Corporate and Individual Tax Rates
The primary method nations use to produce public funds necessary to support investments is tax collection, which varies from nation to nation. For instance, business and individual tax rates vary between the US and England. The US’s highest corporate tax rate was lowered from 35 percent to 21 percent by the 2017 Tax Cuts and Jobs Act (TCJA) (Watson, 2022).
On the other hand, England’s corporate tax rate is 19%. However, the new corporate tax rate emphasizes that from April 2023, firms must disclose earnings of at least £250,000 to pay the higher 25% rate (“Changes to UK corporation tax rates,” 2023). Smaller businesses will continue to pay the former 19% rate on profits up to £50,000 (Changes to UK corporation tax rates, 2023). For companies with earnings in the middle of the two ranges, marginal relief gradually raises the corporation tax rates.
Additionally, there are differences in the individual tax rates between the two nations. For instance, in England, one’s tax burden increases with income. If one’s yearly income is less than £12,570 as of 2022, that amount will be considered an individual allowance and will not incur taxation (“Taxes in the UK,” 2022). However, the US has a progressive tax system, implying that those with higher taxable incomes must pay higher tax rates.
Other Sources of Federal Funding
The two nations have other federal financing streams besides business and individual taxes. For instance, imports are subject to customs fees, paid at ports of entry into the US and England. The US federal government also receives money via customs duties, Federal Reserve System revenues, inheritance and gift taxes, and other fees and penalties. These avenues contributed 5.0 percent of federal revenue in 2019 (“What Are the Sources,” 2020). Most products and services sold in the UK are subject to the consumption tax known as VAT in England, which is collected at every point along the logistics chain.
Tax Agency in the UK
The tax collection agency in England is called Her Majesty’s Revenue and Customs (HMRC). HMRC is in charge of tax collection, tax law enforcement, and the management of several social and economic programs. Further, the agency aspires to manage the tax system in the most straightforward, customer-focused, and effective way possible (“Tackling tax,” 2019). This is comparable to the IRS, which collects taxes and sets tax laws in the US.
Tax Compliance
The tax compliance systems in the US and the UK rely on self-assessment, where individuals properly report their income and compute their tax liabilities. Both countries have penalties for non-compliance; as a result, failure to file penalties is levied in both nations for failing to submit a tax return by the deadline. These penalties are often calculated as a percentage of outstanding taxes (“Compliance checks,” 2022). Similarly, failure to pay, a penalty is assessed on the due balance if a person fails to pay the entire amount of taxes owed by the deadline.
Complexity and Simplicity of Taxation in the UK and the US
Due to its broad tax law and various rules, the American tax system is frequently seen as difficult. The Internal Revenue Code is lengthy and filled with complex rules that are difficult for people and corporations to understand. Several credits, exemptions, and deductions may be claimed, but figuring out who qualifies and how much to claim can be challenging. Conversely, the UK tax system is typically thought to be simpler. The tax system is not as vast as the regulations, but they are straightforward.
Remarks
The US tax system is notoriously complicated and varies to some extent from state to state. This is primarily because of the economy’s breadth, diversification, and various deductions. The UK was a great choice for this study because of its complicated tax structure, particularly in specialized topics like capital gains tax, inheritance tax, and value-added tax (VAT). The possible fines and enforcement measures for non-compliance are one factor that might be unexpected in both nations.
References
Changes to UK corporation tax rates from 1 April 2023. (2023). Rodl & Partner. Web.
Compliance checks: Penalties for offshore non-compliance – CC/FS17. (2022). GOV.UK. Web.
Taxes in the UK vs. taxes in the US (2022). Expat Tax Online. Web.
Tackling tax avoidance, evasion, and other forms of non-compliance (2019). HM Treasurey: HM Revenue & Customs. Web.
Watson, G. (2022). Combined state and federal corporate income tax rates in 2022. Tax Foundation. Web.
What are the sources of revenue for the federal government? (2020). Tax Policy Center. Web.