Tuesday 13 March 2012

Taxation à la carte

Last week, a director of the company running Cardiff Airport told a committee of AMs that he wants the setting of the rate of Air Passenger Duty to be devolved in order to boost Cardiff Airport.  There is, of course, a very large assumption being made there – that the Welsh Government, if given the power, would choose to lower the level of this tax.
It’s hard to say whether that’s a valid assumption or not.  I can see the advantages for the company running the airport (a private business, let us not forget, whose interests the Director is promoting).  If such a cut were to lead to more scheduled flights to major European business centres, then I can see the possibility that it might bring some economic benefit, although neither the ‘if’ nor the ‘might’ imply any great degree of certainty.
On the other hand, any government has to consider taxation as a whole; varying one tax downwards could well mean that another tax has to move in the opposite direction if expenditure levels are to be maintained.  It’s probably too much to expect that those pursuing the financial interests of themselves and their businesses will spell out what other taxes should increase – other than that they’ll be ones which somebody else pays.
There’s also a more general point here.  There is an increasing tendency for people to seek the decision-making on any particular tax to be done at a level which produces the most desirable result for them.  But taking power over the easy and popular decisions isn’t really taking responsibility.
Devolving real responsibility means not treating taxation powers as an à la carte menu, but having substantial powers to vary a range of taxes.  It is very much a double-edged sword, but it is the sort of responsibility which any government and parliament worthy of the name should have.  No-one should then expect that all the decisions taken would be to their liking.


Anonymous said...

Your general point does stand. Labour in particular are looking at the merits of each tax from a functional point of view, rather than making a wider link between taxation and accountability.

Air Passenger Duty is such a tiny tax though that it could be lowered without having any noticeable effect on budgets. In the north of Ireland the cut from UK to Irish levels cost them just £3m. In Wales is apparently would be £5m to do a similar thing. You are talking underspends and odds and ends from Barnett consequentials, because its an industry specific tax.

But as I said before your general point stands.

Spirit of BME said...

Being a flat tax man myself, the possibility of HMG would steer away from the policy of keeping personal tax low as they can and increasing indirect tax is very, very remote.
Individual tax payers’ have votes, corporations do not, another big advantage in getting industrial sectors that have little competition e.g. the oil industry, it simplifies collection and they collect this tax for free.