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UK Tax Credit (en anglais)
vonric | 30 septembre, 2007 12:42
The architect of the tax credit system, Gordon Brown might feel trouble coming since the big burden of tax credit has araised. Thousands of families have been overpaid discovered Inland Revenue and they should have to pay back the amount.
How did that happen? IR has got difficulties to find out but most certainly the system itself is to blame.
You have three different examples of the way the tax credit system work in the world:
- In Australia, people have to estimate their wage for the year and their tax code or tax credit will be calculated on that base. They may have to pay extra at the end of the year if they underestimated their income.
- In Canada, the Tax department compute the tax amount based on the previous tax year. They pay tax credit at the end if their calculation find they over paid.
- In the UK they found that the Canadian system, making payment up to 12 months later, was lacking flexibility. They based their system on the Australian one, except that IR was doing the assumption. If a mistake was made, they might take up to 24 months to realize, making you facing thousands of pounds of over-payment to give back. In fear of being overpaid and having to pay back any monees, and not being able to budget, a lot of families are now thinking about no longer claiming their rights. The British system is in danger of doing exactly the opposite of their initial goal: creating more poverty.
The solution seems to be a mix between the Canadian and the Australian system: IR would compute your tax credit based on your previous year income. In order to give flexibility they should be able to adjust the present year tax code if the individual warn them of a change of situation (become unemployed, found job, got a child). In front of the current mess,
I think those changes could improve a lot the situation, combining flexibility and security. It's time to reform urgently!
