Tangled Taxes

The Financial Times has published a welcome editorial comment on the complexity of taxation in the UK and US. In the UK, it says, tax activism by the chancellor (finance minister) Gordon Brown, who is now Prime Minister, has been behind a lot of the tax complexity. In the US, by contrast,

Bewildering complexity in the tax code has sprung not from the exertions of one pathologically interventionist finance minister, but from a kind of tax-code anarchy, in which a roiling crowd of legislators – sometimes loosely herded by the White House, often not – has tweaked and nudged the system in every possible direction, seeking advantage for this group or that, supporting or deterring one thing or another.

In terms of strategic objectives, the code is no longer intelligible, though partly by accident it plainly over-taxes saving and investment, subsidises borrowing massively, asks most of the very rich to pay too little, and most of the working poor to pay too much.

TJN strongly supports simplication. Another FT story about a survey of companies' attitudes to aggressive "tax planning" illustrates nicely the links between taxation and companies' recognition of their links to society: companies with a higher public profile tend to be aware that aggressive tax "planning" can damage their health.

Companies with few shareholders are more likely to use aggressive forms of tax planning, a study by Revenue & Customs has suggested. Businesses that are household names appear to be more risk-averse, according to provisional conclusions of the research into the attitudes held by large groups’ tax departments.

A survey showed that some of the more aggressive companies were also those with fewer shareholders, especially where senior management was also a major shareholder; and that the most risk-averse tended to be organisations with a ‘household name’ quality, which placed a more explicit value on their public reputation,” it said.