A tax system in need of attention

On the eve of the autumn statement the IFS has published a brief overview of the UK’s tax system. Many areas of the tax code remain “in need of attention” despite clear attempts to reform various aspects over the last 35 years, the authors say. This will not come as a surprise to anyone used to the system and its complexities and uncertainties.

Points of interest in the IFS report include:

Income tax, NICs and VAT together are expected to raise £428bn in 2016/17. Corporation tax will raise an estimated £43bn and business rates around £28bn.

An estimated 30.1m individuals will be liable for income tax out of an adult UK population of around 53.2m: “This is a reminder that attempts to use income tax reductions to help the poorest in the country are likely to fail, since less than three-fifths of the adult population have high enough incomes to pay income tax at all.”

The number of higher and additional rate taxpayers has grown “from less than 3% of the taxpaying population in 1979/80 to around 15% in 2016/17”.

Personal tax reforms since 2010 have reintroduced an element of family taxation but there is a “principled debate” to be had about the role of joint versus individual assessment.

The separate existence of income tax and NICs “is largely a matter of historical accident and makes the tax system unnecessarily opaque, complex and administratively expensive”.