Some special pleading

Rational? Sensible? Even logical? But ...

The Independent reports:

Income tax and national insurance could be merged as part of a drive to simplify the tax system by the Coalition Government.

The move is expected to be signalled by George Osborne in his Budget next Wednesday. Although such a huge change would take years to implement, the Chancellor is determined to be seen as a reformer and not just as the axeman who cleared the budget deficit he inherited from Labour.

The idea has been under discussion for years, but politicians have shied away from implementing it. Such an upheaval would be bound to create winners and losers, and the effective abolition of national insurance – currently at 11 per cent for employees, rising to 12 per cent next month – could be portrayed as a tax hike, taking the basic rate from 20p to 32p and top rate from 40p to 52p in the pound.

The fly in the ointment? There are certain sources of income which are subject to income tax but not to national insurance contributions, notably occupational pensions and interest on savings. Is the Chancellor suddenly going to whack an additional 10 or 11% on the incomes of pensioners? For personal reasons, I devoutly hope not.