Reversing “tax liberation”

Submitted by Anon on 16 July, 2006 - 11:30

On our front page we report the huge sums pocketed by the rich through tax avoidance, tax evasion, tax fraud — and the straightforward continuation of the tax cuts for the well-off introduced by the Tories in the 1980s.

All new value is produced by labour. Some of it is recouped by the working class directly, in wages, or indirectly, in the “social wage”. The rest goes into the pockets of the rich.

Every modern state pays lip service to the idea that the tax system should at least soften the squeeze on the poor. In Britain, since the Thatcher government’s tax changes of the 1980s, continued by Blair and Brown, it scarcely does.

The top rates of income tax have been drastically cut, and taxes on consumption which hit the poor more than the rich — like VAT — have been increased. So by 2000-1 the bottom 20% in Britain were paying 41.7% of their income in tax; the middle 20%, 35.7%; and the top 20%, 34.2%.

The worse-off you are, the bigger the proportion of your income that goes in tax.

Take account of benefits, too, and the poor gain a bit. But the steady “liberation” of the rich from redistributive taxation has been a major factor in increased inequality and the decay of public services.

Worldwide, the Tax Justice Network estimates that US$11.5 trillion of assets are held offshore by private individuals at a probable cost to their governments of US$255 billion a year in tax lost.

The typical New Labour answer is that in a globalised world it is impossible to raise taxes on businesses or on the well-off, because they will move their money to a lower-tax area.

The New Labourites exaggerate. Even with globalisation, tax rates vary seriously between countries. It is not as easy as they say for rich people to pick up their whole business — factory, equipment, workforce, supply network — and transplant it to a lower-tax area. Personal tax rates on high incomes range from 60% in Denmark to 19% in Slovakia; corporate taxes range from 45% in Japan to 12.5% in Ireland. “Globalisation” in general could not stop a British government raising its tax rates on the rich to the upper ends of those ranges.

A workers’ government, based on and committed to the working class, could and would challenge the whole logic of capitalist globalisation — the “race to the top” for the rich and the “race to the bottom” for the future.

It would mobilise the workers in the financial sector to keep tabs on where the riches are, and to exert control. And it would reach out to workers in other countries, to begin constructing a socialist globalisation.

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