 |
|
| CURRENT SECTION :: News | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
|
 |
An independent think tank has called on the government to create a single low rate band of income tax that would raise more money and be simpler for taxpayers to follow. The Adam Smith Institute says a new "flat tax" system means a legion of tax inspectors could be abolished because it is so much less costly to collect. They said a single income tax has already been tried in nine countries where it produced more tax revenue than the outgoing regime, which was typically more complex than the low band proposal. It operates by setting a high enough threshold, so that low earners pay no income tax while all other parties pay a fixed rate. Because the flat tax is paid on all income above that threshold, it creates a very low rate of between 13 and 33 per cent and therefore is more likely to be paid in full. Author of the tax study, Andrei Grecu, said the idea had already brought impressive results, proving itself as a system that contained no tax loopholes but instead offered a chance at economic expansion. This he argues is down to the fact that single low band means there is added incentive for people to earn more, while extra jobs and wealth can be created. "Income tax is not only complex, it is perverse, diverting energy and resources into uneconomic behaviour forced upon people by the tax code itself," argues Grecu. "In terms of growth foregone and effort misplace, its economic costs reach into billions of pounds each year, maybe tens of billions." In Britain, the flat rate tax would be best at 20 per cent, allowing it to parallel the experience of Estonia where lowering the level from 26 per cent to 20 per cent, has persuaded more people into payment. For both EU countries, flat tax means no exemptions or allowances and no fees to accountants for covering income but instead a mini economic boom. Hong Kong brought in a flat tax in 1947. Other flat tax adherents include Estonia, Latvia, Lithuania, and Slovakia, as well as Russia, one of the G8 countries. Even the US has signaled interest with some of the Bush administration team looking at the possibility of a flat tax during his second term. It’s argued by Grecu that introducing a single rate system ensures income no longer has to be offshored. He said it would also help free many enterprises currently held back by the tax regime. "A flat tax is simple, letting people understand their obligations. It is fairer, with low earners paying nothing and the rich paying their due. And it unleashes all the talent and enterprise being held back by a devious and complex system." Other proposals in ‘Flat Tax – The British Case’ include a call to abolish dividend and inheritance tax. Nov 16, 2004 Email this article Printer friendly page Previous Page
|
|
  |
||||||||||||||||||||||||
| All content © Contractor UK Limited | http://www.contractoruk.com/lists/?p=subscribe&id=1[Register for News Letter] | [Privacy Statement] | [Terms of Use] | [Top of Page] |