Radical Idea - Tax Everyone?

1955: Rebel without a Cause - Ray

Yesterday I blogged that the "Taxman Cometh" who prosecuted a man for unpaid taxes (and undeclared income). Today there is news that HMRC make deals with some big businesses regarding the payment of taxes - with MPs fairly cross that the taxman is not cometh enough! and rather too cosy with some of the big businesses in the UK to the tune of £25bn - one notable company being Goldman Sachs. Certainly it is very tempting to believe that HMRC are not being tough enough on large companies, however the story has two sides. Personally I doubt very much that HMRC are lenient, the real issue is the UK and global corporate tax system that enables both individuals and companies to create and register companies around the world, in more "favourable" tax regimes. The rules of corporate taxation are complex and frankly this is the realm of the big Accountancy firms that exist to reduce taxes for big business. There is an obvious correlation between the two. The existence of different tax regimes and rules that permit their use make such tax avoidance legal, yet clearly morally questionable. HMRC are unable to collect taxes that are legitimately avoided.

So whilst MPs and the media might wish to wag a finger at HMRC, I suspect that this has something to do with there being a need to apportion blame to someone for the lack of tax revenues and consequential spending cuts across the country. One might say a story of convenience.

Any Government wanting to reform our welfare system and improve the transparency of the tax system could make very radical reforms. None have the desire or courage to do this believing that providing a genuinely transparent tax system would result in many large business, supposedly providing both employment and taxation would leave the UK and therefore leave us worse off. They believe that the gamble would not be worthwhile. I have a very radical approach to this, which most will find surprising given that I spend most of my time advising relatively wealthy individuals and helping them make the most of their income and investments by making use of the available allowances. Here's my radical suggestion - have one rate of tax payable by all on all income or capital gains for individuals and organisations. This would mean that everyone pays tax and therefore "contributes" to the State upkeep (provided that they have income/gains). There would be no need for the very wealthy to hide income or gains if the rate of tax was the rate as everyone else. All income/gains earned or paid to or generated from the UK would be subject to tax. Those that have more pay more, but proportionally the same.

The consequences are of course unknown, but I suspect that there would be little need for HMRC beyond purely collection, or Accountants beyond accounting or financial advisers beyond planning. The State should then live within its means and perhaps we would actually achieve a genuinely creative culture that improves itself.

I warned you it would be radical! Perhaps not as radical as some of the suggestions from UK Uncut, who are, whatever you think of them, at least providing alternative ideas for a system that seems largely bereft of them. If this is our country, then surely we should all be taking an active interest in the society that we want it to become. As I hope is obvious, I believe in enabling people to prosper, creating wealth and independence. We need the rich to help create wealth. I'm not convinced by arguments to cap incomes, I am convinced by the notion that ones own security also lies in the prosperity of neighbours, a society that is full of envy can surely only generate greater insecurity.

DT