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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2009

Taxing: the good, the bad and the ugly

Hemantha Abeywardena writes from London…

Phillip Hammond, the Chancellor of Exchequer, experienced the worst crisis in his political career a few days ago, when he hiked the National Insurance payments for the self-employed. Not only did he incur the wrath of those who were directly on the firing line, but also upset a significant faction of his own party, the Conservative, that include some of the influential ministers in the government, and, perhaps Mrs Theresa May, the prime minister as well.

The indications show that Mr Hammond, a decent, soft-spoken man, will be forced to do a ‘U’ turn – of course, against his wishes - despite the irreparable political damage, that stemmed from the miscalculation - if he hasn’t made up his mind to do so; Mrs May probably will overrule him, which is going to prove that one’s setback is another’s rebound in the realm of politics.

When the obvious disagreements within the government play out in public, one may wonders as to why Mr Hammond, a businessman and a self-made millionaire, made a decision that certainly had the potential to demonize him; I think he had very little room for manoeuvre when it came to filling up the state coffers.

At present, there may be a lot of finance ministers, who are in the same predicament as Mr Hammond is in, right across the Western world.

Taxing the inhabitants by rulers has never been a popular course of action since time immemorial. It’s not just the burden heaped upon the suffering that triggers off mass discontent, but also our inherent refusal to embrace a sudden change, good or bad.

Politicians, and even the rulers, who misread this strange human trait often pay a heavy price with their political life and in a few cases, with catastrophic consequences.

For instance, Nanda Bayin, the 16th-Century, Burmese King, laughed to death - laugh - due to bursting his lungs, when a visiting Italian trader informed him that Venice was a free state – without a king! He was not the only one who couldn’t take in a change, nor will be the only one, although the intensity of the reaction may vary from individual to individual; history is awash with instances when inertia got in the way for a change that result in monumental upheavals.

Of course, taxing, by far, dominates the list of discontents throughout history, second only to despotism. In Britain, for instance, the tax controversies date back to centuries: in the late 18th century, the British government levied a tax on the sale gloves, to be followed by a tax on hats; then came the window tax, depending on the number of windows that a home had at that time.

With taxing, there were, as it is now, the unavoidable evasion and the small print. In the hat tax, for instance, ladies were exempted for inexplicable reasons. As for the windows tax, if the windows were filled with materials that makes no distinction between the adjacent wall and the former, they were not counted as taxable. The strategy, unfortunately, grew so unpopular when the poorer folks started losing scarce daylight, especially in winter months, which in turn led to health disasters.

As for the hat tax, individuals who failed to comply were supposed to pay a fine; duty stamps were introduced to stick to the hats sold by companies, in order to show that tax had been paid and the laws were enacted simultaneously to make forgery of any kind to be punishable by death!

In the late 80s, meanwhile, Mrs Margaret Thatcher’s invincibility was shattered beyond repair, when she introduced infamous poll tax.

When the ordinary folks are taxed, the outcry has always been, ‘why us, not them?’ it’s often a reference to the big companies that enjoy tax breaks. In recent months, big technological companies, such as Google, Amazon and a few more, have been singled out for being at an unfair advantage on this front.

Even among those who are up in arms, however, there is a significant majority that have a soft spot for some of them; for instance, they want the services rendered by companies like Google take into account before painting it with the same brush: they are a huge source of information that is freely available to mankind; they have mapped the entire earth in digital form and make it available for us free of charge, despite the vast sums spent on hardware, manpower and the flow of data.

Although, in general, the wealthy may be perceived as a tribe that is reluctant to pay their fair share of tax, there are noble men and women, who are prepared to break the mould.

During the global financial crisis in 2008, for example, a few German industrialists went public showing their willingness to be taxed much more than they had been subjected to at that time, by simply saying they didn’t want that much money in their bank accounts. Even in Britain there are plenty of men and women who do just it – and in silence – in many different ways.

They may have differences about what the threshold level should be – when it comes to taxing - with one thing in common; they don’t want to see their contributions being wasted on projects that stem from party political ambitions.

All in all, the taxing across the globe will never going to be any easier in the present form, as the existing economic models always lead to creating widening chasm between the rich and poor.

- Asian Tribune -

Taxing: the good, the bad and the ugly
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