The Search for a Better Tax system.
I live in Britain but taxation is very similar all over the world. Many countries copied our system! I read an article that proposed a different tax system the other day but it only covered income tax and wasn’t a lot different. We need a fairer system. One that acknowledges social injustice.
I’m not really in favour of income tax at all but if we scrapped it now we would have to use more indirect tax and that would be bad for people on welfare benefits. We can at least make it fairer and one rate and system for all.
I propose a income tax rate on the entire income of 50% and a personal allowance of £6,000 each. A single person would be liable to 50% of £12,000 less his personal allowance of £6,000 and so pay nothing. The same person on £20,000 would be liable for £10,000 in income tax less the personal allowance and so pay just £4,000.
I would also scrap a lot of taxes like National Insurance, Vehicle Excise licence and even the television licence.
Getting back to Income Tax, I would allow people to transfer half their allowance to someone else. A married woman staying at home could transfer £3,000 of her allowance to her husband. He would then have an allowance of £9,000 and pay no tax on earnings under £18,000. I would also give a £4,000 allowance for children, again transferable to either parent. This would mean a man with a wife at home and children to support would get allowances of £13,000 and be able to earn up to £26,000 without paying tax. This takes the ‘average family man out of income taxation. A married man or woman with a spouse working and no children earning £100,000 a year would also pay 50% tax less the £6,000 personal allowance and so pay £44,000 in income tax. This is fair a rate for all and a personal allowance that is the same for all but takes into account people’s ability to pay.
Valued Added Tax is payable on goods and services at three different rates in the UK. Zero rated are goods like water, housing, food, children’s clothes, newspapers and magazines. There is also a 8% rate on gas and electricity. Then a 20% rate on most other things. We also have duty on petrol, alcohol and cigarettes.
I propose a that essentials like housing food and energy should all be zero rated; newspapers and magazines aren’t zero rated of course! The 20% rate could be applied to most other things and we could have a 50% rate for luxuries. What is a luxury? A company that uses luxury, prestige or similar words in it’s advertising or promotes its products or services as luxury would attract the luxury rate. Is a Rolls Royce a luxury? Would they prefer their cars to be viewed as ‘family saloons’ and attract the 20% rate or as ‘luxury’ saloons and attract the 50% rate. I think there would be no shortage of companies willing to pay the 50% rate.
I have a receipt for a piano somewhere from many years ago with a postage stamp attached to it. I would like to see stamp duty applied to all contracts so every financial transaction over £100 attracts a stamp duty of 0.5% including contracts for difference, shorting shares, etc. If the stamp duty isn’t paid then the contract would be deemed to be not legally enforceable in the courts. There would be a big incentive to actually pay this tax to make the contracts legally binding.
I’ve proposed a simpler tax system and I would like to see other taxes abolished in the process. Vehicle excise licensing could be scrapped, television licences could be scrapped and maybe a super luxury VAT rate could apply to petrol, diesel, cigarettes and alcohol whose sales aren’t exactly in the public interest.
I would also like the stock market opened up to all so you can buy bonds and company shares online easily. The more complex financial instruments traded aren’t in the public interest; lets simplify everything. The London Stock exchange could help by making the ‘spread’, the difference between the price they buy and sell shares fixed at 0.1%. The stock brokers and banks could do commissions in a similar way to allow people who want to invest small amounts in a diverse range of companies to do so.
I’ve only covered the basics of tax and financial reform in this blog, but I hope readers will agree that sensible reform is needed. The gap between the have and have-nots need to narrowed; reform could mean we all become stock owning capitalists!