Whats the point of a tax code 10 times longer than Shakespeares works?
Heres an exclusive for City A.M. readers: Tolleys, the tax bible, will be expected to run to a staggering 25,272 pages this year.
That is just over 20 copies of War and Peace, and almost 10 times the length of the complete works of Mondays apparent birthday boy, William Shakespeare. If you took a conservative average of 500 words per page, that would make our tax code over 12.6m words long.
It confirms what most of us know: our tax legislation is vast, complicated, and growing. When George Osborne called the tax system a “spaghetti bowl”, the tax code was running at over 11,000 pages. That was just seven years ago.
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A tax system this complicated is inevitably burdensome on millions of families and businesses – while those with the right resources are able to identify legal loopholes.
Previous TaxPayers Alliance research showed that there is a top combined marginal tax rate of 95 per cent for successful entrepreneurs on income earned, saved, invested in a company, and passed on to children – a big disincentive for would-be entrepreneurs. Indeed, the tax burden is set to hit a 40-year high – hardly surprising when the tax code is quite so long.
The messy and burdensome tax code also drags down productivity. We regularly speak to small business owners who tell us that complicated – and unpredictable – taxes are perhaps more troublesome than high rates.
Time spent on compliance and box-ticking is time not spent on innovating and developing new ideas. It means less money to hire new staff.
Whats more, with a simpler tax system, the brainpower of the lawyers and accountants working out how to legally use the tax code to their clients advantage could be put to far better use.
Complexity also fosters resentment from everyday taxpayers. It can undermine faith in the entire system when people cant understand why big companies are seemingly paying next to no tax.
One problem is that politicians too readily see the tax system as a lever for their policy objectives, as opposed to a means for raising enough money to pay for high-quality public services. Children are putting weight? Forget education and personal responsibility, whack a tax on to fizzy drinks and punish the poorest families. Want to see more apprenticeships? Slap a levy on overstretched businesses.
That is pernicious at worst, misguided at best – and either way it adds yet more pages to our creaking tax code.
The sugar tax, for example, is more complicated than one might think – considerable ink is spilled working out who bears the tax when a pub adds water to a syrup to create a drink. A total waste of everyones time and energy, especially given what else is on the governments agenda.
Politicians must also realise that you dont help one group by using the tax system to punish another.
The surcharge on stamp duty of three per cent for buying an additional home is a perfect example. The government wants to encourage owner-occupancy and see more people getting on the housing ladder. Thats great, but it doesnt mean its a good idea to use the tax system to punish the other side.
All this complexity means that taxpayers and businesses are often unaware of how much tax they are actually paying. Even if they wanted to get to the bottom of what they pay and could face in the future, they are unable to navigate the legislation. Patchwork solutions over the years have led to an array of reliefs and concessions that only people with resources are able to take advantage of.
As the banker and US Treasury secretary Hank Poulson once said, complexity is the enemy of transparency. A simpler, clearer and less burdensome tax system would close loopholes, be easier to implement, and encourage business growth.
I hope Im not reporting on another increase in the length of the tax code in 2019.
Read more: The sugar tax is an ineffectual way to price the externalities of obesity
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