Newspaper article Western Mail (Cardiff, Wales)
AXATION has two roles.
TFirst is the obvious need to raise revenue for government to provide goods and services, indeed it is a fundamental tenet of democracy that a legislative body must have the ability if only partially, to raise its own funds.
Secondly, so far as the immediate and future needs of the Welsh economy are concerned, it is the important and innovative use as an instrument of economic development. The two are of course not necessarily mutually exclusive, successful businesses provide substantial tax revenue both directly through their activities and through employment taxation.
An interesting argument against allowing the Assembly to have powers to set or amend forms of taxation is that different taxation regimes are not the norm in the UK and that somehow such differences would damage the fabric of the UK. Nothing could be further from the truth; this is clearly not the case and arguably never was.
The concept of regional taxation within the UK is not a new idea, indeed the concept of a universal UK wide tax system is a myth, and the principal of local (and different) taxation is long established.
The first and most obvious system of local taxation is of course council tax. These differ by rate, by type (domestic and business), by region and indeed within individual local authority areas and clearly represent different taxation levels. Indeed, it is worth noting at the outset of this article that it is surely ludicrous that a tiny community council can raise revenue (through taxation) whilst the Assembly cannot.
The Selective Employment Tax of the 1960s taxed services and re-used the funds raised to support manufacturing and was in reality, given the industrial structure of the UK at the time, a de facto regional tax and was clearly intended as such.
The traditional instruments of economic development based on grant aid, regional selective assistance and other forms of business subsidies, were aimed at poorer regions and were in practice a redistribution of taxation, although not in name. Similarly, differences in capital allowances, now fashionable again as the cornerstone incentive for the new enterprise zones (and permission for their use has to come from the Treasury), have over time been used to encourage investment in regional manufacturing areas. Their use is by definition a tax incentive and organisations that benefited from the allowances were benefiting from a different taxation regime.
Poorer areas have always received fiscal transfers by HM Treasury. These involve transfer of funds from one part of the UK to another and again represent a de facto taxation difference, with poorer areas "benefiting" from increasing taxation whilst richer areas "lose".
The concept of local income tax to replace council tax enjoys growing, if limited support and by its very nature, income tax reflects differences in wealth and income which are, because of different business and industrial structures, regional in nature. …