Time to tackle our terrible tax code

AMAZINGLY, the world’s fastest talker can speak 637 words aloud a minute. Yes, seriously. The record-holder is a Londoner called Steve Woodmore, who has featured repeatedly in the Guinness Book of Records. Tolstoy’s War and Peace comes in at a hefty 1,204 pages; it would therefore take 12 and a half hours for our record-holder to read it out loud, assuming 400 words per page.

I was reminded of these fascinating yet entirely esoteric factoids by the news that George Osborne’s Office of Tax Simplification, led by accountant John Whiting, is about to publish its report. It has its work cut out: the UK’s tax code makes War and Peace look like a short story. The complete Tolley’s Tax Guide – the handbook of tax legislation – is 11,520 pages long, more than double the 4,998 pages filled by the 1997 edition. Whether or not it is a work of fiction remains to be seen; but it is certainly not to be taken lightly. The UK’s tax code is now the longest in the world, according to Lexis Nexis.

Reading it out loud – even at record breaking speed – would take over 120 hours. Assuming eight hours per day, that’s over fifteen working days or three weeks. And that’s just to read it, of course, at top speed – not to understand it. That would take more than a lifetime, especially given that hundreds (if not thousands) of new pages are added every single year. This illustrates the tax system’s absurdity. Nobody understands it, not even HMRC or any individual accountant. You would need a team of dozens of professionals to start to be able to navigate it properly in its entirety. Ordinary people and employers don’t stand a chance.

Tolley’s corporation tax guide alone is now 1,897 pages, 185 per cent longer than it was in 1999-2000, according to an analysis from the TaxPayers’ Alliance. That would take the world’s fastest speaker 20 straight hours to read aloud. The income tax guide is 1,801 pages, 54 per cent longer; the capital gains tax guide is 1,463 pages long, 70 per cent longer; the inheritance tax guide is 958 pages long, 63 per cent longer. That would take the world’s fastest speaker 10 straight hours to read aloud; it beggars belief how complicated it has become to operate what ought to be a simple levy. Yet another good reason to abolish inheritance tax completely.

But the whole code is complete madness. It is totally out of control; there is no value placed on the time and effort that now goes into attempting to comply. Some people are able to use the system’s allowances and loopholes more than others; there is no equality in front of the law. What is really required is a completely fresh start and a completely new system, with an overriding aim of simplicity and clarity. A few years ago, in my book Flat Tax: Towards a British Model, I advocated a revolutionary elimination of all loopholes and exemptions. The idea was to tax virtually all income just once at the same, low rate to slash compliance costs and increase incentives. The trend since then has been the polar opposite: greater complexity, an even more graduated tax code, less rationality – and thus more compliance costs, a severing of the link between effort and reward and reduced growth.

The office for tax simplification’s review of 74 tax reliefs is likely to fall short of real change. We may still be pleasantly surprised – but don’t bank on anything truly radical.

allister.heath@cityam.com
Follow me on twitter: @allisterheath

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