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'Reform is best tax route to UK revival'

03 December 2009
Categories: News
Think-tank suggests 'more rational and effective' system

The Institute for Public Policy Research (IPPR) has added its voice to the call for reform of the UK tax system.

In a new report, the independent organisation proposes three tax routes the Government might take to help refill the public purse, suggesting the most effective direction would be a long-term programme of reforms.

This reflects last week’s recommendation from the Compass think-tank, which suggested an overhaul of the country’s ‘regressive and unfair’ tax system via measures including a 50% income tax band for gross incomes above £100,000.

The IPPR’s document – Opportunities in an Age Austerity: Smart Ways of Dealing with the UK’s Fiscal Deficit – claims there is a ‘strong case’ for changes aimed at a ‘more rational and more effective tax system’ that would increase tax revenue.

It goes on to advocate three ways by which this aim might be best achieved:

  • Extension of VAT to a wider range of goods, with a suitable compensation scheme for low-income households.
  • Increase in green taxes through VAT at the full rate on energy consumption, among other means.
  • Taxation of housing through a progressive system rather than the regressive council tax.

The institute also looks at incremental changes to taxation, remarking that it is ‘bizarre’ that the possibility of a 1% or 2% increase in the basic rate of income tax has been ‘effectively barred as part of political debate’, in spite of the fact that it would raise around £5 billion a year at ‘no great economic cost’.

However, the IPPR adds that most incremental changes would be ‘distinctly undesirable’ – as would a journey down the ‘worst of all routes: imposing substantial new complexity without any clear long-run goal’.

This has so far been the choice of the current government, claims the think-tank’s report, which concludes that the UK requires a coherent tax strategy and should one be imposed by the next administration it would ‘raise additional revenues while not imposing substantial additional costs on the economy and while improving overall functioning of the system’.

Categories: News
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