scrumpyjack wrote:There was some justification for abolishing the credits and having lower rates of tax on dividends (but still higher overall than before) because of the significant reductions in corporation tax. These latest 'simplifications' are nothing of the sort, they are simply an excuse for tax increases.
Indeed. A lot of the complexity of our tax system derives from three factors:
1) A desire to benefit some class of people over some other class of people
2) A desire to encourage some behaviours and discourage other behaviours
3) New rules to close loopholes that were created by other new rules
It would be easy to simplify the tax code. Just have a single flat rate for income tax, capital gains, corporate tax, VAT, IHT etc., with no deductions, allowances and exemptions, set at rates that make the entire change revenue-neutral.
The problem there for the government is that the tax code would no longer favour "the right people" nor manipulate people into behaving this way or that way.
The only case I can recall where a tax was genuinely made simpler was with CGT, when indexation was abolished and a single, lower flat rate was introduced. But of course that has already been partly undone by creating a higher rate. The government just cannot leave things alone.
ISAs are delightfully simple, effective and attractive as they are. No need to mess with them. But of course that is exactly what some would now like to do. It's just too hard to do nothing, apparently.