Dos and don’ts from Down Under
May 2014 15

Joe Hockey, the Treasurer of Australia (the equivalent of our Chancellor of the Exchequer) delivered his first budget yesterday with speedy deficit reduction the clear priority. Australia’s public finances are in far better shape than Britain’s. We have entered the fifth year of George Osborne’s fiscal consolidation and are still on course to borrow £96 billion this year. It’s the first time in 5 years the borrowing number can be written down using fewer than 12 digits. Continue Reading

Big expenses at big NHS quango
May 2014 14

Another day, another example of wasteful spending in the NHS – this time with the NHS England board the guilty party. During the first year of the organisation’s existence, top-level officials managed to run up an expenses bill of almost £200,000 on travel, hotels and restaurants. All of that, of course, is charged to the taxpayer. Continue Reading

IFS is right to slam our tax code. Simpler, fairer, lower taxes now, please!
May 2014 14

Institute for Fiscal Studies Director Paul Johnson has delivered a devastating critique of the complexity and inefficiency of tax policy across the political spectrum, castigating both the current and previous governments and all three major parliamentary parties.

Among the items singled out for criticism were:

60% Income Tax at £100,000, a stealth tax rate as a result of the personal allowance being withdrawn.

1.8 million higher rate fiscal drag. The number of taxpayers paying higher and additional rates of Income Tax climbed from 2.1 million in 1996-97 to 3.2 million in 2009-10 and then soared to 5 million this year under the coalition.

Cutting Income Tax while hiking National Insurance, another stealth tax, and the failure to keep the tax free amount for NI the same as that for Income Tax

Raising Stamp Duty “time and time again, which he described as “one of the worst designed and most damaging of all taxes

A 10p starting rate of Income Tax which Labour talks about reintroducing. Johnson says it was a “mistake. A new 10p band of income tax achieves nothing that could not be better and more simply achieved by an increase in the personal allowance. Yet despite the lessons one would hope they had learned, the Labour Party now promises the reintroduction of this starting rate.”

All of these problems would be avoided if politicians got to work implementing the Single Income Tax proposals of our 2020 Tax Commission. We proposed abolishing Stamp Duty and National Insurance entirely, and replacing Income Tax bands and thresholds with a single rate of 30 per cent on all income, whatever its source. I discussed the proposals in more detail in an article for Taxation magazine, while the Single Income Tax and the IFS’s Mirrlees Review were discussed by Mr Johnson’s colleague Stuart Adam at our Tax Reform Breakfast Briefing, along with Graeme Leach and Matthew Sinclair.

Paul Johnson is right to highlight the many, many substantial problems with our tax code. We need our politicians to implement a much simpler, clearer and lighter tax system and our Single Income Tax shows them how to do it. It’s time they got to work.

Ten reasons for HMRC to think again on direct access to bank accounts
May 2014 13

Mike Down of Baker Tilly has written ten reasons for HMRC to think again about their plans for direct access to taxpayers’ bank accounts, for his colleague George Bull’s Weekly Tax Brief email:

1. How much can we rely on the amount of tax to be taken from the account to be the correct amount, and should we trust HMRC unconditionally as tax tribunals have found it untrustworthy in the past over aspects of tax administration?

2. The money in someone’s account might not be theirs: it could be a joint account with a spouse, other family member or even someone unrelated.

3. A person’s name on an account may be simply as nominee for someone else, or because he/she is acting as a trustee or executor. The first named person in these circumstances is often misunderstood by HMRC which leads to unfounded accusations that interest has been missed off a tax return.

4. How will these proposals work in respect of fixed rate accounts which tie up money for a period of time with a “penalty” loss of interest for early withdrawal? Or alternatively cash ISAs, or situations where there is a sweep facility between different bank accounts or an offset mortgage? And what if a withdrawal by HMRC results in the debtor incurring account charges because the balance drops below the threshold for free banking?

5. In practical terms, how would HMRC actually identify the person’s main bank account? Details are supplied by banks but only at certain points in time. By the time HMRC gets round to taking the money, the balance may be less than expected.

6. Self-employed people may use accounts to save for a business investment such as a new property or new equipment.

7. Self-employed people may need the money in their account to pay wages – is HMRC really suggesting that staff should not be paid if the taxman gets in first and simply takes the money? HMRC says it will take wages into consideration, but this may not be enough to reassure affected staff.

8. Individuals worried by a possible deduction of money by HMRC may simply revert to cash transactions which do not get reported for tax purposes resulting in losses to the Treasury.

9. What if HMRC issues estimated assessments or determinations and fails to speedily agree postponement applications?

10. What if HMRC simply gets it wrong by identifying someone with a similar name or the like?

They are very good questions. HMRC’s consultation can be found here.

More funding for GPs would ignore the need for fundamental reform
May 2014 12

The Sunday Times reported yesterday that 800,000 patients were turning to A&E departments and walk-in centres because they are unable to get an appointment with a GP.

Predictably, the chair of the Royal College of GPs blamed a “funding crisis” and warned that the service was “teetering on the brink of collapse.”

With constant talk in the media of an NHS cash crunch/funding crisis (delete as appropriate), it’s important to understand some basics about the NHS budget and general practice. Continue Reading

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