The tax system in recent years has become more complicated, less efficient and less transparent. We should have a tax system which looks ‘like someone designed it on purpose’, writes Paul Johnson
The coalition government has pursued two tax policies with considerable consistency and at remarkable cost – the increase in the income tax personal allowance to £10,500 and the cut in the headline rate of corporation tax to 20%.
Between them these are set to cost getting on for £20bn a year – a remarkable cost in any parliament, let alone under current fiscal circumstances. But consistency in these two particular policies stands out among the complexity and uncertainty created elsewhere.
Responsibility for much, perhaps most, recent poor tax policy rests with both this government and its predecessor (and often earlier governments too). Gordon Brown, Alistair Darling and George Osborne all made some improvements to the tax system. But poor tax policies where this government and the last are both culpable include the following.
But the current government hasn’t just carried on with mistakes made by its predecessor. Among problems of its own creation are:
And, of course, the last government could fill its own hall of shame with damaging tax policy, including:
And this all matters. Complexity, uncertainty and inefficiency in a tax system which takes £4 in every £10 generated in the economy costs a huge amount in lower welfare, less economic output and straightforward inequity. Even if we can’t have perfection, something close to coherence and consistency would be nice. In the words of former US Treasury Secretary William Simon, we should have a tax system which looks ‘like someone designed it on purpose’. That feels like a low benchmark, but it is one we are a long way from meeting.
These observations formed the basis of the author’s speech at the 15th chartered tax advisers address. See also www.ifs.org.uk.
The tax system in recent years has become more complicated, less efficient and less transparent. We should have a tax system which looks ‘like someone designed it on purpose’, writes Paul Johnson
The coalition government has pursued two tax policies with considerable consistency and at remarkable cost – the increase in the income tax personal allowance to £10,500 and the cut in the headline rate of corporation tax to 20%.
Between them these are set to cost getting on for £20bn a year – a remarkable cost in any parliament, let alone under current fiscal circumstances. But consistency in these two particular policies stands out among the complexity and uncertainty created elsewhere.
Responsibility for much, perhaps most, recent poor tax policy rests with both this government and its predecessor (and often earlier governments too). Gordon Brown, Alistair Darling and George Osborne all made some improvements to the tax system. But poor tax policies where this government and the last are both culpable include the following.
But the current government hasn’t just carried on with mistakes made by its predecessor. Among problems of its own creation are:
And, of course, the last government could fill its own hall of shame with damaging tax policy, including:
And this all matters. Complexity, uncertainty and inefficiency in a tax system which takes £4 in every £10 generated in the economy costs a huge amount in lower welfare, less economic output and straightforward inequity. Even if we can’t have perfection, something close to coherence and consistency would be nice. In the words of former US Treasury Secretary William Simon, we should have a tax system which looks ‘like someone designed it on purpose’. That feels like a low benchmark, but it is one we are a long way from meeting.
These observations formed the basis of the author’s speech at the 15th chartered tax advisers address. See also www.ifs.org.uk.