Article

Economics

Politics

24 October 2024

1 min read

How can taxes build a better society?

As we await Rachel Reeve's budget announcement, Laurence Fletcher wonders what positive tweaks can be made to our economic system.

Laurence Fletcher

Laurence Fletcher is a journalist at the Financial Times.

Few doubt that Chancellor, Rachel Reeves, will be putting up taxes when she presents her first Budget on October 30. The political narrative of recent months has very much been of an alleged fiscal “black hole” of £22bn - or is it £40bn? - that somehow needs to be filled.

While the size of the shortfall and the identity of those responsible are both hotly disputed, and despite a lack of detail from the Treasury about what it actually consists of, the questions now being asked are not whether taxes will rise but which ones and by how much.

Months of speculation have focused on employer National Insurance, capital gains tax and freezing income tax thresholds as areas that Reeves could look to for the additional revenue. But beyond the immediate issue of raising enough revenue to make good any shortfall, lies a deeper, trickier question about the way in which taxes should be levied for the good of society. If a government is to force people and companies to hand over their money, then what is the most ethical way to do this? Who should pay and who shouldn’t? How can tax be used to reduce inequality and build a better society?

Answering such questions is, of course, far from straightforward, because there are plenty of other factors in play.

For instance, some taxes are surely levied because they are simpler to collect. Take income tax - an unpopular measure introduced in 1799, then abolished before being reintroduced as a supposed temporary measure. It could certainly be argued that taxing people’s income - their attempt to get on in life and improve their lot in life - is less “fair” than taxing wealth that has been accumulated by someone’s ancestors years ago. Working hard and earning income is often surely a way of breaking down class divisions. But income tax - contributing 28 per cent of UK government tax take in 2023-24, according to The Institute for Fiscal Studies - has the advantage that it is relatively difficult for the average worker at a UK company to avoid it. Ease of levying it is surely a driver.

Equally, some taxes that might seem “fairer” have deliberately not been levied because of the difficulty in collecting them, and/or because to try to do so could be counterproductive. A wealth tax, for instance, would be “economically damaging”, according to one of the UK’s highest profile tax experts, Dan Neidle. Or take the politically contentious issue of non-doms, a colonial era tax break allowing rich foreigners to avoid UK tax on overseas income. It would be fairer, the argument goes, to tax them on the whole of their income. If they are going to be resident in the UK, then surely they should be taxed like a UK resident whose home is here?

Former Chancellor Jeremy Hunt abolished this regime earlier this year but left a number of concessions that the incoming Labour government pledged to abolish. But non-doms are tax-sensitive and highly mobile, and a number of jurisdictions compete to attract them. Many are entrepreneurs and wealth creators that many countries need. Reports have suggested a clampdown could raise no money or even cost money and could drive people away.

So what can be done to use tax in an ethical way? Paul Williams, research professor of marketplace theology and leadership at Regent College, Vancouver and chief executive of the Bible Society, takes a perspective that he believes offers some solutions.

He takes as his starting point a story in the gospels, where Jesus is asked whether people should pay taxes to Caesar. The question is a trap - either Jesus gives his backing to taxation that is highly unpopular with the Jewish people, or he rejects the tax in an act of rebellion against the Romans.

Jesus replies that they should “pay to the Emperor what belongs to the Emperor, and pay to God what belongs to God.” We are to pay our taxes to those in authority, but we are also to honour God.

While Williams believes that too much emphasis is placed on the Budget and political parties’ promises to be able to fix everything, and that a more radical rethink of our economy is required, he also sees room for positive tweaks to the current system.

One key area is the property market, the manifestation of so much inequality in society, with some people owning multiple houses while others cannot afford to buy one. Williams argues that the ready availability of debt finance has allowed those who already hold assets to easily acquire properties, turning real estate into an investable asset class to the detriment of many of the poorer in society.

“The reason there’s so many homeless people and empty houses is due to debt finance. It makes it easy for a relatively small proportion of the population to acquire a large percentage of the assets.

“The system has allowed a structure in which a small advantage in the beginning can lead to big, big differences over time.”

Williams highlights parts of Devon and Cornwall that have been “completely ruined” by wealthy people from elsewhere buying second homes that used to belong to locals, leaving property out of reach of anyone who lives and works there.

Nevertheless, he believes taxation can be used in this area to help level the playing field.

He proposes a “pretty punitive” marginal rate of tax on ownership of more than one home. (Stamp duty only partly does the job and is a blunt instrument also affecting people moving homes, thereby makes mobility expensive).

“You want to disincentivise the way the housing market is used for speculation,” he says.

“Housing is being treated as a commodity. The problem is, it’s not; it’s not just an asset. It has utility value and a communal and quasi-spiritual value, enabling people to feel rooted.”

Buy-to-lets, meanwhile, are better than having empty second or third homes, but “wouldn’t it be better if occupiers could buy that house?” he adds.

Meanwhile, research by the Financial Times recently found a huge wealth gap between the average millennial and the top 10 per cent of millennials, who are benefiting from family wealth to accumulate substantial housing assets.

So would increasing the rate of inheritance tax - one of the most hated of taxes - and/or lowering the threshold also help reduce some of this inequality? After all, how is it fair that one child in the UK is born to inherit large property wealth while another is born to inherit little or nothing? Or, even worse, that second child will only ever be able to afford to be the tenant of the first, paying them rent for the rest of their lives? Williams is not a fan of inheritance tax per se, arguing that it is “not part of the package” in a Biblical image of a flourishing economy. But he adds an important caveat: “the playing field is not level".

“There might be circumstances to impose a one-off tax on the very wealthy… if you want a transition to a more equitable society.”

Such steps are not easy to take. It is, he admits, probably “career suicide” for a politician to adopt such views. But if we are to take steps towards a fairer way of life, and avoid a two-tier society in decades to come, then maybe the conversation needs to shift this way. Perhaps the Budget could be the time to start.

Article

Comment

Gaza

Israel

Politics

4 October 2024

7 min read

Israel-Gaza war anniversary: why peacemakers need a touch of doubt

Which narrative do you believe?

Graham Tomlin

Graham is the Director of the Centre for Cultural Witness and a former Bishop of Kensington.

Split-screen on TC shows many different news channels in English, Arabic and Hebrew.

Split-screen reporting.

Al Jazeera.

As the focus of the crisis in the middle east shifts from Gaza to Lebanon, and as the anniversary of the October 7th attacks comes round, a look at the narratives that surround this conflict helps chart a way forward.

At the heart of the Middle Eastern crisis involving Israel, Gaza and now Lebanon, are two very different stories.

One of them goes like this.

Israel is the only properly functioning democracy in the Middle East. It is a sanctuary for the Jewish people who over centuries, and around the world, have experienced extraordinary levels of persecution and discrimination. As a small country it has bravely established itself over the past 76 years as a haven of liberal, democratic freedom and prosperity despite the hostility of its neighbours, such as the Iran-backed Hezbollah in Lebanon. The Hamas attacks on October 7th 2023 were an unprovoked murderous assault on innocent citizens, the butchery and savagery of which was unprecedented in recent times. Hamas and Hezbollah both represent an Islamist ideology which has been a recurring thorn in the flesh of all democratic states, and which has taken root in Gaza and Lebanon. Israel's response of attempting to drive out such a deadly enemy from neighbouring states is entirely justified and reasonable. Any country faced by neighbours dedicated to its destruction would do much the same. Yes, there are civilian casualties in the conflict, but there always are in war. To oppose Israel’s campaigns in Gaza and Lebanon is in fact to lend covert support for terrorism, and a form of antisemitism, because it challenges the right of Israel, and the Jewish people, to self-determination and self-defence.

Yet there is another other story, which runs thus: At the time of its founding in 1948, the pioneers of the state of Israel committed an original sin which has plagued it ever since - its expulsion of much of the indigenous Palestinian population from the land in the Arab-Israeli conflict which followed the founding of the state. Ever since then, Israel has sought to subjugate the remaining Arab population, treating Palestinians within its territory as second-class citizens. Since 1967, it has illegally occupied the West Bank and Gaza, denied Palestinians basic rights of civic equality while enabling and encouraging Jewish settlers to gradually steal land which is recognised by the United Nations as Palestinian. Within Israel and the Occupied Territories, Palestinians find it harder to get building permits, to find jobs, to be properly represented in parliament or to have opportunity for education. Therefore, it is not surprising that that the simmering resentment such treatment provokes leads to occasional resistance such as in the intifadas of the 1990s and 2000s, the election of Hamas in Gaza, and even the attacks of October 7th. Israel regularly accuses anyone who criticises its policies of antisemitism, using it as a shield to hide its mistreatment of the Palestinian minority. It has used the occasion of the October 7th attacks to launch a massive assault on Gaza and now southern Lebanon, regardless of the civilian casualties. The result is, at least in Gaza, a humanitarian disaster which will takes, years, even decades to resolve.

Which of these narratives do you believe? Depending on a whole set of other commitments you probably resonate with one or the other. If you are more left leaning you probably favour the Palestinian account. If your instincts are more right-wing you will tend to favour the Israeli one. And I’m sure you can pick holes in the opposite narrative if you want to.

Christians fall on both sides of this debate. Christian Zionists tend to see the emergence of the State of Israel as a fulfilment of Biblical prophecy that God would one day bring the Jewish people back to the land from which they were exiled in the distant past. Supporters of the Palestinian cause point to the Bible’s injunctions towards justice, its regard for the poor and oppressed, and to Israel’s Old Testament calling to look after the alien within their nation. Surely Israel has a duty to treat the Palestinians within their borders as equal citizens?

To love your enemy does not mean to pretend that your enemy is a friend - at least not yet.

So, does Christianity bring anything to this conflict? Or is it just as divided on this issue as anything else?

One the most distinctive notes in the teaching of Jesus is his remarkable and unprecedented, some would say ridiculous call to love your enemies and pray for those who persecute you. It was - and is - standard human behaviour to love your family and friends. It's more of a stretch to love your neighbours who happen to live next door. It's a whole different ball game to love your enemies. The phrase trips off the tongue as one we know well, yet how could it ever be possible for Israelis to love or pray for Hamas fighters, or the inhabitants of southern Lebanon to love the nation across the border to the south that is shelling them each day?

I cannot even begin to imagine that. Yet closer to home, how does this idea of love for enemies effect our approach to these two stories, held so passionately on both sides of the debate? I first visited Israel/Palestine in 1989, in the middle of the first Palestinian ‘intifada’ or uprising against Israeli occupation. I stayed in east Jerusalem with Christian Palestinians and heard and saw first hand their feeling of resentment at being treated as inferiors in a land which had, they claimed, until the ‘Nakhba’, or ‘Catastrophe’ of 1948, been theirs for centuries. I came back full of righteous zeal for the Palestinian cause and would talk to whoever would listen about the injustice of Israeli treatment of the Palestinian people. I wanted people to imagine what it would feel like to know your family’s ancestral land was taken at gunpoint in 1948, to have to go through humiliating checkpoints to get to work, to have a neighbouring Jewish settlement harass your children and family, trying to get you to leave your home, so they can take the land, with little or no support from your own government or the police. And, in many ways, I still do.

Yet over the years, and on numerous visits back to the Holy Land, I’ve gradually begun to try to see the story from the other perspective as well. Listening to the voices of Jewish people both in Israel and here in the UK, I've tried to imagine what it would feel like to be part of a people that has been hunted down in pogroms stretching back into a shameful past, including the expulsion of Jews from Arab countries in the twentieth century and the attempt of a modern European state to exterminate that people entirely. I've tried to understand their hope in the state of Israel as a place of security and their desperate need for it to survive and thrive as a place where Jews can feel safe, even as real antisemitism does from time to time raise its ugly head elsewhere in the world. Alongside Palestinian memoirs such as those from Sari Nusseibeh and Elias Chacour, I read Jewish writers such as Alan Dershowitz and people like Ari Shavit who captures the dilemmas of liberal Israelis caught between lamenting the expulsion of the Arabs in 1948, yet enjoying the fruits of that period in the present.

I still yearn for Palestinian friends to find peace and equality, but realise that like so many enduring issues in world politics – it’s complicated.

To love your enemy does not mean to pretend that your enemy is a friend - at least not yet. Many people reading this will have passionate commitments to one story or the other. Yet surely to love our enemies does mean to try to begin to see the story from another perspective, to try at least to put yourself in the shoes of the other, to entertain for a moment a little bit of doubt about the certainty of your own moral case.

Loving your enemy might well be a ridiculous, impractical idea. Yet the alternative is hardly turning out well.

It is what some within the land of Israel have tried to do. Salim Munayer and Lisa Loden are, respectively, Palestinian and Jewish Christians. Their book Through My Enemy’s Eyes tries to do just that – showing how Palestinian and Jewish Christians read the same Bible through different lens, and beginning to imagine how some form of reconciliation might be possible. Organisations like Musalaha and Telos are trying to buck the trend, helping each side meet the other and begin to imagine what reconciliation might look like.

Loving your enemy might well be a ridiculous, impractical idea. Yet the alternative is hardly turning out well. If Israeli radicals were to succeed in expelling all Palestinians from the West Bank or Gaza, or Hamas / Hezbollah were to succeed in expelling the Jews from Israel - Neither is a solution that speaks of justice.

It is hard to imagine any progress towards peace without something of this attempt to try to understand a different perspective. You cannot build peace without being a peacemaker – a figure often misunderstood, but according to Jesus, also strangely blessed. Whatever side you are on, perhaps you have a moral duty to make every effort to understand the other. Unless we do, we cannot begin to help resolve this most intractable and dangerous of global problems.