As a package of measures, the IEA argues the reforms would lead to increases in employment, productivity and wages through a lessening of the tax burden. Additionally, it claims this would disproportionately benefit low-income workers who are more likely to be in insecure jobs, low-paid employment or unemployed. In total, the think tank says that the poorest 40 per cent of the country would all see tax cuts in excess of 10 per cent.
These are the 20 taxes the IEA wants to abolish
- 1. Affordable housing and other s106 obligations
Obligations under section 106 of the Town and Country Planning Act 1990, which operate effectively as taxes on property development with some of the cost being borne by land values, should be abolished, albeit with some of its function replaced by a location value tax.
- 2. Aggregates levy
This tax on quarrying aggregates exists to reflect the associated externalities but the harm to local environments from quarrying would be better managed by regulation that requires sites are made good after aggregates have been extracted
- 3. Air passenger duty
Fiddly and already partially covered by the EU’s emissions trading scheme, flights should be fully brought into the ETS
- 4. Alcohol duties
The case for Pigovian tax on alcohol is weak with socialised healthcare provision but becomes almost non-existent in its absence.
- 5. Apprenticeship levy
The apprenticeship levy will makes a badly designed income tax system even worse, introducing new distortions, further opacity and additional complexity. It should be abolished.
- 6. Bank surcharge
No principled reason exists to support the bank surcharge on profits. Profitability is a poorer indicator of taxpayer exposure than balance sheets, which the bank levy captures more effectively when a flawed regulatory environment exposes taxpayers to risk of bank failure. It should be abolished.
- 7. Business rates
A halfway house between a damaging intermediate tax on commercial property and an efficient tax on location value, business rates should be replaced by a location value tax.
- 8. Capital gains tax
Most capital gains represent double taxation on the difference in the present value of expected future income between the dates of purchase and the sale of the asset. This is already effectively taxed and so presents an obstacle to the efficient reallocation of capital assets within the economy
- 9. Climate change levy and renewables obligations
Following the abolition of exemptions on renewable energy sources, the climate change levy now operates as a tax on industrial energy use irrespective of carbon emissions. It should be abolished and replaced with either a comprehensive carbon tax or the full inclusion of emissions into the EU-ETS, which would allow regulatory quasi-taxes such as renewables obligations to be abolished.
- 10. Community infrastructure levy
The complex, arbitrary and contentious community infrastructure levy should be abolished, albeit with some of its function replaced by a location value tax.
- 11. Corporation tax
Replace with a tax on corporate income from capital.
- 12. Council tax
Confused, outdated and unpopular, council tax should be replaced by a location value tax.
- 13. Diverted profits tax
This would be defunct when profits are not taxable.
- 14. Gambling duties
The case for Pigovian tax on gambling is almost non-existent.
- 15. Inheritance tax
There is a coherent, strong case to tax inheritances as part of income in the hands of the recipient, but the case for outright abolition is probably stronger still, for reasons discussed in the section on income tax. There is no case at all for the existing inheritance tax with its poor choice of base (the size of the estate bequeathed) and its substantial and highly distortionary exemptions (such as artworks and agricultural land).
- 16. Licence fee
There is no principled case for a tax on the ownership or use of televisions or other broadcasting receiving equipment.
- 17. Stamp duty land tax
Similarly, there is no good reason to tax the transactions of properties. This tax artificially depresses property values, discourages investment and distorts the allocation of assets – for example, by discouraging older people from moving to smaller accommodation when they no longer need as much space after their children have left the family home.
- 18. Stamp duty on shares
There is no good reason to tax the transactions of shares and this tax artificially depresses equity values, discourages investment and distorts the allocation of assets
- 19. Tobacco duties
The case for Pigovian tax on tobacco is weak with socialised healthcare provision but becomes almost non-existent in its absence.
- 20. Vehicle excise duty
There are no principled reasons to retain VED on cars, but a per vehicle tax on heavy transport vehicles to reflect external costs of road maintenance not already covered by fuel duty could be acceptable.