The Government has made very good progress on introducing full spending transparency. Councils now publish all spending over £500, with the exception of Nottingham. The Treasury's COINS database was released. Procurement contracts are posted online, and updated in real time. Whitehall pay and benefits are now more transparent than ever. Spending on Government procurement cards over £500 is currently being published.
But we don't have the same transparency when it comes to tax. The accounting fiction that is National Insurance is really just a second Income Tax, for instance. We published a detailed recommendation to abolish NI and make payslips more honest last week. So much more can be done on tax transparency and it really is the one area that the Government can inform the debate on tax with little effort, in keeping with a broader transparency agenda.
Today the TaxPayers' Alliance have released an exciting smartphone app that tells you exactly how much tax you pay when you buy a certain product. Not only that, it also lets you know exactly how much extra you have to earn to afford that product because of taxes. This is crucial. We can generally work out how much VAT we pay on a product, but harder is working out how much you had to earn to pay for things like Income Tax, employees' and employers' NI and Corporation Tax first. For example, a flight to New York that cost £217.00 would have been £157.00 without indirect taxes. Paying the £217.00 requires £379.12 in earnings before income and corporate taxes.
The app is easy to use - with just a couple of simple inputs before you get going - and you can download it for free here.
The calculations and other examples are also explained in an accompanying Research Note. This is the fourth paper released by the 2020 Tax Commission, a joint project between the TaxPayers' Alliance and the Institute of Directors. We've brought together some heavyweight names to identify and try to solve the problems with the UK's hideously complicated tax system. Commissioners have met throughout the year and additional research is going into the final report, which will be released in the New Year.
No-one sat down and designed the system we have now. I'm confident no-one even could if they tried. It means that taxes are opaque and that complicates things for families and businesses alike. To identify specific problems though, we need tax transparency. And our Tax Buster app will help shed some light.