Not the colourful, rubber- soled slippers popular around the world; but the ‘flip-flops’ used by electricians to create ‘sequential logic’. Of the several types available the two most useful for recession- time governance are ‘reset’ and ‘delay’ flip-flops.
George Osborne, Chancellor of the Exchequer, embracing the logic of a ‘flip-flop’ has resorted to both types using them to great effect over the past several weeks. He would seem to appreciate that sometimes in the application of tax policy government must press the ‘reset’ button. True it may be argued that the information which gave rise to the need for a ‘flip-flop’ in the first place should have been known before the revenue-raising measure was included in his Budget. Be that as it may, the bigger point has to be the nature of the government’s response to the widespread critique of its plan.
For this reason the Chancellor’s ‘u-turn’ on the proposal to ‘cap’ tax deductions based on charitable giving is a timely and appropriate use of a ‘flip-flop’.
Popular opinion and unmanageable budget deficits have generated various models of ‘wealth’ taxation; placing their implementation at the top of the political and social agenda. No government has escaped this pressure to find a quick ‘fix’ for the realities of a financial system rapidly going ‘bust’.
Little wonder then that the 2012 budget included a measure to expose the ‘rich’ to higher levels of taxation by limiting the deductibility of charitable giving. While not quite the same thing as the ‘Robin Hood’ tax – a ‘levy’ on market speculations of a kind available only to the ‘super-rich’ – the massively unpopular ‘charity tax’ was spawned by the same motivation to ‘tax the rich to give to the poor’.
This is the rhetoric of the anti-austerity lobby who argue for growth and stability, not through budget balancing and reducing deficits, but making the ‘rich’ pay their fair share of taxes which in turn will allow governments to continue state- sponsorship welfare-ism.
In contrast, the logic of these times suggests that the ‘Robin Hood’ agenda when applied to individuals and not financial institutions is not as workable a solution as may have been hoped. Governments know this, but faced with the imperative of re-election and the difficulty of escaping culpability for the economic slowdown when explaining the impracticalities of the approach, the Chancellor, like others before him, reached for what was considered to be low-hanging fruit – charities.
Strange fruit of course because charities stand alongside state programmes that assist the impoverished – whether that poverty be of body, soul, mind, or pocket. They are the means through which the ‘rich’ can support causes which may not be the likely or consistent recipients of government largesse.
Aside from placing a fetter on purse-strings, the added ‘distraction’ that the Chancellor referred to as part of his rationale for scrapping the ‘charity levy’ may have been the imputation of less than charitable motives by the donors. Indeed, the obvious inference of the plan to establish a pre-determined level of philanthropy, is that excessive charitable giving has been found to be a means of ‘aggressive’ tax planning loosely referred to these days as ‘tax evasion’.
Of equal utility for the Chancellor has been the ‘delay’ flip-flop which was recent employed to manage the fallout from a proposed impost on reheated food. Found to be in need of further qualitative and quantitative analysis of the differences between food purchased ‘hot’ and food rewarmed in advance of purchase, the full application of the so-called ‘pasty tax, has been placed on a strategic ‘hold’.
Like all good tools however, ‘flip-flops’ are most effective when applied sparingly so that they remain corrective devices and not the principal instruments of government policy.