PAYE is a great way for the government to collect taxes.
- Other people work as the collecting agents for free.
- The income never touches the employee, so they don't feel the pain when the money is taken.
- The government doesn't have to worry about people not paying their taxes as they never touch the taxpayer.
- The Government gets the money up front rather than at the end of the year.
- Government can happily overcharge and then refund the difference at the end, getting free credit.
Its game set and match to the government
Government - 1
Taxpayer - 0
Problems with the income tax is, it tends to fall more on the employee when unemployment is high, and more on the employer when unemployment is low. Essentially kicking each group when they are down and adding to the cycle of boom and bust.