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August 19, 2005

Flat Taxes and the Treasury.

How lucky we are to have a government that believes in the truth, the even handed enquiry into what would be the best way of ordering our world. Recently the Treasury compiled a report on the virtues and problems with a system of flat taxes, paying especial attention to the proposals of the Adam Smith Institute (for whom I occasionally write at their blog).

When, under the Freedom of Information Act, some asked to see the report, guess what happened?

The system is being backed by free market reformers worldwide but a Treasury paper released under the Freedom of Information Act last month had key sections detailing the advantages blacked out.


The uncensored paper seen by The Daily Telegraph presents a more balanced picture, acknowledging that a flat tax could increase economic activity and tax revenue, making Britain more attractive to foreign investors. It could create a "mini-economic boom" and would "eliminate distortions", the paper says.

Part of a two-page section that was removed says: "The reduction in rates and thus the tax burden faced by individuals should, in theory, stimulate further economic growth" and would establish "a one-off virtuous circle from tax cuts to economic growth to tax revenue".

Oh happy isles, that we should be ruled by those so conscientious and concerned for our welfare! That a simpler taxation system might be a good idea will only cause confusion so we must be protected from the information that might cause such consternation! Welcome to out brave new world where information, compiled at the taxpayers expense, about how those taxpayers should be fleeced, is not trusted to those dear little baa lambs, the taxpayers, because, well, why?

August 19, 2005 in Economics | Permalink


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HM Treasury recently released documents on a flat tax, under new freedom of information disclosure rules. The problem is that according to a story by George Trefgarnein today's Daily Telegraph, The flat tax secrets that worried Brown did not want us to... [Read More]

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Tracked on Aug 19, 2005 12:53:52 PM


presumably because it discussed the beggar-my-neighbour benefits that could accrue to the UK if it became a tax haven.

Posted by: dsquared | Aug 19, 2005 9:33:22 AM


I get the feeling that your beggar-my-neighbour reference implies that you regard economic activity/wealth creation to be a zero sum game. Increasing it in one place only serves to reduce it somewhere else.

Am I wrong in this interpretation? Why not instead issues of tax competition. Similar concept, but less pejorative terminology.

Besides, even if it is beggar-my-neighbour, isn't it the job of the Government to address the interests of the United Kingdom? It has no responsability for the interests of anywhere else.

Posted by: Chris harper | Aug 19, 2005 3:44:21 PM

I have some more details about the FOI exemptions cited in this case.

Posted by: Martin | Aug 19, 2005 8:47:47 PM

Isn't Flat Tax just an intellectual justification for rich people to pay less tax?

Tim adds: That’s certainly one way it is used, yes. But there is more to it than that.By doing away with all exemptions and thus having a lower rate one reduces economic distortions.

There is also the point that effective tax rates actually fall in the UK as income rises. The more you earn the easier it is to shelter income from the taxman by using the various incentives.

For me the most scandalous thing about the UK taxation system is that it kicks in so low, you pay income tax on part time work at minimum wage. Most of the proposals include doubling or even tripling the personal allowances so that those on less than 12k (the ASI) to 15 k would pay no income tax at all.

Posted by: Steve | Aug 20, 2005 3:46:38 PM

Doesn't a flat tax reduce the amount of tax-related surveillance the government can do? I know their computer systems and organisation is currently too poor for the information to be used that way but maybe they are waiting until they can improve the system. I'm not sure this was completely beside the point when they considered whether to implement this better taxation system!

Posted by: Gavin Ayling | Aug 21, 2005 8:27:25 PM