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

Wednesday, 14 May 2014

Gary Barlow, Pfizer & some Increasingly Common, but Stupid & Illiberal Ideas

Gary Barlow, formerly of take that invested in a scheme which has subsequently been ruled offside by HMRC. As did Jimmy Carr. Neither of these individuals is a finance professional. They were advised that these schemes were legal, followed advice which subsequently turned out to be wrong.

Upon losing the case with HMRC, the investors in these schemes will get presented with a bill for the tax they avoided. If they pay up, with interest, that is that. No criminal proceedings. Tax is complicated, and there are a lot of grey areas, especially when you have multiple streams of income from royalties, employment, investments and so-forth. This is why people employ accountants to ensure you pay the taxes you owe, and not a penny more.

Calls to strip Barlow by Labour MPs (including from Lady Margaret "the Dodge" Hodge, whose own tax affairs have been called into question) of his OBE are therefore grotesque and vindictive. I am sure this is entirely unrelated to the fact Barlow is a Tory supporter. Tax is not a moral issue. You pay what you owe, and if HMRC and your accountant disagree how much you owe, then the dispute is settled in court. This is what courts are for. Tax should always be seen as a strictly legal issue. Morality doesn't come into it, however much lefties wish to invoke morality to ensure that more tax is paid (by other people).

Almost no-one pays extra tax voluntarily. But you can lefites; put your money where your mouth is or shut up.

Pfizer is attempting to buy Anglo-Swedish pharmaceutical company AstraZeneca, and they intend to move their Brass plaque to the UK too. Labour are worried about asset-stripping, amid high-minded waffle about something called "the UK science base". AztraZeneca has about 15% of its people in the UK, and has itself been closing labs, due to the fact it faces a patent cliff. If you don't know what a "patent cliff" is, then you shouldn't be having an opinion on the takeover at all.

It is unlikely anyone buying AstraZeneca would close good, productive labs, especially ones close to a large and internationally respected university like Cambridge, at the hub of a Pharmaceutical and Biotech cluster called "silicon fen". Indeed that lab, in which AstraZeneca has recently invested is one of the things that would be worth keeping. And if Pfizer don't want it, if it's that valuable, it can be sold to someone who does.

The UK listing is another. The US charges tax is a perverse way - money earned overseas, on which tax has already been paid may face further taxes should the company wish to bring profits onshore. Broadly speaking No other countries do this. The US has been able to get away with this for now, because the US is so important. But companies like Pfizer, and Apple whose "problems" with their enormous pile of useless overseas profits will only grow may choose to move their head office to a friendlier regime in order to sidestep this problem.

This means US business will still get taxes charged in the USA. But all other profits will be charged and taxed in the non-US jurisdiction (in Pfizers case, the UK) and the movement of profits for investment will not face US taxes that no other jurisdiction would think to charge. Yes Pfizer is "tax-dodging" but the beneficiary of this is HMRC who're simply less vindictive and stupid than the IRS.

Despite this vast inward investment (£26bn or so) that Pfizer is making in the UK, Ed Miliband invokes fears of "Asset Stripping". Indeed all asset-stripping is, if done profitably, is selling assets to people who value them more. Being against this process is just left-wing flat-earthism. Much like the cant about Gary Barlow's tax affairs.

There's a kind of Hysteria in which anyone who gets into a dispute with the tax-man, or who seeks to quite legitimately reduce their tax bill is seen as a "tax-dodger" and so beyond the pale. It's stupid, it's illiberal and it harms business and prevents investment. A Miliband-led UK will be a great deal poorer as a result.

Wednesday, 4 December 2013

Labour's dishonesty on tax.

There are few things that annoy me more than watching Labour complain about a "tax-cut for the rich". The top rate of tax is higher under the coalition than it was for all but one month of Labour's time in office. The rate was raised as a nasty political ploy in order to trap the coalition. Labour raised a tax, knowing it would be damaging, simply so they could accuse the Tories of being "for the rich". I cannot think of anything more damaging than using the tax-system to score political points.

This is why Labour ruin everything, every time they get into power.

Never, ever let them get in again.

Wednesday, 10 April 2013

A Better Basis for Taxation

I don't like tax, but if we absolutely have to raise some taxes, it's better if it's raised in ways that have other benefits.

Fuel taxes reduce pollution and congestion. Tobacco taxation reduces smoking and so forth. Land value taxes increase the assortiveness of the property market. The added benefit is these taxes are extremely unpopular, which limits the amount Government can raise. Now... all we need to do is ban PAYE. Once everyone has to write a cheque for income tax and national insurance, it will be at least as unpopular as fuel duty.

Wednesday, 28 November 2012

Minimum Unit Pricing for Alcohol

Cameron seems to think a minimum unit price for alcohol is a good idea. It isn't of course, it's the worst type of New Labour nanny-state idiocy. You know that, I know that. What's important is who the enemies of liberty are, and how they use their positions in a conspiracy against the public.

The medical political complex has become dominated by a kind of purse-lipped puritan, who sees the maintenance of life as its sole aim. To these people, the poor especially must be bullied, for that is what it amounts to, into "healthy lifestyles". To this end, government must see to it that the poor especially must be prevented from doing harm to themselves. Especially by smoking, drinking and taking drugs.

The war on smoking is going well. The habit has been de-normalised in much of middle-class society, remaining widespread only in the working class. The ban on smoking in pubs has caused tens of thousands of pubs to shut down. Not, of course the nice gastro-pub in which the members of the medical/political complex might take their 21 units a week (a number for which, of course there is NO evidence), but the kind of local boozer in which a builder might enjoy a pint after work. Builders, who are more likely to smoke than public health professionals, have responded to the incentive provided by the smoking ban by going to the supermarket for lager, and watching the television at home, where they are (still, just) allowed to smoke, instead of socialising with their friends and work colleagues.

The public health professional is not now satisfied with the steady decline in smoking. They are now going after booze, in a big way. And they are fundamentally dishonest. The UK has relatively low consumption of alcohol. Consumption of alcohol is falling. Young people are drinking less than ever. Of course some people go out and get squiffy on a Friday night, but THEY ALWAYS HAVE and much of the vomit and blood on the street is down to insane licencing laws that see local pubs shut (no "entertainment" you see) and vertical drinking barns with bull-necked bouncers who delight in giving random kickings, stay open late. People are herded into noisy "venues" only to have all of them shut simultaneously, leading to fights in kebab queues and taxi ranks. Stressed, drunk people whose jackets are probably still in the cloakroom of the club they've been kicked out of, and by whose bouncers they've had kickings, are herded around by increasingly officious and aggressive people wearing high-viz, until the police arrive and add one more person to the crime & disorder statistics.

A free market in the night-time economy wouldn't look like that.

Sheffield university's Professor Petra Meier's MODEL-BASED APPRAISAL OF ALCOHOL MINIMUM PRICING is being widely touted as evidence that minimum pricing works. It's nothing of the sort, of course. It's a model. If you assume a policy works, and put those numbers into a spreadsheet, you can estimate by how much consumption will fall at different unit prices. All you need is a title - in this case two PhDs and a Professor - to be believed when you say "but the model shows that consumption by problem drinkers falls the most". But it is by no means evidence that the policy will work. It's a tarted-up guess. It's policy-based evidence making, and hoping no-one challenges you on the data.

In a word they're lying to you. But by repetition the lies become the accepted truth.

But it's not about whether an intervention into minimum pricing would work. To make the argument about that risks the medical/political complex actually finding it does work, within their parameters, and being encouraged to ban bacon. Is a drop in alcohol consumption a good thing? Why? We probably want to cut the blood and vomit on the street on a Friday night, but that isn't about booze, it's culture, law and licensing. Why fight on ground of the puritan's choosing?

The question should whether it's the state's role to intervene in pricing. Because once that rubicon's been crossed, you can bet we're back to fighting the cold war again as price-planners flood through the economy, and every decision gets scrutinised by your GP. We will see restrictions on fatty foods. And before long, no-doubt the nation will be forced (for the good of the NHS) to do their press-ups and sit-ups every morning, in the road, where you can be inspected. Minimum pricing therefore is about whether the state has a right to tell you and me what we do with our bodies.

I like a glass of wine now and again. Once in a while, and less often than I used to, I like to get squiffy with my friends. This is absolutely none of the government's business. And it's the poor who suffer most. Pubs in poor areas were  already marginal businesses, and they've gone. So the low-waged have seen their social forum shut, increasing atomisation and alienation. And all because the temperance lobby don't like the sight of men with cigarettes and a pint. The poor have been driven to a WORSE health outcome by the smoking ban. And because their lives are a bit less social, the harmful drinkers may well drink more. Of course, if this is the case, there's no evidence, because there's no-one looking. The temperance lobby got their policy, and they've moved on.

This isn't about health. It's about a certain type of curtain-twitching middle-class puritan, drawn to careers in public health who see the poor not as people, but a problem to be tidied up. This is true of slum clearances which destroyed communities in the name of public health, and it's true of the modern-day temperance crusade.

My prediction: This policy will be declared illegal under European law as the Scottish experiment is shot down. Cameron will use that as a pretext to drop a policy in which he's invested, but on which the rest of the Cabinet is less less keen. He will use it, like the votes for prisoners, as something on which he will "stand up to Europe". We will still hear the confident assertions medical/political complex go unchallenged on the Today program.

Further reading on the subject: Heresy Corner's post is very good and Christopher Snowdon's blog is excellent on the litany of lies by public health professionals and the temperance industry. You should read it.

Wednesday, 21 November 2012

Starbucks, Tax and Idiocy.

On my local high-street, which leads up to a market square there is an independent coffee shop, Cafe Rouge, Thorntons, Greggs, Costa Coffee, and on the Market square there is an independent next door to Starbucks and another selling coffee from a trailer in the middle of the Square. All of these are within 300m of each other. All of them sell coffee, as do the 5 pubs and two other restaurants which you would pass were you to walk from one end of the high-street to the other. That's before you consider the 4 sandwich shops which also sell coffee to take away. At nearly half the premises in the high-street, you can buy a coffee.

Is anyone surprised that Starbucks is not making money in the UK?

The UK's corporation tax rate is 28%. Starbucks paid a rate of 31% globally. Surely they should be declaring profit here if they can?

Once again, the UK uncut crowd are simply wrong; but that didn't stop MPs jumping on the bandwagon. What must be especially galling for a company making little profit in a brutally competitive market-place is being hauled in to face questioning by a new-Labour parasite like Margaret Hodge. Hodge, herself a multi-millionaire whose family business, Stemcor also pays its tax globally, at a global rate of 41%, (which suggests they need a better accountant) but pays very little of that in the UK. Hodge may not be an expenses cheat, but that's probably because she was born into the fabulously wealthy Oppenheimer family and doesn't need to be.

What's really pissing me off is the reporting of tax as a proportion of revenues in order to give a low number. If your margins are low, as in food and beverage retail, you can have huge turnover, off which you're skimming a little profit, after wages, payroll taxes, overheads, materials, property and so on. Taxes as a percentage of revenues is an utterly meaningless number, yet this is becoming the dominant ratio in the idiot left and the mainstream media.

So here's a little guide. Revenues is the money you take from customers. Corporation Tax is NOT calculated on this number, Value Added Tax is, and no-one's suggesting VAT is being avoided. Then there's costs of sales, which represents all the things you do to make those sales such as employ people, buy materials and stock, rent or buy premises. You also include your central functions, such as HQ staff and buildings. Revenues less cost of sales is known as 'operating profit', or sometimes 'profit before tax' or 'pre-tax profit'. You then apply the tax-rate to that number.

Please don't report tax as a percentage of revenues and call it tax-dodging because that marks you out as an utter moron with shit for brains.

Thursday, 6 September 2012

Ed Balls' "Wealth Tax"

In an Independent "exclusive", Ed Balls has said he's going to impose a "proper wealth tax". Wealth taxes are window-lickingly stupid and anyone advocating them is an economically illiterate moron. here's why:

  1. Moral hazard. It penalises those who save for retirement, pay off a mortgage and seek to not be a burden on the state, against those who spent their surplus income on Beer and Cocaine.
  2. As Tim Worstall points out, a well-off retiree might face a wealth-tax greater than their annual income.
  3. Real wealth is very mobile. No-one is going to stick around or let their money stick around to be taxed by the government. The left hand side of the laffer-curve on wealth taxes is very short. For this reason, the super-mobile top 1%, who pay 25% of income taxes will leave for Switzerland, Monaco or the Carribean. You end up therefore not taxing the 1%, but the less-mobile upper-middle income retirees instead. Even here, a wealth-tax increases the attractiveness of the Costa-del-sol, where retirement property is currently cheep, like a budgie. The wealth tax may, and probably will, therefore end up costing the exchequer.
  4. For the reasons laid out above and many more, wealth taxes are very hard to collect. Dennis Healy, former Labour chancellor of the exchequer during the 'winter of discontent', no rich-pandering neo-something he, said in his memoirs "in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and the political hassle"
  5. Though to be fair, that the hapless Healy thought something impossible does mean it actually is.
Wealth taxes are so utterly stupid that even Gordon Brown's lickspittle, Ed Balls is not actually proposing one. He appears to be entering negotiations with the Liberal Democrats by suggesting a mansion tax instead. He's just appeasing his own moron supporters by calling it a wealth-tax. I've no problem with a mansion tax, but it would be best imposed putting a few more council tax bands on at the top, rather than designing another silly, gimmicky tax with its own bureaucracy of Labour-voting trades unionists. However increasing council tax, even on the rich is political suicide because of the Daily Mail.

So. Everyone's wrong. Democracy: doncha love it?

Friday, 22 June 2012

The Jimmy Carr Tax Trick.

Self-employed? Sick of paying tax? Here's how Jimmy Carr got away with paying 1% on his income.

  1. Resign from employment in the UK
  2. Establish a company based overseas
  3. Get hired by the offshore company, on a minimal salary, say £8,105 per year.
  4. Pay any earnings directly to the offshore company
  5. Receive large interest free loans from your company
  6. Declare these interest free loans as tax liabilities to reduce Income Tax payable to HMRC
It stinks so bad, I might have to try it.

Wednesday, 20 June 2012

Filthy Lucre

Of course, following the bust in 2000, over a decade of poor returns means those excitable investors who got into shares following 'Big Bang' and the privatisations, got burned and left. While share ownership is a bit broader than it was pre-1986, it is being seen as increasingly the preserve of the rich or institutions which manage pension funds. Companies are increasingly eschewing a listing on public markets, preferring to tap other sources of capital. The Economist is in no doubt as to why.

The burden of regulation has grown heavier for public companies since the collapse of Enron in 2001. Corporate chiefs complain that the combination of fussy regulators and demanding money managers makes it impossible to focus on long-term growth.
I've also seen the bleat from the left about companies like Boots being taken private. Suddenly the left is reaping what it sows. If you make it difficult to raise risk-capital on the stockmarket, you cause people to seek other, less onerous sources of capital. This means the returns available to the private equity industry (which haven't been all that good) are not available to the private investor, or his pension fund. This benefits no-one except the caste of city/wall st. insiders.

In the name of equality, share transactions and dividends are taxed, further promoting debt finance over equity. Executive pay is being regulated, further weakening any incentive to go public. The left through rhetoric and regulation is destroying a means by which ordinary people can take control of their lives through investment.

It's not just at the level of the company. In the name of protecting investors, regulations ensure it's difficult to give advice, especially on small amounts of money. So the poor are vulnerable to the bucket-shop, leading to poor strategies and lost money even where there is not outright fraud. Private investors are encouraged by tip-sheets into wildly inappropriate stocks because their broker isn't allowed to point them in the right direction. Banks are the most complained-about sector on the high-street. They are also absurdly tightly regulated, selling investment "products" larded with fees with opaque performance measurements designed to comply with regulation and keep the customer in the dark thereafter. If that same person wanted me to suggest a share for him to dabble in the stockmarket, I would be breaking the law. The bank can chuck his money into a crappy fund and forget about him drawing commission every year for doing so.

The greatest engine for investment has been broken, not by excessive risk-taking (that's what the stockmarket is FOR) but by over regulation based around the foolish notion that a chaotic system can be rendered safe. What's left is the kind of big, regulated utility which doesn't offer the returns to attract the hot money (utilities) massive hype businesses whose owners want to cash out (glencore, facebook) or crappy aim-listed mining juniors whose shareholders are ultimately betting on the financial equivalent of three-legged bob in the 3:15 at Epsom. The rest are there out of habit, until they're taken over or taken private.

Regan's epithet about the Government's view of the economy is aposite:
"If it moves, tax it. If it still moves, regulate it. If it stops moving subsidise it."
Big business still needs the stockmarket. But only just, and not as much as you, me and your pension fund need it. The Government needs to let it breathe. This is how regulation makes us poorer without making us safer.

Stamp duty (our very own Tobin tax) needs to go. Restrictions on advice need to be softened. Taxes on dividends need to be cut. Share ownership is a means to the ownership of capital open to the masses and it needs to be encouraged, not tamed.

Monday, 26 March 2012

Pigouvian Taxation, Externalities and Markets.

Tim Worstall, Writing at the ASI makes an interesting point about Pigouvian taxation. Namely that politicains will see them as a source of revenue rather than simply trying to disinterestedly find the level of Externalities to build into the price.

And I'm afraid that the more we see of entirely righteous Pigou Taxes the more we see of this behaviour. I pointed out in these very pages some years back that if we applied the Stern Review to petrol taxation then fuel duty should fall by 12 p a litre: since then it has risen another 5 or 6 p still using Stern as the justification. Air Passenger Duty was set (amazingly, by Gordon Brown) at the Stern level of some $80 per tonne Co2-e: it has been doubled at least since then purely for revenue purposes.
Of course that's the "pigouvian" element of these taxes. But many taxes, such as land value and fuel duties are not just pigouvian searches for the correct price for the externalities. In the case of APD and Fuel, this "externality" is the price of climate change caused by CO2, but They are also part of the system of taxes which set the price on the use of a scarce resource: Road and Air space. Here the "correct" price is whatever the market will bear to ensure the (for example) roads run full, but not congested. So it's possible to argue that road space (as priced by fuel duty) is too expensive for 12 hours a day (overnight when the roads are empty), far too cheap for 4 hours a day, and about right for the rest of the time when the road flow is high but laminar.

Taxation can be used to ensure a more efficient use of a scarce resource. A tax on the value of a property for example, will provide an incentive to buy a house no bigger than you need, encouraging Granny to move out of her 4 bedroom house earlier than she may have done, increasing supply for those who may well value these scarce properties more: Families with children.

There are NO upsides to income taxation. Given that the money needs to be raised somehow, wouldn't it be better if our taxes helped ensure assets were used more efficiently? These are also taxes that can be avoided by changing behaviour, which makes it harder for a Chancellor to take a higher share of the national pie than people are comfortable with. Income taxes are an unavoidable punch in the face. A pound raised from pigouvian tax, even a tax set at too high a level is better than one on income or corporate profits, that reduces the supply of jobs.

Finally, the very fact that these taxes are deeply unpopular is a good thing. It is harder politically for the Chancellor to screw more out of drivers than he is doing. However he is under constant pressure to increase taxes on "the rich" (i.e. people other than "me"). If the basis of taxation moved towards consumption, the chancellor, rather than finding it easier to raise money and spend more, will find it harder as people change behaviour to avoid the tax, and agitate against it if they can't.

Tell me that's a bad thing.

Thursday, 8 March 2012

Entry for most inapropriate paraphrasing of "First they came..."

Fuel Duty, stamp duty, council tax, parking charges. People HATE these taxes and campaign on the basis that these taxes are "unaffordable". Well, they're not, because people keep paying 'em. QED. It might hurt, but that's a feature, not a bug. I'm not arguing they're fair or reasonable. But this really is a case of liking taxes levied on other people. People whinge when they're taxed on what they like to do.

The underlying problem is that the British state spends 50% of GDP and is raising 40% of GDP in tax. We're taxed too much because the Government is spending too much. It's spending too much because for 10 years from 2000, when the one-eyed Scots maniac abandoned Tory spending plans, the Government spend with the care and attention to effects, of a man urinating after 10 pints. When the Government is spending 40% of GDP or less THEN people can whinge about wanting a tax cut. Until then...

First they came for the smokers, and I didn't speak out because I am not a smoker.
Then they came for the petrol, and I did not speak out because I drive a prius.
Then they came for my drink and I didn't speak out because I drink less than my doctor.
Then they came for my house, and because I'd supported every other tax rise, while voting for Labour to piss other people's money at my problems, everyone else told me to "suck it up, you selfish twat."
(With apologies to Martin Niemoller) More tax needs to be levied, and if you've ever voted labour, it's your fault. With consumption and property taxation, at least you have a chance to avoid it, if you wish. Give up smoking, buy a bicycle and drive less, get your booze from Calais cut down the drinking, or buy a smaller house when you no longer need four bedrooms. This is much fairer than income taxes, which everyone seems to think are paid by the rich alone. Look at your pay statement. How much extra consumption tax could you pay, if that big chunk of your income didn't dissapear into the Government's maw each month? Consumption taxes are taxes on idiots buying a new BMW because his penis is small, rather than making do with a cheap 2nd hand runabout.

If people decided to take a bike or walk to the shops, they'd be healthier, and free the roads for those who need to drive. Fewer smokers, better health; (I don't like saying this) more expensive booze, possibly less blood and vomit on the street on a friday night. A tax on of big properties will increase the supply of family homes for families, as it creates an incentive for Grandma to downsize BEFORE she's incontinent. These taxes have positive, as well as negative effects. Income tax is just a punch in the face with no redeeming qualities. National insurance is a punch in the face which comes with a P45, without any redeeming features. Corporation tax is an just income tax (upon whom does the incidence of corporation tax fall?) which comes with a rejection letter from applying for a job after you've been fired because of NI increases, with no redeeming features.

To be honest, I think tobacco and alcohol are probably already taxed enough, but the principle of taxing activities with negative externalites is a sound one. Cut taxes on payroll, income and profits. Raise them on use of resources with short supply, specifically roads and big houses, to ensure more efficient use by those who value them most.

Why is it worse to pay council tax than income tax?

Tuesday, 6 March 2012

Is Vince Cable Right?

The 50p rate is a silly tax and raises little if any money, so needs to go. Osborne appears to want this. Both the Tories and Lib-Dems want to raise the income tax threshold to £10,000. This makes sense too. Why tax people earning less than a "living wage" and make them beg for some of it back? This seems perverse. This tax cut offsets any benefit cuts suffered by low-waged workers and makes a great deal of sense and seems fair. Politically, I can see why "the rich" need to be seen to pay more, even if I disagree they do.

Economically speaking cutting the 50p rate is a free win for the exchequer because it's raised a great deal less than expected and may actually raise more money at 40% (the jury's still out on this one, though I suspect the IFS will show the 50p rate has cost the exchequer...). Raising the tax threshold however is a genuine tax cut. As such, we at this blog are not punk-Keynesians who believe that more deficit is any form of "stimulus". This means a raising of the tax threshold to £10,000 either needs to be matched by spending cuts (the best option) or a tax raise elsewhere.

Given that further spending cuts are not on the table, the question is what to tax. I am in favour of cutting income and payroll taxes, as well as those on capital and profits in order to raise taxes on consumption. I am also persuaded by the economic rationale for land value taxation, which is why council tax doesn't get much abuse on this blog.

According to the BBC news, the options are extra council tax bands at the top, an increase of stamp duty, or a mansion tax on properties worth over £2m. A Mansion tax is silly. Why introduce a new tax, when there are land value taxes in place which could be modified? Although this was in the manifesto of the wooly-inbetweens and will probably be the most politically easy to implement, it's not the right option. It's distortionary, creating an arbitrary cut-off at £2m and will hardly raise any money at all, and with an additional bureaucracy for a new tax, is gratuitously inefficient.

There are not enough of these to make a "mansion tax" pay

An increase in stamp-duty on the most expensive homes is probably the next most politically likely. After all, you only pay it when you sell or buy which for most voters is far enough away to be ignored. Gordon Brown did this, and the result was a much less efficient market, one we're still suffering now. Transaction taxes like this reduces liquidity in the housing market. A Tobin tax is a silly idea for shares, and houses are no different. Such a tax will encourage people to hang on to homes they rattle around in, thus increasing prices of four bedroom family homes for those, young families, who need them most, but can't afford them. They're paying income taxes, effectivly subsidising grandma's three spare bedrooms in which nick-nacks gather dust. Transaction taxes are stupid. They decrease liquidity and predictability of markets, and therefore increase volatility. These are not good things in a market as central to an economy as residential property.

By far the best, most economically efficient tax, with the fewest economic side effects and one or two positive effects too is to simply increase the number of council tax bands, increasing the council tax on the biggest, most valuable homes. This will encourage empty-nesters to move down the property ladder, freeing family homes for, well, families who need them. It will encourage a more liquid, and therefore less volatile and more predictable property market. The act of downsizing your property will free vast amounts of capital currently tied up in property, to be redeployed elsewhere in the economy. It will increase incomes for pensioners who downsize.

One of the biggest structural flaws of the UK economy is the love affair with bricks 'n mortar. By taxing property to pay for an income tax cut you replace a damaging tax (high rate income) with a less damaging tax (property value), and improve the liquidity and assortiveness of the UK property market into the bargain. You also increase the amount of tax raised locally, increasing the power and prestige of local government, which fits the Government's localism agenda.

However. This isn't what will happen. The arguments in favour of raising council tax are too difficult, the tax too unpopular to be the vehicle to replace the taxation of income between £7,000 & £10,000. What will happen is that a "mansion tax" on "the rich bugger down the road" will be levied and an opportunity to reform council tax will be lost. There will be a tax cut. There will be a replacement tax, which won't raise as much as income tax on income between £7,000 and £10,000 and therefore the deficit will go up. The property market will be made a little more complicated and a little less liquid.

The Tories are half right. (actually a bit more than half). The Liberal Democrats are half right (actually a bit less than half). Half times a half, is a quarter, so I suspect the coalition will be a quarter right. This is why tax systems should not be designed by a committee.

Thursday, 5 January 2012

Sin Taxes, Incentives & the "War on the Motorist".

For 50 years, the roads have been designed exclusively for the car, to the exclusion of almost all other means of transport. Branch lines were axed on the rail-network and the rest fell into unionised disrepair, motorways were built, tramlines ripped up and buses (outside of London) were neglected as the choice of the underclass. Little thought was given to the bus, cycle or pedestrian in the design of roads, or if they were, it was about controlling the pedestrian with cages and detours, in order to keep the motorised traffic flowing. Town centres were wrapped in urban dual carriageway circulatory systems leading into and out of multi-storey car parks. Unfortunately, the experience of road-building is that any increase in capacity is rapidly filled, and despite the investment, the experience of the driver in most of the UK is pretty miserable.

As a result, any removal of road-space from the private motor car, for bus lanes, cycle lanes or other forms of public transport is enormously controversial, and seen as part of a "the war on the motorist", who feels over-taxed, and generally put-upon. Because racism is no-longer allowed, the most vituperative comments on Local papers' 'sPeAK YoU'RE bRaneS' boards are reserved for cyclists who are all red-light jumping, suicidal, pavement-riding, road-hogging Lycra Nazis who are in the way. Angry yet smug, they are the cause of all that is wrong on the roads.

Of course driving can be fun. The open road (ha!) or a race-track. And we've all experienced the joy of giving it the beans when given the opportunity. This is what people think driving SHOULD be like. It isn't.

Driving is NEVER like this...

Driving is uniquely stressful, especially in stop-start traffic. This is why cyclists are so hated. The unexpected flash past the window merely adds to the stress of the motorist in the urban queue who immagines actions to be far more dangerous than they actually are. The disconnect between how driving is, and how it should be, combined with the envy of the cyclist, as he makes progress, ignoring the red light (when safe, I do so to get out of your way...) and nipping in and out of the traffic, leads to these feelings of hate and rage. Of course, if you're sitting in traffic, you're part of the problem, not me...

Now my principal interest, as an occasional motorist myself, is to have smooth traffic flow and as stress-free a journey as possible. The problem comes at pinch points which set the capacity for an entire system. For example, the M4 (of Jeremy Clarkson's bus-lane fame) into London from Heathrow has its capacity set principally by the Hogarth Lane roundabout in Chiswick and a 2-lane overpass between junction 2 & 3. There's no point having a 3 lane black-top if it just pours vehicles over a bridge which will be backed up for 6 hours a day as a result. The thinking behind the bus-lane is that a significant chunk of that traffic will be doing one route: Heathrow to West London. A bus will take cars off the road, freeing capacity, for people who want to use a car, and presenting another option for those who haven't a car parked at Heathrow, and for whom the train or tube is inconvenient. It takes excess capacity off the road, leading to the pinch-point, meaning at peak hours, the traffic flows slower into the junction, leading to fewer tail-backs. Thanks to Clarkson, the bus lane is no more, and there are more delays as a result.

This is also the thinking behind variable speed limits when the road is clear - for example to ease the congestion at Junction 6 (spaghetti junction) of the M6 whose capacity is exceeded almost every day, you often see 50mph limits on the overhead gantries for 20 miles leading up to it. Of course everyone ignores variable speed limits and Junction 6 stops moving every day (Advice: the M6 Toll road between junction 4 & 11 is well worth £5. If this blog can teach you anything, never, unless you absolutely have to approach junction 6 of the M6. You will be there for hours...).

So here's the rub. Traffic engineers can look at a system and suggest that IF everyone does X, we can have capacity Y. But motorists don't like being told what to do, and rarely believe it's for their own good. The legacy of the hated Gatso camera (which I want to see removed), speed bumps (cyclists hate these at least as much as motorists), one-way systems, all designed to make traffic flow better, but end up making drivers even more stressed. And a stressed driver is an aggressive driver. And that makes no-one happy least of all, me on my bike.

From a recent twitter thread: "£8bn in spending on roads, but motorists pay £30bn in taxes." or variations thereof is an oft heard refrain. So let's look at this in more detail. Vehicle Excise Duty (a tax I've long argued should be abolished) raised £5.4bn and fuel duty raised £24bn. Fair enough. But this isn't a hypothecated fund for road building. It's more akin a usage fee for a scarce resource, in this case road space. It is also designed to cover the externalities of CO2 emissions (whatever you think of this, I'm not interested right now), noise, pollution, and congestion.

England (see comments) is the world's 3rd most densely populated country (ignoring micro-states) after Japan and the Netherlands. The greater south-east is the most densely populated area in the world. There just isn't the room for everyone to use their cars at the same time. So bear that thought in mind when reading the next few paragraphs. What this enormous £30bn tax bill represents is a colossal mis-pricing of an asset. Roads are far too expensive for 12 hours a day (9pm-6am). They are far, far too cheap between 7:30 and 9:30am or between 4:30 and 6:30pm. They're probably about right (given that they're full, but running smoothly) during the rest of the day.

So. You've a problem for 4 hours a day, across much of the south-east as everyone tries to get to the same places at the same time, by the same means of transport. You've got 3 options.
  1. Build capacity. The problem is that if you build enough capacity, you get Milton Keynes or in it's extreme form, Los Angeles. Free Parking in LA has been a curse. A 2 bed semi in Milton Keynes costs £315k compared to £500k in 'war on the motorist' central, Cambridge. This differential despite the fact that Milton Keynes has better connections, and is an easier commute into London (the strongest correlator with house prices). People don't choose to live in a car-paradise, because cars though lovely to be in, impose enormous externalities on everyone around them - noise, pollution, danger - when they move faster than 20mph. The market has spoken. People like their car. They don't like other people's, and they will put up with restrictions on its use for quality of life.
  2. Encourage alternatives, which means laying on buses, trains, trams and designing the roads so they aren't savagely hostile to all but the most aggressive and confident cyclist. The fact I am not in a car, is one less car in the queue up the hill to the roundabout. Motorists should recognise this and welcome it. The problem is cycling is uncomfortable to the weak (yes I do feel utter contempt for fatsos in boxes...), and buses are just nasty. So that in itself is not enough.
  3. Discourage motorists at peak hours. This is the argument behind the congestion charge. I don't like road pricing mainly because of the surveillance aspect of it. I don't like 'the man' being able to track my movements. Instead I prefer the widespread use of parking charges as a proxy for road pricing. This isn't a "nudge", but an application of the principles of the market to road congestion. Councils encourage short-term parking for shopping, with nominal short-term ticket charges, rising sharply should you wish to park all day (which is often not possible at all in a council car park). Further more, councils charge an annual tax on office parking spaces -£600 in the last example, to discourage commuting and encourage the use of alternatives. Clever use of technology will allow motorists to pay when they leave for what they've used, rather than using penalties and traffic wardens, which just creates more stress.
On top of the externalities motorists impose on themselves, like congestion, cars impose externalities on everyone else when they move. (Don't even try to deny this. Would YOU want to live next to a main road...?) especially when they move faster than 20-30mph: These externalities which reduce the qualitiy of life for those around them are principally Noise, pollution and danger, which are reduced to almost nothing when the speed drops. This is the reason most residential streets are being closed off at one end to prevent "rat-running". The campaign for 20mph zones in urban areas isn't a war on the motorist, but an attempt to help people who live there, live with cars safely and without stress. Intelligent road design can achieve this without further stressing the motorist. The point is, where the road design is intelligent, the average motorist doesn't notice it. I do, because I am a road design bore.

So, motoring & parking charges are seen as "sin taxes" on what most people regard as a necessity. They aren't. Nor are speed limits below what you think "safe and reasonable" or traffic calming measures a politically motivated restriction on your freedom. They're mostly about demand management and safety. This is why the Tax Payers' alliance is wrong on 'Sin Taxes' which according to them "either work, or raise revenue. They can't do both". They can, of course, it's just a question of where any particular tax is on its laffer curve, something the TPA is fond of pointing out in other contexts. If a 5% rise in tax leads to a 2% drop in use, you have raised money AND had an effect. In any other context, a market-pricing system for use of a scarce resource would be lauded by the TPA, but not, it seems when applied to the motorist, which is bizarre. Because the TPA are firmly of the (correct) belief that market price-setting anywhere and always leads to more efficient use of a resource, and therefore greater wealth for all.

So. All this stuff I've been writing about these last few days isn't about a "war on the motorist", nor is it particularly about cycling. It's about a fair crack of the whip for all means of transport, which all have their place in a sophisticated, decentralised, efficient means of getting people to the right place at the right time. If all you have is a hammer, everything looks like a nail. The UK is too car-centric, and needs to invest in alternatives, mainly to make the car itself work better. A benefit of fewer cars in our town centres MIGHT be a more pleasant and relaxing environment for us all.

I mentioned three countries more densely populated than the UK - The Netherlands, Belgium and Japan. All have embraced the bicycle as a means of urban transport, and both invest heavily in public transport. They do this because in parts of the world where lots of people live together, there just isn't room for everyone to drive. Motorists know this, deep down, and fear the loss of their privileged position in the hierarchy on the road. That is why any comment which involves addressing the necessity to control traffic is dealt with in such an angry way. Humans are irrationally loss-averse, and blind to opportunities. Just as benefits recipients fear the changes to the benefits system more than is reasonable, the motorist fears any alternative to the car more than is reasonable.

Note, I am not suggesting YOU can't use YOUR car, merely suggesting that government has a role in providing safe alternatives, even if you're a libertarian. If you're a libertarian, you should be in favour of market pricing mechanisms. This isn't government promoting anything, nor is it isn't a war on the motorist. Can we really go on sitting in traffic for hours (when I say "we", I mean "you". I'm long-gone)? Wouldn't it be better if, on a sunny day, you weren't put off taking a bike to work for a change because of a perceived danger? It's about giving the options, not taking them away. Wouldn't it be nice if there was an incentive for your employer to allow you to work at home? Do we really ALL need to make the journey to work at the same time? Without a pricing mechanism which captures at least some of the externalites, you will not have the most efficient use of resources, and we're all poorer for it.

Finally, and much more broadly, we have the wrong basis for taxation. Why do we tax jobs, leading to fewer jobs; why tax profits, we want more; why not tax externalities instead? Pigovian taxes make more sense than income taxes because the tax can create a positive outcome in more efficient useage of resources. Wouldn't that make sense?

Monday, 5 December 2011

The Darwin Economy

Robert H. Frank, professor of Economics at Cornell university has written a very interesting book called the Darwin Economy. The central Idea is that Humans are prone to decision-making which is optimal for the individual, but damaging to the Group, in a manner similar to the evolutionary Arms race which sees Bull Elk producing enormous antlers every year. Such adornments are costly, not only in the resources of calcium and protein, but also in the difficulty of moving in forests with such ungainly headgear, leading to predation by wolves.

Thus spending on such display items as cars and houses is excessive and sub-optimal. Humans being status-conscious beings, we feel it necessary to keep up with the Joneses, leading to an arms-race of consumption cascading from the super rich all the way down to the very poor.

This is market failure, but not in the way the left thinks, as is explained at some length in the book. Instead Professor Frank suggests it is a failure in the basis of taxation. Why do we tax things that are good, like income or jobs which we need more of? Why not tax things like status consumption or use of scarce resources, in which the effect of the tax is beneficial (lower mileage driven, fewer resources consumed, less excessive status arms-race) over and above the tax raised?

This isn't to say that tax doesn't take out of the productive economy, of course it does. But that the blow would be softened if IN ADDITION to the tax raised, there was some compensating behaviour change which made some people a bit happier. No-one benefits from a payroll tax like National Insurance in the UK. Many people benefit from lower congestion as a result of high fuel duty, not least the people paying it who would otherwise find traffic much more problematic than they do now were taxes less than 65% of the cost of their fuel. Perhaps a brand-new BMW (which as everyone knows will immediately turn you into a sociopathic tail-gating arsehole) should be taxed at a higher rate than a more utiliarian vehicle?

It's an interesting idea, but is perhaps over-argued. I'm not sure I appreciate the endless repetition of the zero-regulation, zero-tax Libertarian caricature in the book, which has me screaming "STRAW MAN" in almost every chapter. Most libertarians, on this side of the pond at least, accept the need for some regulation, especially in competition. Zero tax isn't a realistic propostion either and I am convinced by the Rahm Curve, with a peak at around 20%. Many Libertarians (including this one) even accept the need for some redistribution of income, to compensate people for the extent to which people's station in life is defined by luck (a lot more than most people think). Finally, redistribution is an important guarantor of social cohesion, preventing, in final analysis, the rich ending up swinging from a gibbet.

Where the book is strongest is in its defence of free markets. Many leftists think "market failure" is the observation that the rich have more options than the poor. It isn't. I would urge my left-wing friends to read it simply to hear a cogent and well-thought out explanation of how markets benefit ESECIALLY the poor. It is also why cash transfers are better at increasing utility, especially for the poor, than "free" top-down administered services, all areas which had me nodding in agreement.

I am not wholly convinced that the steeply progressive consumption tax Professor Frank advocates, should be the proper basis for Government revenue, but it certainly got me thinking. Certainly a properly constructed negative income tax or citizens' basic income fulfils many of the benefits of the free market that Professor Frank supports, in that they give the poor agency in how they spend the resourses available to them, rather than ceding all that agency to well-meaning bureaucratic agencies. Where I disagree with Professor Frank is the extent to which status displays and positional goods (especially access to education) hurt the poor. The mansion-extension example which crops up though the book may lead to bigger houses further down the income distribution, but I am not convinced this is a wholly bad thing. Maybe amongst vulgar americans, where relative size is everything (over here, of course, we pay up for age, which is um... better or something). And the benefits felt by tradesmen who will build the mansion extension appears to be completely ignored.

Everyone engages in status displays amongst those either side of them, and by and large, aren't that fussed by the lives of the rich & famous with whom they're not competing, however much media bien pensants think they shoud be. A progressive handicap system to status displays, as proposed, won't really change that desire to compete in status display. To decry as fundamental a human desire as competition as "waste" seems like social engineering and I'm not convinced by Prof Frank's explanation. Even Guardianista's eschewal of status displays can become competitive, as parodied in Viz's Modern Parents. The evidence appears to be that the demographic most upset by high GINI coefficients appears to be relatively wealthy lefties who frot themselves into a state of deep mailaise over the statisitics. If there is one group of people for whom I have zero sympathy, it's Hampstead sociailists. I like much of Professor Frank's analysis, but I remain a flat-taxer.

Tuesday, 4 January 2011

100 Days of Miliband

Red Ed has decided that the Vat hike is bad for poor working families. He’s right in so much as all taxes are bad for working families. But then I very much believe he doesn’t think that all taxes are bad. Indeed I suspect he uses the thought of introducing more of them to raise the flagpole in the bedroom when he’s feeling a bit tired and emotional.

Whilst VAT is an unpleasant tax. The simple fact is that it isn’t charged on most Giffen goods. Food, Fuel, Kiddies Clothing which the poor consume more of in relation to their total income are VAT free or VAT Reduced in the case of power and utilities. So in reality, other than their Lambert and Butler ciggies, the vast majority of the poor’s purchasing power is unaffected. As for the rich – yeah, their M&S organic Kumquat and Aardvark Dropping salad is VAT free because - being a food - HMRC considers it the same thing as a pot noodle. Ditto that darling little Louis XVI Transitional style fauteuil that the “Rich” bought, as Antiques don’t get charged VAT. But everything else the “rich” spend their money on is going to see an increase in tax.

The hypocrisy of this is quite outstanding since the Labour Nomenklatura proposed increasing this tax twice and only failed to do so because Gordon Brown vetoed this proposal by Miliband. They also jumped on the bandwagon of the number of Flu shot vaccinations being down this year to complain about how the government had got rid of advertising it. Obviously Red Ed hasn’t spoken to Liam Byrne in his old department about there being “no money left”. It also didn’t occur to Mr Miliband that people aren’t fucking stupid, and can work out whether they need a needle jabbed into their arse or not without Sir Henry Cooper and the power of the state assisting them in the decision. Never ever forget that Labour are deeply unpleasant shits who will use an old lady dying of Flu to try to regain power.

The fact of the matter is VAT is also incredibly avoidable in many cases by ordering your goods abroad, or driving a large white van there. You simply make sure that the bloke sending you those DVD copies of “Oh Brothel, where art thou” and “Titty Titty Gang Bang” sends it in a Brown paper box with the “Cadeau” box on the customs form ticked (and lets be honest, this is probably a service he will offer anyway). You also make damn sure that the value of the good purchased is £17.99. Stiff shit if you insure it for that and then loose it in the post of course, but other than that you’re laughing. For that very reason I suspect this VAT increase is actually going to raise bugger all extra money, unless everybody goes out and buys something that cannot be carried by postie – like a bed.

Thursday, 28 October 2010

Barclays, Bob Diamond and a move to the United States

In City AM this morning I read that Barclays is seriously considering moving its headquarters from London to America. Now on one hand I’m quite enjoying this, on the other I’m worried. I would like nothing more than to see a British bank stick two fingers up to the British government and give them a real lesson in the lack of power of the state. Especially this will be one in the eye for "Casino Banking" whiner Vince Cable, the man who predicted all 19 of the last 3 recessions and George Osborne – a man promoted beyond his limited means.

Just in case you need reminding, of all the banks that failed it was the retail banking systems that failed, not the Investment banking arm. They lent vast amounts of geared money to the general public for overpriced houses on fantasy "Self certified" earnings multiples. So with Barclays and HSBC leaving on a Jet Plane, the UK will be left with the bailout banks with no Investment banking arms whose only contribution to the UK finance industry is the fact they were based in ZanuLabour constituencies. Confidence in the City will collapse, and the jobs will leave in droves.

The only thing a Glass-Steagull act that is being suggested by the Bank Of England will do is force Barclays to walk out of the UK. They are already planning on doing this. The mistake they are making is a planned move to the US which is even worse for business.

The problem in getting a Yank to run your business is the fact that sooner or later he will want to move it lock stock and barrel back to his home. Yanks and business are like Muslim chaps marrying a non-muslim girl, he may say he loves and respects you, but you’ll still be reading a Koran and wearing a Burqa as quick as you can say “But My Mohammed’s Different”. Ditto the Americans, they honestly think that the US is the best place in the entire world to do business, and any reason not to have your business based in the US is some form of mental illness.

In reality Bob Diamond is probably missing his Rounders team and squeezy Hamburger Cheese. But Bobby, bearing in mind I looked after your account and know how much was in it 4 years ago, do you really miss A1 Sauce that much that you want to pay US taxes? Oh and whilst we’re at it, corporate taxes aren’t any different - but a damn site harder to avoid in the US. Barclays should take note, because if Private Eye is to be believed, you’ve been very good at making sure that you only pay UK taxes on the minimum amount possible, you pay the rest in low tax jurisdictions for your entire overseas operation.

Well that won’t be an option for you, the US recently announced that US domiciled companies will be paying US taxes on their entire international operation, not only the US domestic part. UK taxes may be higher, but are they higher than the Chanel Islands, Liechtenstein and god knows where else you pay your taxes on international holdings? Also bear in mind the IRS is a different boiling vessel of poissons entirely to HMRC. They will hound you until the end of time, and have the reach to do so wherever you are in the world. Once you let those fuckers have access to your documentation you will never ever get rid of them.

In case the taxes didn’t put you off, you have to pay health care for all your workers on top. Their legal system is worse because the courts over there hand out long distance phone number damages, and their politicians are just as likely to bash your industry if they think a vote is in it. Indeed that’s the reason Barclays pulled their Retail Banking license in the US back in 1990, I know because I was living under the same roof as the guy at Barclays who was responsible for closing the US Operation at the time. And that was at the fag end of Reaganomics, not after the Patriot Act, a financial meltdown and 2 years into the Obama administration.

Jeez, Barclays- did you not notice BP? Are Barclays that spectacularly unaware of the world around them? Barclays may not produce gooey guillemots, but Wall Street isn’t that popular in the US either. You have a President who desperately needs to shore up his political base and the MoveOn crowd would like Obama to wallop banks like Keith Richmond on PCP banging the Rank Gong. The Republicans won’t give a shit because the Last Republican senator of New York State probably got a Zeppelin hanger named in his honour, and the bankers aren’t popular with the average Republican voter either because they’re over privileged east coast Liberal Yallies who sponsor the Opera and Ballet, rather than Team “No Fear” Racing and the Indi 500.

Do yourself a fat favour Barclays. Take a long hard look at the horrible legislation the UK is introducing, get on the plane to Newark, enjoy that Kansas City Strip at Gallagher’s near the Rockefeller centre, then move to Singapore or Zurich. Just please come back once the idiots in HM government decide you were useful after all.

Wednesday, 15 September 2010

On "Fairness" in political discourse

"All men are created equal" so says the American declaration of independence, putting equality of opportunity front and centre while the French revoloutionary slogan "Liberty, Equality, Brotherhood" put equality of outcome at the heart of political discourse. The word "equality" means very different things depending on its context.

The same is true of "fairness". If all men are created equal, surely all citizens should pay an equal share of the burdens of state? This is the thinking behind poll taxes: a flat charge levied on all citizens. All men are equal, and are charged equally for the services to which they are entitled, surely that's fair?

But, those with the broadest shoulders should pay more? Well that's the thinking behind taxation as a percentage of income. Churches were the first to realise the potential in this idea, with the Zakat and the Tythe being set at a most-reasonable (by today's standards) 10%. As society gets richer, so does the state/church levying the taxes. Everyone pays the same proportion of their income to the state. The poor pay the least. The rich pay the most. Surely that's fair?

But then of course, this means that some people get very rich, and some very poor people still have to pay for services they might not use, and the payment is extracted at the point of a gun, is it fair to expropriate 10% of the income of someone struggling to get by? No. So the state set a rate below which it is immoral to take money by force. Let's call this the personal allowance. Above this rate, everyone pays the same share of their income to the state. Surely that's fair?

But then there are some people who are still successful and rich, and that will never do. So the broad mass of envious middle and low earners have taken the opportunity presented to them by democracy to see that someone else pays more tax. That "someone else" means, in effect "The rich" defined as "anyone earning more than I do". The people ask the politicians to see to it that "The Rich" should pay a higher rate of tax "because they can afford it". Some of that is returned to the broad mass of middle earners in paltry benefits of one form or another, to keep them quiet. Of course, in time, the state freezes rates at which the higher rate is levied and lets everyone creep into the bracket fomerly marked as "rich" which now includes almost anyone working. The politicians have managed to persuade the people that this is "fair". Within a couple of decades, everyone working is paying tax. Everyone not paying tax is kept on benefits by 90% marginal tax rates - the Tories haven't shown much interest in this demographic and the Labour party likes to keep its pets supplicant to the state's teat. Is it fair that the poor face obscene marginal rates, while someone who probably uses public services less than average pays more absolutely AND as a percentage of income than the rest of us? If so, why?

Monday, 13 September 2010

Tools Down

Oh this is terrible. The Evil Tory job cuts (Not yet announced) have caused £27 Billion of Taxes to remain uncollected. Mark Serwotka, Union Steward and Professional Scrabble contestant has said. The Horror! Think of those £27 Billion pound coins out there, all alone in the pocket of the person that earned them. Unloved, un cared for, away from the warm embrace of the state. He also says the job cuts caused by merging Inland Revenue have caused the incompetence, not the fact that his workers are fuckwits. Comrades, Taxmen are loosing their jobs, to the streets people!

Bob Crow has also said that the cuts must be resisted and threaten Strikes and civil disobedience. And the afore mentioned Andy Triple Word score has said the public should be ready for “a campaign of resistance the like of which we have not seen in this country for decades”. Well this will certainly save one department’s budget. Just like the Miners strike, the Police should get a nice bit of overtime for this one. Their truncheons whacking lefties the like of which we have not seen in this country for decades. The question on everybody’s lips is this. Other than Plod who will be cutting round in a nice new Ford Focus Zetec, will anybody actually notice? The way you used to spot “Industrial” action was when the rubbish started piling up, but since the eco “we are guests upon this planet” collections started this is hardly anything new. Does the state still bury dead people?

Some Union Bright spark is suggesting sit downs on the motorway. Oh, what could possibly go wrong there? Good to see the money they peel out of my wallet going to making sure the brightest and best are working for the state.

Wednesday, 15 November 2006

It Really Should be Simple....

If you believe that taxes should be primarily used to influence behaviour rather than raise maximum revenue for minimum pain then you're an idiot. Many people combine this beleif with one that cars are evil and people who use them should be taxed to penury in order to save the environment (pah) then you're an unspeakable bastard, who's hiding his communism behind greenery. However by this rationale, most of the electorate and the entire serious political class are unspeakable bastards. The argument that Stern is manipulating science for political ends, that cars aren't the harbringers of the apocalypse they're painted and that global warming is likely to be benign, isn't getting much air-time. So we might as well try to make the measures to cut carbon emissions as effective, and painless as possible. And if money must be raised, we might as well solve congestion and nudge towards road safety while we're doing it.

So let's start with road tax. Its regressive. It taxes the little old lady's ancient rover runabout (1,000 miles per year) just as much as the rep's v6 mondeo (20,000 miles per year), on the basis of an arbitary carbon rating based on engine size. Every year you have to troop down to the post office in order to get your tax disk - forgetting a vital piece of paper at least once and having to make another journey, stand in a queue and get your disc.

Its Counterproductive. Now I drive a Fiat with a 1.2 litre engine. This engine is not big enough, but gets into a lower band for road tax. It actually increases the carbon emmission of the vehicle which really needs a 1.4 litre engine, because to make progress you need to rev the damn thing so hard. To keep to the speed-limit up any sort of hill, my foot is flat to the floor. You can forget it if there's a passenger or two. On the other hand a big v8 can purr along at 70mph and comfortably make 40 mpg. The perverse incentives caused by a blanket assumption that Big engine bad, small engine good, actually lead to an increase in carbon emissions.

Its inefective, except as a political statement of your spiteful greeness. Do you seriously think that someone who spends £80,000 on a top-of-the-range Range Rover is going to be in the slightest bit perturbed by even the most excessive road tax being bandied about? What about the farmer already royally buggered by the governments abject failure of single farm payments, who genuinely needs a 4x4? How are you going to exclude him from your socialist spite?

Road tax is ineffective, regressive and counterproductive. If you're an authoritarian bastard, who thinks that peoples lawful behaviour is the business of the government, that cars are bad and that people need to be persuaded not to use them, then you need to make carbon from cars cost. Petrol Duty, is Progressive. It taxes as a function of miles done and efficiency of vehicle and driver. It taxes someone hammering up the A1 at a ton more than someone sticking to the speed limit. It taxes inefficent cars more than efficient ones, whatever their engine size. It rewards careful driving (in a roundabout way).

People can therefore choose how much tax they want to pay. A bit more to have a nice motor with a big engine. A bit more to drive it fast. Perhaps you can decide to take a bike on a short journey and save the 20p a mile it costs in petrol... Or you can opt to pay the tax and drive, or pay even more and drive like a frenchman on his way to an adulterous tryst.

That won't wash with our chancellor. No - he must demand that you hand over the keys to your "gas guzzler" or "chelsea tractor" (notice the spiteful language designed to suggest that you wont pay it, only "the rich"). He demands payment upfront for carbon you might emit. No choice there - because let's face it, cars aren't optional, unless you live in London. But then this chancellor has always held the public in the deepest contempt.

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