Thank you Gordon! I learned recently (but haven't verified) that there was such a thing as the Office for Tax Simplification which inherited a tax code running to 15,000 pages, one presumes mostly documenting exceptions and exemptions. When disbanded, the code was 20,000 pages. I used to believe that the classic 'Yes, Minister' was comedy but came to realise it was documentary.
The OTS - well that didn't work out very well. But honesty compels me to point out that reducing the tax code is incredibly difficult. Most of it deals with very arcane aspects of corporation tax and issues like whether jaffa cakes are food or sweets. These are constantly being litigated and Tribunal & High Court decisions add to the length of the tax code. Avoiding such disputes is almost impossible while language is imprecise and there are many alternative interpretations of both tax and accounting principles.
The people who believe that a wealth tax will be an effective way of raising tax revenue are delusional. Outside stock market prices and bank accounts there are few or no objective ways of valuing assets. At one time I was involved in a legal case in Hong Kong dealing with property values that lasted for more than 10 years - not quite Jarndyce vs Jarndyce but enough to show that the court system would be completely swamped by endless litigation which, in turn, would lead to thousands of additional pages in the tax code. There have been many studies of the costs of tax administration and compliance. Wealth taxes including estate & gifts taxes consistently rank among the most expensive per £1 million of tax raised.
Another illuminating post Gordon, thank you. As you suggest, the consequences of tax policy on the medical and other (public sector) professions are probably unintended, but result from the persistent focus on 'fairness' by governments over the past two decades, not least from supposedly right-leaning administrations keen to burnish their progressive credentials. As a result, given (until now) the political imperative of not touching headline rates, ever more cumulative, quasi-wealth taxes have been introduced on housing, vehicles, investments etc. and via threshold freezing to try and square the circle of satisfying inexorable increases in governmental spend. Perhaps no wonder that Reeves is reportedly looking at income tax as even the Treasury realise the futility of the 'those with the broadest shoulders' policy.
It is enormously difficult to stop politicians messing up what start out as simple tax structures. The best example in the developed world has been Estonia. It had a standard tax rate of 20% for VAT, personal income tax, and corporate profits tax. However under pressure to fund a large increase in military spending those rates have been or are being raised to 24%. There is a personal tax allowance but that is removed gradually between a monthly income €1,200 and €2,100 per month which increases the marginal tax rate to nearly 40% over that range. The tax system is still relatively simple but adding special allowances, etc is a process that is very hard to stop.
Still even a tax system with two rates can be simple and relatively progressive. The problem is that adding a large exemption - and then increasing it as has happened in the UK - puts enormous pressure on the need to raise more tax revenue from those above the exemption. Basically to raise revenue efficiently you must tax everyone, but that is resisted by politicians.
I think the inflexibility around Council housing still exists. I do wonder what effect on Revenue (and the cost of collection) a simple "Once you've earned X, you pay a flat rate Y% on all earnings."
I was once told by an Accountant that he could help with tax problems. He was rather surprised when I told him that he was a symptom of the problem, not the cure.
Thank you Gordon! I learned recently (but haven't verified) that there was such a thing as the Office for Tax Simplification which inherited a tax code running to 15,000 pages, one presumes mostly documenting exceptions and exemptions. When disbanded, the code was 20,000 pages. I used to believe that the classic 'Yes, Minister' was comedy but came to realise it was documentary.
The OTS - well that didn't work out very well. But honesty compels me to point out that reducing the tax code is incredibly difficult. Most of it deals with very arcane aspects of corporation tax and issues like whether jaffa cakes are food or sweets. These are constantly being litigated and Tribunal & High Court decisions add to the length of the tax code. Avoiding such disputes is almost impossible while language is imprecise and there are many alternative interpretations of both tax and accounting principles.
The people who believe that a wealth tax will be an effective way of raising tax revenue are delusional. Outside stock market prices and bank accounts there are few or no objective ways of valuing assets. At one time I was involved in a legal case in Hong Kong dealing with property values that lasted for more than 10 years - not quite Jarndyce vs Jarndyce but enough to show that the court system would be completely swamped by endless litigation which, in turn, would lead to thousands of additional pages in the tax code. There have been many studies of the costs of tax administration and compliance. Wealth taxes including estate & gifts taxes consistently rank among the most expensive per £1 million of tax raised.
Another illuminating post Gordon, thank you. As you suggest, the consequences of tax policy on the medical and other (public sector) professions are probably unintended, but result from the persistent focus on 'fairness' by governments over the past two decades, not least from supposedly right-leaning administrations keen to burnish their progressive credentials. As a result, given (until now) the political imperative of not touching headline rates, ever more cumulative, quasi-wealth taxes have been introduced on housing, vehicles, investments etc. and via threshold freezing to try and square the circle of satisfying inexorable increases in governmental spend. Perhaps no wonder that Reeves is reportedly looking at income tax as even the Treasury realise the futility of the 'those with the broadest shoulders' policy.
It is enormously difficult to stop politicians messing up what start out as simple tax structures. The best example in the developed world has been Estonia. It had a standard tax rate of 20% for VAT, personal income tax, and corporate profits tax. However under pressure to fund a large increase in military spending those rates have been or are being raised to 24%. There is a personal tax allowance but that is removed gradually between a monthly income €1,200 and €2,100 per month which increases the marginal tax rate to nearly 40% over that range. The tax system is still relatively simple but adding special allowances, etc is a process that is very hard to stop.
Still even a tax system with two rates can be simple and relatively progressive. The problem is that adding a large exemption - and then increasing it as has happened in the UK - puts enormous pressure on the need to raise more tax revenue from those above the exemption. Basically to raise revenue efficiently you must tax everyone, but that is resisted by politicians.
I think the inflexibility around Council housing still exists. I do wonder what effect on Revenue (and the cost of collection) a simple "Once you've earned X, you pay a flat rate Y% on all earnings."
I was once told by an Accountant that he could help with tax problems. He was rather surprised when I told him that he was a symptom of the problem, not the cure.