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UK May Merge Social Security, Income Tax

By Amanda Banks, Tax-News.com, London

08 July 2014


The TaxPayers' Alliance (TPA), a group that campaigns for tax reform in the UK, has praised reports that Chancellor George Osborne intends to include the merger of employees' National Insurance Contributions (NICs) with income tax in the Conservative Party's next election manifesto.

The TPA said that NICs paid by employers should also be included in the plan. The TPA said that employers' NICs, while borne by employers, is de facto a cost to employees, in just the same way as income tax and employee's NICs, as these are considered as a cost of hiring workers and therefore impact wages.

The group has published several reports and a video setting out the case for how NICs can be abolished as part of a move towards a Single Income Tax. It says that the move would simplify tax compliance and make tax deductions more transparent.

The Alliance welcomed that Osborne's plan includes protection for pensioners, with a guarantee that their income will not be drawn into the merged tax.

In May, the Institute for Fiscal Studies produced a report that observed that National Insurance is widely understood to be a tax on income but is treated differently. The report's author, IFS head Paul Johnson, claimed that governments are "actively conspiring" to ensure that some taxes, including NICs, are "not well understood and can be manipulated accordingly," to allow scope for stealth tax increases.

TAGS: compliance | tax | economics | tax compliance | employees | United Kingdom | ministry of finance | social security | tax reform | individual income tax | Tax

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