I've just been reading an article about the Goldman Sachs traders who have been criticised for deferring their bonuses until 6 April to benefit from the lower 45% rate that kicks in next year. Well you would, wouldn't you? There is so much hypocrisy over tax and it is all entirely in the government's hands to resolve (and quite easily in my view).
There are so many 'mixed messages' sent out by the current system. On the one hand, the press would like us to be easily scandalised by the GS traders and companies which aren't perceived to pay their 'fair share' of Corporation Tax, and on the other we are offered ISA's, EIS, VCT's, capital allowances and offsets which we and companies all use. That's what they're there for. How many of those who claim to be scandalised by these things use ISA's? Anyone who has used ISA's since their inception will have a 6-figure and maybe a 7-figure sum now outside the tax net. Pot/Kettle?
This government (like many others) promised to simplify the tax system. As ever, they haven't, they made it worse. A truly simple system would solve all these problems at a stroke and, coincidentally, would raise significantly more tax (that is tax actually paid to the Exchequer rather than the high marginal rates beloved of politicians). A Flat Rate system is fair, easy and cheap to administer, and the more you have, the more you pay (which is certainly not the case at the moment). The key to it is that when you introduce that system, a) you set a sensible level below which no tax at all is paid (what's the point; it only gets paid back in benefits?), and b) you also sweep away the whole raft of reliefs and allowances which form the bedrock of the current avoidance industry, including the distinction between income and capital gains (and, yes, that includes your house).
We've just received our first winter fuel allowance and travel passes which we don't need. I saw the campaign to get better-off pensioners to give it back and I thought, no, it's not my job to second-guess the system and decide my own tax and benefit rate (the Starbucks principle!). It's ludicrous that we are taxed on the one hand and then given back part of the money as benefits on the other, and it's up to the Government to sort out the system. In the meantime I, like most others, will organise my affairs scrupulously and legally to pay all the tax I am required to and no more. If the Government don't like it, they know what they should do about it.
