Tax and be damned

OK, I have to admit this entry is less about pure business finance and more about a subject that affects us all – taxation. Specifically that sort of taxation that’s going …

12th September 2007 at 9:40 pm

OK, I have to admit this entry is less about pure business finance and more about a subject that affects us all – taxation. Specifically that sort of taxation that’s going to make us all go terribly green, if that nice Mr. Cameron and his friend Mr. Goldsmith have their way.

I’ve just paid one, in fact – the congestion charge in London – and you can probably see from the time of this entry that if it’s preventing congestion then I’m a monkey’s whatsit. Never mind, this isn’t about my frustrations.

Except it sort of is. The congestion charge works as a revenue raiser purely because it isn’t working. Confused? Then let me explain. If the C-charge really, really did something about congestion then people wouldn’t come in to London. It had that effect at first but it no longer does. People come in and pay, and if TfL is really, really lucky they forget to pay their charge and have to cough up even more.

If they stopped coming in to London, of course, the whole system would collapse because of an absence of money.

It’s the same with these green taxes with which we’re all being threatened (I assume there’ll be a business levy as well as one on consumers). Use up more consumables and you’ll pay more tax. In theory this should encourage businesses and individuals to consume less.

Except if they actually do so, the money coming in will shoot down. Quickly. Offer tax breaks for positive moves towards greening the planet and the problem multiplies when people really start to get things right. People become green, money goes down.

So we end up, under these proposals, working under a system whose financing depends on our causing damage to the environment. To me, it doesn’t make sense – but hey, they’re coining it with the congestion charge.

Guy Clapperton

Guy Clapperton is a freelance journalist who specialises in small business issues and has written for the likes of The Guardian, the FT and the Daily Mirror. Guy has written about finance and franchising for SmallBizPod.

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  1. Finnsense says:

    There are two function to so-called Pigovian taxes such as the congestion charge. One is to reduce harmful behaviour and the other is to raise money to offset the costs of harmful behavour.

    The congestion charge has both reduced the amount of traffic going into Central London and raised money. That money might not be used for good, but it could be. If you don’t think it is, elect a new mayor.

    In general your argument is simply misplaced. Economists of all stripes agree that Pigovian taxes are the most efficient way to deal with negative externalities. Read Greg Mankiw who is was an advisor to GWB and is clearly on the right of the spectrum. No-one likes taxes but it seems you are allowing your dislike of taxes to cloud your judgement.

  2. Guy Clapperton Guy Clapperton says:

    I’ve done a fair bit of reading on the subject and can confirm opinion is divided. I acknowledge your right to disagree with me of course but you’re making wrong assumptions – I actually think *income* tax, for example, has gone down too far.
    You haven’t addressed my central point, which is that an economy that starts profiting from these negative externalities will actually suffer if they go away. Thanks for commenting.

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