Interesting thought

You call it governance, you are not using the word tax. But tax is revenue. While aid makes governments accountable to donors, debt makes government accountable to lenders, and oil makes government accountable to nobody – tax makes governments accountable to their citizens.

How does taxing multi-national companies make governments more responsive to their citizens?

18 thoughts on “Interesting thought”

  1. Is this “No Representation without taxation”? And if so shouldn’t we make tax more broadly based so everyone paysa similar share. Otherwise shouldn’t the rich have more votes as they pay more?

    Seriously doesn’t he realise there is a difference between saying that a government funded through taxation of its citizens is more responsive than one that is not, to saying that means taxes should go up. One does not follow the other.

  2. I want no representation without taxation…

    So if you’re on the dole or in prison etc No Vote

    No pay, no play!

  3. Refine Dickie’s point a little further: personal tax makes governments accountable to their citizens. Which I think has a ring of truth to it.

    I harbour a suspicion that the best way to increase the quality of Governance in Africa is to cease aid payments, increase trade with them and have African states collect monies from African people. People having income taken from them expect something in return.

    This is no taxation without representation.

    This is why lobby groups, corporate interests, etc have so much sway in Parliament – they are granted a degree of influence due to the corporate taxes they ‘pay’ to Government and the personal taxes they enable through employment.

    If you don’t want big business to have that influence do away with business taxes.

  4. Democracy makes governments accountable to their citizens. Tax has nothing to do with it. There’s been and continues to be tax in countries with unaccountable governments.

  5. There is a very long tradition of explaining various improvements in government conduct by the desire to raise revenues from citizens, dating back to reforms made by monarchs in return for raising war funds, and there’s a shit load of empirical research on this question, here at least RM is bang on the money …. although as the OP suggests, if you want a strike an accountability bargain with citizens, you need to tax them, not multinationals. I don’t imagine RM is very familiar with research on tax structures in poor countries, but the sort of taxes that deliver better behaved governments do not feature prominently – although things are changing.

  6. It has long since reached the point where I can identify a Ritchie quote without need to check the URL or read the rest of the post. He’s that predictable in one sense. And yet, I’m constantly amazed at his sheer inanity.

  7. Well, both Magna Carta and the English Civil War were at least in part brought about by objections to proposed taxes. But that’s a strange view of accountability, that it consists of not quite driving the population to violent uprising.

    No. What makes governments accountable is that they have to be judged – brought to account if you like – every election and long before there’s blood in the streets we can change them.

  8. Brian, follower of Deornoth

    Tax makes Governments accountable to the recipients of public-sector largesse: if there are enough of them. All public policy over the last fifteen years has been designed to create increasing numbers of recipients.

  9. “How does taxing multi-national companies make governments more responsive to their citizens?”

    Perhaps by making those who operate maulti-national companies understand that we, the peoiple, are the landlords who have permitted them the freedoms allowed by The Companies Acts, and that ultimately we own their asses?

  10. “we, the peoiple, are the landlords who have permitted them the freedoms allowed by The Companies Acts, and that ultimately we own their asses?”

    Ultimately ‘we’ own nothing as they leave us to ourselves – the key word being ‘multinational’.

  11. “tax makes governments accountable to their citizens.”

    My understanding of accountability – please tell me if you think it’s incorrect or too narrow – is that a person is accountable to me if I can enforce some kind of agreement with him.

    If I do not pay my taxes the government can use the law to make me pay my taxes on pain of fines or imprisonment – I am therefore accountable to the government. But if I believe my taxes have been improperly used or misappropriated I cannot seek redress there and then.

    In our system of democracy MPs are accountable to their constituents and the government is accountable to MPs. One of the reasons there has been a decline in public participation in the system is that people don’t feel they have a say!

    I understand that governments have offered things in return for higher taxes but I think that is more of a reward or ‘bribe’ than a kind of accountability.

  12. I was going to say much of what ukliberty just did: one of those things is not like the others. Aid makes governments accountable to donors, because aid is voluntarily given and can be voluntarily withdrawn. Loans make governments accountable to the debtors because — whilst the already-loaned money may be defaulted-upon — further loans will be more expensive to secure.

    But tax? Check out what Ritchie says when corporations attempt to avoid paying tax…

    And yet in a sense he’s right. If the government was a despotic baby-eating heartless capitalist profit-maximiser the country probably wouldn’t be that bad a place to live. For a start, they’d swap income tax and tarriffs and probably VAT as well for a property tax. They’d abolish nearly all regulation on business, but particularly minimum wage and equal opportunities legislation. Wanting a reliable store-of-value and unit-of-account, they’d start to phase out fiat currency in favour of a commodity standard, at least in terms of what they request taxes to be paid in.

    Goodbye unfirable civil servants. Goodbye gold-plated pensions. Goodbye seniority-based pay. Hello bonuses, golden hellos, headhunting etc.

    They’d leave the EU, repeal the smoking ban, the hunting ban, and simplify firearms legislation. They’d spin off the NHS and the DWP as charities, endowing them with some shares in the country to get them started. They’d replace the Civil List with a fixed number of shares too. They’d withdraw our troops from their engagements around the world, replace Trident and quit the asinine practice of a) arbitrarily dividing the Forces into Land, Air and Sea and b) trying to make ourselves what we can much much more cheaply buy from the Yanks.

    The problem is that we — especially Ritchie — don’t think about taxation as the government’s revenue. If we did there’s no way this country’s economic policy would be as it is. If the Yanks did, the IRS wouldn’t be fricken underfunded.

    Even if we hang on to democracy, it’d still be a sensible idea to formally separate the parts of government who’s job is to raise revenue, and the parts who’s job is to do good.

    Incidentally, you and your readers may be interested in this. It’s from the US, but it’s pretty interesting.

  13. ukliberty, sconzey, you can always reduce your taxes by one of the following two ways:
    (1) Emigrating
    (2) Working less or investing less in taxable activities.

    There are cases of governments that have tried to stop one or both of those escape options (eg sending out people with guns to shoot those who don’t work), but they haven’t been as successful at inducing work as those governments who allow their citizens to keep more of what they earn.

    Furthermore, tax revenue goes up with the economic activity of a country, encouraging the government to pay attention to things that increase economic activity if they want more revenue.

    Martin, the reason that the government allows limited liability and what-not to companies is that limited liability allows investors to raise far more money than they could without it, allowing them to invest in capital-intensive projects such as railways or canals, or new drugs. So we, the people, already benefit from the Companies Act. This deal may not be a good one, but if you think that then it would make most sense to argue for changing the Companies Act directly.

  14. @Tracy W: That’s kinda the point I went on to make. 😉

    Go read my comment again, starting from “If the government was a despotic baby-eating heartless capitalist profit-maximiser the country probably wouldn’t be that bad a place to live.”

  15. I am told that the first Companies Acts were introduced not to protect companies but to make it easier to sue companies. Previously they had been partnerships, and trying to sue a large partnership with changing members was apparently procedurally horrendous.

    So by giving a company its own legal personality separate from that of its members (the basis of limited liability), it became possible to sue the company as an entity and therefore much easier to take legal action against it (and of course to tax it).

    Apparently if you read Hansard when the first Companies Acts were being debated, that is the way the debate took place.

  16. sconzey, my apologies for my misreading. I thought, from your first section, that you were arguing that taxes could not be not paid, while aid and future loans could be.
    As for the rest, I’ll note that there’s a lot of space between “heartless profit-maximiser” and “totally indifferent to tax revenue”. A government can want to do a lot of silly stuff, while also caring at least a bit about a higher tax revenue.
    Richard – interesting. Of course being easier to sue makes other parties more likely, at the margin, to want to sign contracts with you.

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