Call to merge NI and income tax

Published:  11 March, 2011

LONDON: Merchants could see administration costs for salaries cut if proposals to radically shake-up taxation are accepted. The Office of Tax Simplification calls for an end to the parallel systems of national insurance and income tax.


In a report on small business tax commissioned by the chancellor last July, it said: "The overwhelming conclusion is that genuine and long-lasting simplification can only be brought about through major structural change to the UK tax system."

"Our aim is to develop practical ideas that will make things easier for small businesses when it comes to their tax responsibilities," said John Whiting, the former PricewaterhouseCoopers accountant who led the study. "It clearly would be very radical to combine them totally, but there are stages you can go on along the way, each of which will bring a simplification dividend."

National insurance was established in 1911 to fund pensions and other welfare payments and was revamped after the Second World War to help pay for the NHS. But the "contributory principle", which links entitlement to some state benefits to a worker's record of national insurance payments, has eroded in recent decades with only six state benefits dependent on a worker's accumulated national insurance contributions.

A spokesman for Mr Osborne said he would respond formally to the report in his budget on 23 March, but had an "instinctive sympathy" with the radical simplification plans.

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