A flat tax would not suit the UK economy | Oliver Kamm

Hugo has suggested that there is a case for a flat tax. I disagree.

Tax reform should ideally do three things: raise revenue, preserve incentives to work and improve the position of low earners. Unfortunately these aren’t always compatible. Trying to meet them with a flat rate of tax would require a low rate and high personal allowances. You can’t do that while trying to reduce the budget deficit.

There is a good case for simplicity. A flat tax achieves this, though, not because it imposes a uniform rate but because it ends exemptions. The complicated part of the calculation is to work out taxable income; once you’ve got that, the calculation is simple, whether you have one or several marginal rates. A flat tax is not suitable for a complex economy such as the UK.

Twitter: @OliverKamm

“The British tax system is unfair…a small but significant minority are paying far less than their fair share.” Read more

Notes

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