Taxes and Benefits

The last few days has seen a big furore over the extent to which the very rich, in Britain, have been seen to avoid and evade paying taxes.  Quite right too, but the reality is that, in a week or so, that furore will have died down again, as some new news story takes its place.  Its quite different with the question of benefits.  Moreover, the general attitude to tax avoidance and evasion is quite different to the attitude to benefits fraud.  Why?

There seems to me to be several answers to this question.  Firstly, despite the fact that its been shown that HSBC were involved, not just in tax avoidance schemes, which are legal, but also helping their clients to evade tax, which is illegal, all the focus has been on a discussion of tax avoidance.  That means that a smokescreen could be thrown up.  So, although most people are appalled, when former Tory co-Treasurer, Lord Fink, stated that tax avoidance is done by everyone, the Tories and their media mouthpieces have been quick to present this as, "Who pays more tax than they need to?  Who doesn't take advantage of Duty Free, or ISA's, and so on?"

But, of course, even within tax avoidance, let alone the illegal tax evasion, that some of these people were involved in, there is a huge and qualitative difference between doing things that are not just legal, but actively encouraged by the government, and doing things which border on being illegal, and which are merely clever manipulations of the rules, so as to avoid paying the tax that the government intended you to pay.  It is not tax avoidance to put money into an ISA, for example, because the government never intended you to pay tax on those small amounts of savings.  On the contrary, the government wanted to encourage you to save money.  The government clearly did not want you to stash millions of pounds away into some obscure scheme, that takes advantage of some badly worded phrase in the tax code, that enables you to get out of paying tax on earnings, the government intended you to pay tax on.

The other argument, that the tax code itself is over complicated, may be valid, but the gigantic number of rules for the benefits system is never considered as a reason even for people being mistaken about what benefits they might have been entitled to claim.  Moreover, if someone is found to have cheated a few extra quid out of the benefits system they end up in jail, whereas the billionaires simply offer to pay an amount of money - often less than they actually owed in tax -  and the HMRC accept it, because they claim they are more interested in getting in the tax.  If they gaoled a load of the tax dodgers, they would soon find the rest were less inclined to engage in such activity in future, and to pay what they owed!

Moreover, one reason the tax code is too big and complicated, is because clever tax accountants, in the past, found ways of getting round it, and in order to close those loopholes, additional legislation and amendments, to the tax code, were required.  Frequently, it has been the same tax accountants that worked on producing the legislation to close those loopholes, who then found lucrative work for themselves advising their super rich clients on how to get around the tax laws they had just been paid by the government to create!  Can you imagine the government asking the CAB or Claimant's Rights organisations to frame Benefits laws?

There is also a qualitative difference between someone saving a few quid by taking advantage of the Duty Free allowance, or taking out an ISA, and someone avoiding paying tens of thousands, and even millions of pounds in tax, because a clever tax accountant has found such a loophole for them.  The fact remains that for the vast majority of the population, they have no choice about avoiding tax on their income, or on the vast majority of their spending.  Their employer deducts directly the Income Tax and National Insurance from their wages, including those bits that go to pay for those commodities that make up the major elements of workers' expenditure on health, education, social care and so on, but over which they have no control.  The vast majority of workers' consumption spending is also directly taxed in the form of VAT and duties, which again are directly collected by the sellers, and handed to the government.  No amount of clever accountants could relieve you of the tax you have to pay by these means.

But, there is another reason why the attitude to the rich getting away with avoiding and evading tax is considered differently, by many people, to the question of a few people fiddling a few extra quid out of the benefits system.  It is that Britain still has a very deferential attitude towards the upper classes - just look at the attitude towards the Monarchy, for example.  They are the biggest benefit scroungers in the country; they live in the biggest council houses in the country, at taxpayers expense; their ancestors acquired wealth and property by the most vicious and widespread murder, and robbery - today it would be considered to be the proceeds of crime, and taken away from them, yet they are continuously fawned over.  When it comes to the super rich, we are also told that they cannot be taxed on their massive wealth and income, because they might decide to take their money elsewhere, which would mean a loss of jobs.

The Left itself does not help in this mindset, because workers are continuously told that the only alternative to ownership of businesses, by this elite of the super rich, is ownership by the capitalist state, whose bureaucrats are frequently interchangeable with the bureaucrats who make up the Boards of Directors of businesses, that oversee the interests of the money lenders!  Workers, having seen that, as employees, they were treated no better, and often worse, by those state run businesses, for example, the experience of BL workers, and the miners during the 1980's, as well as being treated shabbily as consumers, for example, the bureaucratic regimes in respect of council houses, the mistreatment of patients by the NHS, and social care homes and so on, no wonder refuse to see the capitalist state as any kind of real alternative.

But, the statist message of the Left is just as elitist as that of the Tories.  It says, these businesses can only be run by either private capitalists and their representatives, or by the capitalist state, and those same representatives of capital.  Any concept that what these super rich individuals own, in any case, is only money - fictitious capital - and that what really counts is actual productive-capital, in the form of factories, shops, buildings, machines, and so on is lost.  Any idea that the workers could themselves simply take over all of this capital, irrespective of what happens to the stock market prices of bits of paper, or the electronic entries in the accounts of the banks, also disappears.

The role of the super rich is then cast in the public perception as completely different to that of the benefit recipient.  Although, in reality the former is by far the biggest leach on the surplus value produced by workers, the reality is inverted, like a mirror image, so that they appear not just fundamental to production, but the actual source of the profits made by businesses.  By contrast, the benefits recipient, who is the victim of the system, and frequently a bigger creator of surplus value than a drain upon it, is turned into the main leach on society.

Moreover, there is a deeper psychological factor taking place here.  One reason that the rich are able to get away with the continuance of such an unequal society, is the suspension of disbelief by the vast majority.  The chances of winning the Jackpot on the Euromillions are infinitessimally small, and yet people do the lottery in the hope of winning, just as in the past they did the football pools.  A survey a while ago found that a majority of people saw the way of getting rich being by either winning in such a lottery, getting a big compensation payout, becoming a top class sportsperson or entertainer, or getting onto a TV show like Big Brother!  Few thought that it was possible to get rich by actually working.

And the fact is that, the majority of people have a different attitude to the rich than they do to the poor, because of this simple fact - most people would hope to be rich, and very few hope to be poor! Its rather like Kant's Categorical Imperative, that says that a moral law is only valid if it is universalisable. That is, I can only logically support a moral principle, if I would be happy with that principle also applying to me.  Because most people want to be rich, and are prepared to suspend disbelief, so as to think that maybe someday they will be, few want to adopt a moral principle that the rich should be dispossessed, or even taxed heavily, because, in the back of their mind, is that nagging feeling, what if it was me.  By contrast, few people want to be poor, and so, although there is more chance they might end up in that position, they are more likely to be unmoved by attacks on them, more likely to be indignant at any supposed infringements they might undertake.

But, of course, there is another factor.  The media have been full of the reports over tax, in the last few days, but in a week or so that will have subsided.  We will not, for example, have long running weekly serials entitled "Tax Dodger Street", in the way we have "Benefits Street"; we will not have daily day time programmes, presented by odious TV presenters, entitled "Saints and Rich Tax Evaders"; we will not have the gutter press running endless stories about unnamed rich tax dodgers, who have been provided with free Lamborghinis, and mansions, in the same way those rags run stories about claimants and immigrants being given such phantom largesse.

But, in a sense, it is in any case all a charade.  The reality is that even if the super rich did pay their fair share of tax, it would change nothing fundamentally.  What they paid in tax on the one hand, thereby reducing the tax that workers had to pay, they would simply claw back over time, by reducing workers wages, by the amount of tax those workers had saved.  The real issue here is that the tax avoidance and evasion amounts to a redistribution of wealth and income amongst the capitalist class themselves, favouring the money-lending capitalists over the productive-capitalists, just as the benefits system, and welfare state, only redistributes income within the working-class, usually from the better paid workers to the worst paid workers, but not always, as things like subsidised tuition fees favour the middle class and better paid workers whose children are more likely to go to University.

As Marx long ago pointed out, none of these tax and benefit measures can affect anything substantially.  As he pointed out in relation to tax.

"No modification of the form of taxation can produce any important change in the relations of labour and capital."

And his only reason for supporting direct taxation over indirect taxation was because it was more open, and enabled tax payers to see how much running the state was costing them. It was then a reason for workers to restrict the growth of the state, and focus instead on their own self-government.

"Because indirect taxes conceal from an individual what he is paying to the state, whereas a direct tax is undisguised, unsophisticated, and not to be misunderstood by the meanest capacity. Direct taxation prompts therefore every individual to control the governing powers while indirect taxation destroys all tendency to self-government."

(Instructions For Delegates to the Provisional Council of the First International)

But, moreover, any such tinkering could make no real difference, because ultimately the distribution of income and wealth is a function of the production of wealth and income.  So long as capital is owned and controlled by a few they will continue to derive the majority of the income and wealth produced by that capital.  Only when workers establish their own co-operative property on a large scale, will the distribution of wealth and income be changed fundamentally.

"Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?"

(Critique of the Gotha Programme)

The furore over tax avoidance and evasion shows just how removed the Tories are from the reality of life for the vast majority.  But, we should not be fooled by that into thinking that a Fabian/Lassallean style programme of tax redistribution can make any significant change for workers to the causes of inequality in wealth, income and power.  Only a change in the ownership of the means of production can do that.  It is why we should promote the development of worker owned and controlled co-operatives, and the development of workers' self-government as an alternative form of democracy based upon it.