Today's prime Ritchiebollocks:

Erm, Ritchie,this isn't the way business works. We don't make individual employees liable for the losses of their employer, even in cases where you believe you are able to apportion liability to an individual. That's because it's frankly a totally stupid idea. Are we really to say that we should find the employee who - say - failed to tighten a bolt properly on Deepwater Horizon and send them a bill for tens of billions of dollars?

Equally, we aren't commencing a witch-hunt to identify precisely which miserable sod in the London 2012 organisation can be blamed for the tripling of the Olympic budget. Nor are we singling out a Department of Health civil servant to land them with an invoice for the NHS supercomputer overruns. Instead we establish lines of control and responsibility within organisations in order to reduce the risk that an employee goes off on a frolic on his own. In Hartnett's case, this includes lines of political accountability.

The very idea that we should seek to make individual employees liable for the economic outcomes of their business decisions is an extraordinarily right-wing - one could even say 'neoliberal' - point of view. I simply don't know why Ritchie espouses such a view. Other than, in the case of Hartnett, it fits his political narrative to say it. I don't think for one second he actually believes it.

Filed under: Economics, Taxation with tags bp, dave hartnett, hmrc, idiots, nhs supercomputer, olympics, richard murphy
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The Times carries some useful tips today on how to check your tax code, the simply brilliant British invention that ensures that income from salaried employment is (usually) taxed at precisely the right amount. So I'm astonished to learn in the Telegraph via Guido that the Tories plan to axe the Pay-As-You-Earn system (PAYE) if they gain power.

Amazingly, PAYE dates from 1944, decades before computers. While it may be an imposition on employers, which probably explains why countries like the US don't have it, its huge benefit is that it liberates ordinary people with simple tax affairs from the need to file a tax return.

I don't see how a cashflow based taxation system will work.

Firstly, Britain is obsessed with having a progressive tax system; 'progressive' in this context means tax rates that go up as you earn more money. PAYE handles this by forcing the employer to do all the hard sums. If you get income from another source, they tell HMRC which then fixes it through either this year's or next year's tax code. How will the next pound you earn be taxed under the Conservative proposals?

Secondly, it's far from trivial to work out what a particular piece of income might be. Let's say I receive a Paypal payment from someone. Is it because I sold them something on eBay (possibly taxable at the marginal rate if it's a business, but not otherwise)? Is it a gift (not taxable)? While clever computing might help in some situations, it looks like another NHS supercomputer problem in the making. Times a million.

Thirdly, as Guido points out, there are serious privacy issues here. The State has the right to take you to court to force you to hand over money to it. That's not quite the same as allowing it instant access to your PIN so it can take your money when it likes.

Fourthly, this is simply bad politics. The Tories will be lifting a burden from companies, which cannot vote, and placing a heavy administrative burden on people, who more or less do. Lessons can be learned from the US. There, a quarter of a billion people have to navigate the fiendishly complex IRS rules and regulations to file their own personal tax return. Then they have to do exactly the same again in respect of their state taxes for every state they have worked in. It's insane.

Yes, there are faults in the system. But let's not underestimate how much PAYE has freed millions of ordinary people from tax filing drudgery. It doesn't deserve to be binned just yet.

Update: Clever Tim Worstall sees the upside - pressure for lower taxation.

Filed under: Current issues, Other blogs, Taxation with tags conservatives, guido fawkes, hmrc, nhs supercomputer, paye, privacy, tax returns, telegraph, tim worstall, times
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