Sin taxes are a sin in themselves

Wednesday November 30, 2011

Martin Cullip accuses government of double standards

Easyjet, Ryanair, Virgin Atlantic and British Airways have all recently registered objection to the government’s rapid inflation of Air Passenger Duty. Introduced in the 90s, APD is one of the newest ‘sin taxes’, brought in supposedly to counteract externalities caused by the greater availability of cheap air travel.

Once the initial objection to yet another new tax was overcome, governments did as governments do by viewing APD as just another income raiser for already stretched public budgets. The airlines argue that, from an initially benign £5 to £40 per ticket dependant on destination, the cost has soared to £24 and £170 respectively, and that whatever demon it was supposed to tackle has been largely forgotten.

The understandable consternation is almost certainly going to be ignored, though, if past experience is taken into account. Unfortunately, history tells us that sin taxes are a sin in themselves considering their propensity to depart very swiftly from their reason for being introduced.

In the same week that airlines were making their representations, another form of transport sin tax was being debated in parliament, after an e-petition tabled by Robert Halfon MP well exceeded its 100,000 signature target. The modest demand was that fuel duty should be stalled in the next budget; hardly something to be argued against in the current economic climate with inflation raging, one would think, but the coalition haven’t received the suggestion with much enthusiasm at all.

Again, fuel duty was originally introduced, so we are told, to pay for state administration of roads, as well as offsetting the environmental effects of car use. Yet it now exceeds the entire budget of the Department of Transport by some considerable margin.

So much so that the Taxpayers’ Alliance this month produced a regionalised breakdown of what they call ‘excessive motoring taxes’. It details how much each and every motorist, in every council nationwide, is paying annually over and above the cost to the country of their car use – as much as £500+ per person in many cases.

A freeze on fuel duty should therefore be the least we deserve, and a real terms reduction more than fair. However, history tells us that politicians will ignore or even scoff at the concept of forgoing revenue however logical or equitable that may be.

Traditional sin taxes have focussed on unhealthy practices. Alcohol has always been easy to hit at every budget since the 1960s, the result being that governmental income from your bottle of wine is one of the highest in Europe, with the £9.4bn alcohol duty receipts far outweighing costs to the NHS of alcohol abuse by a ratio of around 4:1.

The drinks and pub industries are increasingly clamouring for a cessation of punitive taxation rates, but are constantly ignored, most recently by George Osborne’s last budget where he ramped up the yield yet again by 4p per pint and 15p per bottle of wine, in line with a pre-stated commitment to raise duty over and above inflation. The fact that this flies in the face of the very point of sin taxes is apparently irrelevant.

Likewise, tobacco duty in 2010/11 was £9.144bn, with resultant VAT estimated at a further £2bn. Even the most pessimistic half-believable estimate of externalities is around £5bn, yet it is inconceivable that the Chancellor will hesitate to turn the screw again next time he rises to speak about his plans to balance the bloated public purse.

Sin taxes are no longer about tackling harm. They are now purely a means of extracting money out of free citizens under the disingenuous cloak of a benevolent state, driven by a fake concern for the way we choose to live our lives. Government originally planned all these taxes as a way of dictating a homogenous lifestyle – decided by them – irrespective of personal choice. This is already a poor excuse in a free society, but it is unforgivable that even those flimsy ideals have now been superseded by the most base of all human traits; that of chasing money; an unbreakable dependence on stealing the public’s already taxed income on false pretences.

So citizens can rightly point to appalling levels of taxation, but the state has already spent their money for decades to come, so are unable to allow even a modest relief to the burden they have created for individuals and businesses by their short-sighted greed. Such is the public sector behemoth created on the back of make-believe altruism, a return to the original justification for sumptuary taxation – and levels that are reasonable – is quite simply impossible.

Just as politicians berate us for our ‘addiction’ to substances or actions of which they disapprove, so has their sin tax regime tied them tightly to an addiction of their own – to our cash.

The deleterious effect of governmental reliance on ill-judged cash-grabbing like this is a very real one for our freedoms, since every added penny is just one more step along a prohibitionist road, as John Stuart Mill detailed in his famous essay ‘On Liberty’. He declared, “Every increase of cost is a prohibition, to those whose means do not come up to the augmented price. To tax stimulants for the sole purpose of making them more difficult to be obtained is a measure differing only in degree from their entire prohibition, and would be justifiable only if that were justifiable.”

Mill was concerned with the moral discord between what the state deems as being within its remit to tax, and the will of people to pursue their own choices. The UK government has passed well beyond that argument now, as the idea that sin taxes could somehow be seen as in contravention of the common good has long since been discarded.

The problem in modern times is that sin taxation has far exceeded acceptable levels, and cannot possibly be reduced to something resembling the modest reasons for which it was introduced without a wholesale re-thinking of the role of the state, and a seismic hit to the budgets public bodies that have grown to rely on it.

It is clear that sin taxes are now merely being used as an instrument to squeeze as much income as possible from an already over-taxed society, and are actively impinging on the liberties and prosperity of every tax paying citizen, without even a nod to the original justification for their existence.

We can quite correctly call for reductions and a return to measured rates based on sober financial calculations, but there is little or no chance of such concerns ever being entertained. It is quite simply not affordable for any government to do so.

While taxing us for the sins they have identified in us, politicians have succumbed to the sin of avarice themselves by becoming dependent on ill-conceived revenue which blights the lives of every one of the people they are elected to serve.