Sorry to bring this up in the more light hearted area of discussion, but I have been doing some serious thinking and the question really begs for an answer.
We need something, but the current system fails on so many levels....
customs and excise, but the rest of it is surplus to requirements.
Not wanting to state the obvious, but why would anybody pay any tax if there was no HMRC?
and know that we have to contribute to the running of the country. OK there has to be some sort of admin, but Agents work out the tax and clients pay. We certainly don't need all the compliant crap spewing out of HMRC at the moment.
Actually, most of us are not honest when it comes to tax. A bit like most of us don't keep to the speed limit.
Why should all taxpayers be required to use (and pay) an agent?
The compliant crap spewing out of HMRC is because people are stupid liars who need to be treated as such.
Why on earth would you not stick to the speed limit unless you are some impatient nutter?
Surely 99% of the population at times drive over the speed limit? Its not right but Im certain most people do it from time to time and not with the intention of mowing some old lady down crossing the street.
As far as HMRC goes, Im certain without them we would be in a far bigger mess than we currently are.
liars are making up compliant crap to treat stupid liars. That sound about right? Or are you saying that HMRC are the perfect school teachers who need to dish out compliant crap to tax payers, most of which are dishonest?
... we don't need HMRC, and we don't need compliance accountants.
My old chestnut, scrap cash and just have the banks deduct and pay over a percentage of transactions. I worked out around 2-3% should do it, taking into account government cost savings.
Then what you get in your bank is yours and we can all get on with living rather than shuffling bits of paper around.
Accountants can concentrate on adding value to their clients through worthwhile financial mangement rather than endless box ticking and form filling about dead data.
Audit emphasis could then focus on what the company is doing going forward (and relevant) instead of what it did last year (which is largely irrelevant).
Than may be the emphasis can shift back to companies making money from doing something useful themselves, rather than creaming off the fat of others, and I can go and live on a small holding somewhere remote.
@johnjenkins - no I'm not saying HMRC are the perfect school teacher..... I think what I'm saying is that HMRC are like a bad teacher in a school full of insolent, tax evading children. We might need a better teacher, but we can't have no teacher at all.
@OGA - complexity brings fairness. Your suggestion favours the rich over the poor.
I'm with OGA all the way. I have posted this on another thread but I believe HMRC are the new trainers of tax evaders and if they keep pushing it will get worse. So in a way you are right. Bad breeds bad.
That is the biggest load of BS I've heard. I calculated Tesco pay around 1% of cash flow in tax, a typical company client with say £2m turnover would pay around 3% and a sole trader on modest income around 5%, really favours the small guy!
Complexity breeds unfairness as the wealthy can use it to minimise tax. If every one paid a small percentage of a transaction, no one could avoid it.
If the rates were set in stone governments would have to get on with effective government instead of ego trips and ill conceived ideas. The better they performed the more cash they would get by increased economic activity, instead of the worse they perform the higher they tax us to pay for their failures as now!
Not saying it is the perfect solution, just a suggestion, but everyone tinkers with what we have, rather than start at the bottom and designing a system that works for the world today. Blue sky thinking is I think the jargon.
I understood that you were effectively arguing against progressive tax. Is that correct? That's been an area of much debate, but I am generally of the (conventional) opinion that taxes should be progressive.
It is not just the complexity which enables the wealthy to minimise their tax bill. For example, the ability to emigrate to Monaco would be the same whatever tax system was in place.
I tend to agree that the tax system needs a massive overhaul - but I'm resigned to the fact it will never happen. It would be like trying to get people to drive on the right hand side of the road, rather than the left. I have a bit of a problem generally with this country how we have reached this status quo - no real investment in infrastructure, or anything else, while the population increases steadily, breaking the current infrastructure. I think the tax system is the same - it was designed for a time when there were fewer higher rate taxpayers, when HMRC had the time to get things right. Now we're left with an outdated system which can't cope due to massive lack of investment in the infrastructure of both the tax code and HMRC.
But, the new tax system should still be progressive.
fairness. Complex, progressive taxation will only bring regression. That might be a good thing cos once we are rock bottom something will have to be done.
... not on my watch.
the nature of tax as a percentage means you pay more if you earn more, why should you pay at a higher rate.
Far better to give tax incentives to spend that money investing in UK industry, invention and education.
High progressive tax increases the incentives to go to Monaco - better to have them here paying 25% to treasury than elsewhere payingdidley squat surely, and these are the ones we are talking about. Taxing a chap in London 40% on part of his £50k salary is not fair compared to a chap in the regions on £40k when you look at their costs of living, primarily rent/mortgage.
How many would actually go? If they get their high earnings from working in the UK, could they earn the same in Monaco? I guess there are less jobs in Monaco than in the UK but a few may manage it.
Would their family want to be hauled across the world away from their other family and friends? I get really cheesed off with the threats of people moving abroad so that they get favourable treatment not available to many others. If they did go abroad, I wouldn't allow them back when they discover they need a vital heart operation that will cost £50k and it is now better for them to be in the UK, pay tax (or not pay tax because they are not working anymore), and benefit from the NHS.
but high earners need definition. It means different things to different people. Around London, where a one bedroom flat costs £150,000, a salary of £50,000 pa is peanuts. In other areas You could buy a two bedroom house for £50,000 and a salary of that would put you in the stock-broker belt.
To my mind, £250,000 pa would be the vey low end of a top earner, and many would and do move families around the world for that.
But, you are blurring the debate, entitlement to benefits and services is a different debate to fairness of tax and even less relevant to do we need HMRC!
Sorry. I went off-topic when I picked up your Monaco comment, but yes, we need HMRC the same as we need police and the NHS, and everything else.
They provide a public service. Whether they are very good at it, or good value for money, is another debate, but if HMRC were 'got rid of' then something else would have to take it's place at the taxpayers expense, the same as we couldn't get rid of the police unless the country were crime-free ... and tax dodging and crime are never going to go away!
Did you not read my solution? If we had tax collected in a sensible, modern way we wouldn't need them? Tax would be hived off automatically and could not be avoided!
May be then the low earners could received credits and benefits and the HMRC staff could be transferred and turn their threats and intimidation on benefit cheats rather than honest tax-payers.
Thinking on, if the bank provided an annual statement of tax with-held, there could just be a simple tax return and repayment claim system. A slight complication to the system could be differing rates, which could be notified to the bank similar to a PAYE code. In my developing model, the tax would be deucted by the receiving bank,and it could be possible to apply and exempt status to a person, similar to the gross interest system at present.
My answer is then thus, under the present system we need HMRC, but what we really need is a decent tax system where you do not need HMRC, at least for taxes, customs and duties are a different matter of course....
just come to reading again and there is a flaw here - you assume everyone has a (UK) bank account. This is not the case.
Have just been hearing about people unable to get mobile phones as no credit history (as opposed to poor ones) e.g us poor downtrodden wives where everything is either joint or in the husbands name. Apparently being the second name is as bad as not named from a credit point of view. Crown servants returning from overseas without being able to get anything which requires a credit check. and millions of ordinary people who pay tax but do not have bank accounts for a variety of reasons........
... part of my premise was abolish cash.
We need some lateral thinking here see!
Don't need a bank account, but can still be electronic.
Have a card, a la oyster card, so when you pay/get paid it can be used like a credit card.
May be you have found the poverty safe guard? If those unable to get mobile phone etc could be issued a "reader" so that they can accept payment. Actually, with modern technology it could probably store information and automatically upload when it passes a node and the "tax" could be creamed off and the available balance reduced accordingly. possibly set with limits to exempt them from tax deductions below a certain weekly limit.
There are ways round all problems, but we should be looking a devising a new, fair simple system rather than bodging up one that became unfit for purpose many years ago.
So that would resolve that problem, and if they paid no tax it wouldn't matter, my target is the high earners who avoid tax by the million, not the low end where it is immaterial.
As to overseas bank accounts, the system could be such so that it could easily pick up such transactions, and the requirement could be for any bank, wherever based, would have to withold and pay over the tax on any transaction with a leg in the UK.
I don't say I have all the answers, but I think these questions need asking and answers sought.
"My old chestnut, scrap cash and just have the banks deduct and pay over a percentage of transactions. I worked out around 2-3% should do it, taking into account government cost savings.
Then what you get in your bank is yours and we can all get on with living rather than shuffling bits of paper around."
A receives £50k per year and is taxed at 2% = £1k tax; net income £49k
B receives £100k and pays out expenses of £50k and is taxed at 2% = £2k; net income £48k
C receives £1m and pays out expenses of £950k and is taxed at 2% = £20k; net income £30k
Your flaw is not taking into account expenses.
... by dint my model encourages efficient use of resource, rather than wastrel spending to reduce the tax bill.
As I say, I am up for debate, but the biggest causes of tax loss are undeclared income, which my model eliminates, and mis-claiming of expense, which my model eliminates.
The biggest plus is that what you have in the bank is yours to keep.
I did suggest a solution above in using bench marks and varying rates for different sectors, like flat rate VAT. Every trader has a UTR, attach there tax rate to that, the banks can then have a UTR to open an account which will tell them what rate to use.
It's just the older I get and the nearer zero my counter gets, the less point I see in chasing bits of paper round a desk, I would rather spend the time looking at my clients accounts to see how they can improve profits and efficiency, adding value I think it is called, rather than compliance work that need not be necessary.
Another option is to have a single rate, but let people re-claim tax by submitting an expense claim, either monthly, quarterly or annually, like VAT returns, but then you are getting things complicated again, unless you restrict it to tight categories, say rent and purchases, possibly payroll.
On that thought, with the impending RTI for PAYE, that could be an automatic re-credit so tax on payroll is effectively just a pass through, i.e. when you submit your payroll details, the tax deducted from the payment to the employee goes to the employer, not the Treasury.
All comments appreciated, but it is more useful to offer alternatives, picking holes is easy! May be if we came up with a complete plan we could send it to number 11 as an Aweb UK tax system blue print?
Whatever system is used, there will always be complications. My first thought about taxing receipts was that transfers may get taxed twice. However, wherever there is a problem there is usually a solution, hopefully one not too complicated!
I do agree with getting rid of cash altogether. That would go a long long way towards fighting crime, the black economy, the liars and the cheats.
I really don't understand why banks won't allow some people to have a bank account. They don't give automatic loans and overdrafts so is it payment of their bank charges they are worried about? Why can't some people get bank accounts? Is it just the banks that won't allow it or is there another reason? Does anyone know?
If undeclared income is the problem, then the answer is something even more complicated - impose a withholding tax on everything, and then have people credit the withholding taxes against their final tax bill. Basically, expand the CIS scheme to every industry.
It will go down like a sack of shit, but it would reduce simple under-declaration.
Also, we could go the way of countries like Nigeria, and never issue a repayment of taxes in any circumstances whatsoever. That would help with carousel fraud too....
"by dint my model encourages efficient use of resource, rather than wastrel spending to reduce the tax bill."
Do you mean that by purchasing goods to produce what people want is discouraged simply because your tax system encourages a business model that doesn't spend any money at all? I think you will find it will do a lot more damage to the economy than a tax system that allows expenses to be tax deductible.
"Whatever system is used, there will always be complications."
What is wrong with allowing genuine expenses to be tax deductible? Tax transactions has no advantage in a modern economy. Yet it has many disadvantages.
Many years ago people had simple tax systems but they were found wanting because they were unfair and some people knew how to ensure they didn't pay their fair share. Anybody can come up with a simple tax system. Unfortunately, many people can avoid paying a fair share of tax when the system is too simple.
"If undeclared income is the problem, then the answer is something even more complicated - impose a withholding tax on everything, and then have people credit the withholding taxes against their final tax bill. Basically, expand the CIS scheme to every industry."
People would rush to cash. The black economy would expand at an alarming rate. Unless reasonable measures are introduced you would end up with total civil disobedience.
Somebody wants a loan of £10k. Do they have to get a loan for £12k to get net £10k? Or are loans exempt from this withholding ta
A supplier sells a van for £20k (which makes a £2k profit). The withholding tax is £2k. How does the seller pay their rent and employees? I know there would be withholding tax on all of these. The complications are enormous. I think the present system is best.
What needs to change is using common sense. There was a case recently when over 100 people were supposed to be claiming benefits and living in the same flat. It would appear that the benefit people just threw money at them and there were no checks on how many people were giving their address as that flat.
A Polish guy said that a jail in the UK is like a stay in a spa. He could conduct criminal activity and then when he gets jailed he could have a rest with all expenses paid. Why do we spend a lot of money on prisons? They should be low cost places where people are held with the minimum spent on the criminals. Why can people commit dozens of offences and not be jailed? If they were jailed earlier there would be less chance of them entering old people's houses and killing them for their pension money.
My suggestion regarding withholding tax was not fully thought out, I am sure there is a feasible way to expand the base of transactions subject to withholding taxes. One of the reasons we have so few withholding taxes (effectively only PAYE, and interest) is because evasion isn't actually that bad in the UK (at least, not compared to other countries).
But withholding is an obvious proven answer to evasion - if that wasn't the case, then employers could just pay all their employees gross and the employees could pay their own taxes....
It's impossible. People would resort to the old bartering system, and probably create their own currency. It's the old story. There is an optimum point whereby people will start rebelling against increased taxation and penalties and my view is that we have certainly reached that point, maybe even passed it. A small tax on every transaction could work however if the banks were in control of this we all know that their charges would be horrendous albeit tax deductable.
@Peter. There are a few people out there that crime is their job and going to prison is all part and parcel. No rules, do what you like, nice lifestyle (i'm not talking about the muggers etc.) some people think it's worth doing a bit of time occasionally.
Regarding PAYE, evasion is surely one reason but I am sure another reason is many people cannot be trusted to save their tax. I suppose most small business people are expected to be better at managing their money.
"@Peter. There are a few people out there that crime is their job and going to prison is all part and parcel. No rules, do what you like, nice lifestyle (i'm not talking about the muggers etc.) some people think it's worth doing a bit of time occasionally."I am sure you are right about the big time criminals but that seems to have extended to the small timers. They think there's no point obeying any law because the consequences are insufficient to worry them.
Albeit this would not mean the end of HMRC, I do think having a flat rate tax would simplify matters considerably. There would be no 10%/32.5%/42.5% on dividends, no 20%/40%/50% on investment income/earned income, just one flat rate on an individual's taxable income. I would also extend the flat rate to capital gains and IHT.
The level of personal allowance/ capital gains annual exemption/ inheritance tax "exemption band" should be set at a sufficient level to help the poorer members of society but anything over that is taxed at a flat rate (probably about 33%).
In order to assist businesses that are looking to invest in the future, I would set corporation tax at a flat CT rate of 18%.
"In order to assist businesses that are looking to invest in the future, I would set corporation tax at a flat CT rate of 18%."
This is why we have capital allowances/AIA.
By all means have a certain tax rate but don't get it confused with encouraging capital investment.
when you get to that optimum point and especially with all the money going into EU with bail outs etc. people will get the hump. Not the rich who can afford it but the smaller business who have to work long hours for little reward. You need to get rid of the source of the problem not try and treat the symtems with stuff that doesn't cure but just produces unwanted side affects.
Basically we are taxed too high because our money is going to pay for things that most of us don't need, don't want and can do without. Come on let's be honest who actually needs a European Government, Court etc. etc. That's one of the main reasons Europe doesn't have any money. Enough is enough.
But the EU should operate like a multiplier... it is meant to support the growth of all the EU members by supporting intra-group trade and giving us better leverage in the global marketplace. Who is to say if that is happening or not...
Besides, I don't think your theory really holds water. The USA is as screwed as Europe is, it's just that it does a better job of holding together as a whole due to being a single country.
It's also interesting that the corporate tax rates in the USA and Japan far exceed the UK corporation tax rates, so clearly it's not just Europe getting the squeeze.
Company tax rates are higher in USA and Japan but personal tax rates are lower and they have lower indirect taxes.
The EU should do lots of things to benefit us but it doesn't. All it does is spend money on crap that nobody needs nor wants. £135b for Greece to default again. We don't need a EU court in any way shape or form, certainly not a EU court of human rights. In short we are not Europeans (that includes all the other EU countries). free trade and labour movement yes, maybe one MP from each country meet once a month to discuss things common to all then the heads meet once a year to see if any proposals fit each countries needs. We have the UN for security. If we had a federal Europe taxing us only the rich would survive.
If we had a federal Europe taxing us only the rich would survive.
Are you sure? Presumably if all 27 EU countries abolished their national governments and everything was dictated by Brussels, there would be a significant cost saving. In fact, wouldn't that be the same as the USA?
Just look at how much is being wasted already. Why do think China didn't bail Greece out?
If you really want to know the real wastage (which incidentalyy we foot some of the costs) have a serious word with Nick Farage. I know a lot of people dismiss him but where Europe is concerned I believe he talks sense.
Ask yourself this thisistibi, USSR disbanded for a reason? Gorby was, in my opinion far beyond his time.
Off the beaten track once again. HMRC should go so should the EU.
I think perhaps you are repainting history a bit with your suggestion that Gorbachev disbanded the USSR. I am certainly no expect in this area but my understanding is that he wanted to devolve certain powers, but certainly not break it up...
Anyway, in my mind you haven't made a convincing case for abolishing HMRC. Every country has a tax administration and the only way to get rid is (apparently) to abolish cash. That raises too many questions and new problems to count....
I think we need HMRC - it just has to be managed better.
I think we need to tax profits, etc. and not transactions.
Taxation has to be complex to ensure it is as fair as possible. There are certain complexities not needed but radical changes will not work.
Tax rates can be reduced to encourage hard work and enterprise but it has to be combined with making the public sector more efficient. The private sector needs to be reviewed for situations where there is not proper competition.
As it is the genuinely needy are not receiving help and lazy/criminal/incompetent people are able to take too much of the pie.
a tax administartion doesn't make it right. Politicians are too scared to try something different when it comes to raising money. Stealth taxes, yes, but change for our benefit, I don't think so.
How long before Greece default again (they would have defaulted this time if it wasn't for the second bail out)?. This is money that Europeans have either paid in tax or spent to give others profit. Either way the money originated from us. If we don't have this type of spending then we don't need to pay so much tax etc. etc. Unfortunately governments gear their income to their spending. There comes a time when there is no more income to be had - what then?
@Peter. It is the complex tax system that is causing all the problems. How do you know radical changes won't work. The only good thing about a world war is that it brings about radical change - eventually for the better.
Back to the plot. HMRC is only there to feed the political persuations on how to get more money out of the tax payers.
"@Peter. It is the complex tax system that is causing all the problems. How do you know radical changes won't work. The only good thing about a world war is that it brings about radical change - eventually for the better."
I don't see any evidence that a complex tax system is causing all the problems. If HMRC take so long answering simple letters I am sure it is not due to a complex tax system. Of course there are a few things that can be simplified but most simplifications that have been suggested would give many people carte blanche if they wanted to reduce their tax bill.
take so long in answering phone calls, get coding notices wrong, send out wrong penalties, get investigations wrong etc. etc. etc. is that they have so many other complex things to do even to put things right. Legally reducing your tax bill is a good thing for us, is it not? I would much rather have money in my pocket than give it to the government to waste.
It boils down to confidence. I have no confidence in any world politician or any financial institution and I don't think I'm the only one. Unfortunately we are very close to total apathy or peaceful revolution.
I don't agree with you that the reason HMRC "take so long in answering phone calls, get coding notices wrong, send out wrong penalties, get investigations wrong etc. etc. etc." is because of the complexities of the tax system. I think it is sheer incompetence combined with too much reduction in staff.
"Legally reducing your tax bill is a good thing for us, is it not?" I think it is wrong that a part of the population can reduce their tax bill and another part can't reduce their tax bill simply because the government can't be bothered to ensure the tax system takes account of the issues involved.
HMRC boss: Lets just visit premises in a one mile radius of our office and take any cash they hold as tax. It will be really simple.
HMRC underling: But wouldn't that mean that people who live over a mile away wouldn't pay any tax?
HMRC boss: They are legally entitled to reduce their taxes. Our priority is simplicity not fairness.
HMRC underling: What about the businesses that take cash? They will pay a lot more tax than businesses that insist on cheques on credit cards.
HMRC boss: They are legally entitled to reduce their taxes. Our priority is simplicity not fairness.
HMRC underling: Boss, we collected a lot of taxes but everybody said they were going to move their premises over a mile away from our offices because it's not fair that they have to pay tax and other people don't have to.
HMRC boss: So what? It's simplicity that matters not fairness.
HMRC underling: We went to all premises within a mile but people had either vacated their premises or nobody had any cash so we collected no tax.
HMRC boss: Lets start collecting tax from people with premises within two miles of the tax office.
This went on for a long time. Eventually all businesses had left the country because the majority of people had left the country.
HMRC underling: We have not collected any tax.
HMRC boss: So what? It's simplicity that matters.
John Jenkins: I've got no clients. They all left the country to avoid tax. But at least we have a simple tax system!
Peter Saxton: Why don't we move to a tax system that is fairer? We could make it fairer by taxing people on their income and capital gains and have VAT and duties. We could introduce rules that stopped people avoiding paying their fair share of tax. It may be more complex but it would be fairer.
HMRC boss: People might not like the idea of having complexity and needing an accountant to help them.
Peter Saxton: Building a car and carrying out your own surgery doesn't have many advocates among car manufacturers and surgeons. Some people say that it's because they have a vested interest but I'm not convinced by that argument.
HMRC boss: So our new motto is "Fairness over simplicity"?
Peter Saxton: It makes sense to me.
No tax to collect so we don't need HMRC. Let's take that a bit further. Everybody has left so no HMRC. Now people start coming back set up a simple fair system to collect contributions to pay for neccessities. I have always found the simple things to be fair. Complexity makes it unfair because some people are cleverer than others, some can employ clever people. If you take 25% off all income earned or unearned in this country no matter what source, that would seem simple, but not really fair on the lower paid. So you give everyone an allowance. So why do we need a complex system that will drive a lot of people away?
So simplicity will bring fairness.
Wealthier people will ensure everything they receive is via capital not income.
They will trade in stocks and shares.
In this way they will not pay tax. Is that what you think is fair? It is certainly simple.
That contribtions would come from all sources of income. As you well know whatever system you have the real wealthy will always find ways round. So why penalise the less wealthy with complexity?
There's no working "HMRC" in Somalia, is there?
Is that the future you wish for us in England, johnjenkins?
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