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Simplify taxes : single Business Dividends Tax

Comment 2nd July 2010

I propose that all taxes on business be unified (eventually) by introducting a single simple Business Dividends Tax.

This tax would be a fixed rate charged on any sum of money paid out of a UK business account into an account of a different kind (or as cash). Payments into another UK business account would not be taxed.

A similar system was in place previously in Western Australia, although it was abolished when the Australian tax system was merged.

Why does this matter?

(1) This tax would be the equivalent of a business profits tax, personal income tax, and VAT, merged into one.

(2) The govt. costs of operation are minimal, and can be done at negligible cost by the banks who operate the business accounts in question. There will be a continuing need for tax investigations.

(3) Businesses are encouraged to retain money inside the UK business ringfence, rather than paying it out as cash; to employees, contractors, shareholders, or directors; or to overseas accounts.

(4) But reciprocal arrangements can be made with other countries operating the same system.

(5) Costs of calculating payroll would be reduced, especially for small businesses.

(6) Since the system is trivially simple and automatic, there is minimal chance of fraud.

(7) It would, in practice, be a simple matter to progress from this position to a complete abolition of income tax and income tax recording, if a flat-rate tax system were introduced.

(8) Sole traders and non-business employers would be required to operate business accounts for employment purposes.

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