The UK should axe inheritance tax, stamp duty, the TV licence fee and 18 other taxes to simplify the UK’s taxation regime post-Covid, according to a free market think tank.
The Institute for Economic Affairs’ (IEA) pre-Budget release has called for Rishi Sunak to “simplify the tax system, reduce the overall burden of taxation, and eliminate many harmful distortions”.
The suggestions chide with expectations that the chancellor will raise taxes on Wednesday, with Sunak telling Sky News today he wanted “to deliver our promises to the British people that we will be responsible with their money” and that he would “level” with people on the need to shore up the country’s fiscal position post-Covid.
The IEA report instead calls to “abolish or significantly change” inheritance tax, Stamp Duty Land Tax, stamp duties that exist for buying shares, the apprenticeship levy, the licence fee, Vehicle Excise Duty, the bank surcharge and duties on alcohol, tobacco and gambling.
The think tank also called for a slew of property taxes – including council tax, the community infrastructure levy and business rates – to be rolled into one “single land value tax” and to replace corporation tax and the diverted profit tax “with a single income tax on capital income administered at the corporate level”.
IEA policy analyst Alexander Hammond argued that the UK should aim to emulate Hong Kong’s tax code, which is 48-times smaller than Britain’s.
“A low and radically simplified tax system is the best way for our economy to recover from repeated lockdowns and prosper for decades to come,” he said.
“Given our newfound post-Brexit freedoms, now is the time for a brave chancellor to embark on a radical tax-scrapping bonanza.
“The UK is in the unfortunate position of having many regressive taxes, and this paper suggests a number that could be among the first to go.”
The chancellor is widely expected to raise corporation tax in the Budget this week, with speculation he will outline a plan to increase it from 19 per cent to 25 per cent.
Each percentage increase would raise £3.3bn extra in tax revenue a year.
Sunak may also look to raise Capital Gains Tax in the Budget in a bid to claw back some of the UK’s £300bn in Covid spending.
The Sunday Times reports today that the chancellor will freeze the threshold at which people start to pay income tax at £12,500 for three years and freeze the rate at which people start to pay the 40p rate at £40,000 for three years.
This could bring in an extra £6bn a year without breaking the Tories’ 2019 manifesto pledge to not raise income tax.
When asked about potential tax rises in the Budget, Sunak told Sky News: “I would like to keep taxes low for people… but I want to deliver our promises to the British people that we will be responsible with their money.”
He added: “What I want to deliver is support for our economy, now when it needs it, support along that roadmap helping to drive our recovery.
“But also levelling with people and being straight about the challenges we face over time because of the shock coronavirus has caused our public finances and making sure that we’re clear with people about an honest and fair plan to address that. And I think those things are both compatible.”
Responding to the IEA release, a Treasury spokesperson said: “Since the start of the pandemic we’ve invested over £280 billion to protect jobs, businesses and livelihoods across the UK.”
“At the upcoming Budget we will set out further support for the economic recovery while being up front about the need to repair the public finances once the recovery takes hold.”