The tax system is too complicated, the rich are getting richer and changes are long overdue. Philip Fisher’s summer reading shows that the inefficiencies of the tax regime are something we can rely on not to change.
“The public authorities have hardly any income of their own and are reduced to extracting from the pockets of their citizens monies which the citizens consider to be rightfully their own. Not surprisingly, this leads to an endless battle of wits between tax collectors and citizens, in which the rich, with the help of highly paid tax experts, normally do very much better than the poor.
“In an effort to stop ‘loopholes’ the tax laws become ever more complicated and the demand for – and therefore the income of – tax consultants becomes ever larger. As the taxpayers feel that something they have earned is being taken away from them, they not only try to exploit every possibility of legal tax avoidance, not to mention practices of illegal tax evasion, they also raise an insistent cry in favour of the curtailment of public expenditure. ‘More taxation for more public expenditure’ would not be a vote-catching slogan in an election campaign, no matter how glaring may be the discrepancy between private affluence and public squalor.”
The opening two paragraphs of this column are direct quotes. Rather than me immediately putting you out of your misery, you might wish to take a quick guess at the source.
The canny might reasonably assume that this is a recent reader response to a controversial AccountingWEB column, perhaps reflecting on the seeming inevitability of tax rises when Rachel Reeves delivers her 2025 Autumn Budget?
The tone would probably rule out any government minister of recent times or, for that matter, anyone appointed to the shadow cabinet.
A more likely bet might be someone like the current or past chair of the House of Commons Public Accounts Committee?
Out of fashion
I will be very impressed if any reader manages to get the right answer, primarily because while the original might have been a seminal work (in current parlance, cult book) at the time of publication, it has now fallen so far out of fashion that few will even be aware of its existence, let alone have read it.
Small is beautiful by EF Schumacher threatened to herald a revolution when it was published just over 50 years ago. It posited the notion that globalisation and the growth of megacorporations might not actually be in the best interests of anybody apart from those profiting from those megacorporations.
It must also have sowed the seed for contemporary ecological theories, as well as presenting well-considered arguments as to why rich countries aiding their poorer cousins will generally be mutually beneficial.
The big surprise is that Schumacher’s opinions on taxation could quite easily have been written as we enter the second half of 2025, although in fact they were published in the early 1970s.
Terrible indictment
Any sane person would conclude that this as a terrible indictment of every government from Edward Heath’s at the time of publication to Sir Keir Starmer’s in 2025.
Today’s rich still benefit from the expertise of the best of both our own and the legal professions and few would argue with the proposition that they “do very much better than the poor” when it comes to having influence over tax policy and minimising their own exposure.
Some of the loopholes that the German-born but British-based author noted might no longer be in operation but have been replaced in great proliferation by others that are equally easy to step through, while if he thought the tax laws were becoming ever more complicated, he had no idea about what the ensuing 50 years would achieve on that count.
Further, his comments about the resentment that taxpayers feel at having to pay what they do not regard as their fair share of taxes could have been extracted directly from angry AccountingWEB responses almost any week of the year.
Same fundamental weaknesses
What conclusions can we draw? Perhaps that while eminent economists, philosophers and politicians might recognise that our tax system is no longer fit for purpose, if nothing significant has been achieved in the past 50 years, there is every chance that the same fundamental weaknesses will still be in play when Small is beautiful quietly celebrates its centenary in 2073.
There is another way. Perhaps at some point in the next decade or two, one or more politicians will firmly grasp the nettle, simplify the tax system to a massive degree, introduce a further element of fairness and beef up HM Revenue and Customs (almost certainly with an expensive but meaningless rebrand) to the point where those attempting to cheat the system are in serious fear of getting caught and paying the price.
I can see those pigs flying over that blue moon already.
