Tax Take

The Sun reports today that the Prime Minister and the Chancellor have suffered some tax problems – precisely that:

‘David Cameron’s tax bill for 10 Downing Street was £2,000 too low, we can reveal. Chancellor George Osborne was undercharged the same amount for No.11.

Under the rules, both men must stump up cash to go towards their flats’ heating, lighting and basic maintenance as a benefit in kind. The sum should be calculated as income tax on 10 per cent of their gross annual ministerial salaries. But in a deep embarrassment for the nation’s two most powerful men, only their net ministerial wage packets once tax and pension contributions were stripped out were looked at for the year 2013-14 — roughly halving the size of each’s tax demand.’

Inevitably, Labour have drawn completely the wrong conclusion from the incident, claiming that it somehow reflects on the Government’s efforts to prevent tax evasion.

We should instead consider what this tells us about the tax system. If even the Treasury, the very people who design the rules, cannot easily navigate them that’s a clear sign that our tax code is far too complex. When the officials inside the system are boggled by it (even the world’s fastest speaker would take days to get through it all) then what hope is there for your average taxpayer or small business?

It is now five years since the Office for Tax Simplification was founded, but we have seen precious little progress towards a simpler system. Simplifying taxes is a winner all round – cheaper for the taxman to administrate, less burdensome for taxpayers to obey, less conducive to errors and harder for people to exploit. Perhaps now that Osborne and Cameron have felt the need for a simpler tax system personally, we might see some changes?

27 comments for: When even the Treasury can’t understand the tax system, it’s time for simplification

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