MICHAEL Fry’s article (Confessions of a justified tax avoider...and why flat tax would stop fiddles, The National, November 14) is classic stuff from your right-wing contributor. I note in passing that the “justification” presented for him legally avoiding paying taxes in other countries seems to be that he invested the cash saved in his house, so that somehow makes it OK. Does it really?

He claims that a simplified tax system “would ... encourage the rich to devote their resources to help raise the rate of economic growth at home”. To quote Mr McEnroe: “You cannot be serious!”. Does he think we’re all idiots?

This is the same nonsense that was used by James Dyson recently to justify the removal of corporation tax by or the lowering of income tax for the wealthy – there is no empirical evidence whatsoever that reducing these two items increases investment in the productive economy.

If you let rich people and organisations keep more of the money they get, they just shove it into rent-seeking activities and dodgy financial assets that make a heck of a lot more money than merely making stuff.

They don’t invest in the real economy where you might get a job working for them.

The main thrust of his article is in praise of tax simplification, and it pains me to admit that he has a point here. It is only because of tax system complexity that legal methods can be invented to get round the rules. However, the “flat tax” argument is an old one, and is simply another way of reducing taxes on the rich, so that they can get more money to pump into non-productive high-yield financial engineering which does not benefit the country to improve the lives of those who are poorer than them.

I was particularly amused by this bit of creative writing – “successful citizens ... can patriotically devote their resources to raising the rate of economic growth at home”. The patriotic rich, currently avoiding billions in tax, are going to pay a much reduced flat tax so that they can instead invest those billions in manufacturing and jobs? Pull the other one, it’s got bells on!
Brian Stobie
Penicuik

MICHAEL Fry’s argument for a so-called flat tax is utter drivel. A mechanism for drastically reducing the taxes of the well-to-do, the flat tax has become a rallying cry for big business and right-wing ideologues.

Michel Fry makes a flat-tax sound so simple. One easy rate, so we all pay the same, easy to calculate, get rid of deductions and lower the tax rates. So simple, but it turns out it is a simple trick, a scam to enrich the one per cent, like so much else neo-liberals are selling. What Fry’s proposals actually mean is that taxes will go up for the 99 per cent who aren’t really, really rich.

Contrary to Michael Fry’s claims of a “fairer” system, a flat tax rate would actually represent an increase over their current tax rate.

Under a flat-tax rate there is no question the vast bulk of the tax savings will accrue to corporate owners, wealthy investors and the professional and managerial elite.

The so-called simplified system would not in fact make Panama redundant. The drive to abolish progressive taxation is part of the big business assault on all measures that serve to lessen social inequality and impede the “free” functioning of the capitalist market. The change to a flat tax will not just produce a financial windfall for the rich, it will exacerbate the fiscal crisis of the state, thus placing new pressure for cuts in social programmes and the privatisation of public services.

Michael Fry and other junk economists who peddle the crackpot theories of Fredric von Hayek and Milton Friedman repeatedly emphasise that the reform of the tax system is beneficial for the country. The participation of foreign investors would, they say, increase tax revenues, increase transparency, and provide an alternative to firms that operate outside of the country’s legal framework and tax structure.

In fact, none of these claims are true. The halving of corporate taxes will inevitably lead to sizeable deficits in the national budget, which is already chronically under-financed due to high unemployment and widespread tax evasion. The state has already drawn back on financial participation in public services such as health care, education, or infrastructure. Any further decline in the national budget can only worsen the situation.
Alan Hinnrichs
Dundee