Thing of the month: Tax
By Stephen Eustace
What do you associate with the word taxation? Positive charitable thoughts of giving a substantial proportion of your income to the government for worthy projects or negative associations of anxiety or pain at the thought of being ‘relieved’ of your cash?
As you reach the climax of each tax year, are you dreading your tax return for the money you owe, or looking forward to a sizeable rebate, or simply confused about what the K or L means in your tax coding? Whatever your situation or mentality, there is no escaping the fact that tax levied on us for government revenue is here to stay.
The foundation of taxation systems is often attributed to military necessities during times of conflict. The introduction of income tax in 1798 was in response to renewed fighting with Napoleon, after which Henry Addington signed the 1803 act, and set a precedent for obtaining money from the community. His infamous wording is meticulous to the point of never mentioning the word income or tax: “A contribution of the profits arising from property, professions, trades and offices.” A comparison made to modern tax stealth methods - avoid calling it tax at all costs!
"Retaliation against unjust taxation is evident throughout history"
When Addington introduced the new taxation act he did not have the power of foresight to know his principles of income tax would resemble modern tax systems. The fact that it is a temporary levy, expiring every year on the 5th April, is one characteristic of the original. Parliament must then reapply for the tax to be upheld in the following year, presenting the current government with new opportunities to increase revenue through surreptitious means and take a few more pence out of our pockets.
There are a variety of taxes we encounter in our lifetimes, especially if you are a house owner, working as employed or self-employed, a car owner and an investor. The majority of the taxes you are likely to meet are - income tax, council tax, car tax, road tax, capital gains tax, corporation tax, fuel tax, inheritance tax, stamp duty and of course value added tax, introduced in 1973, on most purchased goods - making us one of the highest taxed societies in the world.
This trend follows the ancient Egyptian Pharaohs who imposed an extremely intense tax system upon their people; charging on basic produce such as grain and livestock and raiding households to ensure certain quantities of essential commodities like cooking oil were consumed. To enforce these tough tariffs they employed scribes responsible for all tax collections and prosecutions. The Romans used publicani to collect custom duties on imports and exports, called portoria, and inheritance tax to acquire retirement funds for the military. However, both the collapse of ancient Egypt and the Roman Empire are linked to, what Marcus Aurelius described as, bureaucratic arrogance, corruption and excessive taxation on its people.
When Roman rule ceased in Great Britain, the Saxons imposed a tax on land and property in 868 AD called danegeld, as pay off to raiding Danish Vikings. Centuries later in 1629, Charles I was beheaded for treason after disputing with parliament the rights of taxation afforded to king and parliament. Even Oliver Cromwell received duties from excise on both grain and meat, made mandatory in 1643. As with the ancient Egyptians, it mainly displaced the poor and led to the Smithfield riots in 1647.
In Wales from 1839-1844 tenant farmers and the poor alike rioted against the imposition of the high toll charges on roads. The ringleaders were sentenced to deportation to Australia, rather than the normal punishment of hanging; perhaps to assuage the poor they represented.
The theme of retaliation against unjust taxation is evident throughout history and most recently in 2000 when a rise in fuel prices, through increased fuel tax, threatened transportation of goods in the UK
The tax system became more efficient at the end of WWII when PAYE (Pay As You Earn) was introduced in 1944, using employers to ensure continuity in tax deductions on behalf of Inland Revenue. However, not everyone who qualifies to pay tax does so. An army of tax consultants can assist with tax avoidance advice…you may also have played a part in tax dodging by paying for services ‘in cash’, where no record of a transaction is made and VAT is avoided.
Whatever your coding, or whatever tax you pay, submit not to complacency. Taxation as a means to acquire valuable revenue for government continues to evolve. However, as shown with past societies, governments must provide a population with incentive to believe their taxes are going to good use, for the needs of those within society, and if handled unwisely can undermine economic and political stability.
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