The perils of non-compliance

Ireland and America are suffering the same problem with their contentious taxes.

A flat tax, levied on milllions of people matching a basic selection criteria, is being fought vehemently. Although non-payment is ostensibly illegal, in practice it is unlikely to result in any real punishment. This in turn could result in a major headache for the government. Am I talking about Dublin or Washington? Both, obviously.

The Irish property tax is the subject of a massive campaign of non-payment. At the first deadline for registration, last Saturday, only half of Ireland's 1.6 million households had registered to pay. There will be many more waves of deadlines, threats and posturing before it comes but the theoretical end-point is jail.

Clearly, that isn't going to happen to 800,000 homeowners. But what other possibilities do the government have? They can't afford – politically or finanically – to back down. The expected year-one revenue of €160m is too much to turn down and in a country seems to have taken all the austerity it can bear, a moment of weakness could well mark the end of the project.

The government may simply hope that attrition (and increasingly scary letters) will reduce the number of holdouts. It is possible to jail a few thousand people in a way that it isn't with a few hundred thousand.

But they then have a further problem, in that they are "only" fighting over around €80m. If they still want to come out on top financially, they can't go for expensive measures of coercion. For instance, it costs over €75,000 to keep a prisoner in jail for a year; if each holdout manages to take up just five hours of a civil servants time, then at the average wage, they would cost the government more than they owed.

As a result, any enforcement the government does will have to be enacted on the cheap, which won't be easy given the scale of the problem.

On the other side of the Atlantic is a tax that nobody wants to admit is a tax. The Affordable Care Act – Obamacare to its detractors – imposes a $695 charge on anyone who fails to purchase insurance. This individual mandate is the subject of a supreme court hearing which is baffling many economists – because it really is all in the name.

The constitution, after nearly 250 years of interpretation, allows for the imposition of taxes by Congress for pretty much any reason it sees fit. There are still limits to the legislature's power, but it is universally agreed that if the individual mandate were a tax, it would be legal. In fact, the Republican alternative to the act is essentially just that, except instead of imposing a tax on those who don't buy insurace, it gives a tax credit to those who do. In fact, the credit, which is over $2,000, imposes a far bigger penalty on non-purchasers than Obama's plan.

The administration knows how unpopular new taxes are, however, so it is refusing to call it one. And the opposition is playing along, because they know that their best chance to get the bill overturned involves pretending that the new tax is a fine along with the government. And so the court case continues.

That's not the only strange political compromise in the bill, though. In the one measure that supports the claim that the mandate is not a tax, there are no legal penalties for non-compliance. The IRS, which administers the charge, is able to send threatening letters, but ultimately non-payment means nothing.

Even more worrying for the admistration is the fact that the charge is actually far too low to do what it is meant to do. Its implementation is due to the fact that Obamacare requires insurers to take anyone who asks, and cover all pre-existing conditions; but this led insurers to fear that people would remain insurance-free until they got ill, then buy healthcare until they got better. If this were the case, health costs would shoot up, and everyone would be worse off.

Hence, people are penalised for not buying insurance even if they are healthy. All well and good, no?

Not quite. Health insurance is really expensive. That's what got the US into this mess in the first place, after all. $695 a year is actually less than almost every insurance package currently on the market, so the fear for many is that healthy young people will take a decade of paying the charge (or not paying it, if they have the courage), then join up when they get ill. If that happens too much, then insurance premiums will rise further – making that course of action even more appealing.

As President Obama and his Irish counterpart Enda Kenny are learning, making people do what you want them to is hard.

Barack O'Bama: The president with the Irish Taoiseach, Enda Kenny. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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Britain's shrinking democracy

10 million people - more than voted for Labour in May - will be excluded from the new electoral roll.

Despite all the warnings the government is determined to press ahead with its decision to close the existing electoral roll on December 1. This red letter day in British politics is no cause for celebration. As the Smith Institute’s latest report on the switch to the new system of voter registration shows, we are about to dramatically shrink our democracy.  As many as 10 million people are likely to vanish from the electoral register for ever – equal to 20 per cent of the total electorate and greater than Labour’s entire vote in the 2015 general election. 

Anyone who has not transferred over to the new individual electoral registration system by next Tuesday will be “dropped off” the register. The independent Electoral Commission, mindful of how the loss of voters will play out in forthcoming elections, say they need at least another year to ensure the new accuracy and completeness of the registers.

Nearly half a million voters (mostly the young and those in private rented homes) will disappear from the London register. According to a recent HeraldScotland survey around 100,000 residents in Glasgow may also be left off the new system. The picture is likely to be much the same in other cities, especially in places where there’s greater mobility and concentrations of students.

These depleted registers across the UK will impact more on marginal Labour seats, especially  where turnout is already low. Conversely, they will benefit Tories in future local, Euro and general elections. As the Smith Institute report observers, Conservative voters tend to be older, home owners and less transient – and therefore more likely to appear on the electoral register.

The government continues to ignore the prospect of skewed election results owing to an incomplete electoral registers. The attitude of some Tory MPs hardly helping. For example, Eleanor Laing MP (the former shadow minister for justice) told the BBC that “if a young person cannot organize the filling in of a form that registers them to vote, they don’t deserve the right to vote”.  Leaving aside such glib remarks, what we do know is the new registers will tend to favour MPs whose support is found in more affluent rural and semi-rural areas which have stable populations.  

Even more worrying, the forthcoming changes to MPs constituencies (under the Boundary Review) will be based on the new electoral register. The new parliamentary constituencies will be based not on the voting population, but on an inaccurate and incomplete register. As Institute’s report argues, these changes are likely to unjustly benefit UKIP and the Conservative party.

That’s not to say that the voter registration system doesn’t need reforming.  It clearly does. Indeed, every evidence-based analysis of electoral registers over the last 20 years shows that both accuracy and completeness are declining – the two features of any electoral register that make it credible or not. But, the job must be done properly.  Casually leaving 10m voters off the electoral resister hardly suggests every effort has been made.

The legitimacy of our democratic system rests on ensuring that everyone can exercise their right to vote. This is a task which shouldn’t brook complacency or compromise.  We should be aiming for maximum voter registration, not settling for a system where one in five drop off the register.