So, ignoring the question of how an accountant can be so bold as to contribute to a blog….

Yes, simple is good. In my engineering terms, use Occams Razor, or the acronym KISS (keep it simple, stupid).

However, I’m not sure I agree with some of the detail. There is no good reason for taxing people on moving house (stamp duty). There is an argument for taxing people if they buy a second home, on the same principle that they are charged CGT on the profit when they sell. But (to quote Eccles) everybody has to be somewhere, and taxing house purchases is a little bit like taxing other vital parts of life such as food. Just because a large chunk of money is changing hands should not automatically mean that the Government has to grab a percentage of it.

Fairness is a fine principle to base the tax system on, but it also suffers from perspective. For example, all MPs start from the basis that the allowances and expenses priviliges that they enjoy are “fair”, but it’s a minority view….

The banking legislation I was referring to was the UK equivalent to the US “Glass-Seagal” act. This is what kept retail banking and investment banking seperate since the Great Depression of the 1930s.

The progressive repeal of this legislation is one of the significant unlocks allowing the UK retail banks that were “too big to fail” to dig themselves into such a hole.

If this had not been the case, perhaps the High Street brands (HBOS, Northern Rock and to name the most obvious) would not have been able to lose so much money gambling on international markets.

Keeping investment banking seperate means that they would have been allowed to fail (like Lehman Brothers Bank) rather than the politically motivated requirement to keep them afloat at all costs.

As I understand it, the Americans started to repeal Glass-Seagal in the early 1990s, and the British Government felt that (to keep London at the financial cutting-edge) they had to follow suit.

Incidentally, it also seems to be why traditional investment banks (such as Morgan Stanley) started issuing credit cards – the mirror of why the UK banks could make themselves vulnerable. It meant they could claim to be a retail bank and benefit from the corresponding corporate protection.

However, there is also the insurance problem that seems to have infected the banking industry. The idea that you can take as wild a risk as you want as long as it’s covered by insurance. The link is then broken between the idea that a bank can only lend (or risk) what it can afford to lose – the traditional “boring banking” where you went on bended knee to your local branch manager if you wanted a mortgage or overdraft.

Associated with this is the idea that you can “sell” packages of loans on, including some of those toxic mortgages from the US. Again, insurance was meant to ensure that nobody could ever lose, but nobody considered the possibility that the situation would grow to such an extent that the insurance companies could not cover all of the possible losses (AIG anyone?!).

So, yes, the banks have been collectively stupid, especially in forgetting that they used to work in a particular way for a very good reason – it was safe. It required “due diligence” in their operations, for which insurance policies should never have been considered a substitute.

But, if they are to have the ultimate in taxpayer protection, they should have some limits imposed on them. They can either have no protection but complete freedom (as the old investment banks had), or complete safety backed by the taxpayer, but limited areas of operation (like the old retail banks). For them to be completely protected but able to demand freedom to take the wildest risks is not reasonable.

Relaxing, or preferably completely removing, financial regulation is a Good Thing. The exception is to keep solvency and capital adequacy rules for banks. But note, this is only necessary when they operate as a cartel supplier of a monopoly product as thye do in the UK.

The retail banks have been collectively stupid, but remember they are only banks. The reason they went adventuring with our money is because Brown hosed them with poor qulaity cash at too low a price combined with his policies that made debt more attractive than equity risk capital. The banks became Brown’s unwitting (witless?) tools.

There would have to be balancing element for low LVT counties, probably from national taxes rather than local taxes. Also, the proportion of national taxes raised and spent within a county would have to be published along with which department or quango was spending it. Locals would then be able to see, or not, the value added to their community of such spending, and challenge it if necessary.

One of the jokes about accountants is that an accountant is someone who solves a problem you didn’t know you had in a way you can’t understand.

This is true their are many traps in the tax system ready to catch the unwary. I have been preparing accounts and tax full time for twenty years and found another one that I wasn’t aware of today so I don’t know how the novice can do it.

There is also the presumption in the tax system that you are guilty until proven innocent.

(Allegation against Revenue left out -ed)

Further there are glaring inequalities to earn £33,000 net a small company would pay £7,000 in tax whilst an employee would pay £20,000 in tax and national insurance.

The tax system needs to be simplified so that the tail doesn’t wag the dog, their needs to be more fairness and their needs to be stability.

I would suggest the following proposals:

The main mechanism for raising tax or fiscal stimulus should be by adjusting the basic rate of income tax. This is easy to implement and hard to avoid.

Tax on owner managed companies needs revised to stop the abuse of taking a small salary and paying dividends that has taken place over the last ten years.

Stamp duty should be set at 1% on all transactions over £150,000 – a typical family home in a decent area is over £250,000 and 3% stamp duty is too much.

Changes to VAT should be kept to a minnimum as it is very hard tax to administer. I would add that the price of an item is based on supply and demand not the cost of bringing it to market.

Company car tax needs adjusted so that an average car is taxed at an average rate. There is no point in expecting a sales rep who travels a lot of motorway miles to drive a smart car and at present a car such as a Volkwagen Passatt occurs a benefit in kind of 35% of the list price.

The tax credit system cannot be abolished due to the hardships it would cause, but it should be recognised that it is a silly system when someone can pay tax and get tax back. Over time this system should be phased out.

Didn’t the Conservative Party try about 20 years ago with the Community Charge?

I was rather intrigued about the proposed new citizen’s initiative mentioned in Mr Cameron’s speech. For instance, if a local referendum votes in favour of free bus travel then who will finance the scheme?

http://www.conservatives.com/News/Speeches/2009/05/David_Cameron_Fixing_Broken_Politics.aspx

Incidentally, how much (ball-park figure) will it cost to run a local referendum?

Wonder if he can fill in a Tax Return correctly.

“In an interview on GMTV this morning, Brown said that he was “angry and appalled” by what had been happening at Westminster. “If my father, my parents, thought that these things were going on in the House of Commons, they would be utterly appalled,” he said.”
Who gives a rag eye boll**k what Brown’s father would of thought?

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He’s still trying to pretend that that moral compass of his is working!

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Hmmm but the magnet fell out, so it’s pointing towards H.M.P. Pentonville.

IF ONLY…