Tuesday, July 04, 2006

Just How Dumb Are We?

Revenue Anti-Fraud Officer

Here are two Rummie known knowns.

One: as demonstrated so clearly with ciggies, high taxes encourage avoidance- even by normally law abiding citizens.

Two: on the other side of the accounts, generous state handouts encourage fraud- especially when the benefit rules are so complex that even the bureacrats don't really understand them.

Gordo's laberynthine tax credit system is an open goal, and because of Labour's open borders policy, it's not just British fraudsters who are benefiting:

"Workers from some of the European Union's newest members are travelling to Britain, taking low-paid jobs and then applying for tax credits. In some cases it is believed that the claimants - who come from countries such as Slovakia, Latvia and Lithuania - falsely claim that their children are living with them in Britain in order to qualify for higher payments.

Once the claim has been set up, the fraudsters return to their home country but the tax credit payments continue to be paid into their bank accounts. In some cases, fraudsters manage to make several thousand pounds in a few months. They then use the money to buy property in eastern Europe."

The last time we totted up the known fraud against taxpayers, we got to £15bn pa, or nearly 5 pence on the standard rate of income tax. In fairness, that also included "error", but against that the data related to the time before EU expansion.

Obviously with these Latvian home buyers the Revenue have been asleep (again), and the NAO should investigate soonest.

But the most important point is simply to recognise that Big Government has been far too ambitious. There are limits to what it can do both in terms of taxation and benefits, and after ten years of Labour we're bang up against them.

Let's all try to remember that.

PS No of course I don't think we should abolish all state aid for the poor. But we've got the balance wrong. In a previous blog I reckoned if we cut the target income support level from 60% of median income to 50%- where it always used to be- we could vastly simplify our benefit system and save about £50bn pa. We'd improve work incentives and be a much less attractive target for fraud.


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