The cost to our exchequer of tax complexity is highlighted by the government’s recent attack on “umbrella” companies set up by employees wishing to shelter behind a corporate veil to avoid PAYE and national insurance levies. The Treasury slapped a £1 million fine on the Ministry of Defence for its failure to ensure that all their “off-‐payroll” workers are meeting their tax obligations.
It is obvious that
the complexity of our patchwork tax system acts as a breeding ground for abuse
the complexity of our patchwork tax system acts as a breeding ground for abuse. Anti-‐avoidance efforts merely generate more loopholes. By contrast, the simplicity of a low single-rate tax regime optimises collection since there is little incentive to evade.
The citizens of several Eastern European countries, notably Russia, Slovakia, Latvia and Bulgaria, enjoy the transparency and certainty implicit in low single‐rate personal and corporate tax systems that enable their governments to avoid the cost of employing armies of civil servants to chase evaders. In every case the introduction of such a system has resulted in substantial gains – in terms of revenue-raising, reduced costs of collection and fewer prosecutions.
Tax compliance in the UK has become an industry in itself. Instead of being free to focus productive energies on real work, management is increasingly devoting time to acting as a quasi‐governmental tax-gathering agency.