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Double taxation

This fascinating factoid courtesy of The Times’s Gabriel Rozenberg:

Tolley’s Yellow Tax Handbook is the standard professional reference on UK direct taxation. Its format has changed little for many years.

1996-1997 edition: 4,555 pages.

2005-2006 edition: 9,050 pages.

As Rozenberg points out, for income tax law to get to the size that a summary filled 4,555 pages took nearly 200 years. Boy, has the present government been busy.

Close observers of the Treasury will know that this has happened at the same time as the Inland Revenue has been piloting a glorious project that could only happen in Whitehall, the Comprehensive Tax Law rewrite. This, the first part of which is about to be enacted, is allegedly designed–this is not a joke–to simplify UK tax law without changing it.

It does serve to emphasise something that is often neglected, even by our friends at the ASI, who calculate Tax Freedom Day on the basis of the tax take. Tax burden, the cost of tax to the payer, is always greater than the actual tax he has to pay. The difference, the compliance cost, is hard to measure. But it is utterly invisible to the Civil Service, to most politicians, and most employees. To them it is someone else’s problem, if they notice at all.

But when bureaucratic treacle is poured into society’s gearboxes, everyone suffers indirectly. Compliance costs are still costs. Leaving aside the moral case against tax, they produce all the baneful economic effects of higher taxation (a split economy, advantages for tax-planners and those who can afford them, disincentive to work or invest, regulatory distortions), without putting more money into the public purse.

It is not just complication. Many of the more recent reforms (and this started under the Tories) move administrative and collection responsibilities from the government to the taxpayer or his employer, so Tolley’s doubling may well be an underestimate of the increase in compliance costs. Taxation has risen fast in Britain. But tax burden has risen, and continues to rise much faster.

15 comments to Double taxation

  • A

    I presume Mr Rozenburg is the offspring of Joshua (ex-BBC law correspondent, now at the Telegraph) and Melanie Phillips.

  • APL

    “Many of the more recent reforms…”

    Does anyone else agree, the word ‘reform’ has been hijacked by the statists. In this context it is used to portray whatever proposals as enlightened and progressive.

  • dearieme

    “Factoid”, you say. But a factoid is a statement that has all the properties of a fact save that it is not true.

  • Letscuttaxes

    Spot on Guy, the Tax Law Rewrite Commission is a total waste of time, created by the government to keep civil servants in jobs and to give a veneer of tax reform to business, whilst making the UK’s tax regime less competitive as globalisation speeds up.

    However, lets not get carried away and blame Brown for all this. Direct Tax law in 1986 consisted of 1,800 pages, it increased in 11 years to 4,555 pages, due to that allegedly great Chancellor, Ken Clarke

  • guy herbert


    I haven’t verified it, so I would still classify it as a factoid. It has all the appearance of a fact but its truth or falsity is unknown to me.


    Why so presume? I share with the late A.P. Herbert the avocation of informed layman who pontificates on the law, but we are not related. Given that there are a lot of Fleet Street journalists, is it that unlikely two of them happen to be called Rozenberg?

  • Bernie

    …when bureaucratic treacle is poured into society’s gearboxes

    That is a lovely turn of phrase.

  • If you want to see bureaucracy,take a s look at the Single Administrative Document (SAD) form C88A,which has to be filled in with every purchase sent by post from outside the EU.The form can only be completed by consulting the Integrated Tariff of the United Kingdom,three very large thick volumes available at Customs Offices,Larger public libraries or a cool £240 per annum.
    It is the EU and socialist governments everywhere.Some politician will say “We could do with knowing the number of brown boots beng sold” The bureaucrats wil then trot out a form :-
    Brwn boots right,
    Brown boots left,
    Brown boots long,as defined by regulation EC 1253(a)
    Brown boots short,as defined by regulation EC 654369(b) See disability exemption EC 76579,1997
    Brown boots ,wholly made from animal products.
    Brown boots containing n less thn 23.986% man made fibre.
    Brown boots……….
    That is how we are govern now!

  • NeilR

    It’s not just direct taxation, of course. VAT was billed (so I’m informed by my more senior fellow accountants) as the simplest of all taxes. My copy of this year’s Tolleys VAT runs to 1,819 pages – and that’s just the 1st Edition. The 2nd ed. should be out this month (all 121 quid’s worth) …

  • GCooper

    NeilR writes:

    “My copy of this year’s Tolleys VAT runs to 1,819 pages – and that’s just the 1st Edition. The 2nd ed. should be out this month (all 121 quid’s worth) …”

    And yet, have we not been lectured on the wonderful simplicity and ease of compliance on these very comment sections, by several idiots?

    A good article Mr Herbert and interesting commentary from those who know what they are talking about.

  • I’d like to bounce an idea off the folks here: implicit taxation.

    Place a constitutional limit on government spending at, say, 3% of the previous year’s GDP.

    That’s it.

    No taxes, no shelters, no deductions, no compliance cost, 0% marginal tax rate, a flat rate.

    The inflation caused by the spending implicitly taxes each unit of currency. Because government employees and expenditures are funded in the currency, there is still incentive to use it. Considering it would be remarkably stable, others would also still be interested.

    Clearly the revenue would be lower than today’s levels. I’m sure most here would agree that we could do away with a great deal of what is currently spent by governments, with only benefits to result.

    The police, courts, law-making bodies (who would hopefully meet very seldom), etc. would get funding. Nothing else would.

    In times of emergency, bonds could be sold. Breaking the law, and spending more would cause rampant inflation, which everyone would know and hopefully have the sense to avoid.


  • Robert Alderson


    I’m no economist but you’re idea sounds interesting. Two concerns:

    1) I can’t see any country in the world that is even close to managing to rein in government to 3% of GDP. So this would be a very long term objective.
    2) There might be some sort of problem with monetary policy, what would happen if there was an exchange rate shock, deflation or inflation caused by commodity prce rises?

    This might have a practical use for the EU, their spending is probably a small % of total EU GDP this could be a way of keeping it small.

  • Tedd McHenry

    Tax burden, the cost of tax to the payer, is always greater than the actual tax he has to pay. The difference, the compliance cost, is hard to measure.

    Spot on.

    When I was employed I, as probably most employed peolpe do, gave little thought to this. But now that I run my own business I have a much greater appreciation of just how true this is.

    I have a one-man business, so my gross revenue isn’t great. I probably spend three or four percent of my gross revenue on accounting and bookkeeping services. These services provide almost nil value to my company, as they are designed almost exclusively to provide information to the government.

    But that’s just the start. Even though I use an accountant and bookkeeper, I still spend countless hours complying with tax laws in one way or another, whether meeting with said accountant and bookkeeper or making payments into various tax accounts or managing various bits and pieces of paper generated by the system. My time probably adds up to nearly as great a cost as my accountant’s and bookkeeper’s bills.

    So my tax burden is at least five percent, and probably more, of my gross revenue on top of my actual tax bill. (Which is high enough to begin with, than you very much.)

  • guy herbert

    Lots of problems, Ivan.

    GDP is not terribly meaningful, variably defined, and difficult to estimate even a couple of years later. Corrections to official figures are always being fed through, but don’t generally make exciting press-releases.

    GDP includes government spending so you are already building inflation into the system in quite a big way… Worse, yours is a pure deficit spending model. Like the Social Credit approach, you are implicitly relying on the printing press rather than government borrowing.

    Meanwhile, no government anywhere operates on 3% of GDP and there are plenty with deficits exceeding that on existing budget methods. (In fact that’s the deficit ceiling under the EMU Stability and Growth Pact which is supposed to maintain the monetary discipline of the euro.) For most liberal democracies, the long-term rate of defence spending alone in peacetime is around 2% of GDP. In the UK it has historically been higher and in the US much higher, only approaching 3% (from above) at the high tide of the “peace dividend” in the late 1990s.

    (Pragmatic European liberals like myself dream of reducing government to 10% or 15% of GDP, while realising that it would be seriously hard to implement in real life. With the kind of absolute power enjoyed by Blair (but no other Western leader), one could do it in a couple of decades, I guess. But the power would have to survive an election or four, which is a problem for a sustained programme of contrarian radicalism.)

    Even if you know where the limit really is, enforcing it is going to be tough. Simply making things the law doesn’t work without institutional constraints. And this is more true in relation to governments than to individuals because government habits are more adaptable, and governments are harder to catch and punish. Who would catch and punish them?

    Finally, if you throw away interest rates and taxation as brakes on spending, there’s scope for a monetary tragedy of the commons. I suspect that the claim that “everybody knows” about the dangers of hyperinflation would prove to be a delusion, as the same everybody fought for their very own slice of free government pie.


    The EU does have such a limit (though not an unfunded one). Its budget is limited to a fraction over 1% of EU total GDP, though it runs over a multi year cycle, to avoid some of the “slippage” as they so delicately put it arising from Ivan’s annual model. It’s important to note however, that the EU in effect delegates taxation and spending to member states since they are responsible for the implementation of EU Law, by what in the US would be called “unfunded mandate”. The definition of total member-state GDP–an aggregate of aggregates–is also quite an, er… interesting politico-statistical problem.

  • Midwesterner

    Guy Herbert & Dearieme,

    I read “factoid” in the original post to mean a micro-fact. This is the way I’ve often used it. After reading the definition –


    I realize that it can mean either “true” or “false”. As the dictionary says, “usage problem”. Clearly, “false but resembling true” is the most valid usage.

    I guess I’ll stop using it. Too much potential for confusion.

  • Ted Schuerzinger

    I always thought “factoid” meant something that might well be true, but that the person calling it a factoid was implicitly asking the question, “What’s your point in bringing it up?”

    My first memory of factoids was when the newspaper USA Today was first published, with their graphs of trivialities in the bottom corner of the front page of certain sections….