What is less recognised is that there is an important relationship between the levels of taxes and the structure of a country’s economy and society.
Partly because our tax rates have historically been lower, but also because of features such as our tradition of a solid rule of law; confidence that UK governments (regardless of their political hue) will not introduce arbitrary wealth confiscation; our welcoming attitude towards foreign immigrants and foreign investments; the UK tends to attract a disproportionate amount of the world’s most mobile capital and high-income labour.
Think of finance professionals, lawyers, high-skill management consultants, highly-educated design professionals and those in similar professions.
The UK creates and trains its citizens into these roles, disproportionately to our share of the global population, and we also attract foreign-born workers of this type.
We also draw in foreign investors and manage the assets of wealthy individuals and institutions.
The ability to entice this globally-mobile capital and high-value labour is what is called “competitiveness”. Other economies envy our ability to do it.
But one side-effect of our having high shares of such mobile factors is that if we tried to raise taxes on them they would tend to depart.
In any country the attempt to raise taxes beyond a certain point risks failing, because the attempt to raise taxes damages the economy enough that taxes actually fall rather than rising.
But in the UK, because such a high share of our economy involves highly-globally-mobile capital and labour, the issue is more acute than elsewhere.
Very fun indeed. Now, how overwhelmingly important it is is another matter. But it’s a very fun – and clearly true to some extent – point to make.
It’s not just tax itself, though that is important. It’s that we positively need an advantage, and tax is ideal, to compensate for the unpleasant parts of living here.
Although overall our climate is benign, the short, grey days of winter are lowering. The Third Worldification of our cities is no great attraction either. The general incompetence of The State, including the NHS, the police, and the courts, becomes frustrating, the pot-holed roads infuriating, and so on.
So we need lower taxes or skilfully deployed machine-gunners. Or both.
dearieme
My general attitude is just nuke ’em all. This would solve the problem of the Third Worldification of your cities.
Perhaps it’s a good thing that my ancestors left for Oz so long ago????
@Boganboy,
Would it be impolite to ask if your ancestors ‘left for Oz so long ago’ because they wanted to go, or because of some other reason? It reminded me of the tale of a visitor questioned at Australian Immigration as to whether he had a criminal conviction. He is alleged to have remarked: “Blimey, no. I didn’t realise that you still needed one!”
Something that we don’t have, I noticed, is an industry of tax accounting.
Yes, yes, Murphy etc. What I mean is that accountants generally work for the self employed or quite wealthy or businesses, but in Germany ( and similar places ) even those on middle incomes resort to tax advisers to save them a few bob. It is ( was ) assumed that the State knows what it is doing when it came to taxing the hoi polloi and our system was fairly straightforward.
Now of course we know that the State is a Bad Actor out to do us harm, but that is a relatively ( post 1997 ) recent phenomenon.
Witchie.
Damn good question. My parents never mentioned it.
My guess would be that some were and some weren’t!!!
“But one side-effect of our having high shares of such mobile factors is that if we tried to raise taxes on them they would tend to depart.”
Isn’t this rather a statement of the bleeding obvious? Also there is no mention of the fact that the general population being heavily taxed damages the economy because they are left with less money to spend in that economy. Those common folk would also be better off spending their cash on stuff that they actually want rather than what the government decides to spend it on.
@Witchie and Boganboy…
One thing that concerns me about the idea of living in Oz is not that half the population are descended from convicts, but that the other half are descended from prison officers!
… confidence that UK governments (regardless of their political hue) will not introduce arbitrary wealth confiscation;
Keir Starmer: “Hold my beer!”.
Actually more likely to be the actions of whichever rabid lefty ends up in charge after they’ve defenestrated KS shortly after the election.
Boganboy, just be grateful that we don’t live in the UK, the place where all the convicts come from.
Lord Baron.
Is that the reason for our damn stifling bureaucracy – says a former bureaucrat??
@Boganboy…
“You may think that, I couldn’t possibly comment”. 🙂