June 2nd, 2012

Why tax is taxing

Last week the Tax Payers Alliance and the Institute of Directors issued a paper calling for the introduction of a single flat rate tax. The paper seeks a massive simplification of the tax system and reminded me of this story….

A few years ago I was one of the governors of a local school. The school had upped its performance that year and, as a result, the then Education Secretary Estelle Morris gave the school a small bonus payment to be distributed to staff in whatever way the Governing body saw fit.

That was a long meeting.

Whilst we all wanted simplicity any simple solution turned out to be unfair. The simplest option would have been to divide the money up by the number of staff on the payroll. But what about staff who’d left? They should get a share if they worked at the school when the improvements were happening surely? And what about staff who’ve only just joined? Nothing? Part timers? A lower share? People off on long term sick? Class room staff v admin staff? On and on it went. I think we eventually agreed on a hugely complex ‘points system’ that tried to be fair but nobody liked. I think we all just wanted to go home by then.

And that’s the problem with the tax system. It’s complex because it’s trying to achieve many objectives – from raising revenue to social engineering. That’s not to say there’s nothing that can be done to make the system simpler but a single tax rate can never be more than wishful thinking.

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John manages a wide portfolio of owner managed businesses and oversees the smooth operation of the firm’s payroll department.

After obtaining his degree in mathematics from the University of Liverpool, John joined Jonathan Ford & Co in 2004 and qualified as a chartered accountant four years later. John likes to keep abreast of developments in tax and accounting and is responsible for the mentoring of junior staff.

Outside of work, John enjoys keeping fit and is a Liverpool FC season ticket holder.

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