Monday, 25 May 2015

Technology and Property Ownership

In my previous blog in this series “Technology and tax collection: Withholding by financial institutions” I explained that financial institutions could take on the role of withholding tax currently largely undertaken by employers (in the case of personal taxes like income tax) and businesses (in the case of sales taxes/VAT/duties).

While on this subject, and discussing technology, I think I should take the opportunity to explain how I think the recording of property ownership can be transformed by advances in Information Technology.  

With regard to financial institutions, my assumption is that all financial accounts should be registered with (and hence linked to the details of) an owner. This owner should be an individual citizen (or taxable couple/family), a public enterprise, a private enterprise, or a charitable enterprise.The record of the account owner could be held by the financial institution who would link it to all transactions, in a centralised database linking every account to a list of owners, or both of these. 

Essentially, all accounts should be traceable back to a taxpayer or entities with a clear purpose/indication of beneficiaries. This goes against the secrecy that has been utilised increasingly apparently in recent decades by some of the ultra-wealthy and corrupt people of the world in, which would be no bad thing.

My thinking is that even though money and other property changes hands all the time, modern computing equipment should be able to keep a log of these ownership changes in such a way that people should be charged the correct amounts of tax at the most appropriate point in time.

Linking all accounts held with financial institutions to particular taxpayers (or other entities) is a very good idea, and this can be extended to other kinds of property as well. I suggest that there should be asset registers covering all property of particular types. These already exist to various degrees in the case of vehicles and land and these existing databases could be developed and integrated with the tax system so that tax is withheld on the profits made when these items are exchanged.

I would also suggest similar asset registers for items that are of high value and that tend to increase in value. So for example jewellery, antiques and art works can be recorded on databases and their ownership (and the amount for which they change hands) recorded.

Such a system should be considered advantageous to the owners of the property as it provides them with a way of registering that something is theirs. As with the land registry this should reduce the scope for disputes and make it easier to recover items that have been stolen and prove that they are the rightful owners.

Should this information be made public?
My view is that limited pieces of information about property ownership and taxpayers can be made available to the public (for example via internet access to these databases). So people could find out how much a particular item of property exchanged for without knowing the owners. Some broad tax information about taxpayers at particular addresses could be discovered such as lifetime income and lifetime tax-rate.

Some will object to the idea of making this kind of information available, for one or more of a number of reasons. However, I will not discuss this here as I plan to discuss do so in a future blog.

Is such a system overly bureaucratic?
Some may feel that the idea of adding more processes and information recording will make owning these forms of property extremely bureaucratic. This would be the case if the information was recorded by civil servants in huge centralised ledgers as they would have to have been in the past. With IT technology, however, there need not be any human involvement or physical recording.

The parties to the transaction can simply record on the relevant website that they wish to exchange a particular item and the amount changing hands. This amount can either be sent via the registry to verify the exchange or by linking the information to a particular financial transaction. It can all be done via secure websites and all the information can be updated and (if the seller has gained from the transaction) the correct tax can be calculated without any intervention.

Conclusion
I have explained how I have envisioned that information about property ownership (financial and physical) can be recorded and updated in a highly useful and relatively painless way. Linking this information to the tax system should make taxation simpler to administer, fairer and more accurate.

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