The latest edition of the iea's journal, Economic Affairs, contains proposals by a number of tax experts for a simplification of the UK tax system and a reduction in the tax burden.
The compliance costs of the tax system are huge. These fall on businesses, particularly small businesses, but also on individuals. Fifty pages of guidance and 528 boxes to complete on a UK tax form are an unreasonable burden on all citizens, particularly the elderly and those who are not financially sophisticated. John Whiting, immediate past President of the Chartered Institute of Taxation, argues that the UK tax system was designed for a different era. The compliance costs of the current tax system can be up to £288 per employee for small employers. A more appropriate method of collecting taxes can be developed and the job is done better in most other countries. A straightforward percentage deduction from all employee’s pay, after taking account of a basic allowance, could be made. Self assessment could then be used to ensure the correct amount had been taken at the end of each tax year. Employers should not be used to provide government administration services, such as paying out benefits restyled as tax credits for free.
Barry Bracewell-Milnes makes proposals to abolish capital taxes. These are often the most complex taxes yet yield hardly any net revenue. Many capital taxes, such as stamp duty, give rise to huge distortions and are wholly arbitrary and unfair.
‘Tax Reform and Simplification’ published by the IEA provides a coherent and radical plan for reducing the burden of taxation and returning to a simpler, more rational basis for collecting tax.
Read the full paper here.