Maxim Institute - real issues - No 250

Maxim Institute - real issues - No 250
26 April 2007
www.maxim.org.nz

Tax as a tool
The choice for France
Worthy of the sacrifice

IN THE NEWS
British teachers fear segregation
Submissions requested on Health Information Privacy Code amendments

TAX AS A TOOL

Is it right for governments to use tax to direct behaviour to achieve policy goals? This is one of the key questions arising from a new OECD report, the Economic Survey of New Zealand 2007. Tax can simply be a means to fund the necessary activities of government, but it can also be used as a tool to direct people's behaviour to a desired end.

The report addresses economic challenges for New Zealand and areas where the authors believe reforms are needed, including tax. They state that we need to consider strategic long-term tax reform and to deal with weaknesses in the present taxation system. One such weakness is apparently the government's growing propensity towards using taxation 'as a tool to deliver on other policy objectives' because '[t]his has complicated the tax system and has had some adverse effects on individual economic behaviour.' In plain language, using tax as a tool to direct behaviour can have unintended and damaging effects. The authors mention the Working for Families package as an example: as income increases, government assistance decreases, so there is an increasing risk that working hard to earn additional income will be less attractive.

This is a side-effect of a particular use of tax as a tool to try 'to help make it easier to work and raise a family.' But there is also a more fundamental reason why we might want to be cautious about using tax as an incentive, rather than simply using it as a means of raising revenue. Using tax to promote particular behaviours carries certain risks, because it gives the government more of a say in how we live our lives. Tax is a powerful thing; when it privileges certain activities, it can make it harder for individuals and communities to decide to act differently. This risks limiting our freedom and arguably one long-term effect of using tax as a tool is that it diminishes our ability to make decisions for ourselves.

The report suggests various solutions to the economic side-effects it identifies, such as cutting the top rate of income tax to reduce the negative incentive effects currently associated with Working for Families. The risks associated with the 'tax as a tool' approach should also suggest caution about trying to promote behaviour through the taxation system. There may be cases where tax can legitimately be used in this way, but we should not assume that taxes are a legitimate way of promoting every outcome the government desires.

Read the Economic Survey of New Zealand 2007 http://www.oecd.org/document/10/0,2340,en_2649_201185_38394186_1_1_1_1,00.html

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THE CHOICE FOR FRANCE

French voters came out in force last weekend in the first round of the French presidential elections, with the highest turnout in 50 years at 85 percent. The result produced a victory for centre-right candidate, Nicolas Sarkozy, and the socialist candidate, Segolene Royal, who won 31 percent and 26 percent of the vote respectively. Dubbed by some commentators as a contest between 'Sego' and 'Sarko', the campaign between the two candidates leading up to the final round of the elections is now a contest about whose vision for France stands the best chance of solving grave social problems and who can put France on a more competitive footing in Europe.

A fast-growing economy in the 1990s enabled the outgoing president, Jacques Chirac, to pay for the cherished French 'social model'. But the social model has been strained by policies such as the 35 hour working week, which has been a disincentive to growth. Unemployment is running high at about 9 percent and the costs of the pension system and healthcare are also rising. In short, France's leaders have paid for today's benefits with tomorrow's prosperity and as a result the economy, labour market and the welfare system need an overhaul. Besides this, the vexing problem of immigration and national identity--the source of vicious riots and lingering animosity in contemporary France--remains to be tackled.

Many, especially the young, feel that in casting a vision that will move France forward Sarkozy has the edge. He is seen as a no-nonsense man who can make France strong again, promising lower taxes and addressing crime and immigration head-on. However, despite Sarkozy speaking of building a 'fraternal republic', there is still fear that he will be a divisive leader, a consequence of his intemperate language and authoritarian traits. The challenge for Royal is to show that her policies would make a difference, since her 100 point plan would leave the French social model largely intact. Both candidates will be chasing the 19 percent of the vote won by Francois Bayrou, the unsuccessful centrist candidate. On 6 May, French voters have a choice of new directions for the Republic. Conflicting visions for France, and conflicting priorities, continue to battle it out.

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WORTHY OF THE SACRIFICE

ANZAC commemorations up and down the country this week remembered many things: the thousands of young soldiers who served their country in time of war, the suffering and scrimping of the home front, the horror of armed conflict, and the supreme sacrifice so many made for freedom, justice, King and country. But they also signify a challenge to a jaded contemporary world, to live in a way worthy of such sacrifice--to live courageously.

It is on ANZAC Day that we are most conscious of the debt we owe to those who have laid down their lives to secure our freedom. And it is on ANZAC Day that we are confronted anew by the challenge to live with courage. The monument in the Military Cemetery at Kohima, on the Indian border, encapsulates both halves of the challenge we confront every April 25. The scene of desperate fighting against Japan in World War II, the Kohima monument reads: 'When you go home, tell them of us and say, 'For your tomorrow, we gave our today'.'

April 25 is about gratitude for that sacrifice and remembrance of that service; remembrance concretely seen in the thousands of RSA poppies which sprout in buttonholes and on monuments. But that remembrance should also translate into a determination that 'our today' should be worthy of the sacrifice given to secure it; a determination to live with courage, and for a cause greater than self. The consciousness of that sacrifice should ornament and ennoble the present, making concrete the great trust that is human society: a trust between the dead, the living, and those yet to be born.

The continuing commemoration of ANZAC Day, especially among young people, shows that the value of a life lived with courage is widely recognised. It also raises the question, what does living courageously, living in the sacrificial legacy of the ANZAC spirit, look like in a world where selfishness and apathy so often obscure sacrifice and service? ANZAC Day reminds us of an ideal we cannot afford to forget. 'At the going down of the sun, and in the morning, we will remember them. We will remember them.'

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IN THE NEWS

BRITISH TEACHERS FEAR SEGREGATION

The UK Government's plan to increase the number of faith-based schools is again causing controversy. Delegates at the National Association of Schoolmasters Union of Women Teachers conference recently voted for an inquiry into the effects of ending state funding for the existing 7,000 faith schools in the UK. Some criticise faith schools as an inappropriate use of taxpayers' money because they supposedly 'indoctrinate' youth.

Further, critics argue that faith schools are elitist and that they encourage social segregation, something seen as a particular concern in light of terrorist attacks by Islamic radicals and the desires of some to integrate minority groups into organisations in society. Tony Blair, however, has made faith schools an express aim of his education policy, with 40 of 100 forthcoming privately sponsored academies now being partially funded by faith groups. The Department for Education and Skills (DfES) has also signalled there will be no reduction in funding for faith schools.

SUBMISSIONS REQUESTED ON HEALTH INFORMATION PRIVACY CODE AMENDMENTS

The Privacy Commission has released a set of draft amendments to the Health Information Privacy Code (HIPC) for public consultation. The HIPC regulates who can access information in the health sector and what they can access. Some of the proposed amendments are technical in nature. Others deal with more substantive issues, such as allowing the release of information about possible genetic health problems to genetic relatives of a patient. The deadline for submissions on the proposed amendments is 28 May 2007.

Read more about the amendment and how to make a submission http://www.privacy.org.nz/privacy-act/codes-consultation

TALKING POINT

'As the stars that shall be bright when we are dust, Moving in marches upon the heavenly plain; As the stars that are starry in the time of our darkness, To the end, to the end, they remain.'

Laurence Binyon, For the Fallen (1914)

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