A proposal for the Scottish tax system:
This relationship of mutual trust requires that a tax system be based on sound
principles that are clearly stated so that all can understand them. Scotland has a long
tradition in this area. In 1776 pioneering Scottish economist Adam Smith argued
that tax systems need to be equitable, certain, convenient and efficient. Whilst
these may have been a sufficient basis on which to establish a tax system at the time
that he wrote our understanding of rights and obligations in society has advanced
considerably since then and the principles on which a Scottish tax system must
be based have to reflect the world we now live in. The result is that Adam Smith’s
suggestions are no longer a sufficient basis on which to build a Scottish tax system.
Is this going to be footnotes or wrong?
All that being said, the reality is, of course, that no government would want to pay
for all government services out of new money being continually pumped, without
limit, into the economy. That is because doing so would undoubtedly result in
rampant inflation. This fact does not, however, change the principle: that principle
is that all government services can be paid for without taxation. This, then, also
answers the proverbial ‘chicken and egg’ question of which comes first: is it ‘tax and
spend’, or ‘spend and tax’? By now it should be obvious that the correct answer is
that there can be no such thing as tax and spend; the only obvious answer to this
question is that there is always spend and tax. In other words, governments can
always spend to create the public services they think appropriate using new money
created for the purpose and it is the role of tax to reclaim that money from the
economy to prevent inflation.
It’s not footnotes, is it?
And as ever, he completely misses he end point of his scheme. Politicians get to spend all they want for every scheme, out of new money. Tax mops up the resultant inflation. We’re back in a high tax, high spend economy, aren’t we? Old Labour once again.
This understanding is critical to the design of a Scottish tax system. What it
demands is that Scotland must have its own currency from the day it becomes
independent. This is, of course, the sovereign right of any state. But it is not just
a right: it is only by exercising this right that Scotland can be truly independent
of any other country. This is because of another critical consequence of the
understanding of tax and money already outlined, which is that a country with its
own central bank and currency cannot go bankrupt. So long as it issues its debt in
its own currency this must always be true. That is because if it does issue its debt
in its own currency then it can always repay it by having its central bank create
the money required to do so. In that case it can, quite literally, never run out of
money. What that means is that if it had its own currency Scotland could not be
beholden to anyone, including the bond markets. There is no greater expression of
independence than that.
No, really not footnotes. Venezuela and Zimbabwe. Hungarian pengo.
Secondly, this understanding means that the Scottish Government does not need
to think itself beholden to bond markets or their interest rate whims. When the
relationship between government, money and tax is properly understood then what
is clear is that a government need never borrow from anyone but its central bank
(which effectively happens in the USA but which is illegal in the EU except for the
quantitative easing ‘work around’ that achieves the same result). If the Scottish
Government did then decide to issue bonds it would be because it wanted to, at an
interest rate it wants to set, and solely to provide people with opportunity to save in
the safest way possible.
That fantasy of being free of the markets really is very strong, isn’t it?
To be clear, this is not an argument against proper monitoring and accounting for
the velocity of money in the national economy. This should be rigorously accounted
for to protect the economy against dangerous levels of inflation. But it should be
done on the basis of accurate accountancy treatment which understands government
created money as national equity capital created with no cost and no repayment date,
akin to equity (or ‘share’) capital for a company. Accounted for as equity capital,
money creation can be created and monitored to ensure it meets the government’s
monetary policy goals. This, alongside a strategy to ensure the national economy
remains competitive with the rest of the world so as to prevent inflation driven
by exchange rate devaluation, should ensure an independent Scotland is uniquely
equipped for prudent and competent monetary policy and controlling inflation. See
the Appendix at the bottom of this report for a full explanation of this.
And he himself refutes his own theory. For that exchange rate is just another manifestation of that market. And if the effect doesn’t come from the interest rate, or inflation, or the deficit, then it will come through that exchange rate. Which, as Spudda is telling us, must be monitored, meaning that we’re not free from the markets through MMT at all. We’re all just subject to a different manifestation of it.
particularly by the House of Commons Public Accounts Committee, have exposed
cosy relationships and deal making with big business. As a matter of fact the
external directors of HMRC are only drawn from the ranks of big business and the
largest firms of accountants. Revolving doors between HMRC and tax advisers have
caused disquiet. There is no doubt that the rate of prosecution of big business and
the wealthy is tiny (even when tax evasion is apparent, as has been the case when
investigating those whose affairs have been disclosed by offshore leaks). It is a matter
of record that HMRC have more staff investigating relatively insignificant benefit
fraud than they do tax avoidance and evasion. The available evidence does then
suggest an organisation captured by particular interest groups that results in bias
towards those best off in society. Revenue Scotland must not replicate this mistake.
A belief that a tax authority acts impartially on behalf of all in a society is now
considered key to tax agency effectiveness and to high tax compliance rates (and so
small tax gaps) amongst the population at large.
The author of the Courageous State discovers regulatory capture.
Ain’t this great too?
High starting threshold leaves many with no relationship with the tax system
People making minimum wage should be paying income tax.
– The UK does not have a wealth tax
– There is no tax aimed at reducing excessive consumption in the UK
Things that must be done:
– The personal allowance has to be reduced: the more people are engaged with
the income tax system the more they engage with the political process. There
is a danger that those who do not pay income tax ‘do not count’ and it is a risk
that must not be taken;
Yep, the poor must pay income tax. Even those part time on minimum wage.
There is no evidence that a fifty per cent income tax rate is a disincentive to
work or to living in a country: the rate should be in use;
Err, yes, there is.
Investment income should be subject to a surcharged income tax rate when
it exceeds £3,000 per annum. The surcharge should start at fifteen per cent.
A higher rate should be considered in the event of there being significant
investment income. An age allowance should be made for pensioners but this
should not apply to all income levels. This charge is to compensate for the
absence of national insurance on this source of income.
Entirely standard economics says that investment income should be taxed at lower rates than labour income.
To discourage the cash economy all notes of more than £10 in value should
be withdrawn from circulation and no payment of more than £200 in cash
should be considered legally permissible.
Curajus or what?
This is simply wondrous:
No company should be incorporated without the proof of identity of all
shareholders owning more than ten percent of the capital and of all directors
(one of whom must be domestically resident) being made available to tax
authorities. This data should be updated annually. If it is not the company
should lose its limited liability and this fact should be recorded at Companies
– House and all its directors and all shareholders owning more than ten per cent
of its shares should become jointly personally liable for its debts, including on
Let’s abolish limited liability, the third great human invention after agriculture and the scientific method.
The rate of corporation tax for large companies should be at least ten per
cent higher than the basic rate of income tax to ensure that the corporation
tax system is suitably progressive. As compensation one hundred per cent tax
relief should be available on the cost of all sums invested in Scottish business
(as opposed to renting and financial services) activity. This would significantly
increase the incentive for Scottish business to reinvest in the Scottish economy
Umm, haven’t we just said that we should reduce the incentives to saving?
Capital gains should be taxed as if they are income and be added to the top
part of a person’s income. There is no economic logic to treating income from
capital gains differently to that from other sources.
There are libraries full of books explaining that economic logic of different rates.
A financial transaction tax (FTT)
We’ve been over this so many damn times but this is a new bit:
The FTT should include a facility to rapidly increase rates in the event of large
swings in asset prices or in the case of currency volatility. At such times there
tends to be panic that can remove all market liquidity as people try to sell,
whether it is rational to do so or not. A rate escalator can reduce volatility and
calm markets in this situation.
As and when liquidity disappears we should tax all liquidity entirely out of the market?
A Carbon Usage Tax
– The UK’s indirect taxes (VAT and excise duties) plus its system of specific
tax charges (BBC licence fee, road fund licences, etc.) are regressive in their
impact. The UK needs a progressive indirect tax to rebalance the tax system in
addition to the changes already noted under direct taxation. The Carbon Usage
– Tax (CUT) is intended to achieve that goal and to eventually replace national
– The CUT will be charged on the flow of funds through a person’s bank
account. The charge will be levied by the bank and will be progressive. For
most people the rate will be set at zero per cent and it is expected that this
will remain true even when the CUT replaces national insurance. The rate will,
however, be progressive and be applied to all flows into and out of accounts
excluding those that are transfers between accounts a person has (e.g. their
loan, savings, current and mortgage accounts, including in different banks).
Initially charged monthly the CUT would be adjusted to an annual charge at
each year end.
– Resident people who do not appear to have a bank account for CUT purposes
or who cannot explain their low rate of bank account usage will be assessed to
the tax based on their income.
– The tax is intended to tax higher levels of consumption, as indicated by higher
levels of spending, at higher rates. It is intended to reduce that consumption as
a result and act as a green tax as well as an eventual replacement for national
insurance that discourages job creation, when what should be discouraged is
excessive use of the world’s resources.
Why not just have a carbon tax instead of a bank account usage tax?
Scottish tax law should be principles based
– Scottish tax law should say what its intention is as well as specifying the
specific ways in which it is to achieve that goal: this way ambiguity in the
meaning of tax law should be reduced.
– Tax abuse should then be defined as seeking to circumvent the intention as
well as the letter of the law.
– In this way Scottish tax law will build on the Roman Law concept of the
abuse of law.
We’re to abandon Common Law now, are we?
The burden of proof should be
on the taxpayer
Yes, apparently so.
This actually made me laugh out loud:
There are three answers. The first is that if there has been no general shift in the
productivity of labour in Scotland compared to that in the rest of the world and
nor if there is a shift in commodity prices then any exchange rate shift in that case
indicates speculation and will probably be short term. Long term exchange rate
moves are usually linked either to commodity prices (where Scotland is, overall,
well protected because of its energy resources) or labour productivity.
An oil exporter is protected from currency swings as a result of commodity price changes? My word, that is amazing. Just that one claim obviates all of his even potential claims to knowledge about economics.
Yes, I know, this would be very mean indeed to many blameless people in Scotland. But it would be fun to see all of this applied, as long as it’s not to us, wouldn’t it?