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ResponsefromtheTaxPayersAlliancetotheHMRC consultationModernisingtheadministrationofthe personaltaxsystem:TaxTransparencyforIndividuals

SubmittedonbehalfoftheTaxPayersAllianceby JonathanIsaby PoliticalDirector TheTaxPayersAlliance 55TuftonStreet Westminster London SW1P3QL 08453309554 jonathan.isaby@taxpayersalliance.com

ResponsestothequestionsraisedintheConsultation
Vision 1.Doyouwanttoknowmoreaboutthetaxyoupay,andwhatdoyouwanttoknow? Taxpayerscurrentlyreceiveverylittleinformationaboutthetaxtheypay.Wethereforesupportthe provisionofbetterinformationaboutIncomeTaxandEmployeesNationalInsuranceContributions (NICs).ButwealsothinkahugearearipefortransparencyisEmployersNICs.Whilstemployersare legallyresponsibleforpayingEmployersNICs,inrealityitstheemployeewhopaysintheformof lowerwages.Thesepaymentsshouldbeincludedonremunerationadviceandtaxslipsaswell. More generally, whenever people spend their money, they should receive information about the taxestheyarepaying.VATshouldalwaysbeonreceiptsatthecheckout.Sotooshouldthelikesof fuel,tobacco,alcoholandairpassengerduties. 2.Wheredoyoucurrentlylookforinformationonhowmuchtaxyouhavepaid? TaxpayerscanusuallyonlyseetheirtaxbillsonremunerationslipsandP60forms. 3.Ifyouhadbetteraccesstotaxinformationdoyouthinkthatyouwouldhavemoreconfidence in: a.HMRC;and b.theaccuracyofyourowntax? Transparencyleadstoimprovedaccuracyandexposesflawsanderrorswhich,oncecorrected,willin turn lead to greater levels of confidence. Being able to check tax figures more easily will increase confidence. 4.Doyouknowwhattodonowifyouareunsureyourtaxisright? 5.Doyouknowwhatyourresponsibilitiesareregardingtax? 6.Doyouwanttoknowwhytaxispaidandmoreinformationonhowitisspent? Taxpayerswouldvaluemoreinformationaboutwhytaxisleviedandwhatthemoneytakenisspent onourresponsestoquestionsbelowonTaxStatementsenlargeuponthispoint.TheUKhasavery complicatedtaxsystemanditsdoubtlessthecasethatnotallthattaxpayersarefamiliarwiththeir responsibilities. In terms of what those unsure should do, the ways of contacting HMRC are relativelywellpublicisedonHMRCissueddocumentationanditswebsite. OnlineAccounts 7. If you could access online accounts as described in the Irish example, how do you think this wouldimproveyourawarenessandunderstandingoftax? 8.Howoftendoyouenvisageyouwoulduseanonlineaccount? The TaxPayers Alliance supports online accounts for personal taxation. We believe they would increasetransparencyandpublicunderstanding.Wedoubtthemajorityoftaxpayerswouldaccess theiraccountsmorethanafewtimesayear,butitisstillveryimportantfortaxpayerstohavethe meanstoaccessthisinformation.
55TuftonStreet,London,SW1P3QLwww.taxpayersalliance.com08453309554(officehours)07795084113(24hours)1

PrefilledTaxReturns 9.IfyoucompleteanSAreturn,doyouthinkyouwouldbenefitfromyourinformationbeingpre filledinyourSAreturn? 10.Whatdoyouconsiderthebenefitsandrisksofprefillingtobe? 11.Whatdoyouthinkthemostimportantareasaretoprefillthatwouldreducethepotentialfor mistakesandsavetime? TaxpayerswouldbenefitsignificantlyfromprefilledSelfAssessmenttaxreturns.Aswellasreducing the amount of time and effort entering data onto tedious forms, it would also provide an opportunitytochecktheaccuracyofthedatainquestion.Weareconcernedabouttheadditional risk of personal and confidential information being lost if it is being transmitted in two directions instead of one, but we think the benefits should outweigh the risks if adequate data security measuresareimplemented. TaxStatements 12.Wouldyouliketohaveanannualtaxstatementthatsetsoutyourincomeandtaxliabilityfor theyear? 13. Would you want to view your annual tax statement if it included your overall personal tax contribution,youraveragetaxrateandothergeneraltaxinformation? 14.Whatelsecouldanannualtaxstatementshowthatwouldbeofuseand/orofinteresttoyou? Taxpayerswouldwelcomeannualtaxstatementsdetailingthedirecttaxestheypayeachyear.We believe an annual tax statement would be most effective if it included all of the following components: 1. IncomeTaxpaid; 2. EmployeesNationalInsuranceContributionspaid; 3. Employers National Insurance Contributions paid by employers with respect to that taxpayersemployment; 4. A total of Income Tax and both Employees and Employers National Insurance Contributions; 5. Alistofalltaxesanddutieswhicharenotincludedintheannualstatementandasimple estimateofhowmuchanormaltaxpayerwouldpayineachofthosetaxesandduties ideallysomewhatweightedtoreflectthattaxpayerscircumstances. However, in the interests of transparency and accountability, it would be equally important to include a breakdown of spending showing in detail how much a taxpayer contributed to different areas of government spending. This should be done by multiplying a specific area of spendings proportion of total government spending by the individuals total taxes, adjusted to account for borrowingordebtrepayment. Forexample,supposeadepartmentaccountsfor20percentoftotalgovernmentspendingof100 billion of which 80 billion was financed by taxes and 20 billion by borrowing. A taxpayer whose annual taxes totalled 8,000 should include a statement listing the proportionate contributions of his taxes including 2,000 to that example departments spending and a further 2,000 that was
55TuftonStreet,London,SW1P3QLwww.taxpayersalliance.com08453309554(officehours)07795084113(24hours)2

borrowed by the government on his behalf to finance his proportion of spending in excess of his taxes. TheideaofanannualtaxstatementwasrecentlypromotedinaTenMinuteRuleBillintheHouseof CommonsbyBenGummerMP,whoseproposalswewarmlyendorsedatthetime1.Hewasrightto assertduringhisspeechthat: Wewouldnotforamomentthinkofpayingabillinasupermarketorsettingupamobile phone direct debit if we did not receive an itemised receipt in exchange. Yet for tax, the largestoutgoingformostpeople,wegetnothingnototalaccountofhowmuchwehave paid and no detail of where it has gone This one piece of paper could make Parliament more responsive to voters demands while helping the Government better to explain the spendingdecisionstheyhavechosentomake.Suchanimprovementinaccountabilitycould only strengthen our democracy because it would decrease the distance between taxpayers andtheirrepresentatives.2 Education/ImprovingCustomerExperience/PublicEngagement 15. What educational material would you like to see to help taxpayers understand and comply withtheirtaxresponsibilities? 16.Whatareasofthepersonaltaxsystemcauseyoumostconfusionordifficulty? 17.DoyouhaveanyotherideasforhowtheGovernmentcanachievegreaterengagementofUK citizensintax? 18.Howdoyouthinkwecanengageindividualtaxpayerstotellushowthepersonaltaxsystem shouldbemodernised? The biggest area of confusion for taxpayers is the division of taxes on income into Income Tax, Employees National Insurance and Employers National Insurance, all with different rates, rules and thresholds. A government which sadly feels unable to abolish National Insurance by fully merging it with Income Tax (as proposed in the October 2011 TaxPayers Alliance paper Abolish NationalInsurance3)shouldatleastprovidemaximumtransparencybyrevealingtotaxpayershow muchtheypayinonesinglefigure. However, the problem of lack of public understanding of taxation is a direct consequence of the systems unwieldy and needless complexity. HMRC can provide clearer information through statements,onlineaccountsandothermethods,butthereisonlysomuchthiscandotoimprove thepublicunderstandingandlegitimacyofasystemthat,fundamentally,istoocomplicatedandtoo opaque.

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http://www.taxpayersalliance.com/home/2012/01/taxpayersalliancebacksmpsattemptclarifypaytax.html http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120125/debtext/1201250001.htm#12012538002550 3 http://www.taxpayersalliance.com/reports/2011/10/abolishnationalinsurance.html


55TuftonStreet,London,SW1P3QLwww.taxpayersalliance.com08453309554(officehours)07795084113(24hours)3

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