TITLE

THE NEXT TAX FOR REFORM?

AUTHOR(S)
Sandford, Cedric
PUB. DATE
February 1989
SOURCE
Accountancy;Feb1989, Vol. 103 Issue 1146, p20
SOURCE TYPE
Trade Publication
DOC. TYPE
Article
ABSTRACT
This article illustrates the need for reform in the National Insurance contribution system in Great Britain. While the Conservative government is busy simplifying and reducing the income tax, that other compulsory levy on income, the National Insurance contribution (NIC), has remained highly complicated--indeed, it has substantially increased. The rise in revenue from NIC, compared with that from income tax, has been dramatic. In 1979, NIC amounted to about 59% of income tax revenue; today, that figure is almost 80% of the income tax revenue. That the system of the NIC stands in urgent need of reform is the theme of a new research study undertaken by the Institute of Fiscal Studies, Reforming National Insurance Contributions. Complications and higher administrative and compliance costs arise from the existence of four classes of NIC and from different rates of contribution even within a class. But apart from this, there are other three serious criticisms against NIC: the system of contribution distorts the labor market; it undermines the progression of income taxation; and, it is restricted to certain forms of income. To remedy these deficiencies, several ideas have been raised which include merging NIC with income tax on the same base and restructuring the top end of the NIC scale.
ACCESSION #
6251122

 

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