Problems of bringing LVT to public notice
Following on from the comments above, a further difficulty is that the media seem increasingly unwilling to publish or discuss ideas that fall outside the conventional way of thinking about things. A couple of weeks ago, the former Conservative Chancellor Sir Geoffrey Howe talked about the need to change the way tax law is made, citing some of the recent changes which have proved so troublesome. (FT 4 July)
Supporters of LVT will know that the underlying problem is that the principle of taxation according to “ability to pay” is flawed. It results in the creation of a set of perverse incentives, being nothing more than a structure of fines and penalties for successfully engaging in legal economic activity. The ever-growing complexity is inevitable once the abiliity-to-pay principle is accepted. In practice, loopholes are opened up and with them, opportunities for avoidance. More
importantly, there is a huge deadweight cost to the economy in the loss of production that would otherwise have taken place were it not for the tax. According to a report by the Instititue of Economic Affairs, this is about 12% of Gross National Product.
An alternative and sounder basis for taxation is the “benefit principle”, in which taxation is levied proportionately to the benefits received from the community. Put simply, the amount of tax paid is such that people are charge for what they get, and not for what they do not. LVT is such a tax. Essentially it is a user charge.
The present tax system is not fit for purpose, and changing the way that tax law is made will not remedy the underlying problem. There is a need to open up a debate on the subject at a fundamental level. Unfortunately, apart from a few web sites such as this one there is no means of inserting LVT, or even any kind of radical reform, into the public debate. The present tax system, or one very much like it, is taken as a given.
About ten years’ ago, the FT and Guardian would have printed comments such as those above in their Letters to the Editor section. Not now. A letter was sent to the FT editor on 4 July, in good time for publication, making these points. But it was not published, and nor has there been anything advocating LVT in any of Britain’s “heavyweight” newspapers for several years now. It is as if there is a policy to brush the subject away out of view. Of course there is no such policy; more likely, mention of LVT is so far outside anyone’s repertiore of ideas that letters’ editors just put the letters to one side and publish things they can easily understand.
All of which is making it more difficult than ever to insert LVT into the public forum of debate.