Taxman suggests unhappy returns for all

The prospect of everyone in the country having to fill in a tax return every year - as they do in the US, Australia and New Zealand - has been raised by the deputy chairman of the Inland Revenue.

Steve Jameson told a meeting of the Chartered Institute of Taxation that he favoured a radical plan to lift the burden of red tape on small business, which would involve staff filling in their own returns.

"Small businesses are getting to the stage where something radical has to be done to overhaul the relationship between the employer and the state," said Mr Jameson. He than added: "My view is that we have to take employees of small employers out of the system and make them fill out returns themselves."

Those working for firms employing fewer than 25 people would join the 9.2 million people who fill out tax returns under the Inland Revenue's Self Assessment programme.

Such a plan would receive a warm response from small business groups and would underwrite the Department of Trade and Industry's proposals for cutting red tape.

But according to John Whiting, tax partner at PricewaterhouseCoopers, it would be impossible to introduce this scheme only for small companies, and it would have to be extended to all employees. "It would create two classes of employees."

After Mr Jameson's talk, the Inland Revenue spent its time trying to play down his comments. A spokesman said it was a personal view and that, anyway, it would be a matter for ministers.

Ironically, Mr Jameson only made the comments as he was standing in for Dawn Primarolo, the paymaster-general and minister in charge of tax.