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Fecking mess

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    Fecking mess

    http://news.bbc.co.uk/1/hi/business/4523804.stm

    Huge losses

    The emerging details of this fraud, and its sheer scale, help to explain why the tax credit system has been losing so much money.

    It was introduced in its present version in 2003 to pay the new working tax credits and child tax credits.

    Ever since it started it has been widely criticised for being what the Public Accounts Committee recently called an administrative "nightmare".

    They highlighted the fact that in its first year of operation (2003/04) £16bn was handed out to 5.7 million families. But 1.8 million of them were overpaid by £2.2bn.

    Although this was partly due to administrative and computer problems, the National Audit Office claimed in October that fraud had contributed to £460m of that overpayment, along with mistakes by claimants.

    Nearly a billion pounds of accumulated overpayment from the first two years of the current tax credit system will probably be written off as doubtful debt.


    This highlights the general incompetence of this Labour government, it's army of civil servants and it's radical "ideas".

    I you or I are late with our tax returns, make a small error or are suspected of telling porkies, we are branded cheats, hit with penalties and interest.

    However, the loss of a few billion pounds through their ineptitude is nothing to worry about. Best not mention it eh?
    Last edited by DimPrawn; 13 December 2005, 10:57.

    #2
    I'll repeat what I said in an earlier thread. Only an idiot would devise a system that requires:

    * one army of bureaucrats taking money away from you

    * a second army giving it back, and

    * a third army trying to sort out the mess created by the first two

    This is the sort of thing they spend your taxes on.
    Last edited by wendigo100; 13 December 2005, 15:46. Reason: advice from scotspine

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      #3
      dunno if 'pay' is the word. that suggests some kind of commensurate return for our taxes. 'misappropriated' or 'abused' might be more suitable.

      'Only an idiot' - sadly we are not lacking in candidates for that particular appelation.

      Comment


        #4
        Succinctly put Wendigo.

        Comment


          #5
          This is another perfect example of why a flat rate tax system, of say 20% on earnings over £29k with 0% on everything below that, has to be introduced.

          That would make this tax credit system obsolete and would certainly have saved several billion pounds in lost taxes!

          Mailman

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            #6
            Originally posted by Mailman
            That would make this tax credit system obsolete ...
            But an awful lot of people unemployed
            Your parents ruin the first half of your life and your kids ruin the second half

            Comment


              #7
              Originally posted by MrsGoof
              But an awful lot of people unemployed
              They're already unemployed - just getting paid well for it.

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                #8
                Originally posted by MrsGoof
                But an awful lot of people unemployed
                Perhaps even good old El Gordo. What in heavens name would him and his mates in the treasury have left to do if there was a simple tax system...

                ...move next door and find other things to tinker with?

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                  #9
                  This is another perfect example of why a flat rate tax system, of say 20% on earnings over £29k with 0% on everything below that, has to be introduced.
                  Considering that most people get their income from employment, that employment is currently taxed at about 40% on income a little over £7000, and assuming the same level of public spending (cutting it would be a separate issue) then I think a flat rate of 33% with the first 8K not taxed sounds a bit more realistic. (I did see a paper on a think tank web-site once that indicated this would be roughly the rate needed, assuming NI was merged with income tax as part of the change.)

                  Here's my tweak on the idea of a flat tax which makes it even simpler. What I describe above is a 2-band system, 0% + 33%, but I think a single band system is even simpler. Instead of a 0% band, give a tax credit worth the same (i.e. 33% of 8k in this example) to every tax-resident person and make it non-refundable. i.e. Even if someone has no taxable income in a year they don't have to pay the credit back.

                  First the advantages. It is no longer necessary to compute a tax bill at all. All income is taxed at a flat rate of 33% on the whole amount, and there are no circumstances in which anyone has to pay any more tax, or claim any back. (Well except if they have a CGT bill or maybe foreign income - but 99.9% of people have no tax return to fill in.) IR35 and S660A and any other measures to reduce tax avoidance become irrelevant because tax avoidance becomes virtually impossible - no matter how money is routed from one place to another, the same rate of tax will apply. The universal tax credit also replaces the current means-tested credits, so there are no complicated claim forms to fill in. Non-working spouses and possibly children also get it, so it increases family incomes.

                  Their will be objections to the idea that people get a credit even if they're not tax-payers, but how many will really benefit from this? People with more than 8K a year income are not benefiting because it is just replacing the 0% band they would otherwise be entitled to. People living on benefits do not gain because benefits would by law be reduced by the amount of the credit. (The credit would be better for them because they wouldn't lose it when they started working - work for them would be taxed at the same marginal rate as the rest of us, instead of at rates that mean it makes little sense for them to get a job, as sometimes happens at present.) The people who are most likely to benefit are families, the pooling of tax credit income in a household gives people a strong incentive to live with other people, unlike benefits which (because they are calculated on a household basis) give people a financial incentive to live apart. In addition, benefiting families is something we are generally happy for the tax system to do - that's why we had married persons allowance and currently have tax-credit support. Although this system would implicitly support families, it's not socially conservative; it deals strictly with people as individuals and does not care what their relationship with other people they share a household with is. It equally supports married couples, unmarried couples, gay couples, platonic friends living together, any number of adults living together for any reason at all.
                  Last edited by IR35 Avoider; 14 December 2005, 09:03.

                  Comment


                    #10
                    Only problem is...there is still an incentive to avoid paying tax under your suggestion.

                    Whereas, having ONE tax band makes the system a hell of a lot simpler and more importantly means there is no benefit gained from trying to avoid paying tax because the tax band starts so high.

                    More importantly your tax credit system is still over engineered and there will have to be an entire army of mandarins (or maybe oranges?) to administer it.

                    You see under my system there is no point in syphoning payments from your company to you through dividends because the tax on dividends will be 20% (but this wont kick in until your TOTAL income from ALL sources exceeds £29k) etc.

                    What you have in essence pushed is nothing more than the tax system we have at the moment. My system is fairer on everyone and more importantly treats everyone fairly

                    Only a couple more years before I can stand for Parliament!

                    Mailman
                    Last edited by Mailman; 14 December 2005, 09:35.

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