HMRC, you had one job
It can be frustrating to state the obvious. But, typical to its nature, HMRC has forced me to do just that. In 2013, the average Briton had to work 150 days into the year to pay their total tax bill. Not until May 30th did UK residents stop working for the Chancellor and started earning for themselves
It’s simple, really. Brits earn the money, and HMRC arranges to have it taken away through a variety of different taxes—VAT, National Insurance, and of course, income tax.
It's a tough job the HMRC has—to tax and tax some more—but it’s probably safe to say the average earner has the harder job – to supply both the government with the funds it needs to run the country, and the funds she (and potentially her family) need to live on.
So it should be expected, at the very least, that the taxation process be as smooth and simple for the earner as possible; that those 150 days worth of earnings be transferred without fuss…
If only. From The Telegraph:
“Four months ago, HM Revenue & Customs admitted it had collected the wrong amount of tax from more than five million people in the 12 months to April 2014.
Since then, the taxman has sent those affected notification letters explaining how it would claw back or issue refunds for on average £300.
In an email leaked to The Telegraph, a select group of senior HMRC staff and accountants were told "thousands" of mistakes were made.
The recipients were advised to tell taxpayers who questioned their bills "not to repay any underpayment" of tax.
It said anyone who had overpaid tax should not cash any cheques they had received. Anyone who has already cashed a cheque will see the money potentially clawed back if a mistake has been made.”
Mistakes happen, sure. But such levels of incompetence, without any offer of compensation, can only be the work of the public sector.
In almost any exchange between a customer and a private business, over-charges and under-charges play out in the customer’s best interest. If a hotel or restaurant accidentally over-charges you, a refund is surely made (often with sincere apologies and some form of compensation for the trouble). If a grocery store under-charges you for fruit purchased, no letter comes through the post asking you to make up the sum.
But when HMRC makes not one bad calculation, but a series of wrong calculations for millions of customers, the inconvenience falls on the taxpayer, who will have to make up the difference calculated or wait months for her rebate.
Of course, taxation isn't a voluntary transaction, the taxpayer isn’t considered a customer, and the government’s a monopoly—so blatant incompetency shouldn't be a surprise at all.
Sometimes it's the little things that matter in tax systems
A little story that helps to explain why the Greek economy is in the depths that it is:
But as happens so often in Greece, the bureaucrats had other plans. In a country where you are viewed favorably when you spend money but are considered a criminal when you make it, starting a business is a nightmare. The demands are outrageous, and include a requirement that the business pay taxes in advance equal to 50 percent of estimated profit in the first two years. And the taxes are collected even if the business suffers a loss.
I recall something similar from time in California: you must put up a bond for the amount of sales tax that you will be collecting in the future. Plus a fee for the privilege of opening a business in that great state.
This just isn't a sensible manner in which to be running a tax system. Yes, of course, tax must be collected for there are things that we really do need government to do (even if not as many as they attempt to do). And it's probably a good idea to have certain measures in the tax law to make sure that people don't dodge said righteously due taxes. But to add to the capital requirements for starting a business in this manner is simply ludicrous. It's a difficult enough, and expensive enough, enterprise at the best of times. Rather better, therefore, to leave the possibility of avoidance there in the process of leaving some room for a business to even start.
Our own dear HMRC seems to have cottoned on to this point: it's no secret at all that many new firms bolster working capital by delaying PAYE tax payments to the Treasury. It's not exactly desirable in the scheme of things but when looked at in the round better that such companies survive their growth pangs than that HMG gets its money on the nail.