David R. Henderson  

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UK Proposes All Paychecks Go to the State First

Update at bottom.

That's the headline on a CNBC story and these are the first two paragraphs:

The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.

The proposal by Her Majesty's Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid.


Cameron's first order of business tomorrow should be to fire whoever proposed this.

HT to Tom Palmer and Gary Chartier.

Update. This just in from fellow blogger Tim Worstall:

David,

[Re] Your posting about the HMRC suggestion that all paychecks should be routed through them so that the correct tax could be deducted.
There's one reason why it really won't happen (thankfully, my reaction upon first hearing about it was to explode into Anglo Saxon epithets).

HMRC is the most unionised workforce in government....quite possibly in the UK. The union is PCS and the General Secretary is a chap called Mark Serwotka. He is an unreconstructed socialist (proper socialist, not Obama insult style socialist).

While politicians generally have the intellectual firepower of wet lettuce they, even they, are not stupid enough to give such a man/union control over the paychecks of the entire nation.

I know for a fact that this has been gently pointed out to the Cabinet.....

Tim Worstall


Comments and Sharing


CATEGORIES: Taxation



COMMENTS (11 to date)
Simon K writes:

Did you bother to read the HMRC paper Arnold? Of course not, because there's no proposal in it that "all employers send employee paychecks to the government". That something CNBC appears to have simply made up. Its a proposal that employers send the data on tax withholding, which is currently send annually, when they actually make payments. I believe the US gathers this data quarterly, although I may be wrong - it could be monthly. The actual paper is here: http://customs.hmrc.gov.uk/channelsPortalWebApp/downloadFile?contentID=HMCE_PROD1_030623

If you do read it, you'll find that the point of the exercise is to reduce the cost of the tax witholding system by reducing the number of people who have to file returns. This is something the US is miles from being able to implement due to the sheer complexity of the tax code - the UK allows far fewer deductions so most people already do not have to file returns because the automation already in place is enough to get their taxes right at source.

This is how you actually go about reducing the cost of government, rather than merely grandstanding about it.

Joshua W. Scott writes:

Did you bother to read the name of the author of this post, Simon?

Simon K,

You're wrong on this. There are two proposals in the paper. One is real time information, which fits your description and isn't particularly alarming though it could mean a new administrative burden for business. The second is Centralised Deductions, which means exactly what David Henderson suggests it does (see pages 22-27 of the consultation document.

I would recommend that anyone interested in this issue read this post on our blog, by Dominique Lazanski:
http://www.taxpayersalliance.com/campaign/2010/09/why-the-hmrc-shouldnt-become-a-payroll-organisation.html

Best,
Matthew Sinclair
Director
The TaxPayers' Alliance, London

Robbie writes:

It is possible that this is deliberately provocative.

There has just been a small uproar here in the UK after 6 million people paid the wrong tax via a pay as you earn scheme (PAYE).

Obviously there was a lot of criticism of HMRC and their response was basically that under the current system tax it is expected that the tax deducted throughout the year won't be completely accurate, necessitating rebates and extra bills at the end of each year.

It is possible that this proposal is intended as response to the suggestion that they aren't managing the current PAYE scheme effectively, by portraying the steps necessary to create a more accurate PAYE scheme as unpalatable to many.

rjs writes:

CNBC link?

David R. Henderson writes:

Link added. Thanks, rjs.

Vincent Clement writes:

@Simon K:

Did you bother to read the HMRC paper?

"Under Centralised Deductions the employer would send the gross payment through the electronic payment system to a central calculator where the deductions calculated by HMRC would be made automatically. The resulting net payment would then be sent to the individual’s bank account and the deductions would be paid directly to the Government."

Jeremy, Alabama writes:

In a related move, the National Health Service requested that all British subjects have tubes connected to their bone marrow, with all blood creation sent to the government, after which an appropriate amount of blood is returned.

Ella writes:

What's truly terrifying is that any government can propose this without fear of riots and rebellion.

Prakhar Goel writes:
Cameron's first order of business tomorrow should be to fire whoever proposed this.

Wake up and smell the roses Dr. Henderson. Cameron couldn't fire his own private secretary without serious political repercussions. Perhaps I exaggerate but only a little. Cameron's job is not to run the government or anything useful like that. He is the chief PR person of the UK government. Real decision making power is hopelessly disseminated over hundreds if not thousands of individuals many of whom aren't even in the UK.

Pandaemoni writes:

The difference between the proposal and the status quo of automatic "withholding" from paychecks seems merely symbolic to me. I suppose there could be a delay in processing payments, but otherwise I am not sure why I should be more upset with this than I am with withholding generally.

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