Fairer tax for a better economy
Article
The author argues that better and fairer taxes would enhance both economic performance and the government's ability to support public investment - each 'the prerequisite for and complement to the other'. The essence of these reforms would be to shift some of the tax burden from work to wealth, alongside a restructuring of company taxes.
The specific proposals include:
Making earnings taxes equitable: Taxes on work would be significantly reduced, while the treatment of different types of earnings would be brought together into a common unitary tax regime.
- National Insurance would be abolished, mitigating 60 per cent of £104 billion presently paid by employers and employees.
- Inclusive 'Earnings Tax' would be set at a standard rate of 27.5 per cent over an increased tax-free allowance of £13,250 a year (being 50 per cent of average pay). Higher rates of 35 and 40 percent would apply to annual earnings over, respectively, £50,000 and £75,000.
- All non-work earnings would be brought into line with and under the same unitary Earnings Tax. This includes capital gains coming under the same personal allowance, tax rates and earnings calculations as all other earnings.
Refocusing company taxes: In exchange for significantly reduced work taxes and greater support for productive activities, companies would pay more in general Corporation Tax.
- The main rate of Corporation Tax would return to 27.5 per cent, subject to a 15 per cent small company and start-up rate.
- The effective rate of tax would be increased by curtailing general deductions, allowances, tax breaks and so on, while vigorously closing off legitimated avoidance and the parallel 'offshore realm within'.
- Conversely, there would be more targeted tax (as well as more direct support) for substantively productive activities, particularly through deeper capital, R&D and investment allowances.
- A new wealth tax component to corporation tax would be introduced, based on 'net retained capital'.
- The present taxes on financial transactions would be reformed and broadened into a general financial transactions tax.
Taxing wealth: Closing the circle both fiscally and progressively, a general wealth tax would be introduced.
- The new tax would be levied on all holders of wealth, including both individual and corporate entities, with total net wealth over £150,000 at a progressive rate of
- 0.5-1.5 per cent per annum.
- Inheritance tax would be overhauled to dovetail with this new tax, capturing significantly more wealth than at present but taxing it at initially lower, then progressive rates.
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