COMMENT: The Single Income Tax's innovative structure means major simplification

June 26, 2012 1:01 PM

In an article for Taxation, the UK’s most prestigious journal for tax professionals, I’ve explained how the structure of the 2020 Tax Commission’s Single Income Tax means that all sorts of decisions would no longer have tax implications. It proposes to abolish transaction taxes and National Insurance, both employer’s and employee’s. But the most radical and interesting element is its proposals to reform capital taxes. Corporation Tax and Capital Gains Tax would be abolished and replaced with the Single Income Tax applied to distributed income from capital.

The types of decision affected include:

  • Whether a small businessman pays himself in salary or dividends.



  • Whether a company raises capital through loans or shares.



  • Whether two businessmen keep their existing businesses or swap them.


That means people would make these decisions based on which option made the most economic sense rather than which one would mean paying less tax. I’ve also discussed transitional measures to protect pensioners and to carefully stage the abolition of National Insurance. Click here to read the article.In an article for Taxation, the UK’s most prestigious journal for tax professionals, I’ve explained how the structure of the 2020 Tax Commission’s Single Income Tax means that all sorts of decisions would no longer have tax implications. It proposes to abolish transaction taxes and National Insurance, both employer’s and employee’s. But the most radical and interesting element is its proposals to reform capital taxes. Corporation Tax and Capital Gains Tax would be abolished and replaced with the Single Income Tax applied to distributed income from capital.

The types of decision affected include:

  • Whether a small businessman pays himself in salary or dividends.



  • Whether a company raises capital through loans or shares.



  • Whether two businessmen keep their existing businesses or swap them.


That means people would make these decisions based on which option made the most economic sense rather than which one would mean paying less tax. I’ve also discussed transitional measures to protect pensioners and to carefully stage the abolition of National Insurance. Click here to read the article.

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