'A fair tax system can create a better society'. Photo: http:// 401kcalculator.org via flickr CC.
The Joy of Tax
Roger Iredale welcomes an informative and important new book that advocates radical changes to the present tax system
Richard Murphy’s new book, The Joy of Tax, is subtitled ‘How a fair tax system can create a better society’. The author’s intriguing title conceals a carefully crafted discussion of the central importance of tax within a nation’s economy and social policy. Tax is little discussed or understood by the public, and this is a bold attempt to convince us all of its central importance, not only as a mechanical basis for funding the services and institutions that we want, but as the keystone of a democratic society. In his introduction Richard refers to his two sons:
Every morning I wake up thinking that if I have one thing to do it is to make the world a better place for them, their friends and all of their generation.
He is scathing in his criticism of the armies of advisers, lawyers and accountants who avoid and evade tax (he makes very little moral distinction between the two definitions). He argues that it does not have to be like this. If we had a fair, revised, balanced, transparent, compassionate, orderly tax system we could embrace it with joy.
Tax justice
The Joy of Tax extends the theme of Richard Murphy’s 2014 Salter Lecture on tax justice. Highly informative, the book is calmly and moderately written, ending with a jaw-droppingly radical draft speech to parliament by an incoming (and financially literate) chancellor – a speech that is joyous in its simplicity and force, and a must-read for any lover of peace and justice.
Tax is redefined as an instrument for achieving higher purposes than simply balancing the books. In doing so, the book ridicules the concept of austerity and debt reduction as either mischievous dogma or the ‘selective ignorance’ of politicians.
The first part of the book reviews briefly the history of tax over many ages, noting that it began by funding the wars of kings and tyrants, usually retrospectively. This leads to a generic overview of the essentially civilising role of tax as a contract between people and government:
…tax must reflect the values and priorities of [the] people. If it does the people will willingly pay it and return the government that charges it to power. If it does not reflect those values they can, in a democracy, change that government, and will. This process of choice is then enabled by tax and democracy working hand in hand.
Money creation
The book continues with a careful explanation of what constitutes tax, dismissing the routinely-promoted popular idea that income tax is the main one, when it actually occupies only twenty-seven per cent of total UK taxation. He then goes on to a memorable analysis of how money is created both by government and banks out of thin air. He demolishes the popular idea that a bank, in allocating loans, uses money provided by depositors, when in reality it simply taps a keyboard and treats the result as if it were ‘real’ money. This, he explains, is exactly how states create and deploy money.
Out of this careful analysis, which includes the policy and practice of quantitative easing, we see how the state can control inflation, the money supply and expenditure through the judicious use of taxation to stimulate employment, social wellbeing and the generation of future taxes. In fact, government debt is almost never repaid:
The fact is that the owners of government debt think it’s an asset and not a liability, and most are happy to hold it for long periods of time and even pass it on to their children. To regard it as some sort of burden on future generations is therefore absurd.
Underlying this is the ongoing theme that to leave the economy in the hands of banks, the private sector, the market or ideologues is dangerous. The endless tax avoidance of the private sector, with its abuse of havens and deliberate obfuscation, means it cannot be trusted to decide how our lives are regulated and organised. We voluntarily pay our taxes to a government that, in effect, owns them and deploys them for the overall benefit of society. In this it must offer us choice, and has a duty to see that we understand the nature of the choice so that we can understand, appreciate and gain ‘joy’ from contributing.
A fundamental flaw
The problem is that the present UK tax system in all its aspects has become an anachronism, is frequently regressive and is fundamentally flawed by the common law assumption that any mechanism that avoids tax within the letter of the law is acceptable. The book repeatedly suggests that parliament should turn this on its head, outline the purpose of each form of tax and place the obligation on the tax avoider to show why he or she should not pay. This lies at the core of the argument.
Accountants must not be allowed to run rings round regulations, creating ever more complex exceptions that, in turn, have to be legislated against until the law becomes incomprehensible.
The latter part of the book examines in close detail the present structures for regulating and collecting tax within the UK, most of which are contradictory and archaic. This ends with the chapter outlining the future chancellor’s speech to a new parliament. It includes the reflection that there is no minister currently responsible to the House for tax affairs; that powerful corporate interests dominate the Inland Revenue’s advisers, with no room for the millions of taxpayers or small businesses; and that there is miniscule funding for public research on taxation.
Proposals for change
Among the proposals are the gradual phase-out of the dysfunctional National Insurance levy and an amalgamation of existing taxes, along with the welcome abolition of expatriates’ odious exemptions and of the use of companies to avoid personal income tax. It includes a universal citizen’s income for all UK residents. At times this section runs into detail that necessarily indicates an awareness of the complexity of taxing fairly for every circumstance. New, clear laws can be framed to establish reasonable exemptions without making the whole edifice impenetrable.
The proposal to introduce a financial transactions tax (an internal version of the proposed Tobin tax) would include damping down stock market panics and get-rich-quick share dealing. On this latter suggestion, the author helpfully cites Brazil as an example where this has worked. The book would perhaps have benefitted by more examples of practice and experience in other countries.
This exposition of the centrality of tax to wellbeing, social justice and, above all, democracy is a useful intellectual underpinning of the policies that have led many to join ranks with Jeremy Corbyn. The author’s suggested solutions, if really proposed to parliament, would produce foreseeable outrage in those media who support the status quo, a phenomenon familiar to those who know Owen Jones’s seminal work, The Establishment: And how they get away with it.
Richard Murphy’s assumption that we live in a democracy can be questioned, as it becomes clearer that we live in a state with a flawed electoral system dominated by powerful interests that aim to undermine popular opinion and use it to their own self-interested ends. His new book makes a major contribution to the developing struggle between democracy and global corporate power. More strength to his arm.
The Joy of Tax by Richard Murphy. Bantam Press. ISBN: 9780593075173. £16.99.
