…not about it being too high. I think its probably ‘about right’ myself, and there are arguments in both directions, and I don’t want to get into that. My complaint is not that we are taxed too much, bu that we are taxed really badly. Theoretically our income tax system is simple enough:
Basic rate band: £0-32,000 charged at 20%
Higher rate band: £32k- £150k charged at 40%
Additional rate band: £150k+ charged at 45%
All well and good. A few needless cliff-edges there, having a band between 32 and 150k wouldn’t exactly over-stress modern computers methinks. If life for a UK tax payer was this simple, it would be great. the thing is, we have a load of other bullshit:
- ‘Tax credits’ are a thing that are basically benefits, but the government didn’t want to call them benefits so they get called tax credits instead, and are not credits against tax.
- If you earn over £100k, the government starts taking away your ‘personal allowance’ of tax-free income at a marginal rate of 50%. This was a kludge to fix a bodged budget one year that nobody has the balls to fix.
- As well as income tax, there is capital gains tax, which is totally different rates, at different bands, on money from different sources.
- ‘National Insurance’ is a tax on employment paid by employers AND employees, again at totally different rates and rules. Its essentially just more tax, and makes no sense whatsoever to be separated from income tax.
- TV License, is a tax you have to pay to use a TV, or a computer capable of receiving a TV signal. Theoretically you don’t HAVE to have one, but in practice everyone does, and a totally separate regime of costs, enforcement and collection takes place. FFS roll this into income tax.
- Car Tax. This is a tax (technically a duty) for owning a car, even if you never drive it once. This is again, set, enforced and collected in an entirely different way to…
- Fuel tax. A tax for using a car, assuming that its a petrol/diesel car.
- VAT. A sales tax, whose rules are complex enough to be laughable. Some biscuits have VAT on them. other biscuits do not, depending how they are made. I wish I was kidding. I’m not.
- Stamp Duty. This is a tax on buying a house, or buying *some* shares on the stock market. Apparently it seems to be designed to reduce market liquidity and reduce labour force mobility. No other explanation makes sense.
Essentially the UK tax system is one nobody in their right mind would design. We have several taxes (Car Tax, National Insurance, TV licenses) that could happily be abolished and rolled into a rise in income tax, but nobody has the balls to confront this and actually do it. The insane complexity of the system gives profitable work to an army of accountants who do their best to prevent the government collecting tax from the wealthy, whilst confusing the crap out of everybody else. The partisan state of British politics means that cross-party co-operation on issues such as tax-simplification is much needed yet impossible to achieve.
Eventually such system will collapse under their own stupidity. Countries like Italy and Greece show what happens when the majority of people start avoiding tax, you get more and more taxes to compensate for the evasion, leading to greater and greater evasion…
If I were Prime Minister, one of my first steps would be to abolish car tax and stick the revenue lost as an increase in fuel tax. I’d scrap stamp duty. I’d scrap the License fee and roll them both into income tax, and do the same with national insurance./
Accountants would hate me, but c’est la vie!