Taxing Illusions

Robert Carling has a short piece today's inCISe on our current tax system:
One of the milestones of the tax year is nd or a demand for more tax. It is a good time to reflect on the visibility of modern taxation and the features of the tax system that create the illusion of a smaller tax burden than the reality.

The Goods and Services Tax (GST) is largely invisible to the consumer. Prices advertised and charged to the consumer must, by law, include the GST. Contrast this with the United States, where the state-based sales tax is more noticeable to the purchaser because it is an add-on to marked prices.

In the realm of income tax, the device that does more than anything else to delude taxpayers is the Pay As You Earn (PAYE) deduction from wage and salary income. PAYE started during World War II. It is difficult to exaggerate its importance in facilitating the post-War enlargement of government.

PAYE ensures that by 30 June, each year, most wage and salary earners have fully discharged their income tax liability – or even overpaid it – without ever needing to have transacted directly with the tax office. Their employer has done it all for them before the money even landed in their bank account. Getting a refund may even make people feel good about the income tax system, regardless of how much has been spiriupon us – the necessity of filling in a tax return and receiving back an assessment, together with a refuted away from them during the year.

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