Saturday, February 09, 2008

The contents of a Tax Credit Application pack

  1. Application Form - A4 Ten pages. The last page does not have to be filled in if you don't want to advise of your skin colour so it's really only nine pages.
  2. 'How to fill in this form' information booklet - A4 70 pages.


Andy said...

It's called "means testing". In return for detailed information about your finances, jobs and personal life, they will decide whether you deserve to get some of your own money back. Unfortunately the computer system is very expensive, slow, and breaks down frequently, and the part time civil servants who staff it are some of the dumbest people I ever had the misfortune to meet. If the public ever knew just how much waste goes on, they would never stand for it.

On the other hand, since we don't have ID cards (yet), the 'system' has a tendency to lose track of people, so the 9/10 pages are required to re-acquaint you with the computer. The only way to make it easier is either to simplify the rules by which you qualify for a tax credit, or introduce ID cards.

Personally I like British politics more or less the way it is, and prefer not to have an ID card, but if we're going to expand the welfare/social state into a continental style system then we're going to need ID cards to manage it properly.

Pete Chown said...

Andy, that's actually a very good point. The government seem to imply that the tax credits put money in the hands of poor people. In fact, at least some claimants still end up being net contributors. For them, tax credits are not a "benefit", they are just an excessively complicated way of giving a tax cut.

The real effect of tax credits is that they push the tax burden onto the middle class. Traditionally, people at the lower end of the income scale would be helped by an increase in the personal allowance. To balance the books, the percentage rate would then have to be increased too. The increase in the percentage rate would hit the rich. By providing means-tested relief, however, the government can avoid hitting the rich at the same time as helping the poor. The middle classes pay instead.

Of course it's a matter of opinion how much tax people should pay at each income level. But I feel we need a proper debate about tax credits, that takes this into account. It's not (just) a cuddly way of helping the poor, it's a way of forcing "hard working British families" to bear a larger share of the tax burden.

Mark Wadsworth said...

Pete, so why not roll means testing and income tax and employees' national insurance into one single flat rate? With a higher personal allowance?