Chaos is now the operative word for our dysfunctional tax system.
The Institute for Fiscal Studies has looked at the system, and notes that there are certain areas where a person can theoretically pay 60%, 70% or even 100% tax.
Paul Johnson, who undertook the research, quoted in the Telegraph argues that our tax regime lacks coherence to a degree “approaching chaos”.
How do these huge marginal rates of tax arise?
It’s because special tax benefits and allowances have been introduced over the years. And then they have been withdrawn again under subsequent means-testing.
Jason Piper of the Association of Chartered Certified Accountants, explained the phenomenon in relation to child benefit.
“The child benefit you get is entirely 'taxed away’ if you earn over £60,000, but all yours if you earn under £50,000. Between those two levels of income you suffer a charge equal to 100pc of your child benefit.”What ever happened to simplification?
Tax does have to be taxing.
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