The Anonymous Widower

Let’s Abolish All Taxes Except One

This article in The Times by Kit Malthouse will get massive hoots of derision.  But I think the principle behind it is right.

These are two early paragraphs.

So if all taxes, including VAT, form part of the price of the stuff we buy, why do we bother to charge and collect them separately? What would happen if we were to lump everything together, phase out all taxes and just charge higher VAT? Well, several things.

First, everyone would receive their income gross. No more PAYE or self-assessment and, of course, no further need for the Inland Revenue. All that money and all those people currently wasted on arguing about the dozens of different taxes would be redeployed. Billions of pounds and thousands of people, tax collectors (£5 billion) and accountants (at least another £5 billion) liberated for investment and production. Tax would be collected painlessly in small increments if and when you buy stuff.

Years ago, my accountant at the time was a Labour supporter.  But he applauded Mrs. Thatcher in the way she stopped tax loopholes on the one hand and reduced rates on the other.  The result was more tax collected and lots of out-of-work accountants, who then went on to develop more productive skills in areas like budgeting and planning, which created jobs.

The trouble too with our current taxation system, is that it creates anomalies.  The honest get penalised by those who cheat, so good companies and individuals cease trading.  They also give up because of the fact they spend too much time on working out tax.

I have a personal interest in tax anomalies.  They ruined my father’s business.  In the 1950s the purchase tax on print and stationery was about 40%, whereas that on plain paper was zero.  Brochures and other things you didn’t write on were also zero-rated.  So as this was at a time when the new offset litho technology was being introduced, companies who needed printing done setup departments to do their own.  A lot of printers went bust, but if VAT had been in operation then, it would have been a level playing field and the best would have survived.

This would apply with the proposals in the article.

So I’d give a couple of cheers for Kit Malthouse.

In addition, I would of course raise the taxes on energy, so that we reduced our carbon footprint.

After a dinner of some very nice pasta, I’ve had more thoughts about this.

Supposing that it was linked to a system similar to I proposed in Cutting Unemployment.  All you’d need to do was deduct the VAT on your services and that was it.  It gets simpler and simpler.

But there is the problem about how you would account for those who didn’t charge VAT on their services.  I’m sure that one of the accountants made redundant by abolishing all of those taxes would know the solution.

April 6, 2010 - Posted by | News | ,

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