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Horizontal equity and the taxation of employed and self-employed workers

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Author Info
Judith Freedman () (Institute for Fiscal Studies and Worcester College, Oxford)
Emma Chamberlain
Abstract

The schedular system of income tax in the UK frequently comes under attack, not least in relation to the distinctions it draws between the tax treatment of the employed and the self-employed. However, on examination, it appears that non-schedular systems of taxation share both these distinctions and the difficulties that arise from them, albeit to varying degrees. The division between employed and self-employed is also problematic for social security systems. These difficulties are found, to a greater or lesser extent, in all the jurisdictions studied by the authors. It may be argued that all or some of the tax and social security differences are justified by fundamental economic and legal differences between the nature of employment and selfemployment relationships. This may be true where the relationships compared are unambiguously, on the one hand, employment and, on the other, self-employment. However, there have always been non-standard relationships that combine characteristics of both these broad categories. This grey area appears to be increasing with changing work patterns. Consequently,the simple dichotomous system adopted by the UK tax and social security systems has come under pressure. This article considers the problems arising from this situation and some of the ideas that have been put forward to deal with them.

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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 18 (1997)
Issue (Month): 1 (February)
Pages: 87-118
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Handle: RePEc:ifs:fistud:v:18:y:1997:i:1:p:87-118

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Find related papers by JEL classification:
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Paul Johnson & Gary Stears, 1996. "Should the basic state pension be a contributory benefit?," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 105-112, February. [Downloadable!]
  2. David Skinner & Mark Robson, 1992. "National Insurance contributions: anomalies and reforms," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 112-125, August.
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Cited by:
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  1. René Böheim & Ulrike Muehlberger, 2006. "Dependent Forms of Self-employment in the UK: Identifying Workers on the Border between Employment and Self-Employment," Department of Economics Working Papers wuwp091, Vienna University of Economics and B.A., Department of Economics. [Downloadable!]
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