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Sunday 20th May 2012 | 22:00
The 2020 Tax Commission is a joint project between the TaxPayers’ Alliance (TPA), Britain’s independent grassroots campaign for lower taxes, and the Institute of Directors (IoD) Europe's largest membership
organisation for business leaders. The Commission's final report calls for radical but realistic reform of our tax system, that is vital to kick start growth. In a 400 page report, published today, the Commission calls for the abolition of eight taxes and the creation of just one - a Single Income Tax. This is the second TPA and IoD collaboration following the agenda-setting 'How to save £50 billion' in 2009. Several recommendations from that report have been implemented by the Government since the 2010 General Election.
The 2020 Tax Commission proposals would result in substantial tax cuts for all households and provide a significant boost to economic growth. For example, a two earner household, with an income of around £28,000 would receive a tax cut of around £3,400. According to a full analysis of the proposals by the Centre for Economic and Business Research (Cebr), a leading economics consultancy, the changes would increase GDP by 8.4 per cent over 15 years - equivalent to an additional £5,000 per family in 2012-13.
The recommendations of the 2020 Tax Commission are:
1. Taxes should be cut to 33 per cent of national income
2. Marginal tax rates should not exceed 30 per cent, and the personal allowance should rise to £10,000
3. Taxes on capital and labour income disguised as business taxes should be abolished and replaced with a tax on distributed income
4. Transaction, wealth and inheritance taxes should be abolished
5. Other consumption taxes need to stay for now, but transport taxes should be cut
6. Local authorities should raise half of their spending power from local taxes
Other highlights from the 2020 Tax Commission's final report:
* Income Tax and Employees’ and Employers’ National Insurance would be merged into a single tax on labour income, with rates levelled down so that certain groups don’t face higher bills
* Corporation Tax and Capital Gains Tax should be replaced with a single tax on capital income – dividends, interest and rent – at a rate of 30 per cent
* Stamp Duty and Inheritance Tax would be abolished
* A Fuel Duty cut of 5p a litre and the abolition of Air Passenger Duty
* To ensure fair treatment of families with children or a single earner, the proposals would allow part of the Personal Allowance to be transferred within families (a Family Transferable Allowance)
* Cutting the ratio of spending and taxation to 33 per cent of national income would require spending to continue to fall until 2020 at roughly the same pace that it is currently expected to fall until 2015-16
Allister Heath, Chairman of the 2020 Tax Commission:
"It is time for Britain to make a vital choice between tweaking the status quo and letting our economy continue to be crippled by complex and punitive taxes, and drastically changing course with a radical but realistic plan for a tax system fit for the 21st Century. The 2020 Tax Commission has set out that plan and would ensure that income is taxed once at a single, much more reasonable, rate. It could create the conditions to establish the UK as a global trading hub, generating renewed prosperity for all those who live and work here. Politicians
who are serious about Britain’s future need to take it up."
Matthew Elliott, Commissioner and Chief Executive of the TaxPayers' Alliance:
"Right now the Government’s first priority has to be strong economic growth to create jobs and ease the pressure on families struggling to make ends meet. Tax reform is essential to make that possible. At the
same time, the tax system has to be fair, and seen to be fair. Our current complicated tax code where income is too often either taxed repeatedly or not at all doesn’t pass that test. The Single Income Tax is a serious plan for a tax system that can restore Britain’s economic fortunes and leave more of their money in taxpayers’ pockets."
Graeme Leach, Commissioner and Director of Policy at the Institute of Directors:
"This is a radical and practical plan for reforming our tax system to make it fairer and better for the economy. Fiddling with the system causes more complexity and has little benefit to growth – this proposal would put a rocket under economic confidence. This is a real opportunity to make life easier for people, get more money on the High Street and give Britain a tax system which is right in principle and works in practice. We need radical action to kickstart the economy, and this is a comprehensive way to do that in one go.”