I’m intrigued by the proposal of Republican presidential candidate Ted Cruz that the IRS can be abolished and a citizen’s tax return replaced by a single postcard size piece of paper or an IPhone App. He even puts up a mock-up on his website of what the postcard might look like. He gets the information request down to 14 questions.
This obviously has resonances with current thinking about tax compliance in the UK. While I don’t think that abolition of HMRC is on anybody’s agenda, questions about how easy it will be for a citizen to comply with his or her tax obligations is a live issue.
The digital strategy proposal has been put forward as a means of reducing the amount of work a taxpayer will have to do, because much of the work will be done digitally using information already held by HMRC. Yet at the same time, there is a proposal for business to provide information quarterly to HMRC. Can the circle be squared?
If HMRC does succeed in devising a system under which quarterly reporting required nothing more than the pressing of a button to send information from the taxpayer’s business records directly to his/her personal tax account then there will be real efficiency. If however quarterly reporting turns into something which is more like completing a quarterly tax return then it seems inevitable that the burden on business will go up.
Currently we don’t really know exactly what will be required. At the moment I am prepared to accept HMRC’s assurances on the matter, but we really do need to start to get into the detail of this very soon.
A debate is being held in Parliament on the issue next Monday, triggered by the very rare achievement of a member of the public getting 100,000 signatures on an online petition, and I hope that this sheds some light on precisely what is proposed.
I’d love to think that in the coming years it really would be possible for taxpayers to send HMRC a postcard – electronic or otherwise – with all of their tax information. I suspect that some taxpayers could be very creative in the choice of picture on the other side of the card.
If you would like to discuss this further, please contact Andrew Hubbard.