Wednesday, 8 April 2015

Technology and Information Sharing

The title of my book makes the bold claim that I have rethought taxation. Indeed, when I was first starting to develop the ideas behind my hourly averaging proposal around ten years ago I made some big assumptions about what would be possible.

Nevertheless, I find it reassuring that some of the technological innovations I assumed would be required to run my proposed system are now being discussed and even implemented.

The first important piece of technology that makes hourly averaging or the CLIPH-rate tax viable is one of these proposals already in the pipeline; that taxpayers should be able to log into a secure site to exchange information with the tax authorities. Just such a system was announced a few weeks ago in the UK.

The immediate advantage of this is that it means that people would not be required to do an annual tax return. Instead taxpayers could update the tax authority throughout the year, even downloading information from their accounting software.

Perhaps in the future people could transfer information from their online banking, or it could even be transferred automatically from various types of organisation and institution. For example – the Driver and Vehicle Licencing Agency could link each vehicle to its owner’s tax account to enable updated information about the vehicle and organise the payment of fees and charges.

Essentially, people can inform the tax authority of important pieces of information at their own convenience and ensure that their tax affairs are current and in order.

Replacing the annual self-assessment ritual with continual updating (or replacing it with a different one in which people declare that all the information given in the last 12 months is correct) opens up further possibilities.

A crucial aspect of my CLIPH-rate tax is indicated by the ‘L’ in the acronym: Lifetime. With a lifetime averaging system the aim is to treat each further piece of information or payment as if it is the last tax payment. Real Time taxation is also being introduced in the UK, as I will discuss in my next blog on this topic.

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