Stuff and nonsense in these tax rules

UNDER New Labour, the UK's tax system has moved from complex to crazy. The more complex a system, the more scope there is for absurdity and fiddling. The fundamental law of taxation shows that time spent on trying to find loopholes rises with the square of the number of loops.

The more complex the tax system, the more good brains and energies will be wasted in economically futile activities. Complexity in tax is the enemy of productivity. Businessmen frequently complain of this lunacy and are supported by the CBI. Director general Digby Jones claims the cost of complying with these new tax rules has been huge.

At the same time as condemning the cost, he put forward a number of suggestions to Gordon Brown. He wants tax credits to encourage training, extensions to the discounts on the climate change levy, different rates of stamp duty on different types of property transactions and a lower rate of VAT on tourist accommodation.

Jones recognises and condemns the costs of tax complexity and then asks for more. This seems confusing, but it may be very subtle. He is surely too able to be simply confused. He has been elected by those that run British industry to represent them and such men are themselves very able.

We know British industry is managed by very able people. They receive large sums to do their jobs and we are reminded constantly that these rewards are essential to ensure that able men take on these trying jobs. Why, then, does Jones call for simplification in principle and added complexity in practice?

One possible answer is despair. He may think that Chancellor Brown will never admit to his past mistakes. He will not simplify the tax system, even if all members of the CBI go down on bended knees. Possibly, the only way to get the tax system improved is to make it unworkable.

Brown has already done much to make the tax system absurd. Additional nonsense may thus hasten the day when it collapses under the weight of its own stupidities. His suggestions may not, therefore, be cause for ribaldry. Perhaps, we should all make suggestions for making the system more complex.

Measures to improve productivity seem the obvious place to start. The Chancellor keeps making speeches about productivity and keeps introducing new tax measures, which hinder its improvement.

A special tax to improve productivity should thus appeal to his pet subject, as well as to his love of complexity. For example, companies could be required to announce the change in their productivity each year and all those with an above average improvement would get a tax rebate, which would be paid by all those who fall short.

The result should be a wonderful boost to productivity at no cost to the tax system. Why, we should ask, has the Chancellor not done it already?