Theresa May has an Arsene Wenger tax policy: an open goal for abusers and punishment for would be supporters

Posted on

I'm in a hurry in a Parisian hotel room. When the Chancellor will be speaking today I will be at the OECD. I will miss at least four broadcasting opportunities. Country-by-country reporting demands it. But what would I have said in the few minutes that any broadcaster gives at best. These are some thoughts.

First, if Theresa May really meant she was governing for everybody she should have re-read her Adam Smith and realised that tax has to be equitable: the bill has to be biggest for those most able to pay. That is not true in the UK. We have a ridiculously low corporation tax rate, and capital gains tax is much the same. Inheritance tax is almost wholly avoidable for the richest. And we have no wealth tax. And yet she's hitting some of the least well off with more cuts, is targeting the disabled (yet again) and the tax avoidance effort is being aimed at the self employed who do at least already pay. She's like Arsene Wenger when playing Bayern Munich. She gives an open goal to abusers whilst punishing those she wants to support her. This is incoherent tax policy.

Second, this should be a budget for spending: masses of government spending financed by near zero cost borrowing. Any business person would agree. But it's not going to happen. Just when we have the chance to start building the post Brexit economy we won't. As an economist it's almost painful to watch such incompetence.

Third, targeting the self employed working for the government as tax avoiders when the same measure is not being applied to the private sector shows that all credibility has drained from the tax system. tax is dependent on there being a level playing field. May and Hammond are destroying it.  This is bad for tax, it's bad for HMRC, it's bad for Britain and it's and for public services. That's some achievement.

Fourth, the real abusers are still getting away with their activities in the UK and that's because the government will not invest in HMRC and it will not enforce company law to make sure that all companies file their accounts and tax returns. 400,000 (at least) a year do not and they are almost guaranteed to get away with it, completely. They are who the government should be cracking down on, but it would require a bit more spending to recover the billions that go missing. So instead honest taxpayers are punished, we have continuing austerity and a tax system that is falling apart. How this government got a reputation for competence is hard to imagine.