The IFS’ new report doesn’t understand self-employed

The Institute of Fiscal Studies has just published a report called “Tax and public finances: the fundamentals.“

According to the Institute, the report highlights ten critical facts related to taxes and the public sector finances that will underpin the fiscal policy challenges and choices citizens and governments face in the coming decades.

However, Dave Chaplin, CEO of IR35 compliance firm IR35 Shield, challenges the IFS’s understanding of the self-employed throughout the report.

Chaplin said, “Ex-Treasury official Paul Johnson heads up the apparently independent Institute of Fiscal Studies (IFS), which purports to conduct world-class research. However, it has failed to grasp the nature and value of self-employment in its recent report on taxes and public finances, and its narrative appears closely aligned with the same mistakes made by the Treasury.

“The IFS relies on simplified models misaligned with reality rather than grasping the real-world motivations and trade-offs the self-employed faces. Some of their abstract comparisons are wrong and fail to capture an accurate picture. One such flawed model is based on the assumption that the same person earns the same money for doing the same job, whether employed or self-employed.

“Before making sweeping recommendations, the IFS should try to understand the self-employed experience through proper empirical research.

“Too often, they portray the self-employed as mere tax avoiders rather than recognising the innovation and entrepreneurship self-employment enables. Many self-employed consciously sacrifice security for autonomy and flexibility – but the IFS overlooks this.

“The UK would benefit from emulating Australia’s more inspiring, optimistic view of self-employment. Leaders there celebrate the autonomous, entrepreneurial spirit of the self-employed. Here, the rhetoric takes a narrow, negative tone focused on tax avoidance.

“A valid statistical approach to exploring the self-employed would demonstrate the considerable value they create in the UK economy, by those who have consciously opted out of traditional employment to gain autonomy by being their own boss.”