September 16, 2015    5 minute read

The Relationship Between Tax and War

   September 16, 2015    5 minute read

The Relationship Between Tax and War

“If a thousand men were not to pay their tax-bills this year that would not be a violent and bloody measure, as it would be to pay them, and enable the State to commit violence and shed innocent blood”

For centuries, wars and battles have dominated the activities of governments across the globe. An efficient and effective tax system has played a pivotal role in funding armies, weaponry and other resources during times of war. The relationship between income tax and war is a positive one, and it has been for many hundreds of years. Throughout history and still to this present day, tax revenue is used to fund wars across the world. We, the taxpayers, are funding the governments with the financial resources necessary to carry out acts of violence.

The Birth of War Tax Resistance

War tax resistance was born in the 13th century. John, The King of England in 1202, had an empire stretching from Ireland to the French-Spanish border. John needed money to build an army and therefore levied feudal dues far beyond what Englanders were used to. In 1214, King John invaded Europe, but his defeat sparked a civil war in England between the barons and the King. The barons were tired of paying taxes to fuel the wars of King Johns, leading to the introduction of the Magna Carta. The Magna Carta was supposed to be a peace treaty between the king and the barons, in order to control the kings’ revenue collections.

Relationship between Income Tax and Wars – Fiscal Extraction

In ‘Economics of Taxation’, the author highlights the importance of taxation and its relevance to wars. King John’s need for money from taxation resulted in the recall of Parliament and was a factor leading to the Civil War and the execution of Charles I. The author goes on to stress its significance concerning the French and American Revolution. Taxation is a very powerful tool for governments and the ‘higher power’ to use in order to gain wealth and control.

The American Revolution: 1775 – 1783, also known as the U.S War of Independence, is an example of where the tax system was used aggressively to fund war. Tensions arose between residents of Great Britain’s 13 North American colonies and the colonial government, which represented the British crown. Tension had been building between colonists for more than a decade before the break-out of the war, where the British government raised revenue by taxing colonies. Three main methods of taxation were used, notably, the Stamp Act of 1765 and Townshend Tariffs of 1767 and the Tea Act of 1773.

The French revolution: 1789 – Late 1790’s. Initially, the income tax, introduced by William Pitt the Younger in 1798, was temporary, requiring renewal each year and was primarily used to cover the cost of the Napoleonic wars. It continued right up to the Battle of Waterloo in 1815. The income tax was repealed, however only temporarily, as Sir Robert Peel re-introduced the income tax in the 1842 Budget Speech, remaining ever since.

World War 1: 1914 – 1918. The burden of tax was still ‘unfair’ and disproportionate to your income. During the war, Parliament was able to authorise tax to support exceptional levels of wartime expenditure. The tax rate increased from 6% in 1914 to 30% in 1918, revealing the impact of war on income taxes and illustrating the true costs incurred during war times. By 1920, approximately 60% of tax revenue was in the form of direct taxation. Parliament recognised the importance of income tax and took steps to introduce income tax legislation into a single Act of Parliament.

World War 2: 1939 – 1945. Similarly, the income tax rate was displaced from 25.2% in 1939 to 44.7% in 1944, again, demonstrating fiscal extraction by the government at times of war and unsettlement.

Korean War: 1950 – 1953. The Korean War cost the US approximately $30bn ($341bn in constant 2011) this was equivalent to 14.1% of GDP in the last year of the war.

Iraq War: 2003 – 2011. The war in Iraq has cost the UK and US taxpayer’s eye-watering amounts of money. Interventions in Iraq and Afghanistan has cost the UK £30bn, which is approximately £1,000 for every taxpayer in the country.

The War Tax Resistors

Numerous organisations have been set up to resist against paying taxes towards war. In March 2003, an organisation called Peace Tax Seven obtained nineteen M.P’s signatures on an Early Day Motion. In 2000, the Humans Right Act was introduced into Britain, incorporating the European Convention of Human Rights into British law, which led to debates to whether an individual can opt out of contributing to the military and war under Article 9 – Freedom of thought, conscience and religion.

Conclusion

The relationship between income tax and war is indisputable if we are to look back through time and history. The income tax was originally imposed as a temporary measure, expiring each year on 5th April. Parliament reapplies the tax each year with the Finance Act. After the first and second world wars, income tax had been embedded into the economic system and was soon forgotten due to war turmoil. The temporary measure of income tax had vanished in people’s minds and thus was implemented in the fabric of working life as a norm. The Pay As You Earn (PAYE) system was implemented in 1944, just before the Second World War had ended.

This was a very convenient time to implement such a system, as now, members of society would find it harder to protest against the income tax, due to it being deducted at source. It is clear, that governments through time and history have used the tax system in order to profit and increase their power. To conclude, in my opinion, if taxpayers could follow their money through the economic system, observing its use to fund unethical activities, tax avoidance would unexpectedly become a very ethical practice.

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