Time For Tax Transparency, Says UK Lawmaker

by Robert Lee, Tax-News.com, London

Friday, January 27, 2012

UK taxpayers could receive yearly statements detailing how their money is spent, under new legislation put forward by a member of parliament.

The proposals have been set out by Ben Gummer, MP for Ipswich. Writing in the Wall Street Journal, Gummer notes that, for most people, taxes represent their largest single monthly payment. However, he points out, "we are not told how much our combined direct taxation is, what proportion of our income it represents, nor how the government has spent the money we forcibly surrender to Her Majesty's Customs and Revenue [HMRC]". He is clear that things must change.

Gummer argues that transparency, accountability and democracy all point to a need for his plan. He wants to see a simple solution to the problem, whereby a tax statement would be delivered every year to all those who pay direct taxes - namely income tax and national insurance.

He writes: "This statement should show the tax paid in the last year and comparable payment in the current year. Crucially, these figures should be broken down into the main items of government expenditure so that taxpayers can see what they have contributed. An accompanying website should provide a ready calculator so that people's indirect taxes can also be estimated and a grand total of tax-take explained."

According to Gummer, a statement would show a taxpayer on an average salary of GBP26,000 (USD40,835) that they are "spending" GBP43 on prisons, GBP70 on railways and over GBP2,000 on pensions and benefits. He believes that "suddenly billions of pounds, huge numbers previously unintelligible to anyone but economists and Treasury mandarins, would become clear to the millions who supply them".

Gummer presented a bill to parliament setting out the details of his plans on January 25. Introducing his bill, he said his proposal is very simple: that "the government should tell us how much we pay in tax and where it goes".

The statement would provide two headline sets of information. The taxpayer would be given an account of the direct taxes paid in the tax year, effectively allowing the individual to see how the Chancellor's Budget and financial statements have affected their net income. Secondly, the statement would give a detailed description of how the tax money is spent, in cash terms. Additional information to be provided include each taxpayer's share of the national debt, and a share of any deficit or surplus for the tax year.

Gummer maintains that the operation of the new tax system would be straightforward, given that the majority of end-of-tax-year information is now available online. The statistics required would be produced by the Office for Budget Responsibility and the Office for National Statistics. He places costs at GBP0.25 per statement produced, adding up to a total outlay of GBP7.5m.

The bill will be debated on March 30.