The NI system, introduced in 1946 as a contributory welfare fund, adds ‘enormously’ to an already complex tax system, yet is merely another tax, the body has claimed.
David Frost, director general of the BCC, said: ‘Business is being held back by administrative costs and burdens. If we are to compete globally and pay for the chancellor’s ambitious public spending commitments we must have simplification of the tax and regulatory system.
‘Merging employee NI and income tax would be a very positive start. Tax simplification is just the windfall saving the chancellor needs and British businesses will thank him for it.’
The BCC is demanding a three-stage approach to eventually ‘amalgamate employee’s NI contributions into income tax’. The first would put NI on the same earnings base as PAYE and calculate it on an annual basis. Next, the chamber wants to simplify the NI tables, by removing unnecessary bands and exemptions. Lastly, the body seeks to merge employees’ contributions into income tax.
Employers have long complained about the cost of managing NI contributions.
However, merging it with income tax would carry political risks for the government. Income tax rates would go through a steep rise, an outcome Gordon Brown has pledged to avoid. The government would also have to admit that contributions do not go to social services and health, contrary to public perception.
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