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The higher a tax is, the less willing people will be to do the activity being taxed
Photo: REX
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THE most interesting thing about income tax is that it is not permanent. When
William Pitt the Younger introduced the levy on salaries in 1798, it was
supposed to be a temporary measure to pay for the Napoleonic wars. The
pretence that it would soon be ditched led to some rather peculiar quirks in
British law. The reason Britain has to have a finance bill every year – even
if there were nothing of substance in the Budget – is to give the Government
legal power to tax incomes for another year.
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But now, against all expectation, some people are seriously talking about
bringing an end to income tax – or, at the very least, cutting it back
seriously. Some experts are imagining a world where you don’t pick up your
monthly paycheck to realise with horror that the Government has already
extracted half your income.
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Before you get too excited, no one is talking about an end to taxation. As
long as we have a state – particularly one that needs to provide its
citizens with everything from safety and protection to roads, health and
unemployment insurance – there will be taxes. No amount of “efficiency cuts”
will bring the total tax burden down to zero. As Benjamin Franklin declared
back in the 18th century, “In this world nothing can be said to be certain,
except death and taxes.”
That much remains the case today, and with the new Government gearing up for
its emergency Budget a month from now, the omens – at least for taxpayers –
are not good. So large is the hole in Britain’s public finances – and so
poor are governments, historically, at cutting public spending – that it is
now almost inevitable that taxes will have to go up.
The only question is which taxes. And this is where things get interesting.
Historically, Britain, like many of its European neighbours, has tended to
raise slightly more money through direct taxes – like income tax, and
corporation tax charged on companies’ profits. But there is a growing body
of evidence that it should be focusing more on indirect taxes – those which,
like VAT, …
Read the original article at Telegraph
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Tags: britain, Budget, finance, government, Incomes, Insurance, legal, money, pay, taxes, taxpayer, UK, Unemployment
