New Communist Party of Britain
If the social wage is to be no more than a safety net it has to be extended, this can only be done by forcing the ruling class to disgorge their vast wealth. In the immediate situation that can be done by shifting the burden of taxation away from workers and onto capitalists and others who control or share profits.
Though at our last Congress we welcomed the 50 per cent tax rate, introduced by the last Labour government, we pointed out that it was not high enough, encompassed too few of the rich and would be easily avoided. Up to 1979 the tax on the rich was much higher so campaigning for higher taxation of the rich is just reversing the tax cuts introduced by the previous Conservative government and should be seen in the same light as reversing that government’s anti-working class laws.
For the last 40 years, under the Conservatives and under Labour, public spending has been cut. Vital services like the National Health Service, public transport, education and local amenities have all become seriously underfunded.
Taxation is the way services such as education, the health service, pensions and other elements of the social wage should be funded. Of the £466 billion of Government revenue, in 2011/2012, income tax was £150 billion, national insurance £101 billion, value added tax (VAT) and other levies on consumption raised £158 billion and council tax a further £23 billion.
Taxes on profits raised only about 10 per cent of the total tax take, of which £42 billion was from Corporation Tax on profits of about 27 per cent of Gross Domestic Profit (GDP) a further £4 billion was raised by Capital Gains Tax and another £3 billion from share transactions. Vodafone, the mobile phone group, paid no corporation tax in 2011/2012 and recently lost a court case about an unpaid £6 billion tax demand, George Osborne, Chancellor of the Exchequer, then cut a deal so that Vodafone only had to pay £1.2 billion, the company pocketed the other £4.8 billion to add to their profits.
Vodafone is just one of a long list of multinationals that pay little or no corporation tax and who see Britain’s tax regime as a soft touch. Google, the internet search company, paid just £8 million of corporation tax in Britain despite making more than £6 billion in revenues during the six years to 2010. In trying to justify this Google’s chair, Eric Schmidt, said that it was a company’s duty to shareholders to pay no more tax than required and that his company’s hands were tied by the Government’s low demands.
The main rate of corporation tax in 2012 was 24 per cent, having dropped from 28 per cent in 2010; it will drop again to 23 per cent in 2013. But it has been estimated that over the next four years, the effective corporation tax rate that multinationals will pay will be no higher than 17 per cent. That is lower than the standard rate of income tax or VAT.
It is these businesses, their directors and others who benefit from the profits of control who have gained most from the knowledge and skills of the working class. The knowledge and skills of the working class have been developed over time, not by any contribution from the capitalists, but by workers putting in time, effort and money to fund the education, health service and libraries. It is about time that the profits taken by the capitalists paid for the upkeep and development of this knowledge.
For years both Tory and Labour governments have clamoured for lower income tax. In 1979 the top rate of income tax was 83 per cent, which applied to incomes over £20,000, equivalent to £155,000 in 2012, with an extra 15 per cent investment income surcharge. The investment income surcharge was abolished in 1985 and the top rate of income tax was cut to 40 per cent in 1988.
In the 2012 budget it was proposed that the amount of income that could be given away in income to charities, Gift-Aid, be reduced.There was such a hue and cry about this that the proposal was withdrawn. Gift-Aid is a way that the rich can avoid paying some tax and save themselves other expenditure as well. In Britain “charities” cover a wide range of voluntary organisations including public schools, universities and cultural organisations. Giving under Gift-Aid has increased six-fold since 1990, reducing tax revenue by up to £2 billion per year. This might be an underestimate as the budget in 2000 changed the rules so that the Office for National Statistics (ONS) can no longer track donations from corporations.
Gift-Aid works on the assumption, intended or otherwise, that charitable giving by individuals is a preferable way to allocate Government funds. It also assumes that the giver makes better choices than the Government in deciding what is a good cause.
If a rich individual decides, using Gift-Aid, to give £1 million of their income to their favourite charity it will cost them £550,000; the Government will give that charity a further £450,000. In effect this individual has decided that £450,000 of their tax should not go to the National Health Service but should go instead to a charity such as a public school. It is the working class who are subsidising this “charitable” giving without any say on how it should be directed.
Eton College, with assets of over £100 million, is a charity and thus benefits from substantial tax breaks reducing fees by upwards of £2,000 per student per year.
Goldman Sachs, the investment banking group, has a charitable organisation with an income, in 2010, of £57 million of which it spent just £6 million; this charity has no employees. In 2012, with the focus on Gift-Aid, it was embarrassed into increasing its spend to £19.1 million.
A second abuse of the tax system is by exploiting the tax concessions on pension contributions. If someone in the top 10 per cent income bracket, paying an income tax rate of 40 per cent, decides to pay £24,000 per year into their pension fund, the effective payment will be £14,400; the Government will pay £9,600 into the individual’s fund. In effect this person has decided that £9,600 of the tax that they were supposed to have paid should not go to social services, but should be used to supplement their future pension. It is the working class who are subsidising these private pensions of the rich.
The NCP maintains that the burden of taxation should be shifted away from workers and onto the wealthy. The Party is opposed to all indirect and regressive taxes.
To ensure an increase in the disposable income of the working class - to provide free education for all, a national health service free at the point of delivery and a pension at two thirds median wage - a fundamental change in taxation is required. That change is:
PAYE personal allowances to be increased substantially so that those earning less than two thirds of the median wage pay no tax at all. This would exempt a greater number of the lower-paid and pensioners from paying any income tax.
The employees’ upper earnings limit for National Insurance (NI) should be abolished. Employers’ NI should be raised to 20 per cent. The contracting out of NI should be abolished.
New PAYE Tax bands starting at £50,000 and in £10,000 increments to be introduced at 50, 60, 70, 80, 90 per cent and for those with incomes over £100,000 a 98 per cent tax rate. This would impact less that 10 per cent of the working population. If allowances were doubled someone with an income of £110,000 would still get, after tax and NI, about £47,000 whereas someone with an income of £30,000 would see their take-home pay increase by more than £1,600.
Capital Gains should be treated as income with Capital Gains Tax rates tracking the rates for PAYE.
The removal of all tax relief on pension fund contributions.
The abolition of Gift-Aid and other similar schemes that redirect Government expenditure to “charitable” causes.
The removal of all tax on domestic fuel.
The abolition of VAT.
Taxes on insurance to be withdrawn.
Council tax should be reduced to its 2001, level pending its further reduction at a later date. In compensation the central government grant to local authorities should be restored to its pre-1979 level.
All Corporation Tax rebates should be abolished.
The Corporation Tax allowance for the main rate should be reduced to £1 million. This will bring in more companies into this tax band.
The Main Rate of Corporation Tax should be increased to 60 per cent. New Corporation Tax bands, of £500,000 increments from the proposed main rate tax band of 60 per cent, to be introduced at 70, 80, 90 and 98 per cent.
The tax exemption limit for capital gains tax should be abolished and capital gains should be treated as unearned income.
The rich have plenty. They must pay.
Our demands for a progressive tax system can be achieved as workers want it to be done; they are fed up with the Vodafones and Jimmy Carr’s avoiding paying tax. Making the rich disgorge a fraction of the wealth they extort from the working class every year will go some way to reverse the destruction of social provision that has taken place since 1979.
But the ruling class won’t give up their wealth voluntarily and they will seek ways to reverse any tax increases, or at least offset them. So the only guarantee that workers have to ensure that all the wealth generated by workers is used for the benefit of workers is to overthrow the ruling class and take control of the state.