The principles of tax policy

Written evidence submitted by Bryan Harris

I'm very pleased that some focus is being given to how we are taxed. It is long overdue, and I hope some lasting good will come out of it.

I am a mere taxpayer, not an accountant, so forgive me if I speak in broad terms, but hope you will consider the points I make.

STATEMENT OF INTENT

Firstly, I believe there should be a statement of intent that describes the approach to taxation by the government and acts as an agreement that will remind politicians that the days of excess, as in milking the taxpayers, are long gone.

It should also remind us all that governments should work within a budget, and keep borrowing for true emergencies, not incompetencies.

MY VISION

The tax industry is huge, and in my very humble opinion, totally unnecessary. Why do we have all of these people employed working out how much we should be taxed. It borders on the insane.

Surely these people could be better employed in "Productive work"

Taxation may be a necessary evil, but its impact needs to be reduced and made to become more equitable. That is not to say that taxation is only for the very rich, it means the burden should not be placed in one quarter, while others exempt themselves because they live off the State.

There are far too many taxes, this volume badly need to be reduced and simplified, and the tax industry is ripe for pruning.

Red tape of course pushes up costs, and while out of scope here, it needs to be kept in mind.

I have long maintained that government makes basic living too expensive, by their taxation policies and the way they subsidise those on low income. The mere fact that we are all taxed so heavily makes it more difficult for those impoverished to live without government support.

THIS HAS TO CHANGE.

Basic cost of living should be very cheap. What is the point in making it otherwise, apart from being counter-productive, it encourages the benefits bandwagon. Here we are talking about somewhere to live, food and clothes. In my opinion taxation should be removed on the latter two items and reduced significantly on accommodation.

By the simple fact of making it easier and cheaper to get by, day to day, there would be less need to tax us all to fund the welfare state. So, people who administer the system would also be reduced, and the requirement would then be for less taxation rather than more.

SPECIFICS

My hope for a fundamental change in taxation rests with the following, and while an overnight change may not be possible, we should be moving this way, dramatically:

· NATIONAL INSURANCE should be merged into INCOME TAX

· INCOME TAX should in future be paid by the employer

· PURCHASE TAX (or VAT if you prefer) should be the main form of tax revenue.

· CAR TAX should be merged into FUEL TAX

· The TV LICENCE should be scrapped

MORE DETAIL

NATIONAL INSURANCE should be merged into INCOME TAX

I support the views expressed in this article by Lorna Bourke, for this subject: http://www.citywire.co.uk/money/lorna-bourke-my-solution-to-fix-our-costly-and-unfair-tax-system/a452159?ref=citywire-money-featured-articles-list

The main benefit I see is in reducing the cost of collection and administration. If people have been employed for more than 25 years they should be eligible for the State pension. Those that weren't will already be on benefits, so lets continue to call it that, rather than give them a pension.

INCOME TAX should in future be paid by the employer

Just imagine how many administrators could be more gainfully employed if we didn't have PAYE!

The army of tax collectors could find more worthwhile employment, while those employed by companies could move on to earning revenue for their company.

Rather than an employer giving the employee his wage, which then gets reduced by the PAYE scheme, why not just have the company pay this tax directly, an average amount for each employee.

In other words, the employee gets the pay level he agrees with his employee, but the level is less taxation, which is fixed. The employee would no longer need to worry about how much tax he pays, as he would get the same amount each week or month. The take home pay would be approximately what it is now.

The company would instead pay an employee tax, for the total number of employees. That tax level could vary based on the average wage of people in the company, or it could just be a flat head count tax.

For overtime the company would pay an hourly rate to the employee reduced by a percentage for tax. The company would then pay an additional tax based on how many extra overtime hours were worked throughout the year.

Most interest on savings is already taxed at source, this would be extended or removed totally to make this system work effectively and efficiently.

Pensioners, that is people over State retirement age, would no longer be taxed, save for their purchases on non-zero rated items.

PURCHASE TAX (or VAT if you prefer) should be the main form of tax revenue.

This tax should be radically reformed to be the main revenue for government. Luxury items can be taxed more, but the more disposable income one has, and the more one spends, then the more one pays. Children’s clothes (plus shoes) and food would be zero rated, as would all books classified as "Education".

CAR TAX should be merged into FUEL TAX

Another tax that costs a fortune to collect.

Just add a penny to fuel tax and then we pay for the road we use.

Rather than a tax disc being displayed in car windows, there would instead be an MOT disc.

The TV LICENCE would be scrapped

Yet another costly tax and so unnecessary. Funds should come from the general pool of taxation from VAT and Company Peoples tax.

January 2011