So for some reason this is a question that has been bouncing around my head for a while.
There's few people out there who would hold central government up as a symbol of efficiency.
Likewise there's few people who would argue the merits of complexity over simplicity when it comes down to taxation and financial management.
So why when these things are true is taxation so complex?
Think about it. How many ways do you pay tax? And how clear cut are those taxes? I like to think of myself as reasonably financialy astute but I realised quite some time ago its to complex for me to get completely across.
So why is it so complex? My cynical reasoning comes to one answer. Its so complex so we, the people, have no real clear understanding of how much we are really being taxed at all. Let's just take a couple of taxes.
1) Income Tax - You have a tax free allowance each year. Then above that you have multiple tax rates that kick up to 40% and then 50%.
2) Then we have National Insurance. Last I checked this was 7.5% but it may have changed.
3) Then on everything we buy we pay Value Added Tax (VAT @ 17.5%)
4) Then you have additional taxes on things like Petrol, Alcohol, Cigarettes, TV Licenses.
5) Then you have local council tax
Bearing in mind how inefficient we know government to be would it therefore make sense to have them performing the same task (tax collection) in all the above different ways? Or would it be easier, simpler and more efficient to simply say from now on we are just going to tax your income at a higher rate or we are just going to tax the things you buy?
Now I suspect there is a counter argument here that says if you just tax one thing then it will unfair to certain individuals. But if this is the case with a simple, singular tax system it would be easy to fix this. You dont have to worry about all the far reaching consequences of a change in one tax to the myriad of other taxes.
The fact is we're all being bamboozled by complexity and its surprising to me no one has seriously brought this up as a political debate. Dont we all want to know how much tax we are really paying? Do we really want a million stealth taxes? Wouldnt it be better for everyone to be able to have a clear and simple understanding of their tax obligations. Wouldnt this in fact make it easier for the government to collect their tax revenue? Rather than have to police and enforce some of the most complex financial legislation in existance they can just concentrate on policing one policy emphatically?
Food for thought?
Monday, May 3, 2010
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