THE UK tax system is in desperate need of a radical overhaul in order to support the country’s economic recovery, according to a study commissioned by independent think-tank the Institute for Fiscal Studies (IFS).
The study, conducted by Nobel Laureate Sir James Mirrlees, found the system was overly complex, inequitable and costly to administer. Mirrlees called for the tax treatment of different types of income to be aligned so that corporation tax was properly integrated with personal taxes, and the tax treatment of income from employment, self-employment and corporate sources was the same.
The report also argued that the tax bias in favor of debt as a source of corporate funding over equity should be removed, with the resulting loss of corporate tax revenue offset by raising taxes on wages.
Mirrlees said it was “undeniable” that the proposed changes would be “politically difficult”, but said: “We cannot forever succumb to the tyranny of the status quo.”