School of Economic Science - Study Forums

Andrew Purves · Joined: 02 Oct 2008 Posts: 1 Location: London, UK

Please find attached a copy of a paper recently presented in London examining the Tax system in Hong Kong. The thesis is that by collecting some Economic Rent through taxation, a Government can not only accumulate a surplus to use for infrastructure projects, but also keep personal taxation to an absolute minimum, to allow greater freedom for enterprise and wealth creation. I would be interested to know whether the case has been made convincingly in this paper, or whether you are aware of more practical examples of this thesis. If anyone has any knowledge of the taxation system in either China or Singapore (countries which also run budget surpluses, not based on oil revenues) I would be interested to hear how they do it.

Peter Fennell · Joined: 27 Sep 2007 Posts: 53 Location: London

How does China run a budget surplus?

Are the obvious answers: balance of trade surplus, competitive deflation, slender welfare state?

Also single-party government: are budget deficits just the unwillingness of 5-year term democratic governments to tax to meet expenditure?

Richard Glover · Joined: 29 Sep 2008 Posts: 176 Location: Ealing, London, UK

Peter,

Did you see the topic US and China. Although not directly answering you questions, it may give some hints.

http://schooleconomicscience.org/phpBB2/viewtopic.php?t=538

Chris O'Brien · Joined: 17 Jul 2010 Posts: 9 Location: Harpenden, Herts

Excellent article!

Saw an interesting TV programme yesterday(on IPlayer at the moment), Nick Robinson presenting 'Your money and how they spend it'. Norman (Black Wednesday) Lamont was asked about the viability of property taxes. He said that they made good economic sense and were favoured by many economists but were political suicide. David Laws, the previous Lib Dem economic spokesman, said that voters object very strongly to paying tax on something that they have bought with taxed income. I have found that everyone I speak to will not tolerate a tax on property gains. Their view is that it is their good luck and, in any case, they pay double the original price of the house when paying off a 25 year mortgage. LVT, RIP!

Brian Chance · Joined: 09 Nov 2008 Posts: 84 Location: Croydon Surrey U.K.

LVT,RIP!?? This is defeatist talk. This will not do.

The very fact that the question was asked, (albeit only in respect of “mansion tax”) is heartening because it is another straw in the wind, which is finally blowing fitfully in the right direction.

Neither politician denied the advantages of an annual property tax, because the advantages are undeniable and the case was made well in the talk by Andrew Purves.
It is also confirmed by official enquiries, the most significant recent study being that of the Mirrlees report.

Rather than look for other practical examples we could stress that it is simple common sense. Who could reasonably deny that a tax on unearned income must be fairer than a tax on hard won earnings?

Of course it would be unfair to levy it on those who are buying their homes out of earned income, because as much as possible of all future rent on their land has already been pocketed by the vendor in the purchase price. It may also have funded the mortgage on which they are having to pay interest.

It is part of our work to devise a method of partially collecting the rent which can be accepted in current conditions but which will ultimately lead to full collection.

A pragmatic proposal is to start with a revision of council tax as set out in a forum topic. May I hope that there will be better ideas?

But, whatever, - long live LVT!