Tax Retrenchment Now!. Learning from B-EST practice. James Oates Glasgow 4 th October 2014. Tax Efficiency. Maximise revenue with minimum distortion “Pluck the goose to get the maximum amount of feathers with the minimum amount of hissing”- Colbert - PowerPoint PPT Presentation
Tax Retrenchment Now!Learning from B-EST practice
James OatesGlasgow 4th October 2014 1Tax Efficiency Maximise revenue with minimum distortionPluck the goose to get the maximum amount of feathers with the minimum amount of hissing- ColbertDebate should not be about marginal rates, but tax efficiency
2Defining the problemThe United Kingdom has a tax code in excess of 11,325 PAGES longIt is the Longest Tax Code in the worldNominally Progressive it is actually highly Regressive It is literally impossible to understand and has been designed that way3Tax competitiveness 4
Tax take as % of GDP5
Source: EurostatCost of Tax Administration
6UKEstoniaSource: OECDTime to file tax return / year7Source: World BankEsto-Tax SystemA Quick OverviewOK So, where again?
Flat may not be regressive10Flat Tax of 21%Basic Tax Free Rate= 144/month355/month minimum wage (av. 1023)Limited exemptions to lift BTFRHousing loan up to 160 / monthPensions payments up to 210/ monthTraining costsDonationsAll not greater than 50% of total income99.7% of filings made OnlineSocial tax is highSocial tax rate is 33% of gross wagesMin. rate which is the basis for payment of social tax is 320 /monthMinimum social tax liability of employers is 105.60 (monthly rate x 33%)Minimum social tax liability of sole proprietors is 316.80 per quarter (1267.20 per year)1% (2%) unemployment insurance11Entrepreneurship fosteredCorporation tax is 0% on undistributed profits, 21% on distributed profitsTakes minutes to set up limited company and open bank accountsExpectation of entrepreneurshipHigh PISA rankings show quality of workforce
12Land TaxCollected as state level tax, but 100% of the revenue is used to fund Local Councils. The rate is set by the Local Council within the limits of 0.1-2.5%. is levied on the value of the land only, improvements are not considered. Few exemptions- even public institutions are subject to the land value tax. Land that is the site of a church is exempt, but other land held by religious institutions is not exempt.>90% of residences within Estonia are owner occupied compared to a rate of 67.4% in the United States.
13ConclusionsSimple & Clear tax systemLow cost of administrationHigh use of technology (land registry)Structural rather than policy-driven goalsPlenty of feathers but much less hissing14