Do we really need HMRC?

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.

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johnjenkins's picture

What I don't wish for is,

johnjenkins | | Permalink

as we have now, a complex system that the wealthy can manipulate and the less wealthy get stuck with. Keep it simple so that no one can manipulate it. Then if it's simple enough we won't need HMRC.

petersaxton's picture

John's hell

petersaxton | | Permalink

Is it really that complex? What is one rule you would like to remove? If the tax rules are simple enough you wont need HMRC because everybody would be avoiding tax and there would be nobody to pick up all the dead bodies.

johnjenkins's picture

Everybody avoids tax where they can now.

johnjenkins | | Permalink

Don't forget tax avoidance is legal. If you don't want people avoiding tax you make it simple and fair. Then not only can you not avoid tax you don't need to avoid it. The complex system we have at the moment is there primarily to con tax payers into paying more (stealth if you like). Of course the wealthy can employ cleverdicky people to legally avoid the complexities.

I would like to get rid of "compliance" and "rigidity" and replace it with what we used to have "common sense" and flexibility".

What is disturbing about your posts, Peter, is that you seem to assume that everyone is dishonest and that left to our own devices we would turn into animals.

We are not talking about getting rid if our Forces, just HMRC.

petersaxton's picture

Justification?

petersaxton | | Permalink

"What is disturbing about your posts, Peter, is that you seem to assume that everyone is dishonest and that left to our own devices we would turn into animals."

Please quote one comment I have made where you can justify what you have said.

@ Peter: U asked, so how about "If rules R simple, everybody ..

dstickl | | Permalink

petersaxton wrote:

If the tax rules are simple enough you wont need HMRC because everybody would be avoiding tax and there would be nobody to pick up all the dead bodies.

IF every body is avoiding tax THEN the tax law makers (of the tax rules made simple enough) are dishonest!

OR are you now saying that IF the tax rules are simple enough you wont need HMRC because everybody would be EVAding tax?

thisistibi's picture

Sorry but...

thisistibi | | Permalink

... I think this debate expired on Page 1.  It's now developed a rather bad stench of decomposing arguments.

petersaxton's picture

I think you are confused

petersaxton | | Permalink

I am saying that if the tax rules are simple enough people would be avoiding tax - which is legal.

Evading tax is dishonest.

petersaxton's picture

Are you sure

petersaxton | | Permalink

"If you don't want people avoiding tax you make it simple and fair."

 

If the tax laws are simple people will avoid tax.

If the tax laws are simple they will not be fair.

petersaxton's picture

My advice    1 thanks

petersaxton | | Permalink

thisistibi, run to another debate!

johnjenkins's picture

@Peter

johnjenkins | | Permalink

Just read your previous posts. The implication is quite plain for all to read.

I think what you are really meaning to say is that if tax laws are simple everyone will avoid paying tax instead of the wealthy few that are able to with the complex system now in place.

Sorry thisistibi, if you can't stand the heat get out of the kitchen.

Old Greying Accountant's picture

Sorry, busy week!

Old Greying Acc... | | Permalink

petersaxton wrote:

"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 tax

Yes, I think loans and movements of funds between accounts in the same name would be exempt

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.

In my model the tax withheld would be @ 2% = £400 (which would be the same as 20% on the £2000 profit, without the hassle!), as I have said elsewhere, may be different rates for different trades, so those dealing in high volumes small margins (such a petrol stations), may be 1 or even 0.5%, other high margin businesses it could be 4-5%.

As to wages, there is a darn sight more than 2-3% witholding tax already.

Ther are many finer points to examine, may be a de-minimis, set individually, so the first £x in to the bank each month has nothing deducted. As I think it was Shirley said, there are always solutions, just needs a will. Any system such as the present one has so many grey areas it leads to pen-pushers and bureaucrats wasting hours arguing over whether something is deductible or not when they should be doing something useful instead.

 

petersaxton's picture

Simple system?

petersaxton | | Permalink

"Any system such as the present one has so many grey areas it leads to pen-pushers and bureaucrats wasting hours arguing over whether something is deductible or not when they should be doing something useful instead."

Do you really think that if you introduced a "simple system" that people wouldn't spend even more time trying to get round the rules?

I think you need to understand that the present system has evolved from a "simple system" which was found to be flawed and unfair. If you go back to a "simple system" you will just be reinventing the wheel which will lead to another 50 years of change to get where we are now. I would recommend that we review the present rules to see where lasting simplification is possible. I consider only needing P11Ds for benefits in kind would be a good first step.

Otherwise we will soon have somebody suggesting that due to the number of accidents vehicles are limited to 2 miles an hour and somebody walks in front of them with a white flag. There will then be numerous changes until we get to the present situation.

johnjenkins's picture

Sorry Peter

johnjenkins | | Permalink

but the reason why this system is complex and flawed is because previous governments have tried to con tax payers into stealth taxes instead of just upping the standard rate.

A classic example. Gordon Brown tried to re-classify the self-employed onto PAYE (carte blanche) so the self-employed went Ltd. You know what's coming don't you. Yes the wonderfil IR35 saga. I rest my case.

petersaxton's picture

My view

petersaxton | | Permalink

If that's your case I don't think you will convince many people.

Just because there's a few examples of where improvements can be made doesn't justify scrapping many years of progress.

The "simplifications" recommended will just need a vast number of alterations to come anywhere close to being fair.

My suggestion is to deal with the unfair and unnecessary complications and retain the complications that are necessary for fairness. I rest my case.

johnjenkins's picture

"years of prgress"?

johnjenkins | | Permalink

The only progress has been of a technical nature. Scrapping local offices for the mishmash we have now etc. etc. etc. We need to go back to the pre Gordon Brown days and start from there.

petersaxton's picture

The good old days?

petersaxton | | Permalink

Most accountants can understand the various taxes they deal with. It seems reasonable to me that people with more complicated tax affairs need a professional to help them. This is no different to needing lawyers, medical professionals, motor mechanics, plumbers, etc.

There doesn't seem to be a big outcry demanding the removal of the common law and complaining that statute law is too complicated. It needs to be complicated to make it fair.

Going back to "pre Gordon Brown days" and starting from there would result in a waste of time. I am all in favour of improvements but to remove anything because it was introduced in a certain period of time doesn't seem to be helping.

johnjenkins's picture

As I am not a lawyer

johnjenkins | | Permalink

or motor mechanic I cannot comment on these trades. The law is quite simple. If you steal or murder you go to jail. Perhaps it was the wealthy who have been able to wriggle out of situations that make it complex.However I have been an Accountant for 47 years and seen the quite useless changes that have been made in the name of fairness. Wasn't it Gordon Brown that said people should pay the "right" amount of tax then proceeded to totally destroy the tax system so that we have ended up with the wealthy being able to use the complexities to their own advantage. Nothing wrong with that but if you want a fair system it has to be simple by definition.

petersaxton's picture

Confused

petersaxton | | Permalink

I think you are confusing politics with fairness.

Simply ranting about politicians and make them an excuse for getting rid of all the rules is pointless. We need a realistic set of rules for our tax system. Gordon Brown is not a reason to dismantle everything.

You don't have to be a lawyer or plumber before being able to comment on these trades. You seem to be quite happy commenting on politicians without being one.

johnjenkins's picture

Have you not seen what the politicians are doing to

johnjenkins | | Permalink

this country. A man who is a threat to national security cannot be sent back to where he came from. Little wonder we don't have a fair tax system.

It is the politicians who make the rules then don't like it when they get bitten by them. Take a look around the world - what politician has any real credibility?

I could never confuse politics and fairness the two don't go together, never have, never will.

petersaxton's picture

No reason

petersaxton | | Permalink

You may not like what politicians do but that is no reason to dismantle tax laws that on the whole are fair and reasonable.

johnjenkins's picture

How can a tax system

johnjenkins | | Permalink

that favours the wealthy be fair and reasonable. You've only got to look at Vodaphone, GS etc. etc. The low 40% tax bracket and vat threshold penalises the growing business. How can the tax on fuel be reasonable - it's putting people out of business. Between them the financial institutions and HMRC have destroyed the living standards of normal people and this will lead to a total change in how this country is run.

 

petersaxton's picture

Reasonableness

petersaxton | | Permalink

You seem to think that any tax system that has rules that can be got around "favours the wealthy" and so shouldn't have these rules.

That means that you would favour rules that couldn't be got around. All rules can be got around. Whatever you suggest would be unfair to the majority of people. That is a lot worse than have rules that make the tax system fair for the vast majority and allow the rules to be changed when anybody gets around them.

You seem to be saying that we should ban cars because we have people killed in accidents. There has to be a degree of reasonableness in discussions.

johnjenkins's picture

Simple rules and complex rules are

johnjenkins | | Permalink

totally different. Our tax system doesn't have simple rules, if it did no one could get round them. e.g. £10k PA or CT allowance everything else taxed at a percentage. Very simple. People choose to be SE Ltd Co or PAYE. No CIS crap no IHT crap no CGT crap no NIC crap. So all that is needed to check is expenses. These can be fiddled by all not just the wealthy. Level playing field.

Reasonableness takes two sides to be reasonable.

petersaxton's picture

Rules or lack of them have to be thought through

petersaxton | | Permalink

" e.g. £10k PA or CT allowance"

This is what I mean. You have a PA and a CT allowance and the people who run a business through a limited company have two allowances.

"no CGT crap"

It's so easy to swap income for capital gains then not having any taxation of capital gains is unfair. Somehow I don't think you are going to get any support for your views from the thinking classes.

 

In support of JohnJenkins

Wiganer Elaine | | Permalink

I suspect that John meant all income, be it earned or investment including capital gains, would be taxed at a flat rate?

petersaxton's picture

If he did mean that ...

petersaxton | | Permalink

It would be a disaster for people when they sell their house and buy another.

Old Greying Accountant's picture

Personally ...

Old Greying Acc... | | Permalink

... life would be much better without cars - I'm with the Amish on that.

If we were not so selfish, if we were not so materialistic, and if we were more compassionate we would not need money or tax in the first place.

There are places it works, but with the mass instant communications that we have now the voice of the majority/reason/humanity will always be drowned out by the constant bombardment (brain washing) by the minority with their vested interests of greed and avarice for (so called) wealth and power telling us what we "must" buy and how we should think, perpetuating this cycle of self-centred self gratification, a society that bestows honours and adulation on the selfish and the vacuous, who are paid handsomely (extortionately!) for their work, and largely ignores those who work selflesslly; tirelessly and voluntarily for no reward other than the knowledge they have made a small difference somewhere, quite possibly without thanks or praise even.

Unfortunately, the logical conclusion of this is that the rich will get richer at the expense of the poor (in simple terms) and there will be only one possible outcome, which happens again and again throughout history - as nations become "over-civilized" and the "top" echelons finally break the link with their grass roots and become parasites - taking without giving, leeching the life out of the country,

The worm will eventually turn, and then comes the fall into chaos and oblivion, whilst a new order will arise elsewhere. This will happen, and within a generation, two at most unless from somewhere soon (and I can't see where that will be, certainly not the liberal wets) come men or women of stout heart and fair mind, people willing to take the drastic and unpopular measures needes to change the status quo and plot a course for a fairer distribution of the bounties of this country, people who really do ask what they can do for their country and not the inverse.

Tinkering at tax law is acting like Nero, what is needed is a complete sea change in the mentality of the nation, to thoughts of community and looking after our own, not just sitting with the begging bowl out - a move to a day where wealth is measured not by what is in your bank account, but by what is in your heart. 

Saddly I realise the chances of this are as great as mine of winning the lottery, and before you cry hypocrite, the main reason I would want that is to have the means to get me out the rat race and give me the time and ability to make a difference for others, and may be, just may be bring about that sea change we need.

 

 

 

Old Greying Accountant's picture

Under my system ...

Old Greying Acc... | | Permalink

petersaxton wrote:

It would be a disaster for people when they sell their house and buy another.

The flat transaction tax would be less for many than the stamp duty it replaces, and again, there can be some checks and balances to exempt a level from transaction tax as at present.

I don't say all of what we have is wrong, but as a whole it is. We need to devise a better system yes, but you don't throw the baby out with the bath water!

 

petersaxton's picture

The rules were introduced for a reason

petersaxton | | Permalink

Sounds like the baby would be thrown out and another one produced but in a less pleasurable way.

I think 98% of what we have is right but I would prefer to change the two percent rather than start again with something that is totally wrong.

Why?

Wiganer Elaine | | Permalink

Peter, why do you presume that?

Who has said or even made the slightest, vaguest suggestion that there would be abolition of the rules regarding exemptions to capital gains tax?

The rules on what is allowable as an expense against income or capital gains is a separate issue to the point being made surely  which is that all taxable income/gains is taxed at a set percentage?

petersaxton's picture

OGA said!

petersaxton | | Permalink

 

Elaine said: “Who has said or even made the slightest, vaguest suggestion that there would be abolition of the rules regarding exemptions to capital gains tax?”

Didn’t you see the following?

“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.”

“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.”

 

Old Greying Accountant's picture

I also ...

Old Greying Acc... | | Permalink

... adapt my model as things are suggested, I don't dig in my heels.

The current system is at best 50/50 because it allows the vast majority of earnings (not earners) to be exempted from their fair share of UK tax, (if not exempted UK tax full stop) by dint of their wealth, compounded by the fact the money saved is invested in slave labour and unethical practices in foreign countries so we do not even get a sizeable knock on benefit. 

But, on topic, the biggest abuser of the current system is HMRC for various reasons already mentioned above.

Pitched at the right level, the majority of tax payers would be better off under a transaction based system, and not just financially, but in many other ways, they could cut costs without the need for spending thousands on administrators to deal wirth the red tape, they could trade without having to worry about unexpected (or even expected) tax demands and not have the stress of fighting enquiries by the tax authorities and the resultant demands for penalties and interests because they couldn't "disprove" their assumed guilt. 

The losers would be the current avoiders.

petersaxton's picture

I hate to disappoint you

petersaxton | | Permalink

but you will find that most businesses spend a very small portion of their time and cost dealing with accounts.

Many businesses spend too little when they should be interested in profitability of products, etc.

johnjenkins's picture

My example was purely to show that you can have a simple system

johnjenkins | | Permalink

that can't be manipulated. If you just pay a percentage of your income after a PA then how can you avoid? You can evade but that will be no different to what happens now. Again OGA's transaction tax achieves the same effect.

Peter, why are so afraid of change for the better and fairer? Communism and capitalism have come to an end and the twenty somethings are there in the wings ready to start something fresh and exciting.

petersaxton's picture

Don't accuse me of being afraid, please

petersaxton | | Permalink

John

Do the calculation and you will see how a person owning a company will pay less tax than a self employed person.

Why do you think I am afraid? Your childish comments are not welcome. Act like a man. You seem to think your ideas are for the "better and fairer" when in fact they are the ideas of a child.

 

johnjenkins's picture

Out of the mouths of babes.

johnjenkins | | Permalink

I'm a great believer in listening to children, they are simple and fair and are not corrupted. Have you not listened to a child and thought - crikey why didn't I think of that.

petersaxton's picture

Different approach

petersaxton | | Permalink

I've listened to clients and been amazed at their imagination. It still didn't make them right. Same with children.

You want to start again from something simple and, I assume, introduce complexity as it's found to be needed. I would rather start from where we are now and reduce the complexity if it's not needed.

johnjenkins's picture

Yes I want to start from

johnjenkins | | Permalink

something simple but keep it that way. Why ruin something that is good. There is no need to bring complexities into the equation. Tinkering with the present system will not improve anything it will probably make things worse because once you start messing with complexities you have to have more complexities to undo the previous complexities.

petersaxton's picture

Not possible

petersaxton | | Permalink

Tax cannot be simple and fair.

Complexity is needed - not to help the rich - but to make it fairer.

johnjenkins's picture

What's that advert

johnjenkins | | Permalink

"Tax doesn't have to be taxing" Ah yes good old Moira.

OK we are going round in circles so let's tackle it from a different point of view.

We all know what simple is so the stumbling seems to be what is fair. What is fair for some might not seem fair for others. So it is the fairness in some peoples minds in that moment in time that causes complexities. So we get rid of fairness - simple. OK things might not turn out fair but they will be a dam sight fairer than what they are now. With simplicity comes common sense and flexibility and in the end a more balanced fairness.

 

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