THE JOY OF TAX www.transworldbooks.co.uk Joy of Tax.indd 1 04/09/2015 12:30 Also by Richard Murphy THE COURAGEOUS STATE For more information on Richard Murphy and his books, see his website at www.taxresearch.org.uk Joy of Tax.indd 2 04/09/2015 12:30 THE JOY OF TAX How a fair tax system can create a better society Richard Murphy BANTAM PRESS LONDON • TORONTO • SYDNEY • AUCKLAND • JOHANNESBURG Joy of Tax.indd 3 04/09/2015 12:30 TRANSWORLD PUBLISHERS 61–63 Uxbridge Road, London W5 5SA www.transworldbooks.co.uk Transworld is part of the Penguin Random House group of companies whose addresses can be found at global.penguinrandomhouse.com First published in Great Britain in 2015 by Bantam Press an imprint of Transworld Publishers Copyright © Richard Murphy 2015 Richard Murphy has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work. Every effort has been made to obtain the necessary permissions with reference to copyright material, both illustrative and quoted. We apologize for any omissions in this respect and will be pleased to make the appropriate acknowledgements in any future edition. A CIP catalogue record for this book is available from the British Library. ISBN 9780593075173 Typeset in 11/15pt Sabon by Falcon Oast Graphic Art Ltd. Printed and bound by xxxxxxxxx Penguin Random House is committed to a sustainable future for our business, our readers and our planet. This book is made from Forest Stewardship Council® certified paper. 1 3 5 7 9 10 8 6 4 2 Joy of Tax.indd 4 04/09/2015 12:30 Dedication – to come Joy of Tax.indd 5 04/09/2015 12:30 Joy of Tax.indd 6 04/09/2015 12:30 Contents Introduction 9 1 Tax and society 13 2 What is tax? 28 3 Why we tax 45 4 [chapter title to come] 66 5 Tax and choice 103 6 The underpinnings of a good tax system 127 7 The policy decisions tax must impact 155 8 The ideal tax system 177 9 As the Chancellor might put it 206 Notes and sources 239 Index 249 Joy of Tax.indd 7 04/09/2015 12:30 Joy of Tax.indd 8 04/09/2015 12:30 Introduction I can’t remember when Alex Cobham, now of the Tax Justice Network, joked that I should write a book called The Joy of Tax. I have to thank him for the title, and much else. For several years the book remained a title without con- tent: occasional drafts came and went but what I’ve written took a decade of thinking, more than 11,000 blog posts, and vast numbers of discussions to bring to life over the relatively short period in which it was eventually written. Who else to thank then? Two colleagues stand out. The first is John Christensen, the director of the Tax Justice Network. We have been on an amazing journey together over the last twelve or so years. And then there is Colin Hines who is the convener of the Green New Deal Group, without whom many of the ideas I have promoted on the broader economic agenda would not have been cajoled into life. Both have been true friends during my campaigning career who have enriched my life far beyond the matters referred to in this book. Academic colleagues Ronen Palan, Prem Sikka, Anastasia Nesvetailova and Sol Picciotto (professors all) demanded I 9 Joy of Tax.indd 9 04/09/2015 12:30 RICHARD MURPHY improve my thinking over the years and each challenged me to go further than I had ever considered I might. I am grateful. As with all others mentioned in this introduction, none have any responsibility for the ideas and errors in this book, which, for better or worse, are all mine. Howard Reed has been a friend and inspiration on many an occasion: it would be great to do more together. The mem- bers of the Green New Deal Group are all also due thanks: they know who they are, with Andrew Simms and Ann Pettifor standing out for special mention. Some persistent commentators on the Tax Research UK blog, and most especially Ivan Horrocks and Andrew Dickie, encouraged me in my moderating of thousands of comments when that has, on occasion, been a thankless task. I am grateful for their moments of enlightenment. My friends in Jersey may be surprised that I offer a note of thanks to the politicians of that island who started teaching me about obstinacy in the face of the inevitable from 2005 onwards. I’m not sure they will appreciate my thanks. Nor will the many internet trolls who have over the years taught me about the reality of politics in the social media era, even if they never once offered a moment of enlightenment. I owe an enormous debt to those who have funded my work. The trustees of the Joseph Rowntree Charitable Trust showed confidence in me for five years, as did Stephen Pittam and Nick Perks, successive secretaries to that trust. That we shared our Quaker beliefs may have helped. Chapter 6 reflects that fact, unashamedly. The TUC, PCS and Unite all offered support, work and friendship when needed. I am proud to be a chartered accoun- tant and a trade unionist. 10 Joy of Tax.indd 10 04/09/2015 12:30 THE JOY OF TAX Many NGOs also chipped in on the way: occasionally with work, often with support. Christian Aid, Oxfam and Action Aid jump out from the crowd. My colleagues at the Fair Tax Mark have put up with my variable input whilst the book has been in progress. My spe- cial thanks go to Meesha Nehru. I suspect my agent, Carrie Karnia, and editor at Transworld, Doug Young, shared the doubts of many that this book would ever materialize. But they stuck with it, and the rush with which it has come into being. I look forward to repeating the process with the next idea. No one deserves more thanks than my wife, Jacqueline, and my sons, James and Thomas. Jacqueline suffered con- siderable ill health during the gestation period for this book: that it was written as her recovery has progressed is the clearest indication of the way she has been integral to my work. James and Thomas motivate me. Every morning I wake up thinking that if I have one thing to do it is to make the world a better place for them, their friends and all of their genera- tion. Ultimately they will have to judge whether anything I have said or done has helped achieve that goal. Whatever their eventual view might be this book is for them, with my thanks for becoming the friends to me that both now are, from a father who can never really complain about how much time they spend on their computers because I have always been there just a bit longer. Richard Murphy Downham Market September 2015 11 Joy of Tax.indd 11 04/09/2015 12:30 Joy of Tax.indd 12 04/09/2015 12:30 1 Tax and society It has been said that the only two things in life that are inevi- table are death and taxes. I hate to disappoint from the outset, but this is, very obviously, not true. Death has indeed been inevitable from the moment that life was first known on earth. Life has, apparently, existed for about 3.5 billion years.1 However, since as far as we know taxation is a relatively recent human invention, for approxi- mately 3,493,000,000 years death might have been inevitable but taxation was not, because humans have been around for at most 7 million years.2 However, even that is too generous, because written records have existed for a mere 4,500 years and it is only from those records that we know about tax. Thus taxation may have existed for a lot less time than humans have been around. After all, there’s a fair chance that tax was not the first idea we humans hit upon. So Benjamin Franklin’s famous comment about tax is incorrect: for most of human existence taxation has not been inevitable. In truth most things that are said about taxation are just wrong. This will be a recurring theme of this book. 13 Joy of Tax.indd 13 04/09/2015 12:30 RICHARD MURPHY It is, however, worth noting that we do have written records from about 2,500 bc and that some of the earliest, from Mesopotamia, record that tax was a part of life back then, just as it is now.3 From this it would seem that, while taxes may not be inevitable, they have been a fixture on the agenda of humankind ever since we tried to live in any form of com- plex society. If that’s what Benjamin Franklin meant then we can let him off with his error for the remaining 3,499,995,500 years of living history. The history of taxation is, in fact, important. If we are to understand what we want from taxation now – and that will be another recurring theme of this book – then we have to be sure that we’re not just reinventing that history and what it has to tell us. That’s why I am concentrating on this issue in this first chapter. Most histories of tax start in the modern era, but it was actu- ally the Babylonians who are the first known to be in on the act despite having some problems to overcome in achieving their aims.