The end of the ‘Nation State’?
Government, as it has developed historically in the West, is now being undermined. I would point to Richard Murphy’s telling article in his Blog ’Tax Research UK’ (21st December) on the failings of HMRC over Uber, titled “HMRC should be hanging their heads in shame over Uber” (The EU has just decided that Uber is a taxi company, not a “tech” company, merely to be defined by an App. This follows a UK decision that the drivers are workers not contractors). Murphy criticises the failings of HMRC as this issue unfolded, but explores something more telling when he argues that: “The apparent success of many companies in this sector does not come down to their ability to replace a phone call with an app messaging system. It has instead been about cutting out VAT and employer’s national insurance [NI] at cost to the state, public services, fair competition and local services.”
Murphy’s assessment is shrewd and illuminating, and we should explore the wider ramifications of what is actually happening as such new developments (in tax avoidance rather than technology) unfold, at increasing speed throughout the economy, and with significant and growing impact on the wider community (such as the so-called ‘gig’-economy). Let us examine these wider, suppressed, implicit implications; conscious or unconscious, intended or unintended: for what matters is the outcomes.The purpose and success of such tax avoidance activities highlighted by Murphy, especially when taken as a whole, and whatever the short-term intention; is – ultimately – seriously to inhibit the capacity to raise the taxes that are legitimately set by Parliament; and, more critically to undermine traditional Government institutions, powers, authority and the public support and confidence on which the principle of ‘Government’ depends. The same analysis applied by Murphy to VAT and NI could be applied to closely related areas of taxation; for example in the extraordinary rise and power of tax havens, which you will also find thoroughly and critically analysed, typically in Murphy’s Blog, or in the work of the French economist Thomas Piketty, or in Nicholas Shaxson’s brilliant and searching ’Treasure Islands’. The same purposes and success described by Murphy, applies to tax havens, but for a whole suite of personal and corporate taxes, and on a much larger international scale; and the same effect follows: to undermine traditional Government tax-raising and in consequence its, powers, prestige, and public confidence; and at the same time undermines the power and authority of national Governments to act in the interests of the community it serves. So let us look at the constituent parts of this “whole”, and reflect on where these activities are really taking us.
The same argument Murphy applies to VAT and NI, or in evidence for massive tax avoidance through the use of tax havens, can be applied also to the use of what is called ‘aggressive tax avoidance’, even where tax havens are not utilised (the scale of which has escalated, probably exponentially in recent years). The same argument can also be applied to accounting and tax conventions that are exploited to allow international transfer pricing that extract the profits from the country in which they are actually made to another domicile with a lower corporate tax rate. This technique is used by some of the largest corporations on the planet. The same consequences for the Government deprived of the taxation inevitably follows; it undermines their capacity to raise tax, their authority, and finally public confidence in Government.
This is not the end of the attacks on Government’s capacity to manage resources. The same purpose, to undermine conventional Government institutions, powers, authority and public confidence could be said about the dispensation given to banks after 2008 to hold all government to ransom; under the general principle almost universally applied, and still applying: “too big to fail”. This has passed enormous power from Government, or the Central Bank to the private sector. All these devices and techniques are intended to undermine the capacity of Government to manage and control its financial system; over the unfettered control of profit-making or rent-seeking by private, self-interested and self-serving corporations and individuals (operating individually or collectively on a scale in our modern Globalised age, to match that of supposed ‘independent’ countries; a new challenge, at least for large nations states in the Western World).
The same could also be said – and perhaps most critically of all as a dystopian warning about our common future – of the new phenomenon of “blockchain currency” (crypto-currency), of which Bitcoin is merely the exploratory early beginning of a more serious Globalised and intoxicating prospect; a secure currency free of all government(s). This concept is intended to take the dismantling of Government power one step further than the erosion of national governments power to tax, and extend it to its control over currency itself; at which point all Government, as the leading possessor of the collective community’s power and authority, is finally neutered.
Add all these silent, secretive, insidiously spreading features of 21st century life together and we discover that the concept of the ‘nation state’ itself is being dismantled quietly before our eyes by a silent assassin; and nobody seems to understand what is happening, or is motivated to do anything significant about it.