There are two options. We can either decide to tweak the status quo – try and keep a lid on public spending, reform bits of the public sector and hope for the best. Or we can drastically change course: adopt an entirely new tax system fit for the 21st Century and establish the UK as a global trading hub, generating renewed prosperity for all those who live and work here.
This introduction comes from the 2020 tax commission, who have recently released a report convened jointly by the TaxPayers’ Alliance and the Institute of Directors. The report proposes that we abolish the existing tax schemes and replace it with a Single Income Tax of 30 per cent. This will apply to both labour income (wages, bonuses and other earnings from the jobs market) and capital income (dividends and share buybacks, interest and rent).
The report's aim is to look at the nation's income and provide a single tax rate that avoids loopholes. The poor should also benefit, with the report noting that a personal allowance of £10,000 should be provided which could increase by 2020. There are also plans that those earning £25,000 will pay far less in terms of percentage than someone earning £250,000. The plans also boast that these new rates will boost economy competitiveness and that all income groups would gain.
The proposal has now become an eight year plan, with the shake-up report seeking to provide growth and job creation whilst ensuring a fairer tax code. The report also mentions cutting transport tax, although VAT and consumption taxes should remain untouched. Public spending would fall further from 39 per cent of GDP in 2016-17, when the chancellor’s plans end, to 33 per cent by 2020 or thereabouts.
The current tax situation is in desperate need of reform, with every pound earned being taxed and triple taxed by income tax, two different kinds of national insurance, and then further tax from the likes of stamp duty (when buying a house) or inheritance tax in the event of a death. Capital owners also suffer, particularly shareholders - paying the majority of taxes with only part payment by workers in the form of lower wages. Overall, the current system is loophole-ridden and flawed, particularly within 'business' taxes such as corporation tax and capital gains tax. Avoidance schemes such as using debt interest to reduce taxable profit would become a thing of the past.
If you would like to read the full report click here: www.2020tax.org - you'll find more information on plans as well as evidence-based case studies for lower and better taxes.