Short-sighted and too complex
Considering this country has a pensions gap that even conservative estimates put at close to £60bn, it was surprising to see yet another attack on the nation's incentive to save in last week's finance bill.
By removing a tax-free lump-sum for individuals who agree to defer taking up their state pension for five years, the Revenue has undermined government efforts to prevent a future pensions crisis.
In many ways it is short-term thinking from the Treasury. On paper, it seems reasonable as the government gains twice from the move. Not only will it still be able to avoid paying pensions for the agreed period, but it will also earn tax on that lump sum when it is eventually paid.
Chas Roy-Chowdhury, head of taxation at ACCA, describes the move as a ‘blow’ and ‘not a move that will help the pensions crisis’.
The length and complexity of the finance bill is also an area of concern, and has moved some commentators to call for the establishment of a committee on tax policy.He believes it could work in a similar way to the existing monetary policy committee and could set the framework of the tax environment, with the overall long-term goal being the simplification of the system.
It is clear that something must be done to tackle our Byzantine tax structure. The two halves of the 2005 finance bill amount to more than 350 pages of legislation. With a similar tome-like bill being published every year, it won’t be long before tax professionals and companies are literally buried under the mountain of regulation.
David Rae edits the tax page