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Tax Retrenchment Now!

Tax Retrenchment Now!. Learning from B-EST practice. James Oates Glasgow 4 th October 2014. Tax Efficiency. Maximise revenue with minimum distortion “Pluck the goose to get the maximum amount of feathers with the minimum amount of hissing”- Colbert

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Tax Retrenchment Now!

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  1. Tax Retrenchment Now! Learning from B-EST practice James Oates Glasgow 4th October 2014

  2. Tax Efficiency • Maximise revenue with minimum distortion • “Pluck the goose to get the maximum amount of feathers with the minimum amount of hissing”- Colbert • Debate should not be about marginal rates, but tax efficiency

  3. Defining the problem • The United Kingdom has a tax code in excess of 11,325 PAGES long • It is the Longest Tax Code in the world • Nominally Progressive it is actually highly Regressive • It is literally impossible to understand and has been designed that way

  4. Tax competitiveness

  5. Tax take as % of GDP Source: Eurostat

  6. Cost of Tax Administration UK Estonia Source: OECD

  7. Time to file tax return / year Source: World Bank

  8. Esto-Tax System A Quick Overview

  9. OK So, where again?

  10. Flat may not be regressive • Flat Tax of 21% • Basic Tax Free Rate= €144/month • €355/month minimum wage (av. €1023) • Limited exemptions to lift BTFR • Housing loan up to € 160 / month • Pensions payments up to 210/ month • Training costs • Donations • All not greater than 50% of total income • 99.7% of filings made Online

  11. Social tax is high • Social tax rate is33% of gross wages • Min. rate which is the basis for payment of social tax is€320 /month • Minimum social tax liability of employers is €105.60 (monthly rate x 33%)Minimum social tax liability of sole proprietors is €316.80 per quarter (€1267.20 per year) • 1% (2%) unemployment insurance

  12. Entrepreneurship fostered • Corporation tax is 0% on undistributed profits, 21% on distributed profits • Takes minutes to set up limited company and open bank accounts • Expectation of entrepreneurship • High PISA rankings show quality of workforce

  13. Land Tax • Collected as state level tax, but 100% of the revenue is used to fund Local Councils. • The rate is set by the Local Council within the limits of 0.1-2.5%. • is levied on the value of the land only, improvements are not considered. • Few exemptions- even public institutions are subject to the land value tax. Land that is the site of a church is exempt, but other land held by religious institutions is not exempt. • >90% of residences within Estoniaare owner occupied compared to a rate of 67.4% in the United States.

  14. Conclusions • Simple & Clear tax system • Low cost of administration • High use of technology (land registry) • Structural rather than policy-driven goals • Plenty of feathers but much less hissing

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