“You don’t understand, it isn’t that simple – it’s much more complicated than that!” This is the clarion cry of every bureaucrat who ever lived. The truth, however, is that all good things start out simple; but adding complexity creates jobs – lots of jobs – for bureaucrats. So it is with taxation. What was, in 1842, a simple 7d in the pound (2.9%) tax on incomes over £150, has burgeoned into a vast industry of tax invention, collection, administration, calculation and obfuscation – an industry that employs millions and produces absolutely nothing. What is even worse, in its ostensibly singular task of extracting money from as many sources as possible for the Government, it also sucks out much of the energy from an otherwise much more productive economy.
Yet all this could disappear at a stroke. If the singular purpose is to provide Government with the money it needs to run the country, let’s return to simple principles and discover the easy way to do this, with no infrastructure whatsoever.
Firstly, let’s cease calling it a tax. Instead, let us suppose that usage of the Queen’s currency (i.e. sterling) incurs a licence fee. And that our sole focus is the flow of sterling through the economy. Then at the moment any money of any amount ARRIVES in any UK bank account for whatever purpose, let us say a small percentage is automatically deducted at the bank as a licence fee, and remitted to the Treasury instantly. There need be no cost involved in this process, as the Treasury’s software takes care of it without any intervention. The deduction automatically appears on the customer’s bank statement as SELF (Sterling Electronic Licence Fee).
CALCULATING SELF
The formula for this is simple, involving just three coordinates. There is the sum of money the Chancellor needs to raise from all forms of taxation (A); there is the total sum of money moving through all UK bank accounts (B); and there is the time period (C). For simplicity, let us assume (C) is a projected year. Let us set (B) at £100 trillion. If the Chancellor calculates (A) at £1 trillion, SELF is 1%. If he needs £2 trillion, SELF is 2%. If (A) is only £50 trillion but (B) is £2 trillion, SELF is 4%, etc., etc. The Chancellor presents his budget to Parliament in the normal way, laying out how much money he needs and for what, together with a statement from the Treasury indicating (B) for past and projected years. This provides the proposed SELF percentage, which Parliament debates and votes on.
The limited research carried out for this document suggests that SELF would sit somewhere between 1% and 2%. However, the stimulation provided to the economy, both financial and psychological, of removing all other taxes, suggests that money flow and interchange would speed up. And every economist knows that increasing ‘volume of circulation’ stimulates GDP.
THE END OF TAXATION
SELF replaces all taxation, including income tax, VAT, capital gains tax, corporation tax, fuel duty, stamp duty, green taxes, National Insurance contributions, inheritance tax, council tax and business rates.
THE END OF THE TAX INDUSTRY
HMRC and half the accounting profession become redundant, along with tax returns and profit/loss declarations. Indeed, with SELF, the State no longer has any interest in how much money an individual or a corporate body makes or doesn’t make. But management accounting will still have a very important place in the day-to-day running of a business.
THE END OF ACCUMULATING TAX LIABILITY
SELF is taken in real time at point of deposit, and paid in real time to the Treasury, so no-one can accumulate any liability for tax.
WINNERS & LOSERS
There isn’t space in this document to produce comprehensive lists, but here are some headline examples:
WINNERS would include:
• Most working people. Someone with a gross salary of £50k, who also passes say another £25k through his/her bank account in a year, would have paid £750 SELF at 1%, or £1500 SELF at 2%. Compare that with current tax and NI on a £50k salary!
• Employers, who no longer have the onerous Employers’ NI to add to their salary costs.
• Any business whose profits will exceed 1-2% of turnover (remembering additionally the elimination of business rates, NI, VAT and big tax accountancy fees).
LOSERS would include:
• The low-paid, currently paying no income tax, and some pensioners. But they’re not really losers. Whilst SELF would deduct £110 from an £11,000 wage at 1% (£220 at 2%), there is no longer NI to pay, or council tax, or VAT.
• Organisations with vast UK turnovers who declare their profits abroad.
• Charities, lottery winners and other tax-exempt/non-profit organisations or people (but again, consider the overall financial landscape with the disappearance of all other taxes).
SELF ONLY WORKS IF THERE ARE NO EXCLUSIONS, EXEMPTIONS OR EXCEPTIONS
Because as soon as you introduce them, the bureaucracy returns. SELF doesn’t need to know whether you’re banking profits, turnover, a loan, a property transaction, an international transfer, unearned income, pension receipt, charitable donation, interest, an inheritance, or a birthday gift from Aunty Madge. Each time any money drops into any bank account, whether it’s cash, cheque or electronic transfer, SELF is instantly applied, which automatically discharges your financial liability to the State.
THE BLACK ECONOMY IS A RED HERRING
The thought may occur that people will get round SELF by dealing in cash. This is really not worth losing sleep over, for the following reasons:
• With SELF at only 1-2%, many would conclude it’s not worth the risk of keeping uninsured cash under the mattress.
• Sooner or later, cash will find its way back into a bank account (when someone pays a large organisation with cash, for example).
• Live a little, and let traders feel a bit raffish and freed up, without the State breathing down their necks all the time. There’s nothing like the buccaneer spirit to stimulate the economy.
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