We need a tax system HMRC can understand

It’s not just business, jobs and productivity which suffer under the pressure of Britain’s ridiculously over-complicated tax system. Almost half a million PAYE tax-payers will have to pay an extra £180m in extra income tax for the 2007/08 tax year. This is on top of the 6 million already identified whose 2009/10 and 2008/09 tax codes were wrong. The 450,000 doesn’t even include 250,000 pensioners, whose state pension were not taxed properly but whose liabilities HMRC have confirmed they are writing off.

Demands to pay the sums will start to arrive this week although totals under £300 will be written off and the unlucky remainder will have their 2011/12 tax codes altered again to gradually recover the money through the PAYE system. Given the persistent failures of the government’s own tax experts to assess millions of people’s tax liabilities properly, those receiving demands for payment would do well to double check the figures themselves.

The problem is that the whole system is too complex. Too many exemptions, too many loopholes, too many different rates, too many special cases. Taxation needs to be easily understood and predictable. We desperately need a much simpler tax system if we are going to put an end to HMRC’s perpetual errors and the distress and uncertainty they cause for millions of taxpayers.

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