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Wednesday, December 21, 2016

Non-tax taxes

For taxpayers who take the time to read the Scottish Government’s proposals for a differentiated status in its relationship with the EU within the wider UK, there are some important insights in the worldview of the Scottish state and the great and good advisers on its Council on Europe.

It would be churlish to suggest that the paper is anything other than a genuine attempt to find a “soft Brexit” outcome from the upcoming negotiations post Article 50. It succumbs to some of the repetition and self-righteousness of the white paper on independence, but it moves the Scottish Government’s position away from outright hostility and outrage.

The problem for taxpayers is that it reveals precisely some of the reasons that those who favour Brexit want the EU out of their lives; as such its arguments are often counter to what was intended. These can be summarised as non-tax taxes; impositions on wealth creation, innovation and trade that hold ordinary people back from the prosperity they should obtain from their efforts.

Non-tariff barriers are explained; any business will tell you that trade with the EU is replete with these – indeed, the idea that there is a single market is laughable when you realise that in exporting to the entire EU any business will often have to fill in 27 separate applications to trade with each EU nation in order to obtain clearances within the so-called common customs union. Each of those forms will be different and the view of those signing off new trade will differ, dramatically, across the EU nations. Think single regulatory regime, not a free trade market that benefits taxpaying consumers.

Regulations are claimed to, sometimes, be valuable. Well, perhaps, but talk to an engineering business about CE marks, specific industry regulations, environmental and re-cycling documentation and you will get another story. It’s expensive, slow, and traders are often faced with arbitrary blockages while moving goods into the single regulatory regime within the EU that is anything but single.

Labour market regulations – written up in the paper as “workers’ rights” – are lauded as a genuine contribution to a civilised society. But speak to many workers about the working time directive and how their wages are held back by this, and any employer on how holiday pay and other overheads actually prevent them from hiring more people and other down-sides of promising civility without counting the cost; you will soon find that these non-tax tax burdens on doing trade actually hurt poorer workers a lot more than highly paid and protected big business workers. We must always remember that fully a half of all employment is created by SMEs – who comprise 99 percent of businesses in Scotland. Non-tax taxes on small concerns are hugely damaging.

Of course there are gains to EU membership, and it is a perfectly tenable position to be aspirational and believe in the “family of nations” of the EU as the paper repeatedly proselytises. This is a firm statist position to be expected from a centre-left government; although it contrasts sharply with the gut feelings of the cohort who voted to leave the EU in protest against state-centric elites. But for taxpayers the leaving of the EU and Brexit is also about the liberty to trade freely, to operate privately and trigger Adam Smith’s invisible hand that offers unintended social benefits from individual actions and so generates liberty and prosperity for all.

There are a lot of non-tax taxes incorporated into the centralising, collectivist Euro state. In that respect, we should all recognise the echoes in the EU paper of the political hue of the Scottish Government and its tendency to tax us all to support its own local aspirations. Taxpayers should ask themselves if the outcome of both identities is simply to reduce the present and future wealth of our nation.



'Government is the great fiction through which everybody endeavours to live at the expense of everybody else.'
Frederic Bastiat