The CIPP, and other bodies, succeed in consideration for earnings tax to replace national insurance

27 February 2014


The Chartered Institute of Payroll Professionals supports National Insurance being known as “Earnings Tax”, or something similar, as an important first step in the merging of income and earnings taxes says Ben Gummer MP.

Ben Gummer MP (Ipswich) in parliament on Tuesday 25 February 2014 motioned for leave to bring in a Bill to make the provision for National Insurance to be known as Earnings Tax; and for connected purposes. Mr Gummer covered the history of National Insurance and explained that it was not really a contributions based system anymore, but a system of entitlement. For many years the payroll profession has known NI as a tax but this is the first time a Minister, the CIPP believes, has been open about it and during his motion for leave he said “Let us be straight. National Insurance is now a tax. It has the features of a tax”.

Mr Gummer went on to say A small but important part of that is coming clean about National Insurance. I propose we call it earnings tax, because it is a tax on earnings, but we could equally call it additional income tax, or employment tax. Such a change would have no impact on people’s current entitlement or on the rates at which NI is currently charged. It would, however, be an important first step in the merging of income and earnings taxes, as proposed most recently by the TaxPayers Alliance, the Institute of Directors and the Chartered Institute of Payroll (and Pensions) Professionals. I believe that such a merger would have far wider benefits; it would not just benefit the people those organisations represent. But that discussion is for another time.”

The CIPP’s Karen Thomson, Associate Director of Policy, Research & Strategic Visibility said picking up on “but that discussion is for another time” is a discussion that must take place if NI is to change its name. Whilst Mr Gummer says a change of name would cost next to nothing, this isn’t true. It might cost next to nothing for the government to change all the legislation, but for payroll software, training providers, payslip stationery (where not computerised) and company terms and condition manuals etc. there will be costs. However these costs would be acceptable if they are indeed the first step to a merging of the two tax systems.

The CIPP looks forward to the Budget on 19 March and whether Mr Osborne will commit to the name change and further discussions on a merger of the tax systems. The speech which took place at 12.36 on Tuesday 25 February can be found here. The representative bodies reference was at 12.43.

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