The reaction of people to tax is an odd thing. In Cyprus there are proposals to be decided today for a tax upon savings in bank accounts. All around the world people point out the immorality of a government taking money from people’s savings, even if the proposal is only a one off take of either 6% or 10%, depending on how much the savers hold in their bank accounts. It is odd that there is not a similar reaction to other attacks on people’s savings and earnings.
The irony of the tax being proposed and discussed today is that those who were not responsible for the economic difficulties in which Cyprus finds itself are being told to “bail out” those who are. This is precisely the same as what has happened in the United Kingdom. Bank bailouts were paid for by tax payers, either directly by such things as increasing the rate of Value Added Tax from 15% to 20% or by quantative easing which is in effect a tax on savings because printing money simply devalues the currency making savings less valuable and borrowings cheaper in capital terms.
In the United Kingdom we pay lots of tax. In fact we pay about 42% of what we earn in tax, as far as average earnings are concerned. That is a big number. If we save up and buy a house, either as a second home or as an investment we pay tax on the price we pay and then if we sell it in the future because we want to change our investment then we pay tax at 40% on any gain we make, even though that gain is likely to be no more than the effects of inflation. Capital gains tax is to this extent no more than a tax on earnings and a tax on wealth, despite its name.
When we die, if we want to leave our savings above a certain amount to anyone other than our spouse there is a tax at 40% on those savings. That is a large slice for the government to take.
If you want to establish a business and that business needs premises you will be hit for tax (business rates) whether your business earns a penny of profit or not. It is a tax on every business which has premises, and that is an odd concept.
Now the logical conclusion of these rates of taxation is to do your best to avoid paying tax if possible. Tax avoidance is becoming a very immoral practice in the mind of the general public, but you do not have to go to fancy accountants and sign up to complex avoidance schemes to avoid paying tax. You can simply not work has hard as you do, earn less and enjoy more leisure time. You will earn less and pay less tax, and who knows, you have even qualify for some money which the taxpayers can pay to you. That is the simplest way to avoid tax and no doubt millions of folk do it.
Another way to avoid tax is to spend all your money as you make it, without saving any of it. If you have no assets when you die you will not pay inheritance tax on death. It is a simple device. Just use your money to go on holiday frequently, spend as you go, rent your property rather than own it and enjoy it as you live from hand to mouth.
Those who criticise those who avoid tax have at the thrust of their complaint the fact that tax avoiders do not pay into society which protects them. There is something obscene about some types of tax avoidance in which traders and bankers in the city of London paid less tax in money terms than those who cleaned their offices. Taxes are needed to pay for the police, the fire brigade, the health service and the administration fo government, which are necessary. They are also needed to pay social security, some of which is necessary and some of which seems to be paid to mickey takers. Taxes are also need to pay for the Queen and some of her very wealthy family, for nuclear weapons, for wars in places where there should not be wars, for the luxury with which governments feel necessary to surround themselves and all sorts of other things of dubious moral expenditure. Very few have the moral courage of Henry Thoreau who refused to pay taxes because they were being spent upon an illegal war (the United States was then in the process of confiscating part of Mexico) and upon the support of slavery.
Tax is good in parts and bad in parts. Whether it is the proverbial parson’s egg depends, like that infamous egg, on whether there are more good parts that there are bad parts. I rather think that there are now more bad parts than good parts and that some of the tax we pay, not all of it or even a majority of it, but a significant part of it, is wasted or spent on things which are not appropriate for the hard won earnings and wistful savings of ordinary folk.