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.

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North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?

Is fracking the answer to the UK's energy future? Or a serious risk to the environment?

Shale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park.

The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry?

What is fracking?

Fracking, or “hydraulic fracturing”, is the extraction of shale gas from deep underground. A mixture of water, sand and chemicals is pumped into the earth at such high pressure that it literally fractures the rocks and releases the gas trapped inside.

Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland

Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues.

So do these claims stands up? Let’s take each in turn...

Will it create jobs? Yes, but mostly in the short-term.

Industry experts imply that job creation in the UK could reflect that seen in the US, while the medium-sized production company Cuadrilla claims that shale gas production would create 1,700 jobs in Lancashire alone.

But claims about employment may be exaggerated. A US study overseen by Penn State University showed that only one in seven of the jobs projected in an industry forecast actually materialised. In the UK, a Friends of the Earth report contends that the majority of jobs to be created by fracking in Lancashire would only be short-term – with under 200 surviving the initial construction burst.

Environmentalists, in contrast, point to evidence that green energy creates more jobs than similar-sized fossil fuel investments.  And it’s not just climate campaigners who don’t buy the employment promise. Trade union members also have their doubts. Ian Gallagher, Secretary of Blackburn and District Trade Unions Council, told Friends of the Earth that: “Investment in the areas identified by the Million Climate Jobs Campaign [...] is a far more certain way of addressing both climate change and economic growth than drilling for shale gas.”

Will it deliver cleaner energy? Not as completely as renewables would.

America’s “shale revolution” has been credited with reversing the country’s reliance on dirty coal and helping them lead the world in carbon-emissions reduction. Thanks to the relatively low carbon dioxide content of natural gas (emitting half the amount of coal to generate the same amount of electricity), fracking helped the US reduce its annual emissions of carbon dioxide by 556 million metric tons between 2007 and 2014. Banning it, advocates argue, would “immediately increase the use of coal”.

Yet a new report from the Royal Society for the Protection of Birds (previously known for its opposition to wind farm applications), has laid out a number of ways that the UK government can meet its target of 80 per cent emissions reduction by 2050 without necessarily introducing fracking and without harming the natural world. Renewable, home-produced, energy, they argue, could in theory cover the UK’s energy needs three times over. They’ve even included some handy maps:


Map of UK land available for renewable technologies. Source: RSPB’s 2050 Energy Vision.

Will it deliver secure energy? Yes, up to a point.

For energy to be “sustainable” it also has to be secure; it has to be available on demand and not threatened by international upheaval. Gas-fired “peaking” plants can be used to even-out input into the electricity grid when the sun doesn’t shine or the wind is not so blowy. The government thus claims that natural gas is an essential part of the UK’s future “energy mix”, which, if produced domestically through fracking, will also free us from reliance on imports tarnished by volatile Russian politics.

But, time is running out. Recent analysis by Carbon Brief suggests that we only have five years left of current CO2 emission levels before we blow the carbon budget and risk breaching the climate’s crucial 1.5°C tipping point. Whichever energy choices we make now need to starting brining down the carbon over-spend immediately.

Will it help stablise the wider economy? Yes, but not forever.

With so many “Yes, buts...” in the above list, you might wonder why the government is still pressing so hard for fracking’s expansion? Part of the answer may lie in their vested interest in supporting the wider industry.

Tax revenues from UK oil and gas generate a large portion of the government’s income. In 2013-14, the revenue from license fees, petroleum revenue tax, corporation tax and the supplementary charge accounted for nearly £5bn of UK exchequer receipts. The Treasury cannot afford to lose these, as evidenced in the last budget when George Osborne further subsidied North Sea oil operations through increased tax breaks.

The more that the Conservatives support the industry, the more they can tax it. In 2012 DECC said it wanted to “guarantee... every last economic drop of oil and gas is produced for the benefit of the UK”. This sentiment was repeated yesterday by energy minister Andrea Leadsom, when she welcomed the North Yorkshire decision and described fracking as a “fantastic opportunity”.

Dependence on finite domestic fuel reserves, however, is not a long-term economic solution. Not least because they will either run out or force us to exceed international emissions treaties: “Pensions already have enough stranded assets as they are,” says Danielle Pafford from 350.org.

Is it worth it? Most European countries have decided it’s not.

There is currently no commercial shale-gas drilling in Europe. Sustained protests against the industry in Romania, combined with poor exploration results, have already caused energy giant Chevron to pull out of the country. Total has also abandonned explorations in Denmark, Poland is being referred to the European Court of Justice for failing to adequately assess fracking’s impact, and, in Germany, brewers have launched special bottle-caps with the slogan “Nein! Zu Fracking” to warn against the threat to their water supply.

Back in the UK, the government's latest survey of public attitudes to fracking found that 44 per cent neither supported nor opposed the practice, but also that opinion is gradually shifting out of favour. If the government doesn't come up with arguments that hold water soon, it seems likely that the UK's fracking future could still be blasted apart.

India Bourke is the New Statesman's editorial assistant.