Osborne rules out NI/income tax merger

THE ELEPHANT IN the room of tax simplification is trumpeting. The merger of National Insurance and income tax seems to be a possibility, according to the nationals.

But, in fact, chancellor George Osborne all but ruled out a full integration of the systems yesterday. Indeed, his limited scope even caused John Whiting to express his disappointment.

Crucially, Osborne said that he is “not proposing we extend National Insurance to pensioners, or to other forms of income, or that we abolish the contributory principle”. It is this final point that is the most salient. A full merger will have to include an abolition of the contributory principle, otherwise it remains National Insurance.

What Osborne has done is paved the way for an alignment of the systems – the same calculations, the same review period, maybe even a removing all the differences between reliefs applied to the systems. All these would be positive moves and would simplify the systems.

But the fundamental principle behind National Insurance – the contributory principle – will remain. And, as such, the possibility of complete transparency around our rate of tax will not happen.

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