TaxCorporate TaxMerging income tax and NI would be “inconceivable”

Merging income tax and NI would be "inconceivable"

The Office of Tax Simplification said that merging NI and income tax would "simplify the tax system", but a member of the consultative committee said it would be inconceivable in the near future

A MERGER OF income tax and National Insurance would be “inconceivable” in the current Parliament, despite the suggestion by the Office of Tax Simplification that it would simplify the system.

Bill Dodwell, a tax partner at Deloitte who sat on the OTS consultative committee, said merging the base of employment income would be a good thing. He said there was “no reason” that certain employment rewards – in the form of benefits, cash, shares – are subject to one or the other of NI or income tax.

But he said a full merger of the systems would be “inconceivable” in the current term of this government because NI does not apply to pensioners or savings income. “We are not going to get into a system where a government says they are going to put up tax on pensioners,” he added.

Furthermore, the limits and thresholds are different for NI and income tax. “You always end up with a bunch of losers,” he said. When Gordon Brown abolished the 10% rate of tax, it left 5 million lower earners worse off. The country then had to compensate by increasing personal allowances. We ended up giving money to 15 million people.

“You will only see a merging of the system if a chancellor has lots of money to give away,” he added.

He said that the report “a fantastic piece of work”, especially given the limited time and resources of the office.

Related Articles

OTS report: Corporation tax should follow accounts

Corporate Tax OTS report: Corporation tax should follow accounts

5m Alia Shoaib, Reporter
Five key tax and business burdens the chancellor must ease in Autumn Statement

Business Regulation Five key tax and business burdens the chancellor must ease in Autumn Statement

1y Kevin Reed, Writer
OTS seeks feedback on tax simplification strategy

Accounting Standards OTS seeks feedback on tax simplification strategy

2y Fraser Simpson, Reporter
OTS outlines income tax and NI alignment plans

Corporate Tax OTS outlines income tax and NI alignment plans

2y Fraser Simpson, Reporter
Tax code complexity could damage economy, warns think tank

Corporate Tax Tax code complexity could damage economy, warns think tank

2y Fraser Simpson, Reporter
OTS recommends simpler tax package for SMEs

Corporate Tax OTS recommends simpler tax package for SMEs

2y Fraser Simpson, Reporter
Knight's suitability as OTS chief questioned by MPs

Corporate Tax Knight's suitability as OTS chief questioned by MPs

2y Fraser Simpson, Reporter
'Live' online tax accounts set to kick off

Corporate Tax 'Live' online tax accounts set to kick off

2y Kevin Reed, Writer