The UK has one of the most fiendishly complex tax systems in the world; with over a thousand of pages of waffle to wade through and many different tax systems all at varying rates. You need to be a genius to work it all out and most citizens including myself are not. If we don’t know a lot about our tax system, we do not know a lot about where are taxes are going, and if we don’t know where are taxes are going inevitably we cannot trust the system and therefore this leads to a lot of unpaid taxes. Not only this but the government can take advantage of the complicated system to sneakily put up taxes through stealth taxes and also can get away with vast amounts of waste, as complicated systems are nearly always not transparent system. This by the way is the tax system we were left with after 13 years of Labour Government.
The Coalition government says it wants to simplify the tax system, there were also many in the past including at time members of the conservative shadow team like George Osborne who also wanted a more simplified tax system. The way this is apparently going to be achieved is through the office of tax simplification, an organisation created by the government but apparently at arms length. Far be it from me but why doesn't the government actually initiate making the tax system simpler and therefore fairer and lower in the long term, rather than palming it off on another self made quango which will cost the taxpayer a lot of money where the government is just trying to avoid responsibility for making difficult decisions. Also given the fact that we have a massive debt cloud hanging over us, and we need to make serious cuts to public expenditure, we don’t exactly have money to waste on pointless quangos, however well intentioned they may be.
There is though a way to simplify taxes and cut taxes for everyone poor, middle class and rich and be completely fair, and be a system where people know where its going and can budget for it. It is called a flat tax. The flat tax has worked in Eastern Europe to turn countries that had broken economies thanks to being part of the Soviet Union, to places where people want to invest. Indeed those eastern European countries who have introduced a flat tax system have seen on average since 1994 around a 5.5% growth rate, where those who didn't introduced this type of tax system only received a growth rate of 2.6%. The proof therefore is in the pudding.
The only taxes, which would exist in a flat tax system, are a flat and low rate income tax and a flat and low rate profit tax. No other taxes would be needed, rather than a tax system, which runs into thousands of pages, we could have a tax system, which are only at the most a few pages long. If a flat tax were introduced into the UK it would lower marginal tax rates significantly and therefore make the UK one of the most attractive places for businesses to come to. This is needed as to get out of the economic slowdown, this country needs investment and lots of it, what better way to do it then through introducing a flat tax system which will make everyone's lives easier and deal with the deficit at the same time.
Also tax fraud and avoidance would decrease. This is because with fewer taxes and exemptions, there is simply less chance to defraud the system, either by individuals or by the government themselves. You wont therefore see the ludicrous situation year on year where people are either told that they have underpaid in taxes or overpaid in taxes. Not only this broadens the tax base, which means the grey economy which makes up around 10-12% of the British Economy will be encouraged to join the open economy. Putting it simply there will be no point to avoid taxes anymore, because they are lower enough to not people off.
It is also a fair system. It will mean that everyone pays a similar amount of the income lets for example put it at 15% of income. This would be lower than the present system, but at the same time, it would mean that the rich proportionately would pay more because for example 15% of a £million is much more than 15% of £10,000. This is fairer than the present system where thanks to taxes like VAT the poor pay more than the rich. Also due to the lower tax levels for the poor, a life on benefits will suddenly look a lot less appealing as they get the chance to keep more of the money for themselves. So another possible benefit is a tax system that would encourage individual responsibility and freedom, rather than the system at the moment that supports a dependency culture.
There is one problem with the flat tax system; I must admit it works best in system where government expenditure is low. Unfortunately the UK Government expenditure as part of our whole economy is notoriously high; it is at between 40-45% at the moment and rising. For someone like myself who believes strongly in small government, this is deeply distressing. However I truly believe if we had a flat tax system, then the government would be forced to reduce their size and income, leading private businesses and individuals to flourish, and for less government interference in our lives.
Ultimately then if you want a simplified tax system, which will make us a country with lower taxes, a freer country, a fairer country and a more entrepreneurial country then the flat tax is the way to go, and by the way its a lot cheaper than setting up another quango (the office of tax simplification). I hope although doubt that the coalition government will listen to my advice.
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