A Fair Taxation System

A Fair Taxation System

The reality is that tax does NOT fund government spending, all of which can in principle be funded by issuing currency or borrowing.

It is, of course, very unlikely that this would actually happen: inflation would rapidly destroy the value of a currency in this situation and the willingness of people to lend would quickly expire.  This means that TAXATION, a necessary fact of economic life, is an essential tool to CONTROL INFLATION as it allows excess money to be removed from the economy.

The purpose of direct and indirect tax is to achieve a number of  goals (funding government spending is certainly not one of them),

  • Reclaiming the money the government has spent into the economy.  To prevent excessive inflation.
  • Redistributing income and wealth within the economy.  Redistribution of income and wealth is an essential function of Government.
  • Ratifying the value of money.  Gives the currency created by the government its value in exchange and as a result passes control of an economy to the government that charges that tax.
  • Reorganising the economy. To meet social and economic goals.
  • Repricing goods and services. Markets cannot always price the externalities of the goods and services they supply or reflect social priorities.
  • Raising representation in a democracy.  It is important that people are in the system. When they are they want a say on how the system works and democracy is enhanced as a result.

Government spending is essential to deliver prosperity to its citizens and also provide a balanced and stable economy that benefit the many households and businesses not just the few.   With a currency issuing sovereign government the UK can fund its own spending and use taxation as a tool to control inflation.   When taxation is used to control inflation the burden should fall mainly on those strong enough to carry it.


Labour Manifesto 2017:

Taxation is what underpins our shared prosperity. All of us, including business, benefit from a healthy, educated and skilled population, with access to basic services and secure housing.

We believe in the social obligation to contribute to a fair taxation scheme for the common good. We will take on the social scourge of tax avoidance through our Tax Transparency and Enforcement Programme, and close down tax loopholes.

But we will not ask ordinary households to pay more. A Labour government will guarantee no rises in income tax for those earning below £80,000 a year, and no increases in personal National Insurance Contributions or the rate of VAT.

Under Labour’s plans, 95 per cent of taxpayers will be guaranteed no increase in their income tax contributions, and everyone will be protected from any increase in personal National Insurance contributions and VAT. Only the top 5 per cent of earners will be asked to contribute more in tax to help fund our public services. We renew our pledge not to extend VAT to food, children’s clothes, books and newspapers, and public transport fares.

Corporation tax  in the UK is the lowest of any major developed economy. Our new settlement with business will ask large corporations to pay a little more while still keeping corporation tax among the lowest of the major developed economies. In turn, we will meet the business need for a more skilled workforce with extra corporate tax revenues while contributing to education and skills budgets.

We will protect small businesses by reintroducing the lower small profits rate of corporation tax. We will also exclude small businesses from costly plans to introduce quarterly reporting and take action on late payments.

Labour will give HM Revenue & Customs the resources and skills necessary to clamp down hard on those unscrupulous few individuals and companies who seek to avoid the responsibilities that the rest of us meet.

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