Flat-rate tax is commendable[QQ] The 'flat-rate tax' Heather Self so readily derided (Taxation, 2 September, page 6) has much to commend it - while our current methods of raising revenue for collective community action (ie, tax) are not without their problems. It is increasingly hard to identify a country's tax base. 'Our' companies may do little trade in the UK, while 'their' companies may dominate our domestic market. We accountants have not been above suggesting corporate structures to 'maximise' such 'benefits'. VAT is one response, road tolls another, and a tonnage tax a third. A 'data tax' is not a new idea. I would be surprised if we did not indeed see more 'tonnage taxes' in the future. Perhaps we might even see a tax on windows! I don't think tax practitioners need fear for their jobs just yet. Is this inconsistent? Probably. But then so are French road tolls, Italian flexibility and German geography. Finally, I favour incremental over revolutionary change. 'Fundamental reviews' are often a method of regulatory capture favoured by the 'no change' brigade and usually end with a fizzle. Cllr Mark Ingram FCA, AMCT, Harrow Pensions too hard to value So 60% of financial directors who responded to your recent poll think that pension liabilities and assets should be included in a company's accounts at market value (News, 26 August, page2). How exactly would those financial directors measure the market value of a pension liability to 25-year-old man that will not fall due for 25-40 years and which will continue for 5-55 years depending on how long he lives (and his wife if he marries), and which will be based on his salary in 25-40 years time? It is simply impossible to pay anyone in the market to assume this sort of liability. Attempting to match an asset value which fluctuates minute by minute against a liability which can only be, at best, actuarially estimated, makes no sense, which is precisely why SSAP24 did not require this approach but realised the longer-term nature of pension liabilities. A mature pension scheme may be worth more than the market value of the employer, and forcing immediate recognition of unrealised changes in asset's market values could completely wipe out the reported profit of the employer. In theory, the City should 'see through' changes in accounting policy, but in practice, it will only make it more likely that employers will move away from final-salary schemes towards schemes that do not create such volatility, by shifting the market risk to the employee. An employee's own pension may be worth more than the value of the family home at the time of retirement. Final-salary pension schemes are a very efficient way for employers to secure for employees a reasonable standard of living in retirement, without exposing the employee's biggest asset (their pension) to the volatility of the market, and it would be a great loss to all parties if their demise was hastened by something as humble as a new accounting standard. Rod Currie ACMA, MBA Darlington Leave them to sleep easy I have read with interest the correspondence in your magazine regarding personal services companies. Most of the letter-writers look at the companies that are set up to avoid direct employment and probably excessive employers and employees' national insurance. Some companies are indeed set up to do this, but many other very similar businesses are not. I see a major stumbling block to the government's efforts and a flaw in their thinking. Most people outside the institute-governed professions cannot obtain professional indemnity insurance at all. If they can, it is usually very expensive and offers restricted cover. This applies to computer and marketing consultants and many others. They have only one route to take to limit their liability - through incorporation. These companies are genuine businesses and it is not in anyone's interest including that of the government, to interfere with this and ignore the genuine concern of individuals operating in their own right. All they want to do is to be able to sleep easy. Vicky Platt FCA, ATII Harpenden, Herts All letters should be sent to: The Editor, Accountancy Age, VNU House, 32-34 Broadwick Street, London W1A 2HG Tel: 0171 316 9236 Fax: 0171 316 9250 Or email us on: [email protected] Accountancy Age reserves the right to edit letters for space or clarity. Please include your title, company name and a daytime telephone number.
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