1. “New Learning” Barnard’s Inn Hall Holborn London EC1N 2HH Tel: +44 (0)20 7831-0575 Fax: +44 (0)20 7831-5208 Email : michael_mainelli@zyen.com www.gresham.ac.uk © Gresham College 2007 Mercers’ School Memorial Professor of Commerce Michael Mainelli Corporation Or Income Tax: Which Is The Greatest Con?

2. www.gresham.ac.uk © Gresham College 2007 Outline “Get a detailed grip on the big picture.” Chao Kli Ning The Fair & Popular Taxation Oxymoron Taxes Are Revolting Death Of Taxes Tax Evaluation Corporate People Consuming Taxes Democratic Deficit

3. www.gresham.ac.uk © Gresham College 2007 The Fair & Popular Taxation Oxymoron Source: George Bush Presidential Library Read My Lips. No New Taxes!

4. www.gresham.ac.uk © Gresham College 2007 Taxes Are Revolting 1. Root principle – the state’s fundamental power is the appropriation of resources 2. Direction principle - state expenditure has one direction, up, till revolt occurs 3. Leadership principle - taxes always follow state expenditure, till they cause revolt Sumerian tax tablet, circa 2500 BC Rosetta Stone, 196 BC Egyptian taxation, 1236 BC

5. www.gresham.ac.uk © Gresham College 2007 Oppression 4. Oppression principle – states seek votes by giving multiple majorities tax advantages over multiple minorities

6. www.gresham.ac.uk © Gresham College 2007 Taxonomy Of Taxes Income taxes Retirement taxes Capital gains taxes Corporation taxes Poll taxes Excises Sales taxes Tariffs Toll taxes Use taxes Value added taxes Input versus output taxes Property taxes Transfer taxes Inheritance taxes Wealth (net worth) taxes Personal property taxes

7. www.gresham.ac.uk © Gresham College 2007 Death Of Taxes? Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes. Benjamin Franklin (1706-1790, letter to Jean-Baptiste Leroy, 13 November 1789)

8. www.gresham.ac.uk © Gresham College 2007 Hissing Taxes L'art de l'imposition consiste à plumer l'oie pour obtenir le plus possible de plumes avec le moins possible de cris. Jean Baptiste Colbert (French Economist and Minister of Finance under King Louis XIV of France, 1619-1683)

9. www.gresham.ac.uk © Gresham College 2007 Taxation Evaluation 5. Self-defeating principle - every tax reduces its own base, thus raising other taxes which in turn reduce their tax base, leading to new taxes

10. www.gresham.ac.uk © Gresham College 2007 Equality Certainty Convenience of payment Economy in collection Smith’s Maxims

11. www.gresham.ac.uk © Gresham College 2007 UK Government Expenditure As % GDP 1901 to 1998 [Source: Office of National Statistics] 0 10 20 30 40 50 60 70 19011907191319191925193119371943194919551961196719731979198519911997 % GDP

12. www.gresham.ac.uk © Gresham College 2007 OECD Tax Pie

13. www.gresham.ac.uk © Gresham College 2007 UK Tax Take 32.0 33.0 34.0 35.0 36.0 37.0 38.0 39.0 40.0 1980-811981-821982-831983-841984-851985-861986-871987-881988-891989-901990-911991-921992-931993-941994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-052005-062006-072007-082008-092009-102010-112011-12 Projections Tax as % of GDP [Source: HM Treasury]

14. www.gresham.ac.uk © Gresham College 2007 Corporate People 6. Entropy principle – Complication and disorder delude voters, favour special interests and hinder revolt; therefore all taxes become more complex

15. www.gresham.ac.uk © Gresham College 2007 UK Tax Pie [Source: HM Treasury]

16. www.gresham.ac.uk © Gresham College 2007 Consuming Taxes 7. Volume principle - losers scream and winners mumble, thus quiet means more people are taking advantage of fewer, until they leave or revolt 8. Revolutionary principle - tax reform is impossible without revolt

17. www.gresham.ac.uk © Gresham College 2007 Democratic Deficit

18. www.gresham.ac.uk © Gresham College 2007 Discussion 1. Foundation principle – the state’s fundamental power is the appropriation of resources 2. Direction principle – state expenditure has one direction, up, till revolt occurs 3. Leadership principle - taxes always follow state expenditure, till they cause revolt 4. Oppression principle – states seek votes by giving multiple majorities tax advantages over multiple minorities 5. Entropy principle – complication and disorder delude voters, favour special interests and hinder revolt; therefore all taxes become more complex 6. Self-defeating principle - every tax reduces its own base, thus raising other taxes which in turn reduce their tax base, leading to new taxes 7. Volume principle - losers scream and winners mumble, thus quiet means more people are taking advantage of fewer, until they leave or revolt 8. Revolutionary principle - tax reform is impossible without revolt

19. www.gresham.ac.uk © Gresham College 2007 Corporation Or Income Tax: Which Is The Greatest Con? Thank you! “Get a big picture grip on the details.” Chao Kli Ning