Friday, October 17, 2008

Tax As You Go

I hate doing tax returns. In fact if I could pay a bit of extra tax in order not to have to do a tax return I would! So here is a wild idea for making my life easier.

Tax as you go.

I sign up for a deal that adds 5% to every transaction I have with my bank that goes straight into my tax account. If I withdraw €100 from the ATM, €105 is deducted from my bank balance and €5 is added to my tax account. If I pay for €50 of shopping with my credit card, another €2.50 goes into the tax account. At the end of the tax year, the money in my tax account has interest added (which is above the rate I would receive at the bank) and is deducted from my tax bill.

When I pay may tax bill online I get to decide on where 50% of my tax goes and I can allocate it between health, education, public transport etc. There might also be special requests for funding - a hospital wants a new cancer treatment machine - and I can allocate some of my money to that. I can recieve updates on how that funding drive is going by text or email. The government gets to decide on what the pots are - we get decide how much goes in each pot. If we feel passionately that one pot is more deserving than another, WE can lobby our friends to put their allocation in that pot. Once a pot is full, the government MUST proceed with that project. This helps us feel part of the link between paying taxes and getting services which I know is missing for many of us.

There might also be some kind of gold star award we recieve when we pay a certain amount of tax that shows we are a responsible member of the community. People with gold stars are listed, so a wealthy person without a gold star is clearly visible to community and it is clear they are not contributing much to rebuilding the local school etc.

In the long term, I would like a pay as you go system to replace income tax and other forms of tax, removing loopholds and dodgy incentives. When what we want is more jobs and to use resources more efficiently, it makes more sense to me to tax stuff not people. So if I earn lots of money, I don't pay any tax until I spend it. If all transactions, including financial trading, were included, we would only pay a small tax, probably 0.5% on each transaction! Then there would be an end to tax returns - what joy!

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