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Matthew Sinclair: Lower, reformed taxes will reduce tax complexity

Today the TPA has released a new research note looking at tax complexity.  We've studied the length of the tax code in the Tolley's Tax Guides and how they have grown.

Corporate tax has shown the most staggering growth.

Tolley's Corporation Tax Guide


But the complexity of income tax has also grown sharply.

Tolley's Income Tax Guide


For context, War and Peace is just over 1,000 pages long.  With taxes so complicated is it any wonder that HMRC keeps making mistakes?  That small businesses find the challenge of complying with the system as formidable as the actual amount they have to pay?

The Government has said they intend to do something about this issue, and deserve credit for establishing the Office for Tax Simplification.  But the truth is that it is hard to seriously reform the system while you are trying to raise 40 per cent of national income, the amount they expect to be spending at the end of the Spending Review. Many of the reliefs and exemptions exist in order to try and avoid some of the worse distortions and hardships that high taxes create, unfortunately many of them just make the situation worse but removing the bigger exemptions without lowering overall effective rates could risk causing significant economic disruption.

If we want to really reduce tax complexity we need to understand that as one great side effect and complement to lower taxes, not as an independent reform.  That's why we have established, with the Institute of Directors, a 2020 Tax Commission, which will look at how and why we should be working for lower, reformed taxes.


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