Mr Whiting explained: 'The PAYE/NICs system is creaking as it tries to accommodate today's flexible pay schemes and social benefits such as Working Families Tax Credit. The employment tax system is predicated on a model of male, full-time permanent employees and is ill-equipped to cope with the working world of the 21st Century where people move in and out of part-time work, full-time work and self-employment.'

Mr Whiting suggested an 'e-tax' return system would reduce the compliance burden on employers who are treated as unpaid tax collectors by the government, by enabling them to work within a simple flat rate deduction system. 'The employer is coping with an ever more complex system and has the burden of being the unofficial tax office as well,' he said.

'Meanwhile, the employee is discouraged from taking an interest in tax. The vast majority are left to believe that the tax is just right and that there is no need to challenge it. Most onus rests with the employer to get it right, and for that matter, to act as the enquiry centre for routine tax questions.'

He added that the e-tax system would involve payments being processed electronically along with payroll information being incorporated into the e-tax return. 'This should be possible for a Government that's truly joined-up,' said the CIOT president.