By getting rid of income tax and placing the burden of taxation on purchases you can remove all the disincentives to create wealth while at the same time help those on low incomes to have more cash available for the basics of surviving. We can reduce the cost to the country by making most of the tax inspectors and collectors into income generators rather than cost centres. We already have VAT on purchases. It must be within the abilities of the clever people at the HMRC to devise a stratified system whereby more VAT is charged on luxury items and less, or even none, on basics such as food and children’s clothing.

The tax amount would be set and collected at the point at which a product first enters the market and then transferred as a net amount, rather than as a percentage of the sale price to the next customer in the chain that finishes with the end user of the product. For example, the tax should be set when the manufacturer sells the product to a wholesaler or another manufacturer that incorporates that product into theirs, or  an importer first takes delivery of the product,  The tax could be set either on the cost price of the item or the Recommended Retail Price. Where the tax is applied to a service it is set on  the value at which the service is provided to the customer, for example the labour content of a bill for plumbing or building. The tax on the products used in these instances will already have been collected.

By transferring the tax as a net amount it will reduce the need for accountants and accounts staff to act as unpaid tax collectors, reducing the amount of time they spend on calculations, or checking calculations as well as reducing the cost to companies and the economy in general. This process will reduce the amount of paperwork needed and make the collection of the tax easier and cheaper. It will reduce the amount of people involved in setting and collecting the tax. The rate at which the tax is collected can be adjusted simply and remove the need for exemptions and prevent non-domicile residents from avoiding tax.

Why is this idea important?

This change is needed so that the burden of tax is fairer and less expensive to administrate. It reduces costs to the government and thus the taxpayer and frees up more people to generate income for the economy.

Leave a Reply

Your email address will not be published.