Press release - 18 June 2001
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View full manifesto here]
“An over-complex tax system helps nobody – compliance costs go up, as do mistakes and difficulties. Anyone who doubts the complexity of our system should try calculating his or her tax bill using the 32 page, 167 boxes, tax calculation guide the Inland Revenue send to self assessment taxpayers.”
The Chartered Institute of Taxation calls on the new Government to simplify the personal tax system in ten ways – five quick wins and five longer term aims.
John Whiting, President of the Chartered Institute of Taxation, said:
“An over-complex tax system helps nobody – compliance costs go up, as do mistakes and difficulties. Anyone who doubts the complexity of our system should try calculating his or her tax bill using the 32 page, 167 boxes, tax calculation guide the Inland Revenue send to self assessment taxpayers.”
10 ways to simplify the tax system and reduce the size of both the tax return and the accompanying calculation guide
1. Children’s Tax Credit and New Baby Tax Credit
Clearly describe the new Baby Tax Credit in the same way as the Children’s Tax Credit: simply a reduction in income tax of £520, rather than an allowance of £5,200 at 10%. This will help ensure that all families who are entitled to receive credits get them – and understand their position.
2. Simplify personal allowances for the senior citizen
Ideally standardise the age allowances for the elderly – have a single rate rather than higher allowances for the 75+ - and abolish clawback regime. At the very least give a standard married allowance – when the difference in tax terms between the 65+ and 75+ married allowance is £7. We should standardise at the higher allowance.
3. Treat Elderly Married Couples as Couples
Allow a partner to transfer his or her allowances to the other partner at will and thereby make it easier to fully utilise their joint total allowances.
4. Give the Full-Year Marriage Allowance to Couples who marry over the age of 66
Let the few couples who wed over the age of 66 have the full-year married allowance at the start of their marriage and avoid the present administrative burden of calculating the proportionate allowance due.
5. Raise the Accrued Income Threshold
Ideally, the Accrued Income Scheme should be abolished. Meanwhile, raise the present £5,000 threshold to £100,000. The cost to the Exchequer would be minimal at today’s interest rates and would save administrative costs.
Longer term aims
We realise that these points will need longer-term study but we raise them now to point out how simplification could be helped by them
6. Simplify Income Tax Rates
We are conscious that this is a very politically charged area, but we have to point to the complexity caused by a plethora of rates -10%; 20%; 22%; 32.5%; 40%. Ideally the 10%, 20% and 22% rates would be combined into a single 20% rate with personal allowances raised to offset the loss to the lower income groups. The dividend tax regime also needs a review.
Even combining the 20% and 22% rates to an average of 21% would help understanding with minimal overall effect.
7. Prune the Capital Gains Tax Rules
A radical overhaul of CGT is called for now the tapering regime is established. At least abolish the pre-1965 gains rules, with automatic revaluation to April 1965. A bolder step would be to rebase completely, without reference back to old rules, to 1982, or better still to 1998. Adjustments to tapering would help as well – backdate the April 2000 changes to the introduction of tapering in 1998.
8. Streamline the tax treatment of benefits
Many benefits are taxable,for example maternity pay, widow’s pension incapacity benefit and jobseeker's allowance; many benefits are not taxable, for example maternity allowance, widow’s payment, disability allowance, jobfinder’s grant. There may be good reasons for individual decisions, but the result is confusion – moving towards a “norm” with appropriate adjustments would be an ideal.
9. Align definitions of income for all income tax, National Insurance Contributions and social security purposes
There should be a common definition of income for all purposes. It is illogical to have different definitions of income for PAYE, NIC and Working Families Tax Credit.
10. Pensions
There is scope to streamline the tax treatments of the three pension schemes – retirement annuities, personal pension plans and stakeholder pensions – and this is before one bears in mind the many employer schemes. This will take time but there has to be scope for taking some of the complexities and confusion out of the system.
In conclusion, John Whiting said:
“We are not trying to argue for the elimination of all allowances and special charges in the tax system. Fairness will always have a tendency to add extra issues and we accept that the tax system will always be used for social policy purposes. But it is important that the hidden costs of complexity are carefully considered.”
[View full manifesto here]
18 June 2001
Contacts:John Whiting: 020 7212 6714; 07710 027595(M)
Vivien Rees : 020 7235 9381
NOTE FOR EDITORS:
The Chartered Institute of Taxation (CIOT), the leading professional body in the United Kingdom concerned solely with taxation, was established in 1930 and received its Royal Charter in 1994. The CIOT’s primary purpose is to promote education in and the study of the administration and practice of taxation. Members of the CIOT have the practising title of “Chartered Tax Adviser”.
One of the CIOT’s key aims is to achieve a better, more efficient, tax system for all affected by it - taxpayers, advisers and the authorities. The CIOT will frame its comments and recommendations on tax issues solely in order to achieve its aims: it is entirely apolitical in its work.
Membership of the CIOT is open to individuals from all disciplines who are competent and qualified to advise on taxation matters. Entrance is through its associateship examination, from which members may advance to fellowship by thesis. An increasing number of members hold the CIOT qualification as their main professional qualification.
The CIOT deals with all aspects of direct and indirect taxation. It is the United Kingdom member of the Confédération Fiscale Européenne (CFE), the umbrella body for taxation advisers in Europe. The CFE represents a total of over 150,000 tax advisers throughout the European Union and its neighbouring countries. It plays a full part in the development and operation of tax legislation in the Union and supports the establishment and maintenance of the rights of tax advisers within the Union.
In 1989 the CIOT sponsored the formation of The Association of Taxation Technicians (ATT). The ATT, with which the Institute maintains a close relationship, provides the qualification “Taxation Technician”. Its examination also acts as a stepping stone towards membership of the Institute.
The CIOT and ATT are registered charities.
12 Upper Belgrave Street
London SW1X 8BB
Tel: 020 7235 9381
Fax: 020 7235 2562
