'Just because you see something, it doesn’t mean you can tax it'

Tax Disc

There was something mild, yet reproving, in the way that Myleene Klass faced-off against Labour leader Ed Miliband on the subject of the mansion tax the other day.

It was as measured as the Queen’s comment about the financial crisis when she went to visit the LSE: 'Why did nobody see it coming ?'.

Sometimes you need people who are not so-called experts in the financial markets to verbalise what so many of the general public is thinking. Now Ms Klass was talking about the dreaded mansion tax, of course, and I bet a lot of financial professionals will sympathise with her comments. There's something a bit 'un- Englishman’s castle' about going after the capital value of one’s abode whilst one is still inside it.

The problem with this tax presumably derives from the fact that we have billionaires who will pay relatively little in taxes and the ordinary folk who struggled to purchase a 4-bedroomed terrace house in, say, Shepherd's Bush now find it's worth approaching £2m. But I don’t want to get into this little political argument - I'll leave that for PMQs and the inevitable slanging match that this has become. What interests me is the concept of taxing the hell out of anything that moves in the faint hope of balancing the budgets. As Ms Klass opined: 'Just because you see something, it doesn’t mean you can tax it'.

This is exactly the problem they are having in Japan. The Prime Minister, Shinto Abe, didn’t want to go through with the planned rise of the unpopular 'consumption tax' (VAT), so he used this as a pretext to call a snap election, a cunning 'referendum for the people', at exactly the same time that Kuroda, the Bank of Japan Governor, was calling for more fiscal discipline from the government. This is where we see the problem at the heart of today’s politics - on the one hand austerity, and on the other fiscal stimulus. It’s as if that those in power simply can’t make their minds up.

There's no way out of this conundrum, however, and it besets all the major Western powers. Borrowing via government bond issuance has never been higher, whilst austerity is never enough, and has to be tempered by political necessity. We’re trying to break the mould of decades of welfare (over)spending, and tax payers are getting increasingly verbal about where their taxes end up going. Let’s hope more Klass acts continue to give our leaders something to think about.

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