Details

Written by: Kamran Mofid

Published: 06 July 2012

Hits: 4773

Dr. Peter Bowman is Science Coordinator on the University Preparatory Certificate at University College London (UCL) and tutors economics at the School of Economic Science, London, UK

When I read Anthony Werner’s recent guest Blog “Can taxation be fair?”* it reminded me of a quotation I had read recently from JR McCulloch, first professor of political economy at UCL where I work. This is what he had to say about income tax:

‘The tax would fall with its full weight upon men of integrity, while the millionaire of “easy virtue” would well nigh escape it altogether. It would, in fact, be a tax on honesty, and a bounty on perjury and fraud; and, if carried to any considerable height—to such a height as to render it a prominent source of income—it would undoubtedly generate the most barefaced prostitution of principle, and would do much to obliterate that nice sense of honour which is the very foundation of national probity and virtue.’

This rings very true today as, in these times of austerity, the issue of tax avoidance and evasion has come to the fore. At one level the deliberate avoidance or evasion of tax is a gross injustice and is particularly malevolent in these straitened times. But McCulloch’s quote raises a different point which I wish to pursue and that is the question of how effective, how just, in simple terms how “good” are the taxes that honest citizens are expected to pay. If we as a society demand that everyone should pay their fare share of tax should we not also demand that the taxes we have to pay are “good” taxes? What do I mean by “good” taxes? Classical economics gives four criteria – (1) they should be fair, so no-one gains an unfair advantage, (2) they should be certain so it is clear how much everyone should pay, (3) they should be easy and cheap to collect and (4) they should fall as lightly as possible on production so they do not inhibit growth. For simplicity I will call taxes which fulfill these criteria “good” and ones that do not “bad.”

Read more …

Details

Written by: Kamran Mofid

Published: 05 July 2012

Hits: 4439

Continuing on my Blog postings of the last few days “Britain engulfed in Corruption” , I now wish to share with the reader-however briefly- the costs and consequences of corruption. I should also emphasise that when it comes to corruption, fraud and wrongdoings, the British experience is hardly unique...

As it has been noted, corruption is a burning moral and human rights issue, affecting the whole fabric of society and community. Corruption infringes the fundamental human rights to fair treatment, unbiased decision-making, and safe and secure civil and political status.

There are a number of definitions of corruption.

This Blog defines it as “the act by which ‘insiders’ profit at the expense of ‘outsiders’ ” (conveying the ideas of abuse of position, offending against relationships, and underhandedness). It may flourish both in overregulated and deregulated economies, under democracy or dictatorship. Following from this definition, examples of corrupt behaviour would include: (a) bribery, (b) extortion, (c) fraud, (d) embezzlement, (e) nepotism, (f) cronyism, (g) appropriation of public assets and property for private use, and (h) influence peddling.

There is a growing worldwide concern over corruption at the present time. Several factors are responsible for this. First, a consensus has now been reached that corruption is universal. It exists in all countries, both developed and developing, in the public and private sectors, and more. Second, allegations and charges of corruption now play a more central role in politics than at any other time. Governments have fallen, careers of world renowned public figures ruined, and reputations of well-respected organizations and business firms badly tarnished on account of it. Third, that corruption has a major economic consequence; destroying the possibility of creating prosperity and well-being for all.

Costs & Consequences of Corruption

According to the World Bank, “The consequences of corruption for economic and social development are detrimental. Corruption deters investment and hinders growth. It spurs inequality and erodes macroeconomic and fiscal stability. It reduces the impact of development assistance and provides an incentive to exploit natural resources, further depleting our environmental assets. It reduces the effectiveness of public administration and distorts public expenditure decisions, channelling urgently needed resources away from sectors such as health and education to corruption-prone sectors or personal enrichment. It erodes the rule of law and harms the reputation of and trust in the state. In short, it increases wealth for the few at the expense of society as a whole, leaving the poor suffering the harshest consequences.”

Read more:

http://go.worldbank.org/BVKN7CIK60