Showing posts with label Tax. Show all posts
Showing posts with label Tax. Show all posts

12 May 2023

What is "fair" tax?

There's been quite a lot of commentary about whether the "rich" are paying their "fair share" of tax, with an inferred moral and philosophical position that what is "fair" is "a lot" and is not just tax on income from employment or businesses, or tax on consumer goods, but tax on property acquired after both earning income and paying tax on the purchase of that property.  This is the concept of a "wealth tax", so let's consider both what this actually means, and whether a different conception of what "fairness" is might see the debate going in a different way.

Let's say you have land, or shares in a business, or an expensive asset (motor vehicle, boat, aeroplane, art work), and a socialist government (which is what it would be) decides you should pay it some proportion of whatever value it deems appropriate, in tax.  This is likely to follow you having already paid the following taxes:

  • Income tax on your employment, or dividends from a business, interest from investments.  After all, to acquire an asset, you need to acquire income to get it.  Yes some people inherit wealth, some people are gifted wealth, but many earn it from employers or their own business.  Government already taxes that, and if you are wealthy the marginal rate of tax on most of that is 39%, so if you earned say $1 million, $370,000 in income tax is already paid on it.
  • GST on your purchase. Yes this doesn't apply to land and buildings, unless you actually build something, or refurbish it. It also doesn't apply to buying shares in a business, but it does apply to cars, boats, aeroplanes, art works, jewellery and the like. 15% of the price is added on and taken by the government assuming it is bought through a business beyond a certain threshold. It doesn't apply to private sales of course.
So after paying tax to earn money, paying tax to buy the asset, the money-grabbing socialists want MORE, and of course if your cashflow is poor (you may have retired), then you will need to liquidate assets to pay a tax on wealth.  Yet who asks the question, why should you pay tax on owning property?

What does "fair" even mean?

From the socialist mindset, which is that of David Parker, the Greens and Te Pati Maori, and indeed appears to be that of multiple journalists, it's only fair if the state gets to take a share of everything you earn and own, including any increase in value in assets you may happen to own.  However, this idea of fairness is rooted in several concepts:
  1. There is something immoral about owning property and it increasing in value without being forced to share that with the state (and enable politicians to spend that money).
  2. People only obtain a lot of property because the state enabled them to do so, and so (despite them already having paid other taxes in the process of earning income and buying goods and services) the owners of such property should keep "rewarding" the state (and by extension "the community") for letting them succeed.
  3. The actual amount of taxes confiscated from people should bear no relationship to the extent to which they avail themselves of what the taxes are spent on.
  4. The state can spend your money better than you can, and in ways that are virtuous and benevolent to society, whereas you only spend money to benefit yourself and your family, and what you value.  Your values as a taxpayer are subordinate to the altruistic values of politicians who know how to spend your money to be kind.
This is largely nonsense. There is nothing immoral about owning anything and having its value rise without other people sharing in it, any different from it being somehow moral to own property and see its value fall, and require other people to help you out because of your losses.  Of course the socialist wealth tax advocates are never too keen on people getting big tax breaks or subsidies if their wealth collapses due to bad investment or simply the market for their assets evaporating.  

There is a kernel of an argument that a stable government with rule-of-law and property rights enables people to thrive, but the amount of state that does that is a fraction of its current size. The GST paid by the consumption of wealthy people could pay for all of that (indeed Roger Douglas proposed in the 1990s that GST could not only pay for the core functions of the state, but the welfare functions as well).  However, even if this is extended further, is it really a rational argument that the wealthier you are, the more the state has done to enable it (except for those who own businesses granted effective statutory monopolies through regulation or import tariffs/controls), and even if you pay more and more in income tax (even if it was a flat tax, a high income generates more tax than a lower one), it can never be enough?

The third point should be the centre of fairness. Treasury estimates around half of all taxpayers are net receipients of taxpayer funds through the welfare and tax credit system.  Why is that fair?  Let's assume those taxpayers occasionally consume the health system, many have children that consume taxpayer funded education and some will have taxpayer subsidised housing. An argument can be made for public goods to be funded collectively, but there are precious few of these. Why should people who have generated considerable income and acquired assets legally be expected to pay for the costs of services other people consume, many many times over themselves?  What is the fairness in being forced to pay for someone else's private goods and services? If taxes are to exist at all, they should only exist to pay for public goods.

The fourth point is clearly nonsense, the state is not a more moral actor than you are, and on average it isn't either.  This is a philosophical point of difference. Statists and socialists think governments are better placed to spend money (because it can "help" people) than you are, whereas libertarians and free-market liberals are sceptical of this. After all, a government may raise salaries for teachers, but this typically rewards both the best and the worst ones, which is a distinction that a government supported by teachers' unions does not recognise.

The real truth about tax is that it is theft and it isn't "fair" at all, it is at best a necessary evil to fund a substantial state, and the amount people pay is based on no moral basis whatsoever. Unless you believe people who have a lot of money have got it through immoral ends or are beneficiaries of a large state (regardless of how this has little evidence), then tax is simply a means to an end - the end being politicians spending money on what gets them re-elected.  The only way to make tax fairer is to have it lower and flatter, and simpler, so people get to keep more of what is theirs, and those who want you to spend it on other things, have to persuade you to give them your money

Be wary of anyone wanting to make tax "fairer" because the bottom-line is that they just think that they (or people they support) are better placed to spend your money than you are.  Oh and the spin-merchants of so-called "wealthy" people who say they "want" to pay more tax (but wont actually do it unless others are forced to) are a bizarre breed who actually think politicians and bureaucrats can spend their money better than they can, for benevolent purposes.  

26 March 2013

Financial Transactions Tax fails the test of reality... again

Financial Transactions Taxes (also known as Tobin taxes) are the fond friend of the banker-bashing left, believing that there are vast fortunes of money swirling around the ether that, if only they could take a tiny cut of it all, they could save the world.

It has been advocated widely by the likes of Paul Krugman, Bill Gates, Resource intensive fat capitalist dickhead hypocrite  Michael Moore, Greenpeace, Oxfam, WWF, Occupy Wall Street and Fidel Castro

So the EU proposed one, and it has been getting introduced in 11 EU Member States.

It appears to be failing to deliver ... and the Swedes would rightly say, having been there before, "told you so".

07 February 2013

The UK Treasury world view is that having overseas holidays is bad

Now I am not one to accept on face value a report commissioned by an industry sector for political lobbying purposes.  For that is exactly what the report on Air Passenger Duty is.

So, it is not unreasonable to be sceptical about some elements of the analysis.   The Treasury has completely dismissed them, as has the leftwing environmental lobby group AirportWatch.

Treasury's view is simple, as scrapping air passenger duty would reduce the tax take to government by up to £4 billion a year.  The assumption is that the people who would retain that money couldn't possibly spend it as wisely as Her Majesty's government.  Business travellers and tourists, both local and foreign, would presumably be expected to fritter away their money on such trivialities as goods and services they want, or to save/invest in businesses or for later capital or consumption goods (most of which will generate tax as income or in consumption).  The leftwing anti-aviation environmentalists of course believe that more money spend on state institutions like the NHS, Police and schools must be a better good than people keeping their own money.

However, part of the argument against scrapping Air Passenger Duty is purely mercantilist.  Air Passenger Duty reduces the incidence of British residents engaging in overseas tourism.  The UK has a "tourism trade deficit" which essentially means that Britons spend more in travelling abroad than foreigners spend on their trips to the UK.  More curiously is that this deficit only exists outside London, so that despite the preponderance of London origin business traffic, most inbound tourism expenditure is in London.  In short, tourism is part of London's economy in a positive way.  The rest of the UK generates a "tourism trade deficit", because the number of locals (outside London) flying overseas for holidays is not offset by foreigners visiting those areas.  In short, foreigners don't come to Britain to visit Birmingham, Manchester or even Scotland and Wales in sufficient numbers, or spending enough money to compensate for the locals keen to flee.

So what?  If Britons can afford to go on holiday to foreign countries it is something to celebrate.  They spend money on holidays to Spain, Italy, France, the United States or wherever, because they get more utility out of that than spending it on a holiday to the Isle of Wight, the Lake District or Skye.  It isn't a direct financial benefit to the UK, but they enjoy themselves.

That freedom to enjoy life, to visit where you want with your own money is none of the business of the government.  Treasury acts as if the money spent by UK residents on overseas trips is a loss that it should be concerned about.  That's simply wrong.  It isn't your money, and the people who return from these holidays are refreshed invigorated and are more likely to be productive, happier citizens, who work hard, raise happy families and are less of a burden upon others.

Treasury doesn't understand that.

Abolition of Air Passenger Duty would increase UK inbound tourism and outbound.  The inbound is a win for the economy, the outbound is a win for residents, and the inbound win may offset the shift of UK residents holidaying overseas instead of in the UK.   The abolition of duty would reduce tax revenue, but the state spends ten times that subsidising housing costs that it constrains the supply of through planning restrictions.  The state spends double that on contributions to the European Union.   The state spends the same on subsidies to preferred industries. 

Of course abolishing Air Passenger Duty would mean demand for air travel would increase, and it would confront the spineless approach to airport capacity around London that has meant the government has vetoed expansion of any of London's three largest airports.  Good.  So it should.  Get out of the way, and let Heathrow, Gatwick and Stansted expand without your interference, if their owners wish it.

Naturally it benefits UK based airlines, which is why they are lobbying for it.  Of course, why shouldn't they? It is a tax on their business.  They don't get any specific services from the state that justify it, so Air Passenger Duty should go.   It should go, not primarily because it would boost inbound tourism and reduce the costs of doing business from the UK to other countries, but because it is a tax on people undertaking an activity that not only generates business, but gives them pleasure.

What about the environment? Well the argument that as aviation fuel isn't taxed it is "unfair" compared to land based modes, is ludicrous.  The response to that is that it is equally valid to reduce fuel tax, and besides almost all rail services competing with airline services are electrically powered.  In addition, fuel tax is not specifically an environmental tax.   

Air Passenger Duty is a tax on flying.   It isn't for airports or air traffic control, and isn't about compensating anyone for noise or other pollution (nor could it or should it be so).  There is an economic case for phasing it out, but more compelling, in my view, is the philosophical case.

When UK residents fly, they do so either for business reasons or personal reasons.  The business reasons are typically about generating wealth, and are good for that reason alone.  The personal reasons can range from leisure to visiting friends and relatives to attending a funeral.  The more of that people do, the happier they are, and as long as they pay their travel costs, there is no good reason for the state to tax them over and above that.

01 October 2012

Liberal Democrats deserve obliteration at next general election

I have a naive fondness for a few elements of the Liberal Democrats in the UK.  It solely comes from the era during which it actually did advocate for less government, less intrusion of the state in both economic and personal lives and it was - at the time the Liberal Party - a real choice compared to the comatose Stalinist-lite economics of Labour and the "slowing down the inevitable trip to socialism" of pre-Thatcher Conservatives.

However, those days are long gone.  The Liberal Party made a convenient alliance with the breakaway Social Democratic Party, which left Labour at a time when its policies included neutrality in the Cold War and economic planning that was, seriously, barely one step removed from that of the like of East Germany.  However, Labour abandoned that under Blair and the Liberal Democrats stayed still becoming a party to the left of Labour, opposing military action against Iraq and calling for higher taxes and at one point for Britain to join the Euro.

Few would doubt today that the party was wrong about that, and although Nick Clegg, to his credit, decided that a coalition with the Conservatives was a better move than trying to prop up the spendthrift remains of Gordon Brown, the party has continued to show itself to be little more than the electable version of the Green Party.  The one area where it could add real value, which is to reduce the surveillance state, the party has proven to be impotent and incompetent.  It has defended the extension of surveillance powers to now require all telcos and ISPs to keep records of every website everyone in the UK visits, every email address they send emails to, on the basis that they already are forced to keep records of every phone call and it is just about keeping up with technology.   So the British state now gets to require records kept of what you're reading, what you're looking at, what you're searching for, but don't worry - if you've done nothing wrong you've nothing to fear right?

That alone should disqualify this lot from being a party with any liberal credentials at all.

Its passionate love of the European Union, obsession over climate change and the "need" for unilateral British action regardless of cost and who pays that cost, and wet attitude to foreign policy and defence are little compared to the latest ramblings - which is that everyone earning over £50,000 should pay more tax because it is "fair".

The Liberal Democrat's main contribution to discussion over reducing the budget deficit is not liberal in that there is no interest at all in shrinking the state.  This party believes that the current 45% of GDP dedicated to state spending is about right, and the way to reduce the deficit is to increase taxes (whilst reducing taxes on the very poorest).  It is pure redistributionist socialism, and it is envy mongering.

Whilst early talk was of a "mansion tax" which would simply be an annual tax on the value of homes over a certain value, this has now become a tax on homes worth over £1 million.  In London there are tens of thousands of such properties, more than a few owned by families or retired people who wouldn't consider themselves wealthy per se.  

The latest talk of those earning over £50,000 paying more should be electoral suicide.  This comprises the top 10% of income earners in the UK, but notably in London it is worth saying that this is far from being wealthy.  A decent two bedroom flat in middle class parts of London can cost £1500 a month in rent.  Try feeling rich with £60,000 a year, after tax (which takes away 31% of that with a marginal rate of 42% on each additional pound).

The Liberal Democrats constantly tout the cliche "fairness", yet that 10% earns 30% of income and already pays 50% of income tax.  How fair is that?

The Liberal Democrats are social democrats, and are, as advocates of the status quo and more tax, simply socialists.  They are where Labour now is, under "red" Ed Miliband, the unions' choice, and given the party is keeping the Conservatives in power, deserves to be obliterated at the next general election.

The big debate in 21st century politics is, once again, the role of the state.  On economic policy, there is nothing liberal about the Liberal Democrats, with no interest in abolishing the absurd shop trading laws that keep London's Oxford Street closed before 11am and after 5pm on a Sunday, no interest in liberalising planning laws that mean planning permission is needed in most boroughs for the smallest of works on your own land, and a religious opposition to more airport capacity.  On social policy the Liberal Democrats are uninterested in talking about laws on drugs, laws on censorship and as we have seen, are incapable of understanding state surveillance.  Finally, their attempts at reform of the "constitution" consisted of trying to adopt a version of the Australian voting system and making most of the House of Lords elected with 15 year terms.

Pointless and counter-productive.

The socialists of the Liberal Democrats should go to the Labour Party where they will find the usual interfering busybodies keen to create new laws, spend more money, invent new taxes and be forever committed to thinking that they are uniquely placed to know better how to spend other people's money.   The liberals, wherever they may be, should go to the Conservative Party, and help it dry up and become, once again, the party of less government and more individual responsibility.   For the SDP part of the Liberal Democrats have no raison d'être given Labour is no longer the home of Erich Honecker like economics, and the Liberal part has largely evaporated, in part because the Conservatives are no longer out to bully homosexuals, scaremonger about dark skinned people and fear ambitious women.

Not that I have time for either of them, Labour set the scene for the current recession and for years kept a delusional paranoid megalomaniac in charge of the public finances (so deluded he boasted that he had abolished boom and bust), the Conservatives are now in the thrall of Whitehall and are led by an indecisive whim and poll worshipping pragmatist.  

However, the Liberal Democrats have no purpose anymore.  Voters, who once saw them as a protest vote whenever Labour disappointed them, know this.  In 2015 opponents of the government will mostly vote Labour, supporters will vote Conservative, there is no point in voting for a version of Labour that keeps the Conservatives in power.

It's just a matter of time.

15 August 2012

Tax stops Usain Bolt from bothering more with Britain

It was telling that in a live BBC interview during the Olympics that Usain Bolt said that he would love to spend more time in the UK, but the tax laws make it not worth his while.

The Taxpayer's Alliance explains why:

Under current rules, athletes competing in the UK are liable to pay tax on their winnings in addition to paying levies on any of their passive income such as marketing, sponsorship and image rights deals. Athletes often have to pay a 50 per cent tax rate on their appearance fee as well as a proportion of their total worldwide earnings. 

No wonder he can't be bothered.

Of course, neither the supposedly "pro low tax" Conservative Party, nor the Liberal Democrat or "opposition in name only" Labour Party agreed with him, largely because all three parties have been embarking on a cannibalistic feeding frenzy on tax for months. How did he compete in the Olympics then? Simple. The UK Government was told it had to suspend these provisions for the extent of the Olympics: The International Olympic Committee insisted that HMRC suspended its normal tax regime for those competing in the London 2012 Olympics. London simply wouldn’t have been able to host the Games otherwise. And the Government has also said that tax breaks will be available to the Commonwealth Games and those taking part in the 2017 World Athletics Championships in London. They've all been claiming how moral it is for people to pay taxes, and how tax avoidance (i.e. legally acting in ways to not pay more tax than you are required to) is immoral. It's been a Marxist orgy of claims that tax avoidance "costs the UK" money, when what is actually meant is that it costs the government - when in fact people with more of their own money tend to invest it or spend it, benefiting them and the people who gain the investment or sell them goods and services. The classical Marxist bogey of tax avoidance is the stereotype of some rich businessman sitting in a suit with a cigar laughing as he appears to do nothing whilst gaining more and more money. He's probably a banker, or someone who earned lots of money in ways that are "not honourable" to socialists (remember earning a six-figure sum as a politician or unionist is ok though). Usain Bolt doesn't fit that stereotype. He's loved by millions of fans. Nobody dare utter a criticism of him or the substantial earnings he gets from promotional deals. See it is ok to make money running fast and being attached to ad campaigns, but not to run an advertising company, or manage his investments, or own a hotel he stays at. Yet the political silence of this issue is palpable. Clearly the tax laws as they stand not only deter the UK from hosting athletics events (when they get hosted they do so with exemptions), but stop people from living and working in the UK as athletes. It is completely self defeating, it means there is less money in the economy and indeed if Bolt lived in the UK and paid no income tax, the UK would still be better off. This is a man who wouldn't be claiming public housing or welfare benefits, he would be almost certainly never using the NHS (when he can afford private healthcare) and would be paying plenty of VAT on his consumption (and fuel tax and air passenger duty on travelling) to cover a decent contribution to defence, law and order and other state spending. However, to argue that, Red Ed Miliband, his new sycophants in the Liberal Democrats and the sellout Conservatives would have to admit that, actually, most wealthy people don't cost the state very much at all. They pay their own way, pay for their own housing, education, health care, pensions and by and large only have a role for the state in defence, law and order and the provision of roads. Because, you see, the underlying reason for the clamour for tax is to take from the rich to give to everyone else. Now if you were Usain Bolt, earning for a relatively short period of your life, enormous sums of money for promotional campaigns, why would you decide that middle class and low income British deserve to get half of all your earnings, when you can stick to Jamaica?

28 June 2012

Is fuel tax in the UK becoming impossible to increase?


I hope so.

Yesterday, Chancellor of the Exchequer George Osborne did his latest U-turn on his budget – he deferred a 3p/l increase in fuel duty that was planned for August. The increase had actually been planned under the Gordon Brown administration, which was always keen to increase taxes on fuel faster than inflation. The coalition government simply sought to maintain it, but was under pressure from Labour (hypocritically) and others to not proceed with it, so it has been delayed.

Now this move is welcome. Unlike the US (and New Zealand now), increases in fuel tax in the UK are not dedicated to spending on transport, but general revenue (and indeed four times as much is collected in fuel tax than is spent on roads). The statist media (indeed state media in the form of the BBC and Channel 4) talk about how it is a “cost” of £500 million (£1.5 billion if the increase is permanently suspended), but this is of course only the nonsense accounting view of Treasury.

It is £500 million that remains in the economy to be spent, invested or saved by individuals and businesses, rather than be spent by government. On top of that the official view (ineptly put by junior minister Chloe Smith) is that it is “funded” by savings in spending from various government agencies. All good stuff, but it does raise two issues.

The first is whether it is permanent. It’s unclear how it will be easier to raise fuel duty in January compared to August. The same politics will arise then and rightfully so.

The second is whether the UK is finally getting to the point where atlas (in the form of motorists) will shrug and say “no more”, at least in relation to fuel tax. That stage has already been reached in the US where the federal government has been unable to raise fuel tax since 1994 and neither have 20 states. It’s causing concern because, unlike the UK, fuel tax in the US is dedicated to expenditure on transport, mostly roads and so it is becoming difficult to fund improvements and maintenance. As a result, more and more states are looking at new ways to pay for roads, with tolls for new links and capacity being popular, along with letting private companies build improvements and toll for them, others are considering how to replace fuel tax completely with direct user charges.

In short, the politics of increasing fuel tax are promoting a shift to user pays, away from taxing proxies, in the United States.

Opposition to fuel tax increases is understandable. People don’t want to pay more when they see government poorly spending the money it does get, with money misdirected to politically motivated new works whilst maintenance falls by the wayside. Tolls are grudgingly supported because they get linked to what you use.

In the UK, opposition is twofold. For a start, motorists feel unfairly singled out, with tax at around 59p a litre BEFORE VAT, tax is the majority of the price of fuel.

Most grudgingly accept VAT on most goods and services, because it isn’t targeted. There is also tolerance of taxes on alcohol and tobacco because of the links between their consumption and health impacts. However, why fuel?

Since none of the money is dedicated to roads (and it is many times higher than the road budget) and roads are crumbling, it seems it has nothing to do with that.

Since there is a discounted rate of VAT on electricity and gas, the environmental argument seems fatuous and inconsistent.

What remains is a Nanny State finger pointing view, aligned to the Green Party, that people “shouldn’t” drive and so fuel tax is a way of encouraging them to use public transport, cycle or walk. The fact that the freight hauled on most trucks has no realistic alternative mode is blanked out. The fact that so many reject other modes, even though they are subsidised (with taxpayer subsidies for rail almost as much as total spending on roads), indicates that it doesn’t meet their needs.

So the overwhelming impression is that fuel duty in the UK is about fleecing people who have few options to avoid it.

It is about time motorists stood up and said enough.

There is a reasonable argument that, in the absence of tolls and privatisation of roads, a tax on fuel used on the roads is a rough proxy for user pays. So if the rate of fuel duty was to match that (taking into account tax taken from annual vehicle excise duty) it would drop from 59p to around 9p a litre (in fact given the massive backlog of capital work needed to renew the network I’d say 10p). If that was transparent, then it would show it up for what it is – a tax grab. Any reasonable view of it being environmental would mean increasing VAT on electricity and gas, which is also unpalatable.

It SHOULD become political unpalatable to continually increase fuel duty – a tactic that Chancellors of the Exchequer have been using since John Major, with Gordon Brown particularly keen on milking money from motorists.

Of course the UK can’t cut fuel tax more than half, for EU law prevents reducing tax on unleaded fuel below what is around 29p/l. Yes, the EU actually sets FLOORS for taxes with Directive 2003/96/EC.

Meanwhile, it ought to be time that UK motorists generally said no – and were louder and more militant against persistent tax increases. This fuel duty increase postponement should be permanent, and fuel duty ought to be in decline.

23 June 2012

Tax avoidance is not just legal, but moral

The feeding frenzy is out.  In the UK if you legally arrange your personal affairs to minimise your tax liability then the Prime Minister thinks it is immoral.

It all came out when a newspaper reported that comedian Jimmy Carr is apparently using a legal tax-avoidance scheme through Jersey.   Carr's humour is ascerbic and rarely has anything political to say, although it was notable he poked fun at banks and tax avoidance not long ago.

However, David Cameron's jumping on the bandwagon of condemning tax avoidance as immoral is about participating in a radical left-wing campaign that essentially supports more tax.  A campaign pushed by the economic-illiterates at UK Uncut.  That group supports increases in the size of the state, opposes spending cuts and wants more money collected in taxes from businesses and those on relatively high incomes.  Its demand to further infringe on the property rights of businesses and individuals is matched by its supporters invading and occupying private property to "make their point".   However, give them credit for being consistent - these people don't believe in property rights (until you take anything they claim).

As I'm a libertarian, I believe taxation is legalised theft.  It is money taken by force because people engage in behaviour the state has deemed it wants to charge for, such as employment, making a profit, buying certain goods and services and the like.  It isn't a charge for a service provided.  There is no consent involved, there is no relationship whatsoever between taxes paid and services received.

So from my point of view, whatever steps anyone takes to not pay tax are moral, because it is an act of self-defence against the use of force against property.  Plenty of Greek citizens do this presumably because they can and because they don't believe the state spends their money wisely, and they'd be right.

Legally, there is a difference between tax evasion and tax avoidance.  Tax evasion is to take steps to conceal undertaking activities for which tax is due.  Tax avoidance is to structure your affairs to minimise your legal liability for tax, not through concealment or falsifying tax returns, but by any legal steps.

Buying duty free alcohol at the airport is tax avoidance.
Choosing investments that have low or zero tax liability over others, is tax avoidance.

Some instruments for tax avoidance are complex and require professional assistance, which effectively means only people with relatively high tax liabilities can see net savings from paying someone to help them minimise their tax bill.

That's what Jimmy Carr did.

Immoral?  No.  

In fact, if he was illegally evading tax I'd also argue that it is not immoral either.

It is not moral to surrender to the state more money than you have to.   The state, particularly when the bulk of what it spends the money on is to give preferences, privileges and unearned money to other people, is not a supreme moral actor.

Jamie Whyte in the Wall Street Journal explains why Carr acted morally (notwithstanding the mild hypocrisy over his past jokes about tax avoidance).  I'll paraphrase his article below.

The usual vague comment trotted out by statists (those who believe that more state spending is generally a good thing) is that it isn't "fair" and that people must pay a "fair share".  

Whyte makes the split between private and public goods.  

Private goods are those which are consumed personally, such as healthcare, education, pensions, subsidies and the like. To equate taxes for those on any ground of "fairness" is open to serious criticism.  Does Carr consume disproportionately more of these than others?  If not, why should he pay more?  Given his income appear to be many orders above that of the national average, it is fairly certain that he would pay much more than he is ever likely to consume.   The people paying little or no tax, who do consume private goods are the ones where there isn't much "fairness", but the left take it for granted that it's fair for such people to have access to goods and services that they can't afford.  However, that doesn't mean it is fair for Carr to be forced to pay for them.  Why is his existence and success an obligation to pay for others?  The only "fairness" argument is to pay for what you use.

For public goods, such as law and order and defence, the only "fair" approach is for everyone to pay the same.   An argument can be made that the wealthier you are, the more property you have so it is fair to bear a higher burden for the costs of the state to be available to protect it.  In which case, a low flat tax to cover such "public goods" would be "fair".  Income tax of 10% would carry little incentive to engage in tax avoidance or evasion.

Beyond that, Whyte makes the compelling argument that given Carr generates income from people paying for his performance, he must generate a "consumer surplus" (nobody pays to go to his shows to get less than the value of the ticket, but more).  So in fact he is already contributing as a producer.  The snobbish sneers from conservative right and socialist left that he is a mere comedian (the conservatives considering it to not be a proper job in a suit, the socialists thinking it isn't as important as a bureaucrat or a miner) can ignore that, despite his comedy not having universal appeal, he makes people laugh and their lives a little bit better.  They pay for it, so he "produces" (the alternative view is to embrace the wondrous delights of authoritarian regimes where comedy is suppressed).

Even adopting the Marxist view that we all have an obligation to those less fortunate which needs to be enforced by force (which I do not share), making Carr pay more in tax isn't really going to deliver that fairly at all.

The British Government does not redistribute wealth in a way that could be defended robustly as favouring the least advantaged, in actual fact it engages in masses of transfers to people on middle incomes and to people who, by global standards, are relatively well off.  Some of the transfers are:

-  Winter fuel allowance for everyone over 60 regardless of income (a subsidy for energy bills for the elderly.  The Queen would get it if she applied).
-  Child benefit, for every child in a household as long as no one in the household is on the second highest income tax rate (which hits at around £35,000 a year - hardly rich).
-   Housing benefit, which can pay rents for a person or family up to £400 a week (a cap introduced since it was found that one family was getting over £160,000 a year for one property).

Beyond that, if it really was about those most disadvantaged, it would not be most people in Britain.  It would be children in Niger or Haiti or elsewhere.  It would be those without schools, without nutrition, without homes.   However, it isn't.  The claim that it is morally justified by helping the most needy is fatuous because it blatantly isn't true (nor could it be, as neither voters nor politicians would stomach it).

Winding back from all that, taxation exists because people vote for governments who impose them.  Indeed the majority are docile about forcing the minority to pay for what governments bribe them with.  Beyond the core functions of the state, little else that it does contributes to wealth creation, the services it does provide are unlikely to be of a standard or nature that people would choose themselves, and it engages in vast numbers of transfers that are little more than bribes to rent seekers who lobby politicians to get them to loot on their behalf.

Jimmy Carr is both legally and ethically correct to arrange his financial affairs to minimise his liability to this monstrosity.  The budget deficit and public debt are not his fault, it is the fault of politicians and their second-handers who have demanded more and more be spent on them and their pet projects and activities, without being willing to force the public to pay for them (let alone ask).

Tax avoidance is legal, it is moral, and indeed I believe people have a moral duty to themselves and their loved ones to maximise the ways they can avoid tax - for tax takes from YOUR wealth so someone else can spend it, as they see fit. Why would anyone voluntarily, and legally, prefer politicians spending his own money to himself spending it, unless he himself was engulfed in self-hate or believed in his own ineptitude relative to politicians and bureaucrats? 

17 March 2012

Envy - Labour's favourite base instinct

Next week is George Osborne's third budget, and the big rumour is that he may drop the top rate of income tax, 50%, which applies to income above £150,000.  It was introduced in April 2010, literally weeks before the 2010 election, designed cynically by then Prime Minister Gordon Brown, to corner the Conservatives.

A totemic tax on "the rich", designed to play into the well cultivated class envy.  To spread the bigoted discrimination against anyone who has managed to get a job or set up a business or inherit a business that generates that sort of income.  Because those how don't have it think the state taking half of every extra pound earned makes up for it.    For salary earners, add on the pseudo income tax "National Insurance" (which isn't insurance), it is 52%, add on the employer's contribution to "National Insurance" and it is 58%.  Yes, 58% of every pound in income over £150,000 really goes to the state.

Those vindictive little envy mongers in the Labour Party demanding a "banker bonus" tax dishonestly neglect to say that over half of the bonuses go to the state in taxes in any case.   

The top tax rate is paid by around 1% of income earners, around 308,000 people, but those people pay 27.7% of all income tax.   Fair?  Why doesn't the Labour Party tell its low income supporters that almost the entire health budget is paid for by the "rich"?  Well it would make people less hateful and envious, and less likely to demand Labour get the power to take more.   

£2.8 billion was the estimate for revenue, but other estimates put the real revenue gained as less, because actual revenue from self assessed taxpayers (high income) has dropped half a billion. In other words, they have re-arranged their affairs to reduce their liability.

The debate around the 50% tax rate is full of misnomers.  Claims like "bankers are to blame they should pay".  Yet most of those on that tax rate are not bankers, and how are they to blame for massive state overspending?  They tend not to claim welfare, housing benefit, use the NHS more than anyone else or use state schools.  They are more likely to employ people and consume on levels that keep others employed.  To blame the successful for the economic situation is dishonest.  Even if one claims that some bankers made bad decisions that caused them to fail, this is hardly a fair way to "punish" people who, by and large, lost their jobs in the first place.  Besides, who punishes politicians who make bad decisions?  

Who holds Gordon Brown to account for selling a significant portion of Britain's gold reserves when it was at a nearly all time low?

The 50% tax rate is not just an envy tax, but is deterring investment and deterring entrepreneurs from basing themselves in the UK.  It is a disincentive and earns little revenue, and besides with the rate below that 40%, it's not as if people on higher incomes are not paying substantially to the state.

If George Osborne abolishes the 50% tax rate, he will deserve enormous credit for sending a signal that the UK is not besotted by an attitude of envy, one that doesn't hate success, that doesn't hate entrepreneurs and doesn't see the purpose of high income earners being to fund a state that spends around 50% of GDP.

He ought also to raise the income tax free threshold to £10,000.  It is Liberal Democrat policy and will make a positive difference to everyone, as long as the tax band thresholds aren't increased so that people in the higher bands don't lose out.  It will be a enormous step to drop the top rate and have a healthy income tax free threshold.   

However, more important than that is to confront the envy, confront the acceptable class hatred cultivated by the left, that people on higher incomes not only should pay more tax than those on lower incomes (flat tax does that), but should pay higher proportions of income in tax.  The moral question is why should anyone surrender half their income to the state, especially when with most purchases they also pay 20% VAT on many goods and services, and draconian taxes on petrol, air travel, alcohol and tobacco.  

That's why abolishing the top tax rate MUST be accompanied by a lowering of the total tax burden, by pulling people at the bottom out of income tax, and being honest about how much tax is paid by those on the highest incomes.

BT8P96E65HAJ

08 March 2012

Fair Fuel UK? How to make UK fuel duty a little fairer

A nationwide campaign comes to London today, called National Fair Fuel Day, demanding that the UK government act on fuel taxes. Finally, the road transport sector and motoring lobby have cottoned onto the fact that some in the media have ignored – the high price of fuel is substantially due to government taxation. 

Some have argued that it is all about oil company gouging. Oil companies being the bogey of the left and easily pilloried. Yet whilst demand and supply do greatly influence price fluctuations, oil companies can't be blamed for much of the price of fuel in the UK.  It isn't hard to compare prices between countries, and notice that once currency fluctuations are taken into account, most of the real difference is tax.

Today, the average price of standard unleaded petrol in the UK is around £1.38 per litre, for diesel it is £1.45. However of those prices, around £0.58 is fuel duty. For the petrol there is also £0.23 in VAT (£0.24 for diesel) (on top of the retail price and fuel duty). So of the total price, the majority is tax. 

In the UK, this situation came about because of the two previous governments. John Major’s government introduced a fuel duty escalator, which increased fuel duty by inflation + 3%, which was then increased to inflation + 5%. When Gordon Brown became Chancellor of the Exchequer he raised it to inflation + 6%. So in short, it was a way to pillage the pockets of motorists, given that most revenue from fuel duty comes from road use. 

Unlike the US or New Zealand, none of the UK fuel tax is hypothecated for transport purposes. The reason being that the UK Treasury has a phobic opposition to government restricting the use of any tax revenues for any specific purpose. The history behind this being that the last time fuel tax was hypothecated was in the 1930s, and revenue was far in excess of spending on roads (which suggested the tax should have been lowered or more spending should have been made on roads). However, even compared to road spending, the fuel tax is grossly excessive.

About £10 billion is spent in the UK every year on maintaining and upgrading all roads, yet £26 billion is collected in fuel duty and £6 billion from vehicle excise duty. As these taxes wouldn’t be collected if people didn’t own or use motor vehicles, it is fair to link that revenue to that expenditure, although the left/environmental movement likes to think of it differently. 

So what should the rate of fuel duty be? Let’s reject the Treasury approach to this, and say that a dedicated roads fund could be set up which would be funded from revenue from road users. If the current level of spending is maintained it would be £6 billion from vehicle excise duty and £4 billion from fuel , or rather only 12.5% of current fuel duty. Given that there is significant deferred maintenance on road networks (and assuming this funding can replace council tax contributions to road maintenance), let’s boost that slightly by rounding it up to 8p a litre that could be hypothecated for road spending. Yes, in theory fuel duty could be only £0.08 if it was all spent on roads, with vehicle excise duty and it was used to fully fund local roads and given a small boost to maintenance.  Yes, the UK government is profiteering from the use of its own roads on a grand scale, that would make most entrepreneurs blush.  However, it's the government, so the left don't get so worked up about that, because tax is "good" because governments "spend it on everyone".

Of course cutting fuel duty by 50p devastate public finances unless there were equivalent spending cuts to match.  Not something I'm unafraid of at all, but let's proceed down a train of thought to do something a little different.

 A £0.50 cut in fuel duty would also correspond to another £0.10 off in VAT, so a £0.60 cut in fuel would nearly halve prices. That would be a major shot in the arm for the competitiveness of transport intensive industries, transport operators and motorists, but of course would dreadfully upset environmentalists, public transport operators and would increase congestion. Environmentalists would argue it would increase climate change. 

Let me be controversial and assume that this is correct, and accept that road users should pay for the "cost" of carbon emissions. The Stern Report claimed that the cost of climate change is around £0.14 per litre.  However, even if I add that to the road spending, fuel duty still drops by £0.36 with a £0.07 cut in VAT.

Another claim from environmentalists will be the cost of real pollution, the noxious kind that actually does affect people's health in cities. Well that’s been calculated too, and is around half of the cost of infrastructure maintenance, indicating a tax level of around £0.16 per litre. It is a cost that is declining as cleaner burning vehicles are renewing the fleet.  Again, it still means that fuel duty would drop by £0.20 with a £0.04 cut in VAT.

At that point I’d make an argument that there is a long run lack of investment in British highways, only part of which can be recovered in the short term by private investment (simply due to public sector crowd out in planning), so that an extra £0.04 a litre should be retained to be transferred at a rate of £0.01 a litre every year to the roads fund, to address 15 years of underspending.

Indeed, given the rail sector pays a small portion into this, it could be argued that tax could be recycled into paying for rail subsidies (although surely it would be simpler and fairer to enable rail operators to claim back the duty).

So what to do? Yes the government makes a fortune from road users, it collects over three times what it spends on roads. However, it also faces a massive budget deficit to cut, so in the meantime, here are my steps to remedy this, over time:

1. No more increases in fuel duty. 

2. Set up a hypothecated highway fund to which all vehicle excise duty and 8p of fuel duty goes into. Establish an independent board to determine how to allocate those funds to the Highways Agency, local authorities and the Welsh, Scottish and Northern Ireland administrations, based on receiving bids for maintenance and capital expenditure. Have those funds allocated on transparent criteria based on cost/benefit analysis. 

3. Calculate and explicitly state that a proportion of fuel duty is to reflect climate change and pollution costs, if that is deemed necessary.  Regularly recalculate these to reflect changes in the vehicle fleet.

4. Explicitly identify the remainder of fuel duty as “surplus”, with the aim of policy to reduce that downwards by 1p a litre every year until the budget is in surplus (estimated 2016/2017), with another 1p shifted into the roads fund for additional capital works. 

5. Once the budget is in surplus, cut fuel duty by the remainder, so that all that remains is the road fund component, plus the externality charge.

Whilst I'd much rather slash fuel duty by 16p overnight, and then argue over the rest regarding externalities, these gentle steps would put some transparency around fuel duty and cease the endless increases just to pay for general government expenditure. If all the roads were privately owned, or run as a business, they wouldn’t be paid for by fuel duty, but from user charges. However, unless and until that sort of radical reform is implemented, the second best option is to treat fuel duty as being linked to road use and road spending.  It would stop penalising the road transport sector and treating it as a cash cow.

16 February 2012

Len Brown's Think Big plan - 10 questions

When you look at Len Brown's plans for spending a fortune on transport infrastructure in Auckland and his plans to charge those using it rather than tax various groups to pay for it, you might ask some real fundamental questions about what he isn't saying and in fact why you trust politicians to get these things done at all.

You see when you look at the underground rail loops, with cold dispassionate eyes, you can see this:

-  An underground rail tunnel and stations costing NZ$1.5 billion plus, that wont be a saleable asset.  Nobody will want to buy it outright for anything approaching 5% of that cost, without getting some subsidy for doing so.  In other words it is a wealth destroyer on the face of it.

- Those who would be forced to pay for it wont be those using it, regardless of what taxes are imposed to force others to pay for it.  Indeed those using it wont even be paying for the cost of running the trains through it.  At best they might pay half the operating costs, one day.  They are not paying for the trains either, you are.

-  Besides the users, the others benefiting are those businesses staffed or patronised by the users, who also wont be paying for it directly, well no more than you are paying.

-  There will be no discernible difference in traffic congestion, because both central and local government run the roads as Soviet style assets charging all users similarly regardless of time and location, with no attempt to ration scarce resources except by queuing or to invest in new capacity unless it is approved by political fiat.

The biggest problem I see in considering urban transport in Auckland is the complete lack of context of the debate.  You see if you want to fly to London, there is precious little involvement of politicians deciding, anymore, the prices, the frequencies of services, the types of planes, the timetables or in getting taxpayers to cough up money for the planes, or the airports.  Similarly if you want to send a container from Albany to Manukau.  You find a company that does the job and you pay it, with the company finding a truck, setting the price and then using the road - and paying road user charges for the privilege (and hopefully avoiding the queues inspired by the Soviet style rationing of the state and council's roads).  In neither case does what the Mayor of Auckland think have too much influence, although in the latter he'd clearly like to tax it more to pay for some unrelated infrastructure.

Yet when it is about people commuting, it suddenly becomes interesting.  Compare even simply getting a bus from Auckland to Whangarei, which is a service run by a private company for profit, buying its own buses, setting its own timetable and prices and providing a service for passengers willing to pay admittedly using State Highways.   Getting a train from Auckland to Manukau involves a train bought by the government, owned by the council, running at prices and times set by the council, managed by a private company, with its costs paid for by ratepayers, taxpayers and road users.

1.  Why are there always alleged "funding crises" for "Auckland transport", mostly involving shifting large numbers of people short distances, but not for moving freight short (or long) distances and not for international passenger or freight transport?  Could it be because the latter is virtually always the responsibility of private companies operating for profit, but the former is dominated by local authorities and planners deciding how they people should move, rubbing up against most Aucklanders who decided long ago they can buy a car and figure it out for themselves?

2.  Why is it that new ships, aircraft, trucks, buses, bicycles and cars (i.e. NOT infrastructure, just the objects that use it) are always  paid for by their owners, because in almost all cases they get enough from their users (if they are used to offer paid for services), but not trains?  Could it simply be that the people that use trains don't like them enough to pay for new ones?  Could it be because government is too lazy to spread the cost of capital of new trains over the life of the asset? 

3.  Why is it that users of ports, airports and the state highway networks all pay for the full costs of maintaining and building them, but users of railways and local roads don't?  Why are they special?

4.   If Aucklanders so desperately want an underground railway loop to use, why does no one, not even the uber-council of Auckland want to borrow the billions required to build it?  Could it be because there wont be enough money raised by the users of the railway to pay for the cost of operating a train through it, let alone pay for the railway in the first place? 

5.  If the underground railway loop is not about the people using the trains, but about revitalising the Auckland CBD, why wont the property owners of the area served by it invest in the loop, or at least support a specific rate to pay for the cost of it?  Is it because they know they Mayor and government are a soft touch with taxpayers money, or do they really simply not believe that the underground rail loop will make a lot of difference?

6.  Given the government has committed to spending NZ$1 billion of other people's money electrifying the current network (with the users not paying a cent towards it), predicated on ambitious prediction for growing usage (and reducing usage of the roads), why would anyone commit to spending several billion more before it actually being demonstrated that the earlier predictions for the results of destroying taxpayers' money on an unsaleable liability would meet expectations?

7.   Why is it good to shift large numbers of people from using a mix of subsidised and commercial bus services to using far more expensively subsidised rail services?  Could it be that advocates of the rail strategy don't like this inconvenient issue being highlighted?

8.    Outside peak times, how much of the capacity of Auckland's rail network lies idle, how much more will lie idle after electrification and the rail loop (I suspect around 66% given international benchmarks)?  How does that compare to the recent extensions to the motorway network?

9.    Why should road users across Auckland, on all roads, at all times, pay for a piece of unprofitable infrastructure that will

10.   Finally, why wont Auckland's Mayor and grand council face up to the fact that if it replaced rates funding of local roads with a form of direct tolls with congestion charging, that it would do far far more to relieve congestion and improve mobility than any rail scheme at next to no cost (whilst giving Aucklanders that don't contribute to peak jams some tax relief)?  Or is it far simpler politically to promise people big infrastructure baubles they don't have to pay for?

Want to know the common denominators with all of these?  A hint is this:

-  Planners don't like people moving about at times, places and in ways that they don't understand and can't organise.  They inherently fear this.  What they ignore is that there are planners in the transport sector that make things work smoothly, but they are commercial planners.  They make airports work like clockwork, logistics companies arrange for parcels to go from Dunedin to Dar Es Salaam and major to do all of this, because the incentives are right.

- Politicians don't like telling people they can't continue to have recourse to other people's money to subsidise their activities any more.  They much rather offer people something for nothing the cost of taxing others.

- Privatising the roads terrifies people because they have been inculcated with legends of fear from past privatisations perpetuated by hysterical socialist doom merchants. 

You see anyone who pretends that an underground rail loop will fix Auckland's transport woes is either a fool, naive or a liar.  Have a guess as to which one the people who should know better are.  If they don't like answering any of the questions above with a straight answer, then you'll know it isn't because they are stupid.

01 December 2011

Does tax evasion cost New Zealand?

The Press reports on research by an outfit called the International Tax Justice Network claiming that tax evasion costs the New Zealand Government more than NZ$7 billion a year in lost tax.

Let's be clear, the Government isn't New Zealand and so the loss is not akin to everyone suffering. 

It's a very simplistic view to presume that somehow this is lost sales, stolen money or anything of the sort, or that behaviour wouldn't change if people paid tax on the transactions listed.   Indeed it is quite false.

For a start, some cash jobs simply wouldn't be done if they were subject to tax.  The value generated from it wouldn't happen, and the consumer would spend the money on something else or save it, which may or may not generate tax.   In other words, tax changes behaviour and so the so-called "black" economy would be smaller if it was subject to tax.  That NZ$20 billion "shadow" economy would be less and so there would be less wealth overall.

When PWC tax partner Geof Nightingale says "If we could tax that shadow economy, we would either have more roads or hospitals or get out of deficit faster" he's quite wrong. For a start, he presumes the shadow economy wouldn't shrink significantly if it was taxed.
Secondly, it is a bold assumption to presume government would spend the money better than the people trading the goods and services.  Even if you go beyond unlimited free air travel for MPs into buying up an unprofitable railway, funding radio stations you don't listen to, paying welfare benefits to convicted murderers and subsidising businesses, government spending is far from frugal or careful enough to presume that people are not better off because they are paying less tax.  Certainly if the businessmen doing cash jobs buys things from my shop (even if I pay tax), I am better off, as are the businesses who sold me those goods, and the employees of those businesses and so on.   How does Nightingale know what is best for them? That sets aside the detail that roads are paid for by what are effectively user charges on motorists (try getting out of paying fuel tax, although RUC is easier to evade).   He could have said more cultural advisors, more planners, more policy wonks, more NZ On Air funded TV programmes, more overseas travel for bureaucrats and politicians, more assistance for hand-picked businesses, more welfare benefits so people subscribe to Sky TV more.   Why is that good?

Yet he then says "We anecdotally hear there's quite a lot of cash business going on in Christchurch these days".  You don't say?  So after the government basically told businesses down town "it's not your property now, you can't go near it" and "oops we demolished your building, forget to tell you or ask you", do you really think people in Christchurch have respect for paying taxes whilst they engage in voluntary productive exchange of goods and services?  Leave these people alone, they haven't hurt you and they are trying to rebuild their lives and businesses, businesses that create wealth, not take wealth.

In a low tax, small government New Zealand, Geof Nightingale may have to get another job, for at the most, taxation would be very low, very simple and as such few would seek to evade it, because it wouldn't be confiscating a sizeable part of your income.  It wouldn't be worth it for most businesses to bother hiring the likes of him.

Finally, it's important to point out to the IRD spokesman who said "our hidden economy and property transaction areas were showing a return on investment of $5.70 for every dollar invested" that this isn't an economic return.  It is just that for every dollar spent on a tax snoop (consider the psychology behind someone who chooses to spy on productive peaceful people to find out if they are coughing up "their share" to the state) the snoops recover $5.70 from the people they catch - catch not actually initially force or fraud on anyone, except of course defrauding the state - a state that will happily take taxes all its life from people and if you die before the age of national superannuation, not give your estate anything for your troubles.  A state that will promise one thing, and then deliver something else.  A state which when it fails to answer your 111 call, or fails to investigate the crime you're a victim of, or fails to get you healthcare when you need it, isn't accountable and wont pay you a refund. 

No.  Every dollar IRD takes is a dollar that otherwise would have been spent on a good or service someone wanted, or invested to make more dollars, or donated to help someone or something as a charity.  Because fundamentally, the difference between the money received by those in the cash economy and the money received by the state, is that in the former case, the person getting paid ASKED and couldn't use violence to demand anyone pay for whatever goods or services he offered.

When the state is small, and tax is low, the size of the so-called "black" economy shrinks (excluding the other "black" economy of banned goods or services) as evasion isn't worth it, simply because people have more of their own money.  That money isn't a loss to New Zealand, because it is part of GDP and because it circulates between consenting adults trading value freely.  The only concern comes from the government bemoaning that it hasn't got its slice of a cake that it had little to do with baking in the first place.

30 November 2011

Piggies in the trough

Stuff reports "Goodie bags containing iPads and smartphones and instructions on how to maximise your free air travel and accommodation perks – it must be induction day for Parliament's new MPs. Goodie bags containing iPads and smartphones and instructions on how to maximise your free air travel and accommodation perks – it must be induction day for Parliament's new MPs... Posters hanging in booths outlined their new perks – "unlimited domestic travel", exclaimed one".

All of the new MPs, National, Labour, Greens, NZ First, to a man and woman, soaked it up, took what they were "entitled to", at your expense.   I bet John Banks will too.

None of those talked to expressed disgust and remorse, including those who claim to speak on behalf of the poor. None showed interest in limiting their domestic air travel to trips to and from their constituency. 

Yet most of you voted for them, so really you only have yourselves to blame right?

04 January 2011

2011 comes with a UK tax hike

Despite all the nonsensical blusterings of the British Labour Party and others on the left who think that government halting the rise of the state is somehow some neo-liberal revolution, the truth is that the Conservative-Liberal Democrat government is not driven by an ambition to shrink the state.
Proof of this has been seen twice in four days.  On 1 January, the UK's fuel excise duty (fuel tax), one of the highest in the world, went up by another £0.0075 a litre.  Not much, and yes it was a decision from the Brown Government, but the money is entirely to help reduce the budget deficit.  You seen, unlike NZ, the UK's fuel excise duty is entirely revenue for the Crown, none of it is dedicated to roads or transport spending at all (and it corresponds to about five times the total government expenditure on roads).  Fuel tax in the UK is now nearly 59p per litre (NZ$1.18).  That plus VAT makes tax more than half the price of petrol.

Speaking of VAT, that rises to 20% from 4 January, up from 17.5%.  Now VAT in the UK does not include food not served in restaurants, childrens' clothes, books and other items, but this tax increase has provoked considerable buying of bigger items such as cars, electronics and clothes in the post Xmas sales.

All in all, it is more money for the UK government, less for consumers, retailers, wholesalers, producers.  Labour's Ed Miliband is opposing the increase, but like an ostrich in the sand he never says what spending he would cut, what taxes he would increase, and given Labour is so overwhelmingly to blame for a decade of reckless overspending, he has no credibility except for the whinging unionised public sector workforce and those who don't want to be weaned from the state tit. 

The Opposition's only response is to say that the UK government should not cut its overspending so fast, delaying the inevitable, and increasing overall public debt levels - but if you're a socialist who wants to remain willfully blind about government borrowing why shouldn't you just be on the side of "the people" in promoting the same ignorance?

Of course there is no need to increase either tax, it will suppress demand and suppress the private sector.  There is still plenty of scope to cut public spending, such as eliminating child benefits and winter fuel allowances for those not in poverty, getting rid of subsidies for "green energy", not pursuing an unprofitable high speed railway pet project and not increasing foreign state aid.   The British state has grown like an obese nanny never sated on desserts.   Tax increases delay economic recovery and help cement the fact the UK economy is now 50% consumed by the state.

Thatcherite government? hardly.