Tax need not be taxing (with a flat tax)


adamhartdavis.jpgFollowing the online tax return debacle, Adam Hart-Davis, the face of HM Revenue and Customs, questioned the way tax is collected in this country. As well as apologising for the online website crashing on Thursday, he described the VAT system as absurdly complicated and said it was a mistake for Gordon Brown to have amalgamated the Inland Revenue and Her Majesty's Customs and Excise in 2005. That move was analogised at the time in the Financial Times with trying to cross a Terrier with a Retriever.

It is worth considering how we got to this state of affairs. The idea has been to save money by replacing the monolithic human system with a complex computerised one. However, implementing the new system has proved more prodigal than its predecessor, with the added disadvantage of putting many people’s personal data at risk. With all the mistakes too numerous to recount, the government is rethinking its affection for these grand IT projects. Given that that the cost to tax payer of abandoned IT projects alone since 2000 stands at £2 billion, this is clearly too little, years too late.

Private industry chiefs have been critical of the incompetence of this government. Rob Steggles of NTT Europe Online arguing: "If an organisation’s web presence fails to perform at a critical time, both reputation and revenue suffer." However, unlike the private sector, HMRC will not go out of business and as such the chaos continues.

The solution is surely to simplify the tax system. In the same interview Hart-Davis argues for a simpler tax system. He suggests that a flat tax system would be both easier for the taxpayer and will ultimately bring in more revenue. He is absolutely right. With a flat rate of tax, a tax return could be completed in matter of minutes on the size of postcard, abolishing the need and unbounded expense of either a bloated bureaucracy or complex computer system.