Tax - there must be a simpler more sensible way?
Discussion
I was chatting with a client on the phone this afternoon, and we were setting the world to rights - as you do. Anyway, we ended up talking about our mutual hatred of the Inland Revenue (especially at this time of year).
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
20% VAT (on everything)
20% Corp Tax on all profit
Abolish NI and Emp NI
More people would have increased cash in their pockets, so they'd spend more money in the shops. Equally, they'd be incentivised / rewarded to set up in business, so it would encourage entrepreneurs - knowing they're not going to be "extra shafted" by Gordon if they succeed.
Get rid of half the Government Dept's - especially the IR, because Tax would be very easy to collect. And, there would be less people like me, looking at various (perfectly legal) Tax planning options (EBT's / offshore accounts, etc). Equally, if the Civil Service could be whittled down it's a double bonus because people that were being paid by the state (Tax payers) would be contributing to it. In business terms, you'd turn overheads into fee earners.
I realise the above would not seem terribly fair to the "have nots", so clearly you'd need some support structures in place. However, if the income from the benefits system is comparable to having a job, then that's hardly conducive to creating a dynamic and prosperous society.
Am I being too simplistic, or would the above (or a version of it) be far more sensible for UK PLC.
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
20% VAT (on everything)
20% Corp Tax on all profit
Abolish NI and Emp NI
More people would have increased cash in their pockets, so they'd spend more money in the shops. Equally, they'd be incentivised / rewarded to set up in business, so it would encourage entrepreneurs - knowing they're not going to be "extra shafted" by Gordon if they succeed.
Get rid of half the Government Dept's - especially the IR, because Tax would be very easy to collect. And, there would be less people like me, looking at various (perfectly legal) Tax planning options (EBT's / offshore accounts, etc). Equally, if the Civil Service could be whittled down it's a double bonus because people that were being paid by the state (Tax payers) would be contributing to it. In business terms, you'd turn overheads into fee earners.
I realise the above would not seem terribly fair to the "have nots", so clearly you'd need some support structures in place. However, if the income from the benefits system is comparable to having a job, then that's hardly conducive to creating a dynamic and prosperous society.
Am I being too simplistic, or would the above (or a version of it) be far more sensible for UK PLC.
A better system would be to eliminate income tax completely, and just raise the level of VAT - on all items, no exemptions.
VAT registered persons would be able to reclaim some of the VAT, not all of it.
Would encourage people to save their money a bit more, and would also be more transparent.
Of course then you'd have everyone just legging it to France and Ireland to do their shopping......
>> Edited by Parrot of doom on Friday 3rd February 19:05
VAT registered persons would be able to reclaim some of the VAT, not all of it.
Would encourage people to save their money a bit more, and would also be more transparent.
Of course then you'd have everyone just legging it to France and Ireland to do their shopping......
>> Edited by Parrot of doom on Friday 3rd February 19:05
srebbe - that would be very similar to my "perfect" tax system. Unfortunately, tax is as much a "political" tool as it is a government revenue collecting tool. Therefore, what makes sense to you or me (or any normal person) is not what makes sense to a politician who has to try and satify too many people.
srebbe64 said:
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
i read an article recently from an old tory a few weeks ago about flat rate tax. his point which i thoroughly disagree with from a fundamental point of view was that a flat rate tax did not actually benefit the population. he put it that there were winners and losers, and with flat rate there would be more losers than winners by a long chalk. his figures tended to back him up.
however, where i disagree is from a qualitative point of view that a flat rate tax will be seen as a fairer tax regardlss of winners and losers.
srebbe64 said:
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
20% VAT (on everything)
20% Corp Tax on all profit
Abolish NI and Emp NI
I like the way your thinking here srebbe and unlike others who have proposed flat taxes you have more realistic rates. Increasing the Vat rate to 20% and imposing it on all goods will generate some of the income needed to reduce the other tax rates.
Flater taxes are the way forward, a process started by the Tory party and put in reverse by Labour (if you consider the impact of NI changes and means tested tax credits)
srebbe64 said:
I was chatting with a client on the phone this afternoon, and we were setting the world to rights - as you do. Anyway, we ended up talking about our mutual hatred of the Inland Revenue (especially at this time of year).
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
20% VAT (on everything)
20% Corp Tax on all profit
Abolish NI and Emp NI
I'd agree, but this particular system would hit those with the least money quite hard. Imagine someone on 12k a year, they'd go from paying approx £800 I.T. (10% on 12k-4k personal allowance) to about £2400. I'd say keep the personal allowance, infact up it to say 7/8k. What do you think of that?
Cheers,
Rob.
Rob_F said:
I was chatting with a client on the phone this afternoon, and we were setting the world to rights - as you do. Anyway, we ended up talking about our mutual hatred of the Inland Revenue (especially at this time of year).
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
20% VAT (on everything)
20% Corp Tax on all profit
Abolish NI and Emp NI
I'd agree, but this particular system would hit those with the least money quite hard. Imagine someone on 12k a year, they'd go from paying approx £800 I.T. (10% on 12k-4k personal allowance) to about £2400. I'd say keep the personal allowance, infact up it to say 7/8k. What do you think of that?
Cheers,
Rob.
Well I did say have appropriate support structures for the "have nots". Equally, someone who has aspirations to earn more should be able to achieve these, without being screwed by the Revenue.
srebbe64 said:
Well I did say have appropriate support structures for the "have nots". Equally, someone who has aspirations to earn more should be able to achieve these, without being screwed by the Revenue.
If you have the personal allowance tho you might avoid the rediculous situation of taking money from people only to give it back again. (minus the administration charge!
) Otherwise i think you're prolly spot on Cheers,
Rob.
Rob_F said:
I was chatting with a client on the phone this afternoon, and we were setting the world to rights - as you do. Anyway, we ended up talking about our mutual hatred of the Inland Revenue (especially at this time of year).
This got me thinking. Would it not be a hell of a lot fairer and simpler to structure something along the following lines:
20% income Tax (on all income)
20% VAT (on everything)
20% Corp Tax on all profit
Abolish NI and Emp NI
I'd agree, but this particular system would hit those with the least money quite hard. Imagine someone on 12k a year, they'd go from paying approx £800 I.T. (10% on 12k-4k personal allowance) to about £2400. I'd say keep the personal allowance, infact up it to say 7/8k. What do you think of that?
Cheers,
Rob.
unless the personal allowances were changed everyone from low earnings to perhaps around £40k salary would actually lose out ( depending on what the NI baseline was )!!! - the only people who would gain *substantially* would be the top 1% OR 2% of the population on 6 or 7 figure salaries - not a vote winner. The tax take to the exchequer would plummet to the extent that even with big cuts to the Civil Service I doubt that basic public services like the NHS could be funded. I pesonally think the real issue is that the vast bulk of people earning up to (say) £100k (ish) find it hard to put much aside and make progress - better to reduce the tax take a bit from those on earning up to say 3x average earnings , and flatten NI. This could be done by lifting the top rate tax band by £20k , and introduicng a higher tax bracket for those earning over (say) £150 k (sorevenue neutral for high earners , and people earning 7 figure salaries would pay a bit more .
I would also abolish inheritance tax, and massively cut non-essential public sector jobs.
when Reagan massively cut taxes in the early 80's ..... he thought the "tax take" would increase , he was led to believe he was on the down-slope of the "Gipper curve", the US economy wasn't ..... tax receipts plummeted and America's Govt borrowing ballooned , nearly bankrupting the economy >> Edited by alfaman on Friday 3rd February 23:51
I was just thinking the same thing on the way home tonight. The public service element of the IR seem to be creating excuses to have a job.
Gordon Brown may not be happy by the overnight eradication of 80% of the public service, not to mention the corresponding reduction in tree chopping (stretching the point I know), but it would just make far too much sense to implement in the UK. Possibly Japan.
I have had this conversation with people many a time: In the UK, we are fire-fighters, we create intricate solutions to fix small problems until the whole thing ends up as a complete tangled web. In Japan, the product is not created until the problems are ironed out. Lean Engineering.
A generalisation I know, but it applies in many cases.
Gordon Brown may not be happy by the overnight eradication of 80% of the public service, not to mention the corresponding reduction in tree chopping (stretching the point I know), but it would just make far too much sense to implement in the UK. Possibly Japan.
I have had this conversation with people many a time: In the UK, we are fire-fighters, we create intricate solutions to fix small problems until the whole thing ends up as a complete tangled web. In Japan, the product is not created until the problems are ironed out. Lean Engineering.
A generalisation I know, but it applies in many cases.
Rob_F said:
I'd agree, but this particular system would hit those with the least money quite hard. Imagine someone on 12k a year, they'd go from paying approx £800 I.T. (10% on 12k-4k personal allowance) to about £2400. I'd say keep the personal allowance, infact up it to say 7/8k. What do you think of that?
Cheers,
Rob.
Most of the proponents of flat taxes think we should have a generous personal allowance, before paying tax at the same rate on all other income.
GOM said:
I would massively cut non-essential public sector jobs.
>> Edited by alfaman on Friday 3rd February 23:51
.....errr....that would be all of them then
well if the NHS was run privately like it should be ..... we'd mainly only need teachers , police and firemen . Just think with a simplified tax structure all those "value-adding" Inland revenue employees would be out of a job. Awwwww diddums
Jaglover said:
I'd agree, but this particular system would hit those with the least money quite hard. Imagine someone on 12k a year, they'd go from paying approx £800 I.T. (10% on 12k-4k personal allowance) to about £2400. I'd say keep the personal allowance, infact up it to say 7/8k. What do you think of that?
Cheers,
Rob.
Most of the proponents of flat taxes think we should have a generous personal allowance, before paying tax at the same rate on all other income.
Indeed. Around 12K or so. It is a futile exercise taking the poorest people in the country, taxing them and then providing them with benefits. Why not just let them keep their money?
The answer is that government does not TRUST the poorest in the population to spend their money wisely. They believe they are better off when the government spends it for them.
Sadly this may be true.
In general I believe a flat tax system with a general personal allowance to be fairer and simpler. But its only worth doing if the benefits in reduced administration are genuinely passed on to the popualation.
Its a brave government that actually makes thousands of union-represented-public-servants redundant. Turkeys don't vote for Christmas!
Its why we'll only ever see such a system introduced if its brought in as a manifesto commitment by a party not currently in government. And they'll need to introduce it within the first few weeks or the Sir Humphreys of this world will prevent them or persuade them out of it...
>> Edited by Don on Saturday 4th February 10:49
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