Tax and N.I. merger & pension

Seabee42

Arguably employers NI just reduces wages by that amount. Even so as its the only tax some employers pay I doubt an employment tax would not still exist. (It is easy for foreign companys to avoid UK Corporation tax as well al those debt offsetting).

Since NI is no longer insurance or anything like it is worth a reform if it could be done. If income is tiered appropriately it is also hard to see why pensioners should be exempt, since most of it is supposedly spent on them.

jamesd

Clifford_Pope wrote: »

Is the proposal to abolish employers' NI too? And do what - merge it with corporation tax?

I haven't seen any proposal to do that, so far.

Bootsox

I have heard of this proposal and it makes me sick. Just another scam to take money off decent people who have worked hard for their retirement and hand it over to skanks and layabouts.

Good that you have raised the issue, the more people that know about it the better, hopefully a real vote loser for whichever government that has the brass neck to try and introduce it.

Plenty on the internet, typically below:

http://citywire.co.uk/new-model-adviser/tories-look-to-merge-income-tax-and-national-insurance/a759404

kidmugsy

Bootsox wrote: »

Just another scam to take money off decent people who have worked hard for their retirement and hand it over to skanks and layabouts.

My dear sir, is that any way to refer to out noble welfare state, envy of the world?

jamesd

Perhaps not but it does suggest that Bootxox has a good understanding of many of the effects of the flat rate state pension on how pension money is being taken from the working for life group to transfer it to others who have not done so. Assorted exceptions, of course, but that's the big picture.

Snakey

I thought this was a proposal that was announced one morning and rescinded by lunchtime?

It is one of those things that sounds good on the surface but when you actually dig down in to how it could work it loses any claim to being a "simplification" (which is more or less the only reason to do it since it would take a foolishly brave Government to increase the tax rate on private pensions by 50%, middle-class pensioners having a traditionally high voter turnout as they do).

I don't think anyone's seriously suggesting bringing it in.

Freecall

This comes up every few years. Standing back and looking at things dispassionately, starting from scratch no one would ever design the system the way it is at present.

Of course we are not starting from scratch and there are lots of vested interests at play which will resist change. At some point however (maybe after a few false starts which just end up making things more complicated) a simpler, more straightforward system will be forthcoming. I say this because world-wide, for the past several decades, there has been continuing pressure towards smaller, more easily understood government.

To even attempt this three things need to be in place :

1. A strong and rising economy.
2. A Government (presumably Tory) with a significant majority.
3. An ambitious Chancellor who is prepared to take bold, risky steps.

May 2015 anybody?

patanne

They would have to change the whole basis for benefit entitlement to start with. Then they would have to gradually increase the amount that a person needs to earn to pay NI whilst increasing the basic tax %. It would take several governments to achieve that. Whilst I think it would be a sensible idea (and will cost ME money) I don't think it will happen. The current government can't even give a good shot at the recent cynical attempt to get some female voters to vote for them, no chance that they could pull off major changes to NI.

Freecall

I agree there are a lot of implications, some of which will be politically very tricky.

That is why I included point 2.

It should not be forgotten that the current government is a coalition and as such must be very difficult to manage let alone get anything done. In fact I am surprised that Universal Credit has not run into more problems than it has.

You need a government that is in the position of real clout to implement this scale of change such as Margaret Thatcher was in her second term in 1983 with a majority of 144 or Tony Blair was in his first term with 179 majority.

Looking back these governments achieved real change (good or bad depending on your view) and represented the sort of platform that an ambitious Chancellor could use to radically reform the taxation system on an even wider basis than we are discussing here.

How individual’s wealth is effected by this could be called legislative risk. Being able to address the big picture without getting hung up on individual barriers to change is a pre-cursor to implementation.

patanne

Even so, they will have to bear in mind the fiasco caused when removing the 10% tax rate. Too many of the no longer young vote compared to the still young & this is something which is going to impact most severely on those people. It will be a brave government which increases tax by around 10% for pensioners, whatever complexion it is.