The Case for Voluntary Taxation

Some people keep saying that they want to pay more tax, that the current tax burden isn't high enough. The option has been open to them for many years, but very few do.

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Figures just released by HM Treasury in response to a Freedom of Information request from Cut My Tax show that last year an extremely small number of 38 people contributed an exceptionally small total of £28,212 in voluntary tax payments. This year to date precisely no-one has contributed anything. In 2014 and 2015 similarly nothing was contributed, whereas in 2018 the government received the princely sum of £800.

Over the last 10 years a miserable total of £1.59 million has been contributed, which is probably less than the cost of supplying tea and biscuits to government departments over the period.

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These tiny amounts should be contrasted with all the fuss created by pro-tax activists who keep claiming that they want to pay more tax. The so-called ‘Patriotic Millionaires’ group is the most active in this respect. Clearly they haven’t acted on their own statements.

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It seems that a number of the people who are supposedly desperate to pay more tax are in reality only keen to force other people to pay more tax. Amusingly press reports indicate that when one of the so-called “patriotic millionaires” sold his business he chose a sale option that enabled him to avoid paying any capital gains tax.

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This group of collectivists who support a much larger state and much reduced scope of individual initiative probably much prefer to donate funds to far left pressure groups than pay any more tax themselves.

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However, there appears to be a much larger group who would be prepared to pay more tax voluntarily if they knew the option was available and could have some say over how the money was spent. There are many among the Twitterati who say that would be happy to pay more tax. A recent survey by Survation on behalf of the high-tax pressure group Tax Justice UK asked 3010 individuals to respond to the question “I am prepared to pay more taxes myself in order to fund public services.” 15% strongly agreed with the statement and 33.6% somewhat agreed.

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At the moment, voluntary payments cannot be directed to a particular area of public spending. There are only two choices – to contribute to general public expenditure or to reduce the national debt.

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Paying more tax would be more attractive if voluntary taxpayers could specify to some extent where their funds could go. Those who believed that providing additional funds to the NHS would reduce waiting lists or improve treatment should be able to contribute to health spending in general.

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If the government wished to specify a particular health spending target to which contributions would be directed– MRI scanners for example – then it could encourage contributions towards this goal

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Some voluntary taxpayers might like to contribute to the defence budget, given the widely perceived need for higher defence spending. Again, the government could promote a more narrow target for contributions – for example a fund to buy weapons for Ukraine. It’s quite possible that many would like to support Ukraine’s fight but don’t have confidence in the various existing funds that seek to do so.

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It’s easy to pay additional tax. All you need to do is write to HM Treasury at accountsreceivable@hmtreasury.gov.uk saying you want to do so and specifying the amount and the date when it will be sent, which must be at least seven days in advance. You also needs to state that the money is yours and not obtained illegally and that you accept that you cannot claim it back. The Treasury will then send you the details of the bank account to send your money to and the reference to use.
The government should promote the payment of additional, voluntary tax by highlighting the option and by providing attractive areas for funding, in addition to letting voluntary taxpayers choose broad areas to direct their funds.

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It’s win-win approach. For many people being forced to pay more tax is a disincentive to work and saving. But for others it clearly isn't, as they want to pay more. Let's make it easier for them to do that, so the state can raise more funds without the highly damaging economic effects of enforced taxation.