Tax Problems

I was interested to hear Conservative MP Michael Fallon’s comments on the HMRC system with regard to the six million people who are about to receive adjusted tax calculations following errors in HMRC’s calculations.  The underlying problem is, apparently, that the system which calculates the tax liabilities of individuals was designed for the old world and is unable to properly handle a world where increasing numbers of individuals have more than one source of income.  An interesting thought.

The full interview is available here.

Tax collection is bound to become an increasing problem for governments everywhere.  As increasing numbers of individuals adopt a portfolio approach to work, and many eschew a traditional employee/employer relationship altogether, the tax base will fragment ever more.  Large organisations can no longer be counted upon to act as tax collector for government.

The effects of recession, a greying population and the working-style preferences of Generation Y all point towards an increasing preference for a portfolio or independent working style.  And a consequently an increasing problem for governments.

As an aside, despite the repeated headlines which link the six million tax payers with an average demand of £1,400, the reality is – as ever – a bit different.  The reality is that 4.3 million of those taxpayers will be receiving rebates (having previously paid too much tax) and only 1.4 million will be receiving demands averaging £1,400.  Still far from acceptable but quite different from the story being implied by the press.  Never let the (whole) truth get in the way of a good story.