Today's the taxman's final reckoning - for now

Article by John Blundell in The Scotsman

IT WAS a brilliant idea of Gabriel Stein, himself a part of the clever Lombard Street Research team, to compute that statistical mirage - the day when the average Brit starts to work for him or herself. That day is today.

The average Scottish taxpayer spends the first 155 days of the year - from Hogmanay through to 2 June - solely to pay off the demands of the tax authorities.

It is only from today we are really working for ourselves and our families. Until now, we have all been serfs to Gordon Brown’s grand illusion that he will deliver us "free" services if only we will work for him almost half the year.

What I fail to understand from Stein’s grim computations, in collaboration with the Adam Smith Institute, is why we lack any hint of a popular tax revolt. Our docility and law abiding habits are virtues but there comes a point when they look too servile and obedient.

We saw this phenomenon most clearly when there was a huge outrage against the price of petrol four years ago.

Simple souls that we are, we all believed this was a conspiracy by the oil corporations. We could not quite grasp that the bulk of what we pay at the forecourt goes to the Treasury; the retailer and the energy companies take only pennies - and make only farthings.

I admit I make the same mistake. If I go to my off licence, I’m always stung by the price of alcohol. It feels it goes to the brewers or the vintners. Of course it goes to the insatiable Mr Brown.

There are many other taxes we do not see. National Insurance sounds virtuous, but it is simply a levy on employing people. The politicians like to pretend this is them taxing the capitalists to give us benefits they would never offer. Of course it is merely taken from our pockets.

Yet still the political opposition seems mute. Taxes are so oppressive and widespread there is a fine open goal for those who promise sharp and dramatic cuts. The Conservatives seem reluctant to talk of more than a penny off here or there. That will never excite the voters.

In Scotland, the parliament has the powers to cut income tax by 3p in the pound. It is modest, but what a signal that would send. All politicians seem to have entered into a compact not to mention this.

The uncritical response is that we accept our taxes because we appreciate what we get in return - our roads, schools, pensions and Holy of Holies, the health service.

This is a specious explanation. The State spends only a small part of its billions on giving us back services. The bulk is spent nourishing the monsters of the departments of state and their myriad employees and index-linked pensions - no "black holes" for them.

One of my heroes is the French libertarian writer Frederic Bastiat. He has a wise maxim: "The State is that fiction by which we all try to live at other people’s expense". That says it all. We all begrudge much of our taxes, levies and dues but then all try to get out benefits.

My ideal is the biblical notion of the tithe. Let us adhere to a rule of no tax above the 10 per cent rule. Many taxes should disappear altogether. Those that survive should not deviate from one-tenth. Can you imagine the liberation to the economy?

Everyone would be re-animated. All of commerce would surge. And the most splendid paradox of all: the Treasury would garner far more in taxation. 10 per cent of a dynamic economy would be better than 44 per cent of a sluggish one.

The State would not have to provide many services that are only needed in a sleeping economy. Who would need any unemployment benefits when working was suddenly rewarding again?

An alarming aspect of the Tax Freedom Day computations is the steadily creeping effect of taxation. In 1993, we worked for the taxman only until 23 May - now it has crawled a further ten days up the year. Gabriel Stein says next year we’ll work for the Chancellor until 7 June and in 2005 it will have advanced a full week to 9 June.

If my 10 per cent rule were observed, we would work for the government only until noon on 8 February.

It causes some anguish to realise Income Tax was only introduced as an emergency "temporary" measure in 1799 to pay for the defeat of Napoleon.

Young Mr Pitt, who imposed it, would have regarded my 10 per cent as radically socialist. He only levied 2.5 per cent.

When Gordon Brown trumpeted his Budget’s £505 million "giveaway" (better a "give back", I’d suggest), such is his stealth, only a few pedants noticed he was collecting a further £4.2 billion.

This is the advantage of our rascally political class. They get away with it because taxes are subtle. We see our wages or salaries clock on to our accounts and forget the skimming to which they are subjected.

VAT is an EU tax. As a fiscal mechanism it is elegant but the commission wants it harmonised upwards to 20 per cent. Is it possible this might spark a popular tax revolt? In the rest of the EU, Tax Freedom Day is already well ahead of us at 13 June.

I wonder if British business could be less compliant without breaking any laws? The supermarkets could adapt their till receipts to say how much less we would have paid but for the taxes. Every petrol station could declare most of what we’ve just handed over goes to the Revenue.

Every pub and restaurant could signal clearly their prices would be a fraction were it not for the clandestine taxes. This is commonplace in the US.

Still, Tuesday is a happier day - the Nativity of Adam Smith. It surely ought to be a Scottish National holiday.

John Blundell is general director of the Institute of Economic Affairs.

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