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Integrating Income Tax and National Insurance: an interim report

Author

Listed:
  • Stuart Adam

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Glen Loutzenhiser

    (Institute for Fiscal Studies)

Abstract

Income Tax and National Insurance are now sufficiently similar that merging them appears to be a plausible option, yet still sufficiently different that integration raises significant difficulties. This paper surveys the potential benefits of integration - increased transparency and reduced administrative and compliance costs - and the potential obstacles, assessing the extent to which each of the differences between Income Tax and NICs - in particular the contributory principle, the levying of an employer charge and the differences in tax base - constitute serious barriers to integration. The paper concludes that few of the difficulties look individually prohibitive, but that trying too hard to avoid significant reform of the current policy framework could produce a merged tax so complicated as to nullify much or all of the benefits of integration.

Suggested Citation

  • Stuart Adam & Glen Loutzenhiser, 2007. "Integrating Income Tax and National Insurance: an interim report," IFS Working Papers W07/21, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:07/21
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    File URL: http://www.ifs.org.uk/wps/wp2107.pdf
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    References listed on IDEAS

    as
    1. William Vickrey, 1939. "Averaging of Income for Income-Tax Purposes," Journal of Political Economy, University of Chicago Press, vol. 47(3), pages 379-379.
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    4. Alan J. Auerbach, 2006. "The Future of Capital Income Taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 27(4), pages 399-420, December.
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    6. Andrew Dilnot & Steven Webb, 1989. "Reforming National Insurance contributions: a progress report," Fiscal Studies, Institute for Fiscal Studies, vol. 10(2), pages 38-47, May.
    7. John Hills, 2003. "Inclusion or Insurance? National Insurance and the future of the contributory principle," CASE Papers 068, Centre for Analysis of Social Exclusion, LSE.
    8. Robin Boadway & David Wildasin, 1994. "Taxation and savings: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 19-63, August.
    9. Evan Davis & Andrew Dilnot, 1985. "The restructuring of National Insurance contributions in the 1985 budget," Fiscal Studies, Institute for Fiscal Studies, vol. 6(2), pages 51-60, May.
    10. Judith Freedman & Emma Chamberlain, 1997. "Horizontal equity and the taxation of employed and self-employed workers," Fiscal Studies, Institute for Fiscal Studies, vol. 18(1), pages 87-118, February.
    11. Andrew Dilnot & Steven Webb, 1988. "Reforming National Insurance contributions," Fiscal Studies, Institute for Fiscal Studies, vol. 9(4), pages 1-24, August.
    12. David Skinner & Mark Robson, 1992. "National Insurance contributions: anomalies and reforms," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 112-125, August.
    13. John Hills, 2003. "Inclusion or Insurance? National Insurance and the future of the contributory principle," CASE Papers case68, Centre for Analysis of Social Exclusion, LSE.
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    Cited by:

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    2. Stuart Adam & Barra Roantree & David Phillips, 2017. "The Incidence of Social Security Contributions in the United Kingdom: Evidence from Discontinuities at Contribution Ceilings," De Economist, Springer, vol. 165(2), pages 181-203, June.

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    More about this item

    Keywords

    Taxation; social insurance; administration;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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