Thursday 10th September

Is that it is never perceived as fair.  The Beatles in ’66 opened their album Revolver with the George Harrison song “Taxman”, complaining that they were being taxed so highly.  And they were.  Super-tax was 98%, but only on very high incomes, but still….Gradually income tax rates have fallen, as personal and other allowances have increased.  I can remember paying 33% income tax and National Insurance and Graduated Pension; around a third of our wages used to go in tax of one sort or another.  Now, all major parties are almost forced to promise not to increase income tax before each election.  V.A.T. is, by one way of looking at things, a fairer tax – in that the more money you have the more you are likely to spend so paying more tax.  But everyone pays V.A.T, the unemployed, the disabled, even beggars – so is that fair.

The unfairest element of taxation is that there are basically two sorts of taxpayers; those who have no choice and those who can, to some degree, decide how much tax to pay.  Most of us are on PAYE, and have no control of the income tax we pay, even any paltry interest we might earn from a bank or building society is taxed at source, and VAT, though not shown separately is added onto most things except food.  But the self-employed, or company directors mostly declare their own tax, and it is very easy and tempting to under-declare your income; after all the chances of being checked are very small.  Directors can decide how much to pay themselves a salary and how much as dividend and often purchase large items through their companys, so avoiding VAT altogether.  Whether this is strictly legal or not is not really the question.  Is it fair?  Almost certainly not, but almost any system will be manipulated by those most able to.  Until we have a system where every financial transaction is seen by Government we will never have a fair tax system.  But do we really want that sort of scrutiny anyway?