Rolling Taxation System?

13th June 2012

In my last post I discussed the idea of introducing a national rolling forecast instead of an annual budget. The idea of a free flowing analysis and expenditure of government funds offers, in my opinion, a more efficient and practical methodology to perform government payments. In this post I would like to suggest a similar approach to government income collection. The current taxation system with the exception of the PAYE monthly payment system is collected on an annual basis. Even with the PAYE system the rate of taxation and the exemptions are set on an annual basis far in advance of the actual payment of the revenue generated. Thus although the money is taken regularly the amount is inflexible and cannot be changed until the annual review period.

What I am suggesting is a free flowing taxation system that can be collected and altered on a monthly basis providing a flexibility, which enables many advantages. The method I have used to implement this idea is a flat rate of tax. That does not mean everyone pays the same amount of tax it simply means the basis level of tax is a set percentage. This principle provides the opportunity to enable all workers to calculate pay and tax on a monthly basis. Unlike the current progressive taxation system the tax bracket never exceeds a certain amount, which means it can be calculated at any time interval without crossing into a higher payment stream.

This core benefit allows for many advantages. Not only can self employed workers now calculate their tax payment on a monthly basis, but all of the benefits of the PAYE system are available to everyone. For example pension tax relief can be claimed monthly, rather than through the annual self assessment method. The benefit and tax exemption system can be implemented and changed on a monthly basis, which not only allows for changes to fit in with government decisions but also allows for macroeconomic controls through these alterations. It also provides the opportunity to merge the taxation system, welfare system and pension system into one model.

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