Monday, August 24, 2015

What are taxes for? By Mike Hedges AM

Since being elected in 2011, most of the discussions I have heard in the Senedd have been around reducing taxes in order to grow the Welsh economy, rather than the need for taxation to pay for public services. When you look at the cost of private education and private health care, it puts into perspective the value for money we get from our taxation system.

Taxation exists to pay for public services. Too many people believe that we can have the same quality of public services as Scandinavia but have a taxation system which is more like that of the USA. It is not by random chance that those countries with the highest tax levels have the best public services and those with lowest tax levels the poorest. It is because taxation is necessary to raise the money to pay for the public services we all need.

Quality public services - be they health, education or infrastructure - come at a substantial cost to the public purse and the only way of paying for them is via taxation. Taxation can be on income, profit, consumption/ expenditure or value of land and property - or a combination of all of them. But if people want quality public services, these are the taxes needed to pay for them.

Whilst nobody likes to pay taxes, and some rich individuals and multi-national companies are expert at reducing their tax payments, providing quality public services means that, if some people do not pay then either public services suffer or others have to make up the shortfall. Every time tax cuts are made, they are shown as beneficial and they appear to be to those who are paying less tax and have more money in their pocket. The effect that these reductions in government income have on public expenditure on services such as health, local government and education are completely ignored until the cuts start affecting people.

The more difficult a tax is to avoid, the more unpopular it is with the rich and powerful. By far the most difficult taxes to avoid are the property taxes (non-domestic rates and council tax). There are no tricks, such as using internal company transactions or having non-domiciled status, to avoid paying the tax. The buildings - whether they are residential, manufacturing, commercial or retail - are not movable and the tax becomes liable on the property and has to be paid.

If we desire quality public services then we have to pay for them, via taxation. This is not the start of a campaign for higher taxes but it is linking taxation with expenditure. Remember the old adage: you only get what you pay for.

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