Introduction

Taxation is always on the political agenda but, in a context of a government programme of deficit reduction principally through cuts to the welfare state rather than tax rises, it is notable that ‘fair taxation’ has become a major political issue. It has been taken up not only by political activists and trade unions but also by the House of Commons Public Accounts Committee in relation both to tax avoidance as an industry and to the abilities of particular transnational corporations to avoid paying corporation tax. While all the main parties endorse austerity, the extent to which paying tax seems to be a voluntary activity, both for very affluent individuals/households and corporations, has become a public scandal and source of genuine popular discontent. The aim of this chapter is to offer a class analysis of taxation and set out some existing proposals that could increase the progressivity and redistributive potential of the UK tax system. After an overview of the main taxes, the chapter will present a selective history of taxation, with a particular emphasis on the role of taxes in mediating the relationship of the propertied and labouring classes. It will then examine the functions of taxation from a political-economy perspective, and some of the means by which the tax system has been modified since the 1980s with the effect of reducing the relative contribution of the affluent and large corporations. Finally, it will outline some proposals that can contribute to addressing the enormous increase in inequality in the UK since the 1970s.

The main UK taxes in 2012

First, we will consider what taxes are currently collected in the UK. Taking the forecasts for 2012/13 as a snapshot (Table 4.1 below), we see that the vast majority of tax revenues are raised through personal rather than corporate taxation. The largest single revenue-raiser is income tax, which is a direct tax on earned and unearned income, accounting for over one quarter of all revenues. It is the tax that has the highest profile both in terms of public recognition and in terms of media reporting. Its annual yield, however, is outweighed by that of indirect taxes, including Value Added Tax (VAT), when taken together.