Coming just days after the publication of Matthew Taylor’s government-commissioned independent review of modern working practices, the latest event from Common Vision’s Responsible Tax Lab gave an opportunity for the core points of the report to be delivered to a gathering of industry professionals from the financial, accounting and public sectors. We heard first-hand from Matthew Taylor about his insights into the tax system over the course of the review, and invited Paul Morton, Tax Director of the Office of Tax Simplification to respond initially before opening up the discussion to all present.
With figures in the capital alone showing a 75% rise since 2010 in people employed on a casual basis, it is not enough to campaign against the challenges posed by the gig economy. That would be like the backlash against music downloads in the 1990s when in fact – as we now know – embracing and improving a new marketplace works much more effectively than banning it. There is no doubt however that the status of these workers, the way in which their income is taxed and collected and the nature of their relationship with the economy are issues which need open discussion between government, trade unions and the wider workforce.
Until this year, corporation tax tended to dominate the headlines when it came to contentious tax policies. But in March, the announcement in Philip Hammond’s Budget (and its subsequent withdrawal) of a rise in national insurance payments for those classed as self-employed gave prominence to a new debate on tax. Of course, this is not actually that new, but the result of a gradual growing gap in the tax treatment of employed and self-employed that has taken places over decades. Matthew Taylor took the opportunity to emphasise that the recommendations of his report, rather than intended to be radical, were proposed to prepare the ground for legislation and to gradually reduce the dichotomy between employees and self-employed workers.
What might these solutions to the current inconsistencies between the tax and employment systems look like? It was not in the remit of the Taylor Review to drill too deep into this, but ideas raised by attendees ranged from the implementation of a payroll tax (instead of the current employer NI contribution) to a restructuring of the method of incorporation whereby self-employed workers can maintain autonomous working patterns yet retain certain aspects of their tax deduction process rather than “become a company” for taxation purposes. Another interesting element of the discussion touched on tax hypothecation: whether it would help with public support for future reform if revenue collected from self-employed workers was ear-marked for the funding of specific benefits?
What seems clear is that this is the start, not the end, of a broader discussion.