Tax or die!
Death and taxes are two topics that most people would rather not think about. But they are more closely linked than you might expect.
Nearly six years ago, I quoted the American inventor, journalist, printer, diplomat and statesman Benjamin Franklin (1706–90). Franklin famously commented that "in this world nothing can be said to be certain, except death and taxes".
If we wanted to be pedantic, we could take issue with Franklin. On the one hand, some companies and rich individuals appear perfectly capable of avoiding taxes. And on the other hand, a third certainty in life seems to be that German national football teams — whether men or women — win penalty shoot-outs. (I hope that doesn't jinx the German women in the current World Cup.)
But that would be quibbling, as Franklin's basic point was a good one.
And even death is not an escape from taxes. Although a number of countries have recently abolished "death duties", many still have them in one form or another, either on the total estate of the deceased or on the amounts inherited by individuals. In the case of the US, a "stamp duty" on estates was first introduced in 1797, shortly after Franklin's death.
Most people dislike taxes but tend to like some or all of the services that taxes fund, whether pension or other welfare payments, infrastructure projects such as roads, schools and hospitals, or the ability of a country to defend itself against external attack (not to be confused with waging senseless imperialist wars abroad.)
Fundamentally, a state has to raise enough taxes from its people and firms to pay for its expenditures. It can borrow at times if it needs to — and it is often sensible to do so. For example, for investment expenditure, during a recession, or at a time of national emergency. But the ability to service such borrowing also depends crucially on the government's capacity to raise taxes effectively (and, one could argue, fairly).
Weak states are typically unable or unwilling to raise taxes as they should. This further undermines the state's credibility and its chances of survival. Tax effectively or you will die.
This point is clearly made in the delightful book, The Shortest History of Europe, by Australian John Hirst. The book starts with ancient Greece, which was a series of "city states" rather than a strong central state. And modern Greece is a classic — excuse the pun — example of a country that has failed to tax its citizens and firms effectively.
This, along with other inefficiencies of the state, is at the heart of Greece's longer-term economic problems. Whatever short-term solution is found, one point is clear: whether inside or outside the eurozone, unless the Greek state starts to tax effectively, it will fail.
UPDATE, 1 JULY: My apologies to the German women's footall team. OK, it wasn't a penatly shoot-out that they lost against the USA, but they did miss a penalty.
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