BREXIT and TAX

VAT was introduced in the UK in 1973 as a condition of joining the then European Economic Community, the predecessor of the EU. Changes to the VAT rules require the unanimous agreement of all 28 EU countries. Originally introduced in the UK at 10%, these rules now require a minimum standard rate of 15% with one or two reduced rates, no lower than 5%, for certain specified goods on a pre-approved list. Further reduction in the VAT rate, including the use of a zero rate, is only allowed under EU rules for goods that have been taxed at that lower rate continuously since 1991. It is, therefore, under continued EU membership, a highly inflexible tax, but one not without merits. By requiring firms to deduct VAT paid on purchases from suppliers, it avoids the double taxation problem that arose with its UK predecessor, Purchase Tax. It is, nevertheless, highly ‘regressive’, i.e. it falls disproportionately on those on low incomes and leaves capital essentially untaxed. It is therefore unsurprising that, following the financial crash in 2008, the government relied on VAT to bail out the banks under its austerity strategy. VAT now contributes 21% of all the tax raised, up from 18% in 2009, and the amount raised has increased by 60% since then[i]. VAT has also made no contribution to reducing carbon emissions to help halt global warming.

In its 2017 General Election manifesto, the Labour Party called for VAT to be restricted to its current range of goods and services. However, according to the Communist Party pamphlet on The EU and Brexit – questions and answers [ii] , even this very modest proposal would breach EU rules. The potential for a progressive tax policy after we leave the EU would, however, be considerable and VAT could play a useful part in this. As was argued in From Each According to Their Means[iii], free from the EU we could vary VAT rates to meet policy objectives and give workers rebates paid through National Insurance. VAT could thus be adapted to incorporate a carbon tax along the lines of the fee and dividend model proposed by James Hansen and endorsed by the Communist University on South London in its discussion paper on Global Warming.[iv].

The people have spoken in the EU Referendum. The only vote we need now is a General Election so that the opportunities it opens up, including the reform of VAT, can be seized.

 

Footnotes

[i] according to UHY Hacker Young, quoted in Economia, February 2019

[ii] Available from the Communist Party for £1 plus postage. http://www.communist-party.org.uk.

[iii] Available from the Communist Party for £2 plus postage https://www.communist-party.org.uk/shop/pamphlets/2025-from-each-according-to-their-means.

[iv] https://communistuniversity.wordpress.com

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WHAT IS BREXIT FOR?

Discussion around Brexit and the Withdrawal Agreement has concerned the Irish border and the Backstop, the loss of tariff-free access to the EU and the implications for the movement of people across borders. Remainers occasionally express concern about a potential loss of employment rights but this has little substance other than to attract naïve social democrats to the Remain cause as the EU has done nothing to resist the increasing casualisation of labour, the erosion of collective bargaining rights or anti-trade union legislation. The Big Issue that no one is debating is what sort of country will Britain be post-Brexit.

Neo-liberals tend to keep quiet about their ambitions for a post-Brexit Britain. Their dream is for a Singapore style economy twenty miles off the coast of France. This means an economy that is exploitative, de-regulated, minimally taxed, gutted of its social services and open to capital from across the world with no questions asked. Close ties with a USA are called for if only to ensure that we can continue to rent Trident and its up-grades.

Communists have a different ambition. If we are quiet about it, it is simply because the mass media does a good job ensuring that our views are not reported. We want a socialist Britain run for the benefit of those who live within its shores, not the owners of footloose international capital. To get there we will need a progressive tax system incorporating many of the ideas in our pamphlet From Each According to Their Means  (1). But as we point out in this pamphlet, many of these ideas – a land value tax; varying rates of VAT with rebates for workers to address social needs; unitary taxation of corporate profits to nullify the use of tax havens; and a tax and dividend carbon tax as advocated by  James Hansen to address global warming – would be impossible under continued membership of the EU or the Single Market.

So in the end the complexities melt away and the choice is a straightforward one: accept the block on progressive reforms that are a pre-requisite of social revolution or seize the opportunity to begin building socialism – provided, as Marx recommended in the Communist Manifesto, that we first “settle matters with our own bourgeoisie”. 

 

  1. Available from the Communist Party Shop at http://www.communist-party.org.uk/shop/pamphlets/2025-from-each-according-to-their-means.html

 

 

 

Global Warming

The Croydon Branch of the Communist Party has enthusiastically supported the decision by Croydon TUC to invite Derek Wall to speak at a public meeting at 7.30 pm at Ruskin House on Thursday, 10 January. Derek Wall is a former Principal Speaker of the Green Party but, unlike many greens, he recognises that climate change  cannot be overcome without “challenging capitalism”.

Communists agree but would go further than merely “challenging” capitalism. We seek its replacement by socialism and recognise that the scientific evidence indicates that time is running out. Furthermore, as was argued in the recent discussion paper from the Communist University in South London (CUiSL), global warming is a class issue that can only be resolved by social revolution. The only viable remedy open to capitalism if mass extinction is to be avoided is the carbon tax model proposed by James Hansen in which the tax is set at a sufficiently high level to keep fossil fuels in the ground and the revenues are distributed to citizens, not corporations. As recent decisions on fracking, airport expansion and defending Saudi Arabia demonstrate, those who own capital will never tolerate this. Their strategy is

A programme of developing green energy and promoting energy saving while leaving fossil fuel consumption to market forces

Making workers pay for the resulting costs and unavoided environmental damage

Protecting the capitalist elite even if this means retiring them to protected, secure environments

It doesn’t, however, matter how many windmills we build. If there are profits to be made from oil and gas extraction, this will continue until CO2 levels reach a point where the oceans boil dry – or, more likely, a tipping point is reached and we tumble into mass extinction.