According to the FT:
The Federation of Small Businesses, which represents owner-managed businesses and the self-employed [has] said the government's plans for digital record-keeping increased the need for simple taxes that businesses could readily understand.
And:
Just three bits of information – sales, payroll and interest costs – would be enough to calculate a company's overall tax bill, under one of the options put forward by a lobby group.
Chris Sanger, global head of tax policy at EY, the professional services firm, who worked on the FSB's proposals, urged the government to introduce a “taxpayer-centred approach” that went beyond incremental improvements to individual taxes.
It was argued that:
The proposal ...would replace the need for separate assessments for business rates, corporation tax, value added tax and, possibly, employers' national insurance contributions. “The simplicity it could bring could be very attractive for a subset of small businesses.”
I suspect that subset may be small.
They have no bad debts, for example. Or subcontracting. And probably premises costs.
So it might just work for micro businesses working from home for one or two customers or always taking payment on supply but for others? I doubt it. For them this may be tax injustice and I do not like that. So, at best it could be an option and that then just makes life even more complicated. When to take it, and when not?
More useful was:
Another idea put forward by the FSB was the creation of a “tax transparent” organisation. This idea, similar to the “S corp” vehicles in the US, would mean that income was considered to be earned directly by shareholders.
That is something I have argued for since 2008.
But some of the ideas are just daft:
It also mooted the idea of replacing corporation tax with a distribution tax. To stop companies hoarding untaxed profits indefinitely, there might be a requirement that the company must distribute a certain proportion of profits to shareholders annually.
Complexity, here we come.
Which will actually be the case whatever the outcome. This is certainly no simplification, whatever anyone will be saying.
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I rather hope, Richard, that you start reading some psychology and learn about ‘loss aversion’.
People do not pay tax voluntarily. They *hate* tax with a vengeance. So Taxation should always be a last resort. And importantly it should be imposed *on entities that don’t vote*.
The correct solution is to remove individuals from taxation altogether. They must never see tax and they must never feel they pay it. Then you get somewhere.
If you pay attention to the right, they always do everything in their power to highlight taxation and try and bring it to the individual’s attention. Then moan like hell about corporations paying tax.
Taxation on salaries should always be paid by the employer. That way an individual’s advertised salary is always the salary they take home. The employer calculates tax on the salary paid to the individual and remits it directly to the state. It is never shown on payslips, and ideally it should be rolled into the corporation tax calculation so that it is crystal clear it is a charge to the corporation.
The left’s mantra should be *corporations pay tax so voters don’t have to*.
I wonder what world you live in?
Certainly not one most people woul;d want to share
If people really hated tax we would not have it: the poll tax went for that reason
Actually people really like what tax does and so pay it with reasonable acceptance, if not (I accept) enthusiasm
“I wonder what world you live in?
Certainly not one most people would want to share”
It’s not my fault that is what people are like. They are like that and you have to deal with them *as they are*. Let’s keep this realistic.
People vote to be taxed
That is reality
They really like what tax does
Interesting.
I have no payroll or interest payments so my tax would be assessed purely on sales – of which profit could be 5% or 95%. No doubt HMRC would have a list of trades (like they have for low turnover VAT assessment) that have a fixed `profit margin` based, I guess, on averages – but possibly just conjured out of thin air – and if you don`t fit into one of their boxes then hard luck.
As HMRC VAT categories cannot envisage a business which not only manufactures things but sells them as well I imagine that the tax categories – if such will exist – will be equally deranged.
Maybe I should change my name to Square Peg.
I think this policy woukd be profoundly unjust
Politically though, Bob has a very good point. The left will never appeal to the majority of the voting population if it continues to be even slightly associated with the idea of putting higher taxes on working people (even if it won’t the Tories have done a great job at putting the fear of god into people that it will).
No academic argument will ever convince ordinary people that paying more tax is a good idea (even if it is), when they know for a fact that the wealthy are paying a pittance in tax and laughing all the way to the banks they collectively own!
If the left shouts loudly (and means it) that it will reduce all taxes paid by workers at all but the very highest levels of the income scale, that it will remove taxes from the majority of the (good) essentials of everyday life, that it will properly tax and collect tax from the wealthiest individuals, corporations and public bads – there is then a slim chance of not having a Tory government for the next 9 years.
I’m not yet hearing that loud and clear from Labour, despite your best efforts Richard. I think they will but it is going to take a lot more infighting before they get the courage to act.
I am trying
“If the left shouts loudly (and means it) that it will reduce all taxes paid by workers at all but the very highest levels of the income scale, that it will remove taxes from the majority of the (good) essentials of everyday life, that it will properly tax and collect tax from the wealthiest individuals, corporations and public bads — there is then a slim chance of not having a Tory government for the next 9 years.”
Completely agreed. However, I think it is very important that Labour say that they are *not* raising taxes on the rich to ‘raise revenue’.
People hate taxes on them and love taxes on others. But then the others, particularly if they are rich others, then up the propaganda showing that the next people in the line for tax is *them*.
That is incredibly effective – particularly amongst the middle classes who think in their heart of hearts that they ‘pay’ for everything.
Which is why an approach that takes taxation of individuals off the table (at least for everybody with a normal job) is such a powerful proposition.
Richard,
“I am trying”
That’s all anyone can do. Keep up the good work.
Are you nuts? I don’t want to pay tax. I’m happy not to share a penny.
Then you really are clueless about the world you live in. Tax helps to build a just society, I’m happy on a average wage to pay my part in that. We should strive for fairness in tax, and labour ought to be a party of higher wages, not campaigning on lower taxes.
The myth is that if you cut taxes then your net income will increase as your net income goes up to your gross salary.
I love these people who are absolutely convinced that their gross salary magically appears because they are such an awesome individual.
Your salary comes from other people’s spending. Initial government spending – since they are the monopoly supplier of Sterling in the UK economy.
So if you cut taxes then what tends to happens is your gross salary starts to drop in real terms below your current net salary as the public multiplier effect collapses due to a lack of spending.
It doesn’t do this smoothly of course. Generally what happens is lumps of people lose their jobs, and many others lose the ability to negotiate a pay rise due to fear of losing their jobs.
I have always considered a business income tax to be an anomaly. Likewise, all taxes on the production “process”, (not product taxes like VAT); Corporation Tax and Business Rates, to be the wrong taxes in the wrong place. The other three of the four main tax sectors (taxes on products income and wealth) should absorb it to the extent that it needs absorbing.
All businesses are ultimately owned by households, directly or by portfolios of shares, insurance and pension funds. That is where the tax should be paid as income. Northern Ireland has reduced its corporation tax to 12.5% for trading income (25% for non-trading), to compete with the Republic. Which demonstrates how arbitrary the tax actually is.
Such arbitrary taxation is the result of neo-liberal governments that still want you to think think that the government has to raise taxes before it has any money to spend, like a household.
I have dealt with this nonsense too many times to be bothered again
The most obvious thing that wouldn’t be included in this simplified calculation is “Cost of Sales”.
I suppose they don’t need to know the “Cost of Sales” for the flat rate VAT scheme, but that has never made much sense to me because people actually know their costs and just opt in if they think it gives them a better result.
Precisely
Sadly tax has to be paid, we all want security, NHS, education etc etc and thus can only be paid by the contribution of the citizens of the UK. Sadly for the citizens of the UK we have had successive governments who have squandered our hard earned cash on highly ill thought out projects, vanity exercises et al. I could go on forever. But what we need is “Flat tax”. 20% on vat, PAYE and corporation tax, on top of that duty on booze, fags and more especially fuel to be properly proportioned to the product. Finally, a housing tax (rates) say, calculated against the number of bedrooms, rather than values, it’s easier to calculate and before you say it, yes, I know about London, but I suppose there are exceptions to every rule. Finally stamp duty on houses 20 years ago was a formality to prove and conclude an assist sale, now it’s treated as a major revenue earner for the state. Simplify the tax rules so everyone understands it and hey presto, might even reduce the black economy……
So what you want is increased inequality
And those on low income to pay an undue share
And to lose most benefits from the state
And to price people out of homes
I get it…
Well, I don’t – and nor do I understand how anyone can create the mind set to promote such ideas
“Finally, a housing tax (rates) say, calculated against the number of bedrooms, rather than values, it’s easier to calculate and before you say it, yes, I know about London, but I suppose there are exceptions to every rule. Finally stamp duty on houses 20 years ago was a formality to prove and conclude an assist sale, now it’s treated as a major revenue earner for the state.”
Ah, the delusional ravings of the right wing Tory nutjobs.
The buildings and improvements should be tax free. tax should be on location/land value so no effort-free capital gains. Unless you are right wing of course.
You want massive tax-free effort-free capital gains and cheap hired help to create a win-win fair situation for all 🙂
Right-wing people and politicians also constantly complain that there is insufficient supply of workers and cheaper hired help is always hard to find and that property prices are too low.
In particular they point out that it is always easy for workers to find new jobs: those steel workers just have to move to the South to work for much lower wages and be happy to live 4 to 8 per room while paying high rents.
Just like immigrants from much poorer countries have been very eager (huge queues in Calais) to do.
Right-wing people and politicians point out some hard evidence: there are now 2-3 million new jobs that immigrants have created for themselves by winning the race to the bottom, where ex-steel workers in the North could have well won that race instead if only they had been willing to work for lower wages and pay higher rents than the immigrants to the benefit of businessmen and property owners in the South: a win-win situation 🙂
For right-wing people therefore those steel workers from “up North” will have no difficulty to find new jobs, rather than being snotty and demanding and hoping to spend their life on welfare in mansions with many spare bedrooms and with benefits well above median wages.
Central banks very much agree of course: lower wage jobs are less “inflationary” than higher wage jobs, and still count as “employment”, and rents and profits and capital gains are never “inflationary”, so higher incomes for businessmen and property owners are not more inflationary than lower ones, and actually create a “wealth effect” (trickle down).
Mmmmm Tory nut job eh!!!!
You have no idea who I am and I might be a Tory, but I have a small business, employ 80 people, 40, full time and 40 part time on fixed hour contracts. All earn well over the minimum wage, no zero hour contracts. My business is in transport and cleaning, so I employ essentially “blue collar” staff. Turnover about £2m. Inc vat. My PAYE bill is about £120,000.00 per year (remember this includes NIC (tax on jobs)) vat payable is about £240,000 per year, corporation tax is about £20,000 per year, fuel duty is about £120,000.00. So all in all I pay about 25% of the company income in tax, one way or another. Oh and we give ALL staff a welfare package so they have a decent home to live in, help with education, nursery aid, proper holidays, health insurance, a pension etc etc, of which is notified as a P11D item, we pay the tax on that so our staff don’t have to….£12,000.00 a year that costs….oh! And by the way, the pension auto-enrolment cost us £15,000.00 to set up. Tory government didn’t tell us that bit, did it!
IPT on insurance went up from 6% to 9.6%, on a £40,000.00 insurance bill, just went up by another £1,000.00!!!!
I think I’m entitled to an opinion on tax, without the insults……
Of course you are entitled to an opinion
But please don’t offer it as the benevolent patrician
I was surprised to see that you appear to support S corporations which have been identified as a tax break for the rich in the US with ‘pass through’ income taxed at a lower rate than corporate income (see https://rwer.wordpress.com/2016/01/14/how-does-the-1-percent-capture-the-surplus/). Am I missing something here?
In the UK the equivalent (LLPs) are inherently more tax compliant when used by UK registered people than most limited companies
The US experience does not cross over to here