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Clegg’s solution to complex tax code: another tax!

By Angela Harbutt
March 10th, 2012 at 12:51 pm | 1 Comment | Posted in Liberal Democrats

A rather depressing Telegraph online headline today reads “Nick Clegg goes after the ultra-rich” . Nick Clegg  has apparently recently “uncovered evidencethat our tax code is too complex and that complexity is benefiting tax-lawyers and the super-rich.

The Deputy Prime Minister says he has uncovered evidence that hundreds of millionaires are paying a tax rate of less than 20 per cent on their earnings by using an “army of lawyers and accountants……. A wide array of tax loopholes and reliefs are exploited by the wealthy to reduce their tax bills, leading to them paying overall rates on annual earnings beneath those faced by ordinary workers, he said.

“Uncovered” really? Good grief – where has he been for that last couple of years ? Here is an article from Mr Littlewood (formerly of this parish) now of the Insititute of Economic Affairs back in Autumn 2010.

Early this year, an IEA research paper showed that with over 8,000 pages of primary legislation – in very rough terms about six times the length of War and Peace – Britain has the longest tax code in the world. For those inclined to believe that other Western European countries are always more bureaucratic than Britain, it was worth noting that the German and French tax codes weigh at a comparatively modest 1,700 and 1,300 pages respectively” Mark Littlewood: Telegraph 8 September 2010

Then again one year later Littlewood said it again …

The Tax Commission research points to the incredible length and complexity of our tax rules as the principal culprit. Tooley’s corporation tax guide, for example, has nearly trebled in length in the last decade. It now has a word count not dissimilar to the complete works of Shakespeare. The TPA amusingly illustrates the farcical scale of our tax code by showing that one of the fastest readers on the face of the Earth would take five days to read it out loud.  Goodness knows how long it takes to understand it“. Mark Littlewood: IEA blog 16th August 2011

Er.. And again a month later…

“The UK’s tax rules are now so complicated and lengthy that British businesses spend around £20bn a year simply trying to comply with the rules . Not handing over a single penny in tax, just filling in paperwork and attempting to calculate their liabilities. That’s an overall cost of around £300 for every man, woman and child in this country every year.

Things are getting worse, not better. When a country’s tax rule book is five times longer than the complete works of Shakespeare – and growing – you can only expect this kind of ludicrous waste and inefficiency. If the laws of association football were this long and confusing, you’d probably need hundreds of referees at every game and it’s doubtful the sport would be viable at allMark Littlewood: Mail On Line: 29th September 2011

Littlewood’s answer to the problem – simplify the tax code by employing best practice from other countries. That (according to Professor Philip Booth (IEA)) would save about £5billion in regulatory costs but also disproportionately assist small businesses being crippled by the burden. It would, of course, also eliminate a lot of the highly complex loopholes much beloved of the rich.

Clegg’s answer to the problem – introduce another tax!  If it was April the 1st I would be laughing. It isn’t and I am not.

Any chance that Clegg’s bizarre approach to this (much-publicised) problem is connected to a certain event being held in Gateshead this weekend?

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Get message into Lib Dem Away Day…small could be huge

By Angela Harbutt
February 2nd, 2012 at 1:26 pm | 2 Comments | Posted in Liberal Democrats

The Liberal Democrats have an away day today – and two years into Coalition their eyes must be firmly now on where they need to go for the remainder of this parliament if they are to have any chance of lifting themselves of the sticky 10% they are currently hitting in the opinion polls.

I think the world and their aunt now concur that being seen as a “brake” on the excesses of the Conservatives is not going to work. It is too negative, and, frankly just too lame. So we need something more positive.

Mark Littlewood (Director General of the IEA and Liberal Voice of the Year) was on the BBC’s Daily Politics today talking on this very subject and championing the idea that the Lib Dems should be the party that champions the cause of  small and medium sized businesses (SMEs)..

Yep – we agree with that.  Shortly after Lib Dem Conference we said the self same thing here at LV... Here is an excerpt from the post..

“So where should the Liberal Democrats be going, who should they be talking to and what policies should that then deliver?

It’s obvious isn’t it ? Small and medium sized businesses. The Conservatives are the friends of big business, the Labour party now firmly under the control of the Trade Unions is also increasingly obsessed with big business (whether workers of large public sector organisations or private enterprise). Ed Balls may have made overtures to small business in his speech on Monday. But referring to my earlier point – no one really believes that Labour is the party of small business or the entrepreneur. It’s just phony.

The Liberal Democrats on the other hand can legitimately claim the position of defender of the small. The most meaningful boost we have had in the polls recently came at the height of the Murdoch inquiry. It reminded the nation that we are not, nor ever have been, in the pockets of big business interests (media or otherwise). We argue for localism over big government. We stand for modernisation not protection of the status quo (and believe me the entrepreneur revolution is well and truly upon us). We are internationalists not protectionists. If any party should be able to win the hearts and minds of small business it should surely be the Liberal Democrats.

And if there is a group of people that every party should want to win it is small business. Small business is huge. There are about 23million people working in small and medium sized businesses. They are shopkeepers and entrepreneurs, lawyers and designers, engineers and specialist manufacturers. They are our kind of people. (And they are much more likely to operate close to where their goods/services are used which will keep the greener ones amongst us happy).  SME’s are small and nifty. Able to downsize and up-size quickly according to market conditions. They are canny,resourceful, and flexible. They are also the engine room for economic growth. Who wouldn’t want them in their camp? All they really want is for Government to stop standing in their way…..”

Do you think that the message is getting through yet?

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The Lib Dems: In search of new voters (part 2)

By Angela Harbutt
October 13th, 2011 at 4:38 pm | 1 Comment | Posted in Liberal Democrats

A couple of weeks ago I suggested here on this blog that the Lib Dems were the natural party of small business (The Lib Dems: In search of new voters…) and that with about 23million people working in small and medium sized businesses, they were a pretty attractive voting sector to pursue.

A study out today provides us with another damn good reason why the Lib Dems really should think about its relationship with small businesses – they disproportionately employ vulnerable people – making them both economically and socially important.

The IEA report Self-employment, Small Firms and Enterprise, by Peter Urwin, says that

…small businesses provide vital opportunities for those who often struggle to find work in the rest of the labour market – those with no or few qualifications, immigrants, women with domestic responsibilities and those with poor English language skills. There is therefore not only an important economic, but also a social dimension to ensure the government is not holding back this sector.

…11% of employees of small firms had no qualifications, compared with 4% of employees of large firms.

…Only 8% of people working in large companies had a language problem, whereas in companies with less than ten employees this is 18%.”

That’s pretty compelling stuff .

So what to do ?

Well , consider the IEA’s conclusions….

At a time when Britain’s economy requires thriving businesses, this research shows that complex regulation such as employment protection legislation and costs such as National Insurance prevent the self-employed from taking on employees.

There is therefore an increasing tendency for people to be self-employed without employees or to work for larger companies that are better able to cope with the costs of regulation. In short, there are too many barriers preventing people from moving from self-employment to becoming employers of small numbers of people and this affects vulnerable groups in the labour market.”

My advice to the policy makers within the Liberal Democrats is not only take note of the importance of small business. But to to embrace the IEA’s recommendations to help support this important sector.

I won’t go into all the  IEA’s recommendations here (go read for yourself) but essentially it argues for government  to lift the regulatory burden on businesses that is currently preventing many self-employed people from developing their businesses and employing people.

All of this would not only demonstrate the Liberal Democrat’s commitment to” the small and the local” (see previous post) – but is also a real strategy for growth and employment.

Sounds like a win-win to me.

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