Tax simplification
3 April 2012
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Uncategorized
2 April 2012
Uncategorized
Tax and Fiscal Policy
19 November 2024
One hopes the overworked staff in the Office of Tax Simplification get overtime. This year they have surely earned every penny.
A glance at the Conservative Party’s Manifesto for the last general election must have inspired British taxpayers: ‘The Conservative Party believes in lower and simpler taxation. … Our ambition is to create the most competitive tax system in the G20 within five years. We will restore (sic) the tax system’s reputation for simplicity, stability and predictability.’
This last sentence reminds us of one of the most heartfelt tributes ever paid to the British tax system (which has received so many well-merited accolades over the years). In 1965 Lord Justice Diplock was moved to observe: ‘It would be a poor compliment to the draughtsman of Section 28 of the Finance Act 1960 if this [three-man] Court [of Appeal] were to be unanimous as to its meaning.’
Naturally, in the light of the 2010 Conservative Manifesto, our expectations were high. But we could scarcely have dared to hope for the scale of the simplification that has now been vouchsafed to us. For the Finance Bill (No. 4) 2010-12, seeking to enact the provisions of the recent Budget, goes further than anyone anticipated. It has proved impossible to contain all its brevity in fewer than three volumes. Victorian biographers could have learned lessons here.
As one leafs through the 686 pages of the Bill, one cannot withhold murmurs of admiration at the beauty of the prose – almost rivalling that of accounting standards! – that the draughtsmen have managed to incorporate. In the ten Parts comprising Volume I, its 227 sections are admirably concise; though they may have overdone the terseness of Part 2, covering Insurance companies carrying on long-term business, which takes up a mere 94 sections and fifty-five pages. One reaches the end of this Part, conscious of a poignant wish: ‘If only it could have gone on longer.’
But the best is yet to come. For Volumes II and III between them contain 38 Schedules and 540 pages. Invidious indeed to choose a favourite! Maybe Schedule 2, with its 40 pages covering ‘Profits arising from the exploitation of patents etc’. Or Schedule 6’s 55 pages encompassing the gripping ‘Seed enterprise investment scheme’. But then again, it is hard to resist Schedule 13’s 36 pages on ‘Employer asset-backed pension contributions etc’. The heart thrills at the very words!
Every captivated reader of these inspired pages will have his or her own special fancy. Who would have thought that Schedule 16 could cover its vital content (‘Part 2: minor and consequential amendments’) in a mere 34 elegant pages? On balance, though, I would award the palm to Schedule 20, on ‘Controlled foreign companies and foreign permanent establishments’. What a tragedy that this Schedule closed with its number of pages (97) still just short of a century. It is a miracle of compression that nobody who has read it from start to finish will ever be quite able to forget.
A glance at the Conservative Party’s Manifesto for the last general election must have inspired British taxpayers: ‘The Conservative Party believes in lower and simpler taxation. … Our ambition is to create the most competitive tax system in the G20 within five years. We will restore (sic) the tax system’s reputation for simplicity, stability and predictability.’
This last sentence reminds us of one of the most heartfelt tributes ever paid to the British tax system (which has received so many well-merited accolades over the years). In 1965 Lord Justice Diplock was moved to observe: ‘It would be a poor compliment to the draughtsman of Section 28 of the Finance Act 1960 if this [three-man] Court [of Appeal] were to be unanimous as to its meaning.’
Naturally, in the light of the 2010 Conservative Manifesto, our expectations were high. But we could scarcely have dared to hope for the scale of the simplification that has now been vouchsafed to us. For the Finance Bill (No. 4) 2010-12, seeking to enact the provisions of the recent Budget, goes further than anyone anticipated. It has proved impossible to contain all its brevity in fewer than three volumes. Victorian biographers could have learned lessons here.
As one leafs through the 686 pages of the Bill, one cannot withhold murmurs of admiration at the beauty of the prose – almost rivalling that of accounting standards! – that the draughtsmen have managed to incorporate. In the ten Parts comprising Volume I, its 227 sections are admirably concise; though they may have overdone the terseness of Part 2, covering Insurance companies carrying on long-term business, which takes up a mere 94 sections and fifty-five pages. One reaches the end of this Part, conscious of a poignant wish: ‘If only it could have gone on longer.’
But the best is yet to come. For Volumes II and III between them contain 38 Schedules and 540 pages. Invidious indeed to choose a favourite! Maybe Schedule 2, with its 40 pages covering ‘Profits arising from the exploitation of patents etc’. Or Schedule 6’s 55 pages encompassing the gripping ‘Seed enterprise investment scheme’. But then again, it is hard to resist Schedule 13’s 36 pages on ‘Employer asset-backed pension contributions etc’. The heart thrills at the very words!
Every captivated reader of these inspired pages will have his or her own special fancy. Who would have thought that Schedule 16 could cover its vital content (‘Part 2: minor and consequential amendments’) in a mere 34 elegant pages? On balance, though, I would award the palm to Schedule 20, on ‘Controlled foreign companies and foreign permanent establishments’. What a tragedy that this Schedule closed with its number of pages (97) still just short of a century. It is a miracle of compression that nobody who has read it from start to finish will ever be quite able to forget.
4 thoughts on “Tax simplification”
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If only this affected tax professionals…If you have children the tax system is grim. Up to about £30K you will receive means-tested benefits that are withdrawn on the basis of household income. So, you need, effectively, three tax returns – one for the household and one for both the parents. Then you are okay for a bit but, at £50K, you get child benefit withdrawn – this time it is based not on personal income or household income but on the income of the highest earning person in the household. And this will have to be assessed on a self assessment tax forms (which previously such people did not generally have to fill in). It will be withdrawn at different rates depending on how many children you have. After £60K, you can relax for a bit until you reach £100k and have your personal allowance withdrawn – though at least this is based on your personal income. The government that does not feel comfortable with the 50% tax rate apparently does feel comfortable with the 60% tax rate that this leads to. So, for pretty prosperous people here, we have eight or nine different marginal tax rates above (say) £22k a year and – amazingly – four different methods of assessment (two adults being assessed as separate people, the household and the highest income earner in the household). The government thinks you should be taxed at 40% if you earn £40K, £61K or £120K but not at £50K or £100K. And this is before the generation of people who are paying back what is, in effect, a graduate tax start their repayments.
I must’ve missed the lower taxation part of this plan, I’m paying more direct and indirect tax than I did when the coalition were elected and will be paying yet more in the next tax year with no end in sight to the tax rises for me, while businesses continue to see their tax bills drop and continue to return record sums to shareholders and themselves in ever-increasing executive compensation.
Between tax cuts, direct and indirect corporate welfare (in-work benefits meaning wages have no need to attempt to keep pace with the costs of living) we’ve become more competitive for businesses for sure, shame it’s bleeding many would-be consumers of their products of what little disposable income they have to actually buy the end products.
And then they have the gall to demonise people who attempt to minimise the impact of all this. I would be surprised if one in a hundred knows what they really ‘should’ be paying.
Consumers are unwittingly the ultimate “Taxpayers”.
Consumers’ cash necessarily supports the entire hierarchy of commerce. There is not a commercial entity that can survive without ultimately servicing the needs of consumers, directly or indirectly. From whom else do you suppose businesses and employees make money? Every tax incurred in the supply chain shows up as a hidden tax in consumer prices.
Consumers should now realise that no one else could reasonably claim to be paying any of those self same taxes.
‘Income Taxpayers’ are simply involuntary intermediaries in the collection of tax from consumers. ‘Income Taxpayers’ are not always reliable as third party tax collectors, as we know, but their use provides great scope for confusing the issue of who really pays tax and concealing the full crushing cost of Government from voters.
The notion that, in the transfer of customers’ money to HMRC, businesses and employees “pay” or really bear any of the burden of income taxes is the greatest illusion of our age. Income taxes are obviously the preferred backdoor method of taxing consumers, while pretending to be the epitome of fairness.
As a result we consumers pay an average of 50p tax in the pound when we spend. It would be a tremendous simplification to explicitly tax retail purchases alone, but admitting the headline rate might be too uncomfortable.