Even the Treasury doesn’t understand our tax system

In the news today it’s revealed that the Treasury have had to write off £11 billion in unpaid tax last year. The sum was owed by small businesses and through errors in calculating tax credits, which the news reports the Treasury did not notice. This is the problem with having a tax system that is so large and unwieldy that even the operator of it, the Treasury, has lost the plot on how to calculate how much is owed. The system actually begins to cost more to maintain it than it should do. The news that the Treasury hasn’t collected the taxes it should have done will be treated in the media as if it is a scandal. How could such a powerful body as the Treasury not understand how much should be going into the national purses etc.

That assumes all tax collection is good. In fact it’s probably far better in the hands of the people who’ve earned it, as they will be able to invest the money locally instead. This episode also reveals a problem with our tax system. It is so long-winded and complicated nobody, even the Treasury, can be completely in compliance with its every letter. The time has come for a flat tax system, ditching all the loopholes, tax credits, and reliefs that various governments have instilled to bribe us with along the way. Far better that if your company earned £10 million profits and a flat tax of 10% is levied that you (and the Treasury) know that you owe £1 million in taxes. Not this expensive mess that we have now. But is any party that brave? The Liberal Democrats have been pushing the idea for a mansion tax for a while now, with Vince Cable talking strongly in favour of it.