That’s the biggest reason why we tax, but there are five other reasons as well.
The second one, many people think is a little obscure, but let me make it clear. Unless we did have tax, and unless we had to pay it using the currency that the government creates – the pound in the case of the UK – then that pound would not have value.
Because the government requires that taxes be paid using the pounds that it creates, to fulfil the promise to pay that it prints on banknotes, and which are implicit. in all its electronic spending, then unless it takes those pounds back in settlement of tax liabilities, it couldn’t require that our pounds be used for all the transactions that we undertake in all our shops, in all our trading, and everything else.
And it is that requirement that we pay tax that gives the pound value in exchange, which therefore makes it useful as a currency. So, tax creates the value of the pound.
Absolute bollocks of course. You can pay your taxes in euros. No, really, HMRC will take ’em quite happily. And if you squint a bit you can say you can pay your taxes in art – because you can pay your taxes in art.
Further, there are many things which have value – say, bitcoin – which you cannot pay your taxes in but which have value.
So the claim’s bollocks but then it is Spud.
He’s doing his usual trick. That taxes can be – normally are – oad in sterling probably does have an effect on the value of sterling, yes. But it’s not definitive unlike Spud’s claim that it is.
funny…
Currency is a method of exchange that uses agreed-on tokens instead of actual goods. It can be anything as long as the two parties agree on the equivalent value in goods of a specific token.
Tax used to be paid in literal goods, and it was only when formalised currency was introduced that taxes started to get paid in currency. And even then only for bulk transactions, like the levy of cities to the local Warlord.
Payment in goods, especially for local levies, was the norm well into the medieval period.
Currency gets its value from trade. And taxes are just another form of trade, in this case formalised robbery.
As usual, Spud puts the cart before the horse, and expect us to applaud his brilliance.
I’d seriously argue whether Bitcoin have value. The definition of a currency is a token of value widely, readily & confidently accepted in commerce. Which Bitcoin isn’t. But that definition also scotches the tri-professor’s view of the pound sterling. It is a token of value widely, readily & confidently accepted in commerce. And ferk all to do with whether tax to the British government is paid in it. As Tim points out, the taxman will accept tokens of value in other currencies & in extremis articles of value. Because paying tax is part of commerce
But this is of course Spud’s central failure. He doesn’t understand what money actually is, so nothing he opines about it makes sense.
He has confused the issue as always, but there is a grain of truth in it.
The Americans, if I remember correctly, declared that you can always pay your taxes in American dollars, and the government *has* to accept them. I think this may have been a result of difficulties after their revolution with payment.
This prevents their government from issuing so-called “currency” to pay for stuff and then not accepting it in return for payment. This puts a base level of demand on dollars, in that Americans can always elect to buy dollars to pay their taxes with.
He has turned it around and said that the British government *requires* that British taxes be paid in pounds. Which you’re saying is not true, and I suspect that’s correct (being neither American nor British, I’m not motivated to look it up).
https://library.croneri.co.uk/cch_uk/btl/taxbull-it-taxbull-tb02-99-9
Even if what Professor Potato says is correct, it doesn’t imply that moar tax is better, as he is trying to imply. Your pocket is merely a vessel for transporting your pound to spud for his all seeing eye to use most wisely
If you can’t open the link Tim provides, it’s to an HMRC Tax Bulletin from February 1999 in which HMRC confirms that they will accept payment of tax and NIC in Euros.
C’mon guys, you can’t expect Spud to be aware of such recent developments.
N Ferguson’s book on the history of money deals with this very clearly. The script that the state issued in payment for goods needs to be accepted by the state otherwise no one accepts the script. Originated in China apparently. But it’s easy to think it backwards. The script is effectively people giving credit to the state. It has no value outside in extinguishing debts to the state except that which people are prepared to put on it. That means if we all started using dollars we would still need to buy pounds to settle tax debts but that’s all. Until the grasping state is 100% of the economy that means the pound would fall in value (purchasing power)
… unless it takes those pounds back in settlement of tax liabilities, it couldn’t require that our pounds be used for all the transactions that we undertake in all our shops, in all our trading, and everything else.”
Which, as any fule kno, it doesn’t.
He still doesn’t understand legal tender, does he?
Got the feeling that the IR (as was) would accept USD, CHF and JPY in the eighties. Probably sparked by the 70s.
Anybody know?
You can also do your tax calculation in a foreign currency, if that’s what you do your accounts in – Corporation Taxes Act 2010 s8.
So exactly how do countries that use another country’s currency work then? They don’t print the money, but accept it for payment of taxes.
Nauseating stuff to be honest: I haven’t the stomach for the video:
Six reasons to tax. None of them to fund the government, all of them to deliver social benefit. It’s a pretty good thing, this tax.
What kind of person writes the above?
So exactly how do countries that use another country’s currency work then? They don’t print the money, but accept it for payment of taxes.
Sensibly I would imagine. They don’t spend more than they receive. Not a concept the illustrious professor could comprehend.
Several places us the US $. Works OK
I paid my Hong Kong taxes in pound sterling at a rate agreed at the point of transaction.
(Mainly because I’d emptied my HK accounts and transfered everything into my UK sterling accounts in preparation for returning to the UK.)
Is Ely in a different tax zone? Perhaps potato products, or model trains, are subject to a different evaluation. Or is the man just mad?
So the only thing that gives currency value is the fact that it can be used to pay taxes…
Got it.
Pretty sure I’d have failed Econ 101 at dear old Mother Miami if I’d put that down as an answer.
What makes this funny is in the context of his post, thought, is that you can tell Murphy’s quite pleased with himself for coming up with this powerful insight. The man’s a knob.
>”it couldn’t require that our pounds be used for all the transactions that we undertake in all our shops, in all our trading, and everything else.”
Does your government actually do that though?
Because the US government doesn’t. If you want to conduct transactions in Mexican Pesos you can here (if you can find someone who will take them). You do, of course, still have to pay tax in Dollars, but the use of Dollars in transactions ‘in all our shops, in all our trading, and everything else’ is not *required*.
Or in Mexico – tons of transactions are done in Dollars (in fact, Dollars preferentially over Pesos) and you have to pay Mexican tax in Pesos but Mexico doesn’t *require* you to do business in Pesos.
“So the only thing that gives currency value is the fact that it can be used to pay taxes…”
It’s more the case that you can always use that currency for something. If you owe taxes, you can use pounds to pay them with.
Now, others may accept them, or not. If others do, then that creates more demand.
If no one else accepts them, then you may end up with a very low tax bill – assuming you can find any pounds to pay it with.
Confederate dollars are not accepted as currency, but they are collector’s items. So they do have value.
A Richie MMT student?
Biden’s chief economic adviser crashed while trying to explain cash
M: As I said above, no, it doesn’t, and I think he misunderstands what “legal tender” is. Of course, as an advisor to the Scottish Nationalists, he should be aware that even that doesn’t exist in parts of the UK.