The tax system is riddled with leaks that mostly benefit the rich. They need to be closed.

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As the Guardian reports this morning:

I entirely agree with the committee. A review of these allowances and reliefs is long overdue. Many are open to abuse. Far too many reinforce privilege. And the benefit of a great many is I open to doubt.

The question is, how to systematically do this? There is no system designed for this purpose in common usage.

That is not to say that there is no such system. The tax spillover methodology that I have developed with Professor Andrew Baker of Sheffield University is suitable for this purpose.

In an academic context, we explained tax spillovers in this paper.

Our detailed explanation is here, and a UK-worked example of how tax spillovers might help the development of better tax policy is here.

As I have explained in a paper I am now working on relating to wealth taxes:

A tax spillover is a loss arising within and between tax systems, whether domestic or international, as a result of one part of a tax system undermining the effectiveness of another part of the same tax system, or that of another state. The tax avoidance industry exploits the opportunities that tax spillovers create. Unless tax spillovers are properly understood that industry cannot, as a consequence, be appropriately challenged, with its activities being brought to a close.

As some readers will be aware, I have long proposed the better estimation of tax gaps to explain the failure to collect appropriate tax revenues. My theory on that issue is here. It tales the issue further than most governments are willing to go at present, precisely because I cover the weaknesses now highlighted by the Treasury committee.

Tax spillovers take this much further still. Tax gap analysis says what is lost. Tax spillover analysis explains why it is lost and is also much easier to do whilst simultaneously offering a plan for overcoming the issues identified.

I would suggest that tax spillover analysis is one of the pre-requisites for any political party seeking to answer the question 'how are you going to pay for it?' precisely because it sets out to answer that question by showing where the opportunities to plug leaks in the tax system are. It needs to be used.

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