Edited by Chris Wales.
Published 2008 (ISBN 1 905370 34 2) Price £9.95
The issue of fairness in the tax system is complex, with many competing voices and interests. For Adam Smith, the central tenant of a fair tax system was that the “subjects … contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state”. This rings true today; those who enjoy wealth do so to some extent only because of what the state offers, be it through providing security and infrastructure, or so that there is a healthy and skilled workforce. Yet the level at which taxation is levied, and the selection of those who are levied, is always going to be a political decision, and hotly contested. In a global age where capital is highly mobile, Britain has to ensure that it attracts inward investment and that its tax system does not act as a disincentive to risk taking and hard work. Balanced against this is the attractiveness of Britain because of the amount of revenue raised and invested in human capital and infrastructure. Alongside this, the complexity of taxation can often mean the system is judged as unfair – hindering efficiency and creating burdensome administrative costs, especially for smaller businesses. But without complexity, there is a danger that a simplified tax structure will be too crude and unfair to many citizens. Beyond the purely economic arguments, taxation also has a social function, defining the kind of community we live in. From One Nation conservatism to the social democratic left, taxation is seen as a way of redistributing wealth to create a fairer, more cohesive society. Thus, a fair tax regime is about both the revenue raised and how this is shared through expenditure. Increasingly, tax is also seen as a way of redressing market failures such as the impact of economic growth on the environment, while arguments about devolution are intimately linked with the tax-raising powers of local and central government. This collection of essays opens up the debate about the strengths and weaknesses of the present British tax system. The authors cover a wide range of issues and seek to solve some of the inherent complexities and tensions that all tax regimes face. Set against the new landscape of globalisation and climate change, the contributors offer their thoughts on how Britain can have a fairer, more modern tax system.