Higher levels of tax compliance should lead to lower tax rates

Morning View
Morning View

The Archbishop of Canterbury’s words on the importance of everyone paying their share in tax should have particular resonance in Northern Ireland.

The Province is heavily dependent on funding from the public purse, and there is little prospect of that changing in the near future.

Stormont has lavished freebies, in a bid to be popular with the electorate.

Prescription charges were abolished and the age of eligibility for free transport was lowered to 60 (in a time of rising average lifespans).

Attempts to introduce welfare reform were adamantly opposed by nationalists, and got a lukewarm reception even from unionists.

And yet if there is ever any attempt to raise the sort of revenues that are needed to fund such freebies, such as higher fuel duty or water charges, there is immediate resistance.

If a society wants Scandinavian levels of welfare provision, then it needs to have high Scandinavian levels of taxation.

If it wants a smaller American-sized state, then it can sustain lower American levels of taxation.

But it cannot have both unless someone else is writing the cheques. This is currently the case in Northern Ireland, but the problem is that English people are beginning to wake up to the extent to which the regions are being subsidised (particularly so after the Scottish referendum).

The Most Rev Justin Welby was talking in particular about tax avoidance.

Both avoidance and evasion of tax mean that the people who do pay their full share have to pay more than they otherwise would.

When, for example, fuel fraudsters evade paying duty, law-abiding motorists have to pay more.

The archbishop is right to say that tax system needs to be simplified. This helps with transparency and compliance and administration.

The ultimate goal for any well-run society is the largest possible number of tax contributors paying the smallest possible amount of tax that is required to fund vibrant public services, delivered efficiently.