A Tax Revolution, with the IoD
A Tax Revolution, with the IoD
The Institute of Directors is calling for a revolution in the tax system to unleash growth and ensure the UK’s prosperity.
The UK tax system is hideously complex. Complexity breeds abusive tax avoidance and holds the UK economy back. To right this wrong, we need radical reform to simplify the tax system and let businesses, families and entrepreneurs save, spend and invest more of the money they make.
Taxes should be based on fundamental principles. They must be simple, low, fair and compulsory. However, the UK’s labyrinthine tax code is far too often punishing, confiscatory and overly complex. This opens up opportunities for evasion, abusive avoidance and distorts important business decision making.
The IoD is calling for:
- All taxes which raise less than £5bn a year to be challenged regularly, with a view to them being repealed or merged
- Income tax bands to be triple-locked, increasing by the highest of the Consumer Prices Index, average wage earnings growth or 2.5 per cent – to end the scandal of fiscal drag
- An end to the clawback of child benefit and the personal allowance which create distortions which see cause marginal income tax rates to spike to more than 60 per cent
- The abolition of the fiscally ineffective 45 per cent additional rate of tax
To give ourselves the best chance to succeed as a country, and support the job creators of today and tomorrow, taxes must promote growth.
We need nothing short of a tax revolution.
Stephen Herring, head of taxation pinpoints the IoD’s key priorities for tax reforms and outlines recommendations for the GE2015 manifestos of all parties.
We all know that taxes serve a vital purpose – funding essential public services and infrastructure.
But the UK tax system is hideously complex.
Not only is it difficult to navigate, but its complexity creates opportunities for abusive tax avoidance and cunning financial schemes.
Some taxes actually hold back economic growth. This hurts businesses and households, damaging public services and investment. Over time, this does great harm to the UK economy.
That’s why the UK’s leading business network, the Institute of Directors, is calling for a revolution in the tax system.
Our starting point is simple: we believe that taxes should be simple, low, fair and compulsory.
They should be focused on the money they raise, and their wider economic impact. They should not be punishing, confiscatory or overly complex.
Reform must be radical. Anything short of this will complicate even further the web of taxation that already holds the country back.
So where do we start?
Well we believe that:
• Taxes collecting below £5 billion a year should be challenged regularly, with a view to their repeal or merger with other taxes.
• Taxes collecting more than £5 billion a year should be simplified and reduced over time to incentivise both businesses and individuals.
• While authentic tax planning must be protected, tax evasion and abusive tax avoidance must be prevented.
It’s not just about businesses. It’s also about letting people keep more of the money they make. So on personal taxation, we want to see a “triple-lock”, where all tax bands increase each year by the highest of consumer price inflation, earnings growth or 2.5%.
This will provide every taxpayer with the same certainty already enjoyed by those on the state pension and it will end the scandal of fiscal drag – where more and more people are dragged into tax bands that were never meant for middle earners.
We’re also calling for excessive marginal rates to be scrapped, where clawbacks on child benefit and the personal allowance hit people with a marginal tax rate that spikes to 60% or more.
The 45p additional rate of income tax should also be scrapped, and under no circumstances should it revert to the damaging 50p rate.
Capital gains tax and inheritance tax should be merged so capital is only taxed once, upon the overall gains generated. This would make the taxing of capital simpler, and fairer.
Reforming business rates and focusing business tax cuts on “middleweight” entrepreneurial businesses will unleash enterprise and encourage further growth.
Freeing businesses, families and entrepreneurs from the burdens of complex taxation and excessive tax rates will ensure they can focus on creating jobs, wealth and opportunity.
We don’t underestimate the challenge faced. Reform is complex and there are many obstacles in the road. But to give ourselves the best chance as a country, to ensure our prosperity, the tax system must be simplified.
Simplification and reform must be radical. We need nothing short of a tax revolution.
Join the revolution at the Institute of Directors.