MSE News: Government plans tax simplification

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Chancellor George Osborne today announced plans to simplify Britain's "spaghetti bowl" tax system ..."

Read the full story:
Government plans tax simplification

Optimist

About time, unfortunately it is currently in such a mess I don't see any quick fix

michaels

I do - remove the artificial distinction between tax and NI and immediately huge swathes of complication and avoidance strategies disappear.

zygurat789

They've tried this before, it was never succesful and subsequently complicated again.

CLAPTON

cgt was a simple 18% (edited and amended from the incorrect 40%) when osbourne came to power, now is is a combination of 18% and 28% depending upon your income
is that an example of a simplication of tax?

JamesU

CLAPTON wrote: »

cgt was a simple 40% when osbourne came to power, now is is a combination of 18% and 28% depending upon your income
is that an example of a simplication of tax?

I thought CGT was a simple 18% when Osbourne came to power.

JamesU

CLAPTON

JamesU wrote: »

I thought CGT was a simple 18% when Osbourne came to power.

JamesU

Thank you ...yes indeed you are absolutely correct.... I will amend by post accordingly

zygurat789

In any "simplification" there are bound to be winners and losers, you can bet your life that the losers will be those for whom tweaks in the system have been made to provide help for those not quite as able as the majority such as age allowances. We have already started a process where it looks as if age allowance is being phased out in order to "simplify" the over 65s earnings limit calculation by eliminating it to the detriment of those concerned.
Whiting & Jack probably have very little experience of living on an income of less than 6 figures and they are seconding civil servants and accountants from top firms!
I can't see how they can fail to look after their own.

JamesU

CLAPTON wrote: »

cgt was a simple 18% (edited and amended from the incorrect 40%) when osbourne came to power, now is is a combination of 18% and 28% depending upon your income
is that an example of a simplication of tax?

The problem with trying to simplify taxes, and perhaps even saving on admin costs, is actually well demonstrated in this CGT example.

The switch from 40% with tapering/indexation to the "simpler" 18% under Labour was a rather generous move in the short term, but stored up a longer term problem due to the removal of the link to inflation. The ConDem hybrid 18%/28% CGT linked to income not only looks more complex but in addition, without the reintroduction of some form of indexation, has created a real dilemma for a lot of long term investors planning for retirement. They will effectively pay CGT tax not just on the real gain but also on past and future inflation for the duration of their investment. Furthermore, despite government rhetoric, many lower rate tax payers will end up paying higher rate CGT taxes. Obviously there are numerous CGT reliefs available depending on the type of investment and individual circumstances but increasing CGT without indexation/tapering is a serious setback for those who have planned investments over decades.

Recent CGT changes are a typical example of where the "excuse" of simplification can increase government tax revenues at the expense of prudent individuals, and I find it a disgrace that the government has adopted this policy "because it is simpler and more affordable to run."

And for sure, with any change in taxation it is inevitable that there will be winners and losers. But on this occassion I fail to see who can possibly win as all have to pay CGT tax on past and future inflation. The government is effectively taxing inflation for the duration of the investment, payable in full upon disposal of the asset in question. What a great way to make easy money at an indvidual's expense, just amazed the government has managed to get away with this.

The CGT issue here was discussed in detail in a couple of threads elsewhere some time back, but I am still furious and generally concerned, as simplification of taxes when rushed and not thought out correctly can be a poor and very unfair compromise.


JamesU

le_loup

Large firms of accountants looking to exploit. The Daily Mail. Loopholes. Corrections of past errors. Lobbying by special interest groups. The Daily Mail. Campaigns by other newspapers. No. 10 petitions. Changes of Government. Competition from other countries. The Daily Mail. Social engineering. Political stances. Friends in the City. Friends in Trade Unions. NGOs. Special pleading from charities. Oh, and don't forget, The Daily Mail.
That's how it gets in such a mess and to change it WILL upset as many people as it pleases. And, of course, all new Governments set out to simplify stuff. How many actually succeed?