Complexity makes tax even more costly than the cash paid to HMRC

January 17, 2011 2:47 PM

The complexity of Britain’s tax code is so burdensome that a majority of small businesses would support a simplification of the system even if it meant they would pay more tax, according to a survey by the Forum of Private Business (FPB). Just 23 per cent of the respondents to the FPB’s survey would oppose simplification under any circumstances if it resulted in increased tax payments for their business. This remarkable figure illustrates how the tax burden business carries is not limited to the cash they transfer to HMRC. In addition to the tax actually paid, management time spent attending to taxation issues and expensive fees paid to tax advisors inflate the cost of tax above what the government collects in revenue.

A wide variety of reasons were cited by small businesses in support of simplification. A simpler system that rewarded growth attracted 57 per cent of businesses, while 50 per cent cited reduced competitor tax avoidance. A general reduction in red tape, reducing time spent on completing tax forms and a more predictable tax take to encourage business planning were reasons that would prompt 45, 27 and 22 per cent of businesses to support simplification.

Britain needs lower taxes on enterprise and jobs if we are to encourage the growth and employment that will repair our unsustainable public finances and help return two and a half million unemployed Britons back into work. Taxes deter business from employing people and expanding by shifting the balance of costs and benefits of doing so. But while lower taxes are vital, the FPB’s report highlights the cost of the sheer complexity of the tax system and the need for the 2020 Tax Commission.The complexity of Britain’s tax code is so burdensome that a majority of small businesses would support a simplification of the system even if it meant they would pay more tax, according to a survey by the Forum of Private Business (FPB). Just 23 per cent of the respondents to the FPB’s survey would oppose simplification under any circumstances if it resulted in increased tax payments for their business. This remarkable figure illustrates how the tax burden business carries is not limited to the cash they transfer to HMRC. In addition to the tax actually paid, management time spent attending to taxation issues and expensive fees paid to tax advisors inflate the cost of tax above what the government collects in revenue.

A wide variety of reasons were cited by small businesses in support of simplification. A simpler system that rewarded growth attracted 57 per cent of businesses, while 50 per cent cited reduced competitor tax avoidance. A general reduction in red tape, reducing time spent on completing tax forms and a more predictable tax take to encourage business planning were reasons that would prompt 45, 27 and 22 per cent of businesses to support simplification.

Britain needs lower taxes on enterprise and jobs if we are to encourage the growth and employment that will repair our unsustainable public finances and help return two and a half million unemployed Britons back into work. Taxes deter business from employing people and expanding by shifting the balance of costs and benefits of doing so. But while lower taxes are vital, the FPB’s report highlights the cost of the sheer complexity of the tax system and the need for the 2020 Tax Commission.

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