Snippets: Aug – Oct 2017

Tax innovation

With the persistent need for additional Government revenue it could be time to look to history for answers.

In 1535, King Henry VIII of England introduced the first ‘Beard Tax’ on males growing facial hair. The effectiveness of the tax in England was questionable, with records at the time being somewhat ‘short’ on detail.

The second iteration of the beard tax was implemented by the Russians in 1698. Their policy was a little more extensive and enabled the police to forcibly shave anyone refusing to pay the tax. Men were required to pay between 60-100 rubles (a small fortune at the time) depending on their position in society, with ‘wealthy merchants’ charged the full 100 rubles upon entering a city. They were then issued a ‘beard token’ to evidence payment.

A few hundred years later in 1944 the Russians had another great initiative – Tax on Trees. The tax imposed on fruit trees alone became so expensive for farmers that it led to a mass felling of fruit trees, causing a fruit shortage throughout the country. The tax was eventually repealed 10 years later.

Chronic bad payers of tax – beware

Inland Revenue is going to have the power to disclose tax debts to debt collectors.  The taxpayers will get a warning but there is no safeguard for ensuring they receive it.  The criteria for making this information public is that the debt has to have been overdue for 12 months and greater than 30% of the taxpayer’s gross income.  Presumably, to achieve the latter, the Inland Revenue Department will match the amount of the debt to the most recent gross annual income.  Thus if the client’s income is falling, it will be increasingly easy to hit the 30% threshold.

Many clients who get into financial trouble put their head in the sand.  If they want to avoid this very damaging disclosure, they will have needed to have either repaid the debt or made an arrangement for repayment.  Nothing is said about the possibility of Inland Revenue requiring an arrangement which is too onerous.

From our point of view, we’re going to need to keep in close contact with clients getting into trouble with their tax.  Unfortunately, clients usually don’t come rushing to us to tell us these troubles.

Scroll to Top