There is "no overriding reason" why a merger of national insurance (NI) and income tax should not go ahead, an actuary says.
The idea of merging income tax and NI to create a basic tax of 32% has been recommended by the Office of Tax Simplification (OTS), and speculation is growing as to whether it will be mentioned in tomorrow's Budget.
Malcolm McLean, consultant at actuarial firm Barnett Waddingham, says all signs point to the policy being adopted.
"The reasons why it has not happened previously are probably more political than anything," says McLean, pictured.
"There are certainly a few obstacles to overcome and any changes may have to be phased in over the longer term and not immediately."
Ros Altmann, director-general of Saga, has previously raised concerns merging income tax and NI will hit pensioners hard, as they do not currently pay NI.
However, McLean says applying NI to pensioners "could not be contemplated" and expects an increase in pensioners' personal tax allowance would be brought in to counter the additional cost.
He adds ending the contributory principle of NI, which is meant to fund state benefits but is topped up with revenue from ordinary taxes, will not be seen as a loss.
Work and pensions secretary Iain Duncan Smith and pensions minister Steve Webb have already signalled the end of the contributory principle and the implementation of a universal state pension and other benefits, as well as an end to means-testing.
However, there are concerns that ending NI will create more complications for people who have contracted out their second state pension, for which they currently receive rebates on NI or pay a reduced rate.
Altmann says it is contracting out which delayed the DWP producing a Green Paper on the universal state pension, which was promised by the end of 2010.
Tom McPhail, head of pensions research at Hargreaves Lansdown, says: "Contracting out has had its day, it is just a question of how to execute it with the minimum of lamentation.
"I think we will get a consultation on this but whether it ever actually comes to pass remains to be seen. Undoubtedly the political will is there for bold plans."
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