How about a simpler tax system?

Our current tax system remains overly complex and, to some extent, dumb - the chancellor clobbers high earners with a hefty tax rate then gives them ways to avoid it. Would a simpler system work? .

The idea of a better flat rate State Pension, getting rid of much of the means testing and thus making saving worthwhile for more people, seems admirable to me. The catch is the problem of implementation. If it boils down to one regime for someone born on Tuesday, and a markedly different regime for someone born on Wednesday, it will never happen. Thus, there will have to be transitional arrangements. Still, the Government does seem close to joined up thinking on pensions, which is to be applauded.

Sadly, the same can’t be said of the policies on taxation. We want economic growth. So we want people to move to where the work is. So when they move we’ll hit them with stamp duty. When they retire, we want them to stay fit and healthy in their own homes for as long as possible. To achieve this, many will have to move. So when they move, we’ll tax them. Taxes on mobility are plain stupid. It baffles me that there is no political support for doing away with them altogether.

Having gone through the annual farce of shifting money around to minimise the tax liability, it also occurs to me that there is no political support for dumping a lot of the allowances that only benefit the relatively well off. Half of us have no savings at all, so the tax breaks are a hollow joke.

Suppose, just suppose, that all income and capital gains were taxed at the same rates. Then suppose that the top rate of tax would be 30%, but that ISAs and Pensions would no longer carry tax breaks (they would cease to exist). National Savings would not have tax free products. Insurance bonds onshore and offshore would have to generate taxable income and capital gains. To my mind, it would be a lot fairer than the present mish mash, where the Chancellor taxes you at 50% and at the same time designs all manner of ways for you not to pay tax at 50%.

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