HMRC are proficient at the stick approach. We are obliged to comply with the rules, or else…
This approach is embedded into legislation, and to some extent should be considered responsible for the tax gap – the difference between taxes due and taxes collected – and the black economy.
What would a “carrot” approach look like? For example, would we, as tax payers:
- Be given a discount on our taxes if we paid early? This would increase incentives to file and pay quickly.
- Be granted a tax amnesty if we volunteered undeclared income: past years being forgiven if future returns were completed in full.
- Grant a similar amnesty to wealthy individuals who repatriate funds from offshore tax havens. Perhaps the amnesty could be linked to reinvestment of the funds in a UK development institution?
- At present, no National Insurance Contributions are payable by individuals once they reach the State Retirement age. Could a similar break point be agreed for Income Tax? This would help fund retirement and be a huge simplification of tax management for pensioners.
If we are going to make real progress on climate change issues, perhaps tax relief should be extended to individuals as well as businesses. What about Income Tax relief if an individual invests in:
- solar panels – for hot water purposes,
- photo-voltaic panels – to generate electricity on-site,
- double glazing,
- roof insulation,
- hybrid or electric cars.
This switch in emphasis, from stick to carrot seems to have some merit, whether we will ever see such changes is open to debate.