The Single Income Tax - The 2020 Tax Commission

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Contents 6 Contents Prologue 3 Forewords 15 Allister Heath, Editor of City A.M. and Chairman of the 2020 Tax Commission 16 Matthew Elliott, Co-founder and Chief Executive of the TaxPayers’ Alliance 18 Graeme Leach, Chief Economist and Director of Policy at the Institute of Directors 18 Biographies of the Commissioners 19 Allister Heath, Editor of City A.M. and Chairman of the 2020 Tax Commission 20 Andrew Allum, Co-founder and Chairman of the TaxPayers’ Alliance 20 Richard Baron, Head of Taxation at the Institute of Directors 20 Kevin Bell, Chairman of Maitland Political and Trustee of the Institute of Economic Affairs 20 Rosemary Brown OBE, Chairman of the Gabbitas, Truman & Thring Educational Trust 21 Mike Denham, Research Fellow at the TaxPayers’ Alliance 21 Martin Durkin, Managing Director at WAG TV 21 Matthew Elliott, Co-founder and Chief Executive of the TaxPayers’ Alliance 21 Anthony J. Evans, Associate Professor of Economics at ESCP Europe Business School 21 David Frost CBE, Chairman of the National Centre for Entrepreneurship in Education and Trustee of Ufi Charitable Trust 21 Graham Hampson Silk, Chairman of Hampson Holdings 21 Graeme Leach, Chief Economist and Director of Policy at the Institute of Directors 22 Andrew Lilico, Director and Principal at Europe Economics 22 Mark Littlewood, Director General of the Institute of Economic Affairs 22 Douglas McWilliams, Chief Executive of the Centre for Economics and Business Research 22 Fraser Nelson, Editor of The Spectator 22 Stephan Shakespeare, Co-founder and Chief Executive Officer of YouGov plc 22
Matthew Sinclair, Director of the TaxPayers’ Alliance 22 David B. Smith, Beacon Economic Forecasting and Derby Business School 22 1. Recommen dations 23 1.1. Implementing the 2020 Tax Commission’s overall proposals can be practical, productive and fiscally responsible 27 1.1.1. The overall economic results of the 2020 Tax Commission recommendations 27 1.1.2. Timeline for the transition 30 2. Taxes in Britain are too high and have become increasingly complicated 33 2.1. Governments have to pay for their spending by taxing, borrowing, printing money or owning assets 34 2.2. Taxes and spending rose substantially in developed countries over the 20th Century 35 2.3. Taxes in Britain are far too high 41 2.4. Britain’s taxes are highly and increasingly complicated 44 2.5. Many earlier reviews have found there is a strong case for significant tax reform 52 2.6. There are a number of different ethical approaches to understanding taxes and spending 53 2.6.1. Utilitarianism sets as an objective the maximisation of utility across the whole population 54 2.6.2. Deontology bases ethics on duties 54 2.6.3. Virtue ethics focus on the virtues we should have and on what constitutes a virtuous life 55 2.6.4. Libertarianism aims to minimise coercion 55 2.6.5. Religions have their own philosophical perspectives 56 2.7. Tax evasion is immoral as well as illegal, and in some cases legal tax avoidance is also immoral; but governments have a responsibility to minimise the opportunity to avoid taxes 56 2.7.1. General anti-avoidance rule 58 2.7.2. Alternative minimum or ‘tycoon’ tax 59 3. Taxes should be cut to 33 per cent of national income 63 3.1. There should be an upper limit on the level of tax 64 3.1.1. There is a limit on the amount of tax that can sustainably be raised 64 TaxPayers’ Alliance | Institute of Directors 7
Page 1 and 2: The Single Income Tax Final report
Page 3 and 4: The Single Income Tax Final report
Page 5: Prologue To create the conditions f
Page 10 and 11: 8 Contents 3.1.2. Under a range of
Page 12 and 13: 10 Contents 4.3.5. Family formation
Page 14 and 15: 12 Contents 8.1.2. Fiscal decentral
Page 16 and 17: 14 Contents Rao, M.G., Tax System R
Page 18 and 19: 16 Forewords Allister Heath Editor
Page 20 and 21: 18 Matthew Elliott Co-founder and C
Page 22 and 23: Biographies of the Commissioners Al
Page 24 and 25: 22 Graeme Leach, Chief Economist an
Page 26 and 27: Marginal tax rates should not excee
Page 28 and 29: 26 Those proposals would result in
Page 30 and 31: 28 so the elasticities are central
Page 32 and 33: 30 As Table 1.1 shows, the impact o
Page 35 and 36: Chapter two Taxes in Britain are to
Page 37 and 38: it is today and did not exceed the
Page 39 and 40: Table 2.2: Ratios of total tax rece
Page 41 and 42: Average workers would have to work
Page 43 and 44: General government expenditure Priv
Page 45 and 46: Government final current expenditur
Page 47 and 48: Table 2.7: Chartered Institute of T
Page 49 and 50: Pages with cases Pages without case
Page 51 and 52: “The last decade has also seen an
Page 53 and 54: “I sought to abolish a tax at eve
Page 55 and 56: There are many ethical questions th
Page 57 and 58: for a society to function, but an e
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The use of tax reliefs in ways that
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“It is said one of Emperor Nero
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tions by people who, in some cases,
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64 3. Taxes should be cut to 33 per
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The old HM Treasury rule-of-thumb,
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68 A tax on success UK celebrities
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The more high-skilled the labour, t
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72 rise from the 40p top marginal r
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74 everyone to have a decent life,
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76 Deciding what we want Peter and
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78 made most strongly in Nozick’s
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80 example. That is simply choosing
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82 should support a state-funded in
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84 while continuing to fund these s
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“The more money that the governme
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Matt Ridley is the awardwinning aut
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“Whereas private extravagance is
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92 So here is a question: is it bet
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“Artificial light was an unimagin
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“Free markets allow you to cooper
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“The concept of the tithe is also
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100 state comes before the individu
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“The aim of zakat is not to satis
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104 of people: tax payers and tax c
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106 Author Title (year) Country Bra
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Politicians making decisions can an
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110 It is reasonable to argue that
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112 make inadequate returns. There
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114 A system of taxation and govern
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116 the individual rather than soci
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Putting the case for spending on ed
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120 Activity: author Unit/organisat
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122 Activity: author Unit/organisat
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124 1997 to 2007, it would have sav
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As a result of the logic of collect
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Brennan and Buchanan’s Leviathan
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130 The UK actually scores highly,
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132 errors that resulted from overe
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134 Author Data coverage Main expla
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136 Compounded total growth, potent
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138 the tax structure rather than t
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At its peak in 1993, spending in Sw
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142 UK non-oil GDP Time trend pre 2
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144 Leadership is key and not just
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69 per cent agree that “if the go
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When asked if ‘people like me’
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150 Figure 3.13: In the current eco
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“We shall cut income tax at all l
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154 3.5.3.1.3. The 1988 Budget Prob
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For most voters the Poll Tax repres
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“… the soundest way to raise th
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160 was the Democratic nominee. The
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162 In 1983, when Labor entered off
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164 have survived. This in part pro
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166 Those substantial disparities a
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168 appropriately to local conditio
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There is an independent negative cr
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172 The IMF staffers found that the
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Public sector pay is 7.8 per cent h
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176 intensity of intergenerational
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178 Real PDE Real GDP Figure 3.17:
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180 Figure 3.19: Ratio of Smoothed
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The consolidations that turned out
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184 - The value added under the var
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186 revised version in 1987 succeed
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188 That statement must give at lea
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190 4. Marginal tax rates should no
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192 2001-02 2011-12 2012-13 2013-14
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“The number of people who pay no
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196 Production and Consumption Effi
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198 offers, the latter effect (i.e.
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“Corporate income taxes can affec
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202 the two is not tax evasion (alt
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“Higher tax burdens raise the pri
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There are numerous economic studies
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208 Table 4.2: Countries and jurisd
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210 made about the engine of growth
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212 Larger businesses have differen
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214 79 per cent agreed that Nationa
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216 0.35 TIE 0.45 TIE 0.55 TIE “N
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218 Feldstein and Feenberg looked a
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220 Personal income tax and employe
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222 As a result, at the time that t
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224 Table 4.5: Revenue raised by th
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226 open economies have lower maxim
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228 Tax rate Realisations Sea but t
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230 increase. And a higher CGT will
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232 The argument that there is a so
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234 High earners will, thanks to th
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236 Percentages of disposable incom
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The critical test should be whether
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Other researchers had already come
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242 preposterous to argue, as Wilki
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244 This was puzzling, since the wo
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246 Other scholars have attempted t
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Many studies of optimal taxation as
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250 amount of tax a single person o
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252 4.3.6. There is not a credible
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254 Incentives, behaviour and justi
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256 have less, and it is not at all
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Chapter five Taxes on capital and l
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Numerous empirical studies show tha
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5.1.3. Financial Transaction Taxes
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There is a stamp duty on shares in
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The Economist recently showed the t
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Corporation Tax lacks public legiti
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Table 5.1: Corporate flows of funds
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would be created for them to acquir
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dividends who were UK companies wou
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■ Original Company agrees to cove
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of removing distortions and an obvi
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Figure 5.3: Landlord with a propert
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And the fact that they do not gener
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capital gains by selling assets to
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Income from capital should be taxed
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UK Government. Capital payments sho
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as neutral between different taxpay
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If companies do not pay dividends o
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[M]any participants were resistant
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for jobs on the basis of experience
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Despite these technicalities the Fu
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■ Married Couples Allowance: Civi
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5.2.3.1.8. Interaction with benefit
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By splitting up employees’ tax bi
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5.2.4. There is an ethical responsi
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■ Amending remuneration advice no
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Table 5.13: Typical Second Phase pa
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■ 2004, British Chambers of Comme
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Chapter six Transaction, wealth and
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usinesses and other assets from bei
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Table 6.1: Cost of capital for alte
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There are a number of ways in which
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6.2. Wealth taxes lead to capital f
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“I found it impossible to draft o
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ather than on returns. Over time an
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2011-12 2012-13 If a mansion tax is
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Many high value properties were bou
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There are many ways in which people
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Real PDE Real GDP Figure 6.3: Annua
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Chapter seven Other consumption tax
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VAT is a substantial stealth tax wh
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Table 7.3: Tax gap estimates, cigar
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Higher taxes on goods that have rea
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to the senspropertiese that it is a
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More recently, Amazon agreed to sta
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■ The increase in high value/low
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The critical difference seems to be
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could improve it substantially, it
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Widening the base of VAT may improv
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Tobacco taxes are justified on the
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An estimate of that kind is reprodu
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Costs of smoking Lower margin Middl
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Duty on hydrocarbon oils & Vehicle
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Chapter eight Local authorities sho
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By pursuing a low tax and value-ori
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is vital to make corresponding chan
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The study tells us that the worst o
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But if councils are to be properly
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for revaluations or higher tax rate
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easons outlined below, the power wo
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Pages Test’ to the government of
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The Single Income Tax could deliver
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384 Appendix - earlier tax reviews
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386 the tax system is critically ex
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388 finances. A “growth-friendly
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390 special treatment for special i
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392 A Tax System for New Zealand’
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394 Evaluation of the 2006 Tax Refo
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396 local state taxes on consumptio
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398 the issue of the tax wedge, the
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400 Heath surveys the academic lite
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402 for the report was personal inc
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404 to add around 35 per cent to th
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406 HM Treasury Report on Flat Taxe
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408 Final Report of the Tax Policy
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410 overreliance on business and pe
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412 and consumption taxes correspon
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414 for poverty is to be found”.7
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416 gradually and not through a gig
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Acknowledgements The Commissioners
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