Analytical
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Introduction
A tax system should be created which works for everyone and is fair, stable, certain and easily understandable. The overall tax system should be designed to reduce social inequality. It would be advisable to expect most contributions from those businesses and individuals with the large sum of money (Jones, 2016).
analytical framework It is appropriate to develop a system that could tackle long-term issues such as climate change, the economic shift from fossil fuel to renewables and the mechanism that could empower citizens and balance relationship between individual and state (Graetz, 2016).
Role and Purpose of Tax
Analytical framework: In addition, most importantly the tax system should deliver the benefits for which it was developed. Most tax reliefs and allowances exist in a system because the government considered it good. When the relief mechanism starts to function, some stakeholders work to use the relief for the purpose for which it was not created and manipulate legislation to make it complex tax avoidance schemes (Pantamee, and Mansor, 2016).
Upon Identification of the loopholes, new legislation is then required to fight for the way it should be applied and the chain goes on and on (Torgler, 2016). This makes the tax system equivalent to a patient who has been prescribed medicine treat the primary illness and afterwards has to take more pills to cover the side effects of the first pill (that had been used to treat the main illness).
Critical Discussion and Analysis
Analytical Framework for an effective tax system
Tax on income should be based on progressive income with a transparent and consistent rate. Policies should be applied consistently for all Taxpayers of varying income. A coordinated mechanism should be developed for the people with low income and greater needs essentially for those belonging to the working class group.
There should be no taxes related to the transaction. Indirect tax structure should be overwhelmingly standardized with the imposition of VAT on almost everything (Shaviro, 2016). Certain exemptions to the rule could be made on the basis of economic reality.
Analytical framework: The environmental transaction should target road occupancy rate and should not charge tax, not on the basis of fuel usage. The consistent tax rate should be charged for carbon emissions. In order to save tax, there should be no tax on normal savings return. Lower tax on dividend would bring equivalent rate on dividends as equal to another source of income after taking into account corporation tax (Qian, and Zhuang, 2017).
A replacement mechanism should be developed for the lifetime wealth transfer rate. An introduction to single rate would bring the transparency and neutrality which should have been the hallmark of a good tax system (Stewart, and Thomas, 2016). Equal standards should apply for the income earned through employment, self-employment and for individuals running a small enterprise. Earned income should be favoured over other sources of income (Pilkington, 2017).
Tax manipulations from the housing system should be removed. This entails getting rid of the jumps in the stamp duty (Cerruti, Alberini, and Linn, 2017). All the tax reliefs and incentives should be erased unless clear objectives are stated as to how and why they are in place.
Policies should be developed to reward long-term investment and one way of doing it is to lower the CGT rates (Hall, and Buckley, 2016). The tax system should be used to support and not delay climate change mission. £100 fines being imposed on the late return should be replaced with the amount being levied on the percentage of tax unpaid.
Taxes on income
The history suggests that flatter tax rates on income tax would work more efficiently. A single rate of income tax, which would work as existing system does but would follow a new administrative mechanism for income earned by corporate sector, is the most effective way going forward.
(Stamatopoulos, Hadjidema, and Eleftheriou, 2017). The major advantage of single rate would be transparency it would bring to the system (Harutyunyan, 2017). It would remove incentives for the taxpayers to shift the source of income from one type to another and would remove the need to put in place regular policy mechanism (James, S., 2016).
The decision to allocate income in the form of employment, self-employment, share buybacks and dividends should be done purely to gain better efficiency and governance.
National insurance
National insurance works more like a secondary income tax. It could be deemed as identical to the income tax but far more costly and opaque (Budak, and James, 2016). Reshaping the genuine social insurance system is a different matter but present system prevalent in the UK is certainly not up to the mark (Martin, 2017.).
Other related taxes that apply on income should be revoked and incorporated into a tax on income including corporation tax, stamp duties on shares and property transaction (this is an advanced tax on the present value of the anticipated future income from assets) and capital gains.
Taxes on gifts
Inheritance tax having a structure similar to that of income tax but works as an estate tax should either be erased altogether or should be amalgamated with income tax depending on the fact whether the left property is viewed as being of the heir or deceased (Alvaredo, Atkinson, and Morelli, 2016). If it were…..
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