Sunday, 12 March 2006

Taxing problems

One last example from Finance, and I promise I'll talk about something else next. But an article in today's paper made me think again about the tax system and how silly the rules are. It's not that I think taxes are too high, or too low for that matter - it is just that the system is so complicated. Think of what that complication supports: tax lawyers and accountants, offshore SPVs for companies and Guernsey Trusts for individuals, the whole panoply of tax planning and tax optimisation. What does this do for the real economy? Nothing. Indeed, less than nothing, as it deprives the chancellor of a goodly number of hospitals and schools and all the growth they would generate.

This is why a flat tax system is a good idea. Of course there would be winners and losers, and if absolutely necessary I'm sure the Treasury could find some system of grants to address any perceived gross injustices. But think what we would gain from this simplicity. A whole useless segment of the economy disappears, and some of those people might do something that makes an economic contribution to the country instead. The brutal burden of completing all those tax returns would be lifted, freeing up millions of man hours. And Gordon could manage the Revenue with a fraction of the staff it has now. How's that for an efficient rule change?

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