Tax: what's a fair share?

The Public Accounts Committee is back on the tax trail.

And so the Public Accounts Committee (PAC) is back on the tax trail. Although did it ever really stop? Certainly, despite the upbeat assessments of the economy made by outgoing Bank of England governor Sir Mervyn King, the pressures on public and private purses haven’t eased. This explains the strength of public feeling that everyone should contribute a fair share of income in taxation. The tricky bit, as the PAC is discovering, is that working out exactly what constitutes a fair share isn’t as straightforward as it might seem.

Having previously called in the tax partners of the Big Four accountancy firms and the heads of companies already publicly called out for not coughing up as much to Treasury coffers as they might (step forward the apparently unholy trinity of Google, Amazon and Starbucks), this round of committee sessions will see some of the same faces hauled back in to answer many of the same questions.

Earlier this week I was at an event where one senior member of the committee was less than positive about the current direction the committee is taking.

He didn’t seem to agree that this fixation on the effective corporation tax rates of firms who decide to base their head quarters overseas was the best use of the committee’s time and resources.

Elsewhere this week tax campaigners UK Uncut Legal Challenge failed in their bid to bring HMRC to book for what UK Uncut claimed was an unlawful deal struck between HMRC and Goldman Sachs.

In dismissing the case the judge agreed that the deal had not been HMRC’s finest hour but he found nothing unlawful about it. To some extent UK Uncut has achieved some of its objectives by bringing the issue of the way big business deals with HMRC into the spotlight and raising the profile of the Goldman’s case in particular. For its part, HMRC continues to deny claims that it is soft on big business.

But getting money out of most large organisations and wealthy individuals is tougher than it should be. And it is certainly tougher than chasing small business owners. In reality, striking a deal with wealthy corporations or individuals might end up being the quickest, simplest and most cost-effective approach to collecting revenues. Ideally this agreement would be one that displeases the entity paying tax more than it does HMRC (although one that displeases both sides a little is probably the most likely outcome). While such an approach may well be cost effective, without the disinfectant of greater transparency such deals will always stink a bit.

Two phrases that have been bandied around so much in the last 18 months that they are rapidly becoming cliché are that we need greater transparency, and that we need a simpler tax system.

Whether Google, Amazon, Goldman Sachs or anyone else with tax affairs complex enough to involve a potential settlement with HMRC has anything to hide or not, the mere fact that details are kept out of the public eye raises suspicions.

The tax affairs of individuals and corporates are between them and HMRC, but if they opt out of the system that the small business owner or the proverbial hard-working family has to settle for then they should do so in the knowledge that the details of the settlement will be made public.

This article first appeared on economia

Photograph: Getty Images

Richard Cree is the Editor of Economia.

Getty
Show Hide image

Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.