What is a new Party for: taxation
Ignore the platitudes of Labour and the Tories: getting the tax system right is harder than rhetorical flourishes about stopping avoidance and evasion. And it's harder than fiddling about with rates or thresholds. Sharpening the wrong tools won't get the job done.
On corporation tax, to ignore that capital is mobile and that the tax systems of different countries tax systems dovetail together poorly is wishful thinking. Steep rises in corporation tax rates without addressing these structural difficulties won't end well.
The best solution is international co-operation - where states club together to tax corporations and then share the fruits. Plug the leaks between tax systems and avoidance becomes much more difficult. And if capital has fewer places to flee, higher rates translate more readily into higher receipts. The EU is embarked on exactly such a project: a "common consolidated corporate tax base". Who knows whether this - and other EU led anti-tax avoidance measures - contributed to the enthusiasm with which tax dodgers funded the Leave campaign?
But if we choose to absent ourselves from the best systemic solution we will need to become more imaginative.
A very substantial source of avoidance - practised by the usual suspects, Google, Facebook, Airbnb and others - involves selling into the UK from foreign tax havens. We should tackle this with a Foreign Sales Levy on large companies who engage in that practice. Base yourself here and you can pay corporation tax - but if you choose to game the system by selling to UK customers from tax havens you will pay a substitute for the corporation tax you are dodging.
Higher taxes on income are - by and large - another triumph of rhetoric over reality. The evidence that raising rates will produce meaningful additional receipts is slim to non-existent. In any event, it is simply wrong to punish hard working strivers but ignore the asset rich. The trend should be to cut taxes on income - and especially on National Insurance Contributions which are regressive, privilege unearned over earned income, and punish responsible employers - and increase taxes on wealth.
We do have a wealth tax - when income is passed between generations - but state sponsored loopholes for particular classes of assets render it insignificant as a revenue earner. Instead it acts to create false markets in those asset classes - their value is inflated by their use as tokens to pass wealth tax free between generations.
We must be radical.
We should halve the rate of inheritance tax - the current 40% rate is confiscatory - but reduce the threshold so it is paid by the top half of estates and applies to substantially all transfers of capital above £100,000. And we should remove the exemptions for special asset classes and special trusts. These measures will be hugely cash generative - and fairer by far than the current system.
We must also commit to a proper annual wealth tax. An inevitable consequence of the march of technology will be greater concentrations of wealth. We must have fewer and lower taxes on income; more, higher and better taxes on wealth.
We spend well over £100bn a year on tax reliefs that go overwhelmingly to the wealthy. We spend over £28bn per annum - £540m a week that could be spent on the NHS - exempting homeowners from capital gains tax on increases in house prices. Over £26bn more - £400 a year for every man, woman and child in the country - is spent subsidising savers. We do this without any analysis of whether this is the best way to spend this money. A new Party should conduct a rigorous review of all of the major tax reliefs and ensure that this massive expenditure generates benefits for all of us. Where it does not, we should not be afraid to tackle the vested interests of land-bankers, buy-to-let landlords and the financial services sector.
And we should reform Council Tax. For the lowest earning 10% of households, Council Tax (after Council Tax support) consumes a staggering 7% of household income (including benefits). For the highest earning 10% of households, the equivalent figure is 1.5%. We must extend Council Tax bands so the owners of expensive properties make a fair contribution. And use some of the proceeds to reintroduce a Council Tax Benefit that reduces the effect on poorer low earners.
This is not the place for a full review of all of the weaknesses of our tax system. But it is clear that there is far more to be done than the thin gruel of the Labour and the Conservative Manifestos of 2017 admit.
[This is the first of a series on how the sepia-tinged 1970s socialism of Labour and the Victoriana of the Tories leaves plenty of room for those who believe today's problems won't be solved with the ideology of yesterday.]