Expert: Phil Woodford - 3/22/2001

Question
I have a couple of questions to ask you.
Do uo believe that the british tax system is fair and equitable? if  not how could we improve it?
Are labour going to promote tax simplification at the next election? can simplification and fairness be implemented together
Thanking you for your reply
Gareth

Answer
Hi Gareth

The first thing I should say is that I'm not an expert on tax by any stretch of the imagination, but I guess I would judge the fairness of a taxation system on two levels.  First, does it charge richer people more than poorer people?  Second, does it strike the right balance between
an individual's right to hang on to their own money and the state's obligation to provide public services?

On the whole, I am not too displeased with the balance in the UK right now.  The Labour government has targeted tax breaks at those people who are less well off, through initiatives such as the working families tax credit and a reduction in the marginal rate of tax for people on lower
incomes.  At the same time, however, it hasn't attempted to penalise the rich, simply for being successful - an accusation that might legitimately have been levelled at previous Labour administrations.

There is definitely a debate to be had over indirect taxation.  The Conservatives allege that Labour has taxed people by 'stealth' and Labour retorts that the Tories were doing exactly the same when they were in power. These hidden taxes on things such as petrol - or perhaps the removal of tax incentives where they previously existed - are pretty difficult to pin down.  In general, I would certainly like taxation to be simpler and more transparent, but this should never be at the expense of fairness. Politicians on the American right have often talked about flat-rate taxes, which simply benefit the wealthy.  Margaret Thatcher's 'community charge'in the UK was exactly the same.  You couldn't get a simpler tax: everybody
paid exactly the same.  But this is precisely what made it unacceptable.

I support both hypothecated taxation (where people are told that a certain proportion of their money has been ringfenced for a particular service, such as the NHS) and straightforward environmental taxation that penalises individuals and companies for pollution.

Hope the above is of interest.

Phil Woodford