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The Weekly paper of the New Communist Party of Britain


Tax the Rich

by John Maryon

BRITAIN’S bloated capitalists will have heaved a huge sigh of relief when Jeremy Corbyn was removed as Labour Party leader, in the sure understanding that they would now continue to get richer as the poor get poorer.

Since the 1970s both Tory and Labour governments have cut public spending in real terms. Vital services such as the NHS, public transport, local amenities and social services have become seriously underfunded. The money to pay for these services is raised by various forms of taxation but that levy should be fair. It is the wealthy who should be made to pay through progressive fiscal policies that can take more of the burden of taxation from the workers whilst ensuring that the rich are fully taxed.

For many wealthy capitalists tax avoidance appears to be regarded as a sport. They may employ sharp-witted accountants to ‘do’ the books, establish overseas tax havens and arrange financial transactions to indicate seemingly lower profits to reduce their tax burden. It was recently claimed that cleaners, on basic low wages, were paying more tax than the highly paid staff who worked in the offices that they cleaned.

In 1979 the top rate of tax was 83 per cent, today it is 45 per cent (46 per cent in Scotland). Council tax and VAT, both regressive measures, play an increasingly important role. Changes have ensured that more of the tax burden has shifted from the wealthy to those who are poor. The New Communist Party (NCP) maintains that the burden should be shifted from the backs of the workers on to the wealthy who can afford it. The party is opposed to regressive taxes such as VAT.

All income tax payers will have their personal allowances frozen for a number of years, which represents a significant and rapidly increasing tax burden. As incomes rise, in an attempt to keep pace with inflation, millions of workers will not only pay a higher percentage of their income as tax but may also become victims of ‘fiscal drag’ as they become eligible for a higher rate tax bracket. These changes taken with historically high VAT rates and changes to National Insurance (NI) contributions will hit hard.

With higher tax rates it could be expected that those with higher incomes would pay more taxes. Data from the Office of National Statistics (ONS) presents a rather different picture.

quality

In 2015–16 the poorest 10 per cent of households paid 42 per cent of their income as taxes of all categories. For the richest 10 per cent that figure was just 34. 3 per cent. The NCP seeks to improve the quality of people’s lives by reducing economic inequality and urges the Labour Party to make a commitment to do so by increasing the higher tax rates.

Higher-rate tax payers are able to gain extended tax thresholds with Gift Aid. They are able to benefit as donations will extend the basic tax band, meaning that less tax is paid at a higher rate. For those earning over £100,000 even more relief is available – in this case the tax-free personal allowance reduction of £1 for every £2 of additional income is off-set by £1 for every £2 of gift aid.

A fundamental question is to ask why the same proportion of tax is not paid on profits as on wages and should the liability be calculated in a similar manner. Any extra revenue generated would make it possible to boost pensions and benefits to help the community. Once full socialism is created many taxes may be reduced or abolished. Essential funding would come from the surplus value generated by publicly owned enterprises.

In November 2020 Boris Johnson announced that defence spending at £41.5 billion per annum would increase by £16.5 billion over the next four years. Whilst public services continue to suffer, no questions are raised in regard to this dangerous and unnecessary waste of money. The Labour Party has said that the announcement signalled a welcome and long overdue upgrade.

much higher

Further financial pressures are created by tax avoidance and evasion. According to HM Revenue and Customs (HMRC) the amount of tax income lost through non-payment, avoidance and fraud amounted to £35 billion in 2019–20. The actual figure could be much higher.

The government has faced criticism for raising national insurance tax on workers rather than directly taxing the wealthy. In 2021–22 the rate for Class 1 NI contributions is 12 per cent; this will increase to 13.5 per cent in 2022–23 and represents an increase of 1.25 per cent. The system is unfair because high earners do not pay at full starting rate, meaning that those with incomes exceeding £50,000 will pay proportionality less of their income in tax. The measures will place a heavier burden on the young whilst those with property and shares, who usually vote Tory, will be less affected.

The NCP seeks a much fairer tax system; a fundamental change that goes far beyond any existing Labour Party pledges. Our Communist policy calls for a wide range of essential measures:

Communist demands for a progressive tax system would redistribute wealth. Making the rich disgorge a fraction of their wealth would go a long way to enable the repair of social provision that has been cut back since 1979. The ruling class will not give up their inflated share of wealth and it is up to the workers to step up the class struggle to achieve justice.