Osborne's grand merger?

Sally Chatterjee

Great news. It's harder than it sounds to make sure there won't be losers but a simplified tax system would be a bonus for everyone, except the legions of tax advisors whose existence is testimony to the byzantine tax structures currently in place.

Andy Leeds

A long overdue reform.

jo

It's a brave politician who dares be honest. Courageous some (Sir Humphrey Appleby)might say....

That said, merging the two taxes makes perfect sense, will add transparency on the tax burden and make it hard for future governments to split them again. In order to revert to the old obfuscation of "NI contribution" they would have to ring fence that part of the tax revenue for NI related issues (health and pensions).

So, even if this merger was reversed at a later stage it would be good for transparency.

I like it. And therefore it won't happen.

Victor Southern

Well, it is the truth. National Insurance is now simply Income Tax. Those years when Brown was proudly claiming he had not increased IT he was continually increasing NI.

Michael

Pensioners don't pay National Insurance. So that is how they are going to put up the taxes for 'baby boomers'.

Jayu

"Team Osborne"? Oh deary me!

bojimbo

Merge taxes ? That will cost £2million to implement .

JohnPage

Making the tax take obvious is the best way to shift voters from wanting government spending maintained, towards cutting it (which the coalition isn't doing).

Labour MPs would hate it.

AlanL

A good idea, but will result in a large tax hike for pensioners (who don't pay NI). They will not be happy, and they are the ones who are more likely to vote...

Yosemite Sam

Michael @ 9.43am is spot on. Osborne better be careful. Despite the obvious advantages of merger for workers, the Treasury and HMRC; for pensioners, it would be a disaster. On the other hand, if the two systems are kept seperate for these two groups, then the advantages of simplification vanish. I will be interested to see if he has a solution to this conundrum.

Ian Walker

bojimbo: No problem - ask every one of the 2.1million businesses in the UK if this will make them a quid more productive.

The answer will be yes.

Ben G

Osbourne should look also at merging employers' NI and corp tax, at least for startups and smaller businesses - that could give a massive cashflow/working capital boost (you pay CT much much later) and lift the tax burden on unprofitable startups (you pay CT out of profits).

You couldn't do this for larger companies that have worked out how to shift profits overseas (don't be evil, Google) - but they need to fix that problem too

Noel1914

Osborne proposes 50% tax hike for pensioners.

Duyfken

I don't like it.

Although it has for a long time been just an additional tax and our pension has been unfunded, its name implies that our contributions have been insurance premiums, with our pension contractually due at the prescribed age and at a designated level.

By folding it all into general taxation, it will provide any government with greater opportunity to use sleight of hand in denying existing and putative pensioners of their expected benefits, both in amount and qualifying date.

Simon Stephenson.

bojimbo : 10.09am

"Merge taxes ? That will cost £2million to implement."

The specific changeover costs, perhaps, but you've no need to worry. This is chicken-feed compared with the continuing savings in man-hours of not having to administer two separate processes of income taxation - major savings to be made in both the private-sector and the public.

It's good that there are still people conscious of the futility of incurring unnecessary costs.

Barry Bilge

Low income pensioners can be protected from this move with a higher personal allowance.

If George really wanted to push the boat out he could combine NI and Income Tax and simplify even further by making it a flat tax of, say, 35%. Bump up personal allowances or use a negative income tax system to protect those on low incomes.

Barry Bilge

"It would certainly be a bold gambit from Team Osborne, not least because it draws attention to the Exchequer's bootprint right across your wage slip. No longer a 20 per cent rate of income tax and a 12 per cent rate of national insurance, but a 32 per cent mega-rate — a more imposing number, even if it is the same total. For higher income earners, it would be 52 per cent. "

You've forgotten about the Employers contribution haven't you? So for lower rate taxpayers it would be more like 44% and higher rate taxpayers 54%.

The tax system really does need sorting. Just look at how complicated just NI and Income Tax has become:

http://tinyurl.com/yk7buyl

Dave B

I thought this had been considered by the Conservatives prior to the election, and dropped as politically toxic.

Publius

Good idea. An end to a deceitful stealth-tax that pretends to be what it is not.

Let taxes be clear, obvious, simple to understand, and up front.

Christopher Bowring

One way to deal with the pensioner problem would be to increase their personal allowance so that a pensioner on average income (whatever that is) would have the extra 12% on income tax offset by the tax free allowance increase. Poor pensioners would pay less; richer pensioners more. The total tax yield from pensioners would remain the same.

Holly ......

Scrap road tax and put it on fuel.
Would he bloody dare?

Tiberius

Some very pertinent observations above if this does go ahead.

Barry Bilge resolves the esential pensioner issue. But with the move towards universal benefits (and universal state pension to follow, I presume), the significance of the "stamp" recedes. But for those still opted out of SERPS, some method of retaining their NI rebate must be found.

But what about HR taxpayers? Their NI drops to 2% (from April) above the NI ceiling, so some way has to built in to avoid the extra 10% of tax that would be payable on that slice of earnings under the new regulations - doesn't it!?

Gawain

It looks as if the Tories have decided that they won't get re-elected. This is a good idea as it will stop Labour feeding off a general misconception that NI contributions go into a ringfenced fund to finance pensions, the NHS or any other "hooray" device you care to add. Unfortunately, the reactionaries in Labour and the BBC will sell this as a tax rise and another vile attack on social welfare. This would attack one of their fundamental myths, and without their myths they have nothing.

Julian The Wonderhorse

Go for it George!

Be bold. If people actually knoew how much tax they paid before they ever get to see their hard earned wages, they would be a little less eager to let so much of it get wasted.

The general taxpayer is delivberately alienated form their tax, most have no idea what they pay, and not a clue about employers' NI contribution. Lift the veil and taxpayers will follow government spending and waste a little more.

Michael

"Poor pensioners would pay less; richer pensioners more. "

Ah yes, good old socialism.

Percy

Christopher Bowring

Good idea Christopher old chap but I thought we were all in this together so perhaps its time the greedy old buggers chipped in a bit too.

JohnPage

A good idea, but will result in a large tax hike for pensioners (who don't pay NI). They will not be happy, and they are the ones who are more likely to vote...

Then have a lower tax rate for anyone aged over 60. It's not hard.

TrevorsDen

John Page - yes to a degree. They could abolish tax for the overs 67's say. Nothing is going to be perfect.

Increasing allowances could be used as well.

Dimoto

Very odd that nobody has mentioned the most obvious way to harmonise and simplify taxes - just do away with NI over (say) five years. I guess that's because everyone is just conditioned to ever higher taxation - really sad.

The benefits would flow to working people, but not pensioners (who wouldn't mind as long as they don't face yet another tax grab - see above).
And it would be far less controversial (and costly), than nibbling away at income tax rates. The LibDems and Labour could never argue that doing away with this regressive tax was anything but fair.
Although Osborne, as a believer in flat taxes, might be too keen.

It could be a major boost for companies too.

Ruby Duck

NI used to be a stamp that cost the same for everyone and gave entitlement to non-means-tested benefits. I guess it changed when SERPS was introduced (wasn't really paying attention).

Rolling it into tax effectively means that, in the not very distant future, there will be no such thing as a non-means-tested benefit ie. no old-age pension, and no unemployment benefit.

We can make our own provision, but by and large that just means a lot of profit for insurance companies (which get a whole lot better at reading their own fine print when a recession means they have to start paying out).

Most of the current NI take should be rolled into tax, but it would be better to go back to the original concept of a simple weekly payment to provide for minimal non-means-tested benefits than to abolish National Insurance altogether.

Percy

Who's going to pay for all this largesse towards you baby boomers, oh that's right the young, even though the NIESR clearly show that:

"While the average 65-year-old has enjoyed a net £223,183 state subsidy above the tax paid, a new-born child will have to contribute a net £159,668 over their lifetime."

You greedy old buggers are really beyond the pale, I don't know why you all moan about Gordon Brown, he really should be your poster boy.

Cynic

Just what I need when inflation is eroding my standard of living and my savings are failing to top up my pension - an increased tax bill! I thought Labour (10p tax rate, anyone?) was the party that didn't do joined up thinking.

Horatio

Might a simple solution to the pension problem (not just pensioners over 60/65, but all those drawing pensions early too) be to tax pensions as 'interest' instead of 'earnings'. Then apply one rate (32%/52% or whatever) to all 'earnings' and a lower rate (20%/40% etc) to 'interest', including pensions as redefined.

It's not so many years since interest was taxed at different rates from earnings anyway: and dividends are still charged to tax differently from other investment income.

Akvavitix

They are only going to merge NI and TAX because they want to hide how many years you have or have not been paying into the Ponzi scheme they call a State Pension. That's it. No other reason at all.

Victor Southern

Percy

You wrote "You greedy old buggers are really beyond the pale".

Do we have another supporter of involuntary euthanasia of the aged?

Some of those greedy old buggers paid for the school you attended, for the road you walk or drive on, may even have fought for your freeedom. Some, when a bit younger, fed you and changed your nappies.

You are best described as an ingrate.

Horatio

It's not just pensioners who would be at risk of losing out significantly by a change to a unified tax/NI rate, but anyone with two or more separate employments (at present, each has a discrete set of NIC thresholds) or combined employment(s) and self-employment. To a lesser extent, the self-employed in general would be penalised, as they have historically been charged lower rates of NIC: the lower rates corresponding to lesser entitlements to benefits, and accrual of basic State pension only (no SSP).

Major Plonquer 1

Higher rate taxpayers (those in the 50% bracket) are usually smart enough to figure out that they are really paying 62%. And if they are very clever boys who start their own business they'll also realise that they pay the employers 12% contribution as well taking it all the way up to 74%.

As an employer in Hong Kong I pay 16%.

So why would I want to open a business in the UK? It doesn't matter how you present it, taxes for employers are just far, far, far too high.

Steve Tierney

I'm really quite excited about all this deregulation for small business. I hope it happens and isnt just hype.

Phil Taylor

If you also merge Employers' NI you effectively give workers an 11% pay rise and show them that about half of their total income goes in direct tax. It would change our attitude to tax forever. We would all feel richer and want some of our money back.

Percy

Victor Southern

Thanks for that, true to type you subject anyone who dares think that your generation is so self absorbed and greedy that the best you can come up with is the "you're so ungrateful, if it wasn't for us" guff.

The truth is you take out more than you put in, good luck to you but you could at least have the decency to admit to the younger generations that you were very, very lucky.

Colin

Victor Southern said:

"Some of those greedy old buggers paid for the school you attended, for the road you walk or drive on"

Yes, using borrowed money which we will have to repay with interest!