Fair Taxes?

Helpful Business Meeting

There’s hardly a day goes by where a journalist or a politician doesn’t make reference to “fair” or “unfair” taxes. I think it’s safe to say that “fair” taxes are by definition “good” and “unfair” taxes are by a process of elimination “bad”. The theme seems to run like this – if a tax is payable by someone else, preferably someone who can be derided as “rich” or “powerful” or “privileged” or any other similar pejorative term then it’s “fair”. And if “ordinary” people have to pay it then it is “unfair”. The level of sophistication by which our economic well-being is governed is mind-blowing isn’t it?

Why does any of this matter? Well actually it matters a great deal. And I am not talking about the idiotic, small-minded badgering of multi-national corporations into volunteering to pay higher taxes than they rightly should. I have already dealt with that in previous blogs. Nor am I referring to the problem of driving wealth away from our shores – again covered elsewhere. The economic case, however righteous, will never reach the ears of the shrill minority who are too busy dancing in the streets to celebrate the death of a Prime Minister they couldn’t defeat whilst she was alive to notice the damage they are doing.

No, today I want to focus on the incredible damage that politically motivated, poorly thought out and overly complex “sledge hammer to crack a nut” tax changes can do to ordinary businesses. We have had dozens of examples in recent years – who can forget the debacle of taper relief abolition? Or the hysterical mess that was the “non-corporate distribution” rate of corporation tax to name but a few. Governments get away with it because let’s be honest, “ordinary” people don’t understand or care about any of this. When I said “Who can forget” what I meant to say was “Who the hell remembers”. Getting away with it is one thing but refusing to learn the lessons of history – well that’s just unforgivable.

Which brings me nicely to the “Annual Residential Property Tax” or “ARPT”. Or, as it has already been renamed after a few weeks the “Annual Tax on Enveloped Dwellings” or “ATED”! Why the rebranding? I can only assume that ARPT implies that we all pay a tax on our residences and that would clearly be “unfair”. ATED however – well who on earth is gonna know what an “enveloped dwelling” is? The only thing most “ordinary” people will assume is that they don’t own one and that therefore, it affects someone else, someone inevitably “rich” and guess what, it must therefore by definition be “fair”!!! And who can argue with a “fair” tax?

My point about ATED is this. It is designed to capture a tiny minority of non-resident individuals. It is ridiculously complex so that the vast swathe of exemptions capture everybody else. It has been brought in alongside a raft of other new taxes on the same group of people – a super-high rate of stamp duty and for the first time a new capital gains tax. It requires a huge cross-section of businesses and individuals to consider the subjective values of their properties, complete returns and claim exemption annually even though they aren’t affected. And guess what, it is likely to generate almost nothing in new revenue!

My prediction is that ATED could go one of two ways and there is precedent for both – either (a) it will be abolished when it becomes politically expedient to do so (the “entrepreneurs relief” scenario); or (b) it will be increased and extended so that it affects more people and raises actual revenue (the “congestion charge” scenario).
So this “fair” tax will either follow the dinosaurs into extinction or it will become “unfair” – frankly, since no one seems to care anyway, I guess neither should I!