Recently the Tax Payer’s alliance released a large report into the findings of their 2020 tax commission. The full report can be found here http://www.taxpayersalliance.com/home/2012/05/2020-tax-commission-final-report.html, but at 420 odd pages it is a bit of a struggle to read. I have therefore attempted to summarise the report in just one blog post for all you lovely people to read.
The Tax Payers Alliance wish to radically simplify the UK’s tax System. Simply put they wish to scrap swathes of UK Taxes, replacing them with two main taxes.
Individuals will be taxed a flat 30% rate with a personal allowance of £10,000. The TPA believes each person should be allocated a personal allowance, and should be able to transfer part of that allowance to a family member if so desired. So a single worker family doesn’t lose out compared to a double earner household.
Here is where it gets slightly tricky, the TPA recommends that local council’s be able to set Local income tax up to a maximum of 8%. The average local income tax (as far as I can tell) is subtracted from the Government Income Tax. I.e if Local Income Tax was 6% Government Income Tax would be 24%. Thus there is a slight area of tax competition brought into local councils.
Individuals would also be subject to VAT, Council Tax, Excise Duties and a Local Sales Tax, again set by local councils with a 5% maximum.
Businesses will be taxed at a flat 30% for all Capital Income and also pay local business rates set by local councils. The TPA wants to use these local taxes to fund 50% of council expenditure, the tax competition they will bring in will see councils being forced to become more efficient to maximise the use of their revenues. A flat 30% Capital Income tax will see a fall in the plethora of taxes that businesses face.
The TPA also recommended a 5p cut in Fuel Duty, all other taxes are to be scrapped.
As I argued before here https://thebackbencher.co.uk.s81650.gridserver.com/?p=198 simpler taxes lead to higher revenues and higher tax take from the wealthy.
Dynamic modelling by the Centre for Economics and Business Research (CEBR) has found that, if the measures were introduced with no spending cuts:
- After five years, GDP would be 1.8 per cent higher; business investment would be 14.6 per cent higher; and public sector net borrowing would be 23.1 billion a year higher.
- After 10 years, GDP would be 5.9 per cent higher; business investment would be 26.0 per cent higher; and public sector net borrowing would be 6.9 billion a year higher.
- After 15 years, GDP would be 8.4 per cent higher; business investment would be 61.2 per cent higher; and public sector net borrowing would be 35 billion a year lower.
The TPA however, recommends that strict spending cuts be put in place, as I showed earlier today there are no actual cuts taking place at the moment. The TPA want to reduce Government spending to around 33% of the economy from the 53% it is now