Saturday 3 December 2016

Politicians today should heed the taxing mistakes made in the past

The biggest issue with property tax and water charges is the fear that they could rise

Published 11/05/2014 | 02:30

CLEVER ADVICE: Jean Baptiste Colbert, finance minister to King Louis XIV
CLEVER ADVICE: Jean Baptiste Colbert, finance minister to King Louis XIV

It's a sad fact that too few of our politicians have a thorough grasp of history. Sad for them, that is. Were it not the case, many of them would have a much easier life. Learning from mistakes is a great skill, and in politics one of the biggest mistakes in history is badly designed taxes. They cost George III his American colonies and both Charles I and Louis XVI their heads.

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A king who avoided too much tax and kept his head was the latter's grandfather King Louis XIV, who enjoyed the services of a clever finance minister and adviser, Jean Baptiste Colbert. Named after a biblical character who had lost his head and working for a character who severed heads on a whim must have made Colbert sensitive to the consequences of bad advice. The trick in taxing people, he told his monarch, is to get as many feathers from the goose with as little hissing as is possible.

Another great mind was Adam Smith. What he lacked in Colbert's French flair for description, Smith made up for with the Presbyterian practicality of his four "canons" of taxation: Equity, Efficiency, Convenience and Certainty. A tax is equitable when those who enjoy the benefits arising from the resultant spending make a contribution to it and when the burden of a tax relates to the ability to pay. A tax is efficient when it doesn't distort a taxpayer's behaviour, convenient when it is easy to to pay and collect, and a tax possesses the fourth characteristic of certainty when its burden is predictable to the taxpayer. We might throw in a fifth canon based on Colbert's goosefeathers. Giving it a more formal name – of the kind the dour Scot would have preferred – let's call it "political proportionality". This is the idea that the grief suffered by politicians on the doorsteps over a tax should be proportionate to the tax collected.

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