The new Chancellor has made a bold statement. According to Sajid Javid, his first Budget in November will be aimed at “simplifying” Britain’s tax system. Now, it’s not uncommon for chancellors new into their role to make such big promises – it’s not as if you can go into the minutiae of every single decision you’re going to make when making statements to the public. Nor is it an unreasonable goal. But it got us thinking – how much can you really simplify taxes in the UK?
Any accountant can tell you that taxes can get immensely complicated. Part of the reason the accountancy profession even exists is that tax and financial systems are complicated enough to need specialists who know how they actually work. It’s easy to see an argument for simplification. Businesses could benefit from a simplified tax system. With Britain’s tax law encompassing hundreds of years of tax laws, there’s bound to be some simplification that would work well.
But whilst there will always be fat to be trimmed in a centuries-old tax code, there is some logic behind tax being so complicated. Taxes aren’t necessarily something that can be generic. A non-specific tax ruling could end up being a recipe for misinformation, tax mistakes and attempts at avoidance and evasion. Tax laws have to try and account for every possible scenario, and then when one is inevitably found that they haven’t prepared for, they need to be edited to close the holes. Yes, it’s a complicated system, but it isn’t complicated just for the fun of it!
Trying to simplify taxes certainly isn’t an unreasonable goal, but it’s not one that can be done haphazardly – that may just invite other risks.