Bin the ‘sin tax’

Wednesday March 23, 2011

Following today’s Budget statement by Chancellor of the Exchequer George Osborne, Tom Miers calls for a moratorium on lifestyle levies

A dangerous assumption is entering British politics. Taxes on activities judged to be bad by the government automatically go up with every budget. The default position is for a higher levy, and act of political will is needed just to prevent the increase.

The language used by government and the media colludes with this new consensus. The BBC groups lifestyle levies together as ‘sin taxes’, as if accepting that government passes a moral judgement on driving, drinking wine or smoking cigarettes.

Journalists in this week’s budget commentary blithely assumed excise increases on tobacco and alcohol, even though the budget was supposed to be fiscally neutral. The Chancellor portrayed his postponement of some petrol taxes increases as if they were a cut.

We need to remind ourselves of a clear, central point if we are to sustain a free society. There is no morality in taxation. There are no ‘good’ taxes in the moral sense. Tax is a coercive mechanism by which government uses the threat of force to take away money earned legally by individual citizens. Whatever the end outcome of government action, robbing Peter to pay Paul has no moral virtue. And lifestyle levies and other discriminatory taxes amount to social engineering.

Sometimes, of course, tax is necessary to secure, for example, the cohesive security of the country against internal and external threats. But governments should always tax with humility, reluctance and openness. The idea of taxes going up automatically year on year is obnoxious.

With this in mind we can take some comfort that the government has learnt caution on fuel taxes, even if it exaggerates its generosity. But duty on alcohol and tobacco are clearly much too high. Much is made of the regressive nature of VAT in that it hits the poor proportionately more than the rich. The same is true in spades on the much higher levies on fuel, alcohol and tobacco.

Not only do these hammer the poor unduly, but they encourage criminality and undermine respect for the rule of law as otherwise law abiding citizens turn to smuggled contraband.

In his time as Chancellor Gordon Brown introduced an unwelcome political trick of announcing several years’ worth of tax rises in one announcement in an attempt to restrict the political flak to one bad moment of headlines.

Perhaps the trick should be reversed with these excise duties. The public finances may make a big cut difficult for the time being. But why not a moratorium on ‘sin taxes’ for the life of the Parliament?

Tom Miers is editor of the Free Society