprise Profit Net of Payroll-Uplift Taxes) included Corporation Tax, and Value-Added Tax on the value added through Gross Enterprise Profit Net of Payroll-Uplift Taxes. For the purposes of this paper, the concept of Non-Payroll Taxes also extends to include Capital Gains Tax, Capital Transfer Tax, Inheritance Tax, Income Tax on un-earned income, and Income Tax on super-normal earned income. Non-Payroll Taxes do not distort economic activity. Profitable enterprise remains profitable.
Thus, I would argue that the campaign for reform of tax processes (to increase tax revenue) must develop and maintain a strategic focus on the need to build a global critical-mass agreement to a rising minimum rate of Non-Payroll Taxes (as defined above):
1. Implementation within each ‘developed’ tax regime should be zero-sum in tax revenue terms; combined with equivalent reductions in Payroll-Uplift Taxes (as defined above).
2. Implementation in each ‘non-developed’ tax regime should give rise to an increase in tax revenue.
Of course, one would also need to build a global critical-mass agreement to block tax havens in order to reverse the current ‘race to the bottom’ on Non-Payroll Taxes.