Calls for single 30% income tax rate

Purse with cash The commission wants a rise in the amount of income people can earn that is not taxed

A single 30% rate of income tax is needed in order to boost growth in the UK, a report by lobbying groups says.

The 2020 Tax Commission's report also calls for the abolition of national insurance, and for the basic personal allowance to be raised to £10,000.

It claims that the changes would result in a tax cut of £3,400 for a two-earner household with an income of £28,000.

The Treasury said it was committed to a "simpler, fairer and fiscally sustainable tax system".

The commission is a joint project between the Taxpayers' Alliance and the Institute of Directors.

It wants a simpler tax system in the UK, but also says that further spending cuts are needed.

The commission recommends limiting taxation as a whole to a third of national income, and limiting spending to the same level, which would mean extending cuts in public expenditure to 2020.

BBC political correspondent Mike Sergeant said those spending cuts would be far beyond the cuts planned so far.

Nick Pearce, director of the IPPR think tank, said the plan was "a recipe for increased recession, increased inequality and increased government debt".

The commission cited research that it said indicated that the "optimum size of the state", in terms of maximising economic growth, was about 30-35% of GDP.

"We have got it wrong in this country where we believe that an ever-larger state is good for growth," said Allister Heath, chairman of the commission and editor of the City AM newspaper.

But Mr Pearce told the BBC that there was no link between the size of the state and economic growth.

"Countries like Denmark, Norway and Sweden have higher rates of public spending than we do [in the UK] and they achieve very high levels of employment, of growth and very good quality of life.

"The central arguments don't hold true," he said.

'Vital choice'

The commission says shifting to a single income tax rate would add £49.1bn to the national deficit in the first year, if the changes were not phased in or if spending were not cut further.

But it predicts that after 15 years the change would actually reduce overall borrowing by £35bn.

Its proposals include scrapping stamp duty, inheritance tax and air passenger duty, and cutting fuel duty by 5p.

Start Quote

We are already taking action in a number of the areas identified in the report”

End Quote Treasury spokesman

And it would replace corporation tax and capital gains tax with a 30% tax on dividends, interest and rent.

"It is time for Britain to make a vital choice between tweaking the status quo and letting our economy continue to be crippled by complex and punitive taxes, and drastically changing course with a radical but realistic plan for a tax system fit for the 21st century," said Allister Heath.

"The 2020 Tax Commission has set out that plan and would ensure that income is taxed once at a single, much more reasonable rate. It could create the conditions to establish the UK as a global trading hub, generating renewed prosperity for all those who live and work here."

A spokesman for the Treasury said the government welcomed the report's contribution to the long-term debate on tax policy.

"It contains some radical suggestions and will stimulate useful debate. The government is committed to a simpler, fairer and fiscally sustainable tax system and supports the case for reducing headline rates of tax to support economic growth," the spokesperson said.

"We are already taking action in a number of the areas identified in the report, for example, making progress towards increasing the personal allowance to £10,000 and further reducing corporate taxes in Budget 2012."

The personal allowance - the amount of income you can receive without having to pay tax on it - is £8,105 for the 2012-13 tax year, and will rise to £9,205 from April 2013.

But BBC political correspondent Mike Sergeant pointed out that while the coalition says it is working to simplify taxes, most of the ideas in this report are not even being considered by ministers, he added.

And although it wants to reduce spending, its doesn't go as far as this commission is suggesting.


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  • rate this

    Comment number 101.

    It makes sense, although 30% seems too much or the threshold too low. But much more needs to be done to make the financial & tax system truly fair. Greed & tax dodging by the wealthy has to be tackled. No one should earn multimillions as a paid employee let alone dodge tax by ever more inventive schemes. Tackle that first & the rest of us might be more open to change & less suspicious!

  • rate this

    Comment number 100.

    Last August, while English cities burned and rioters rampaged through her streets it was business as usual in the socialist hellhole of Scotland

    No rioters... anywhere
    I think a couple of facebook muppets got arrested up here

    The more poverty these right wing nutjobs in England create the more violent and dangerous your society is going to become

    Rocket Science it aint

    Grow up and get real

  • rate this

    Comment number 99.

    The plan does not address bonuses made by those who damage the integrity of the City with their devious synthetic paper trading. The plan could also cost £49bn in yr1.

    But there's a way

    Our PM rejected a EU proposal to raise £46bn through a tax on financial transactions.

    Now if we merge these two proposals together, it will plug the gap, eat into those bonuses and simplify our tax system.

  • rate this

    Comment number 98.

    Some interesting ideas , but there should be high rate of tax
    20K 20 % add in the current value of NI
    > 30K 30%
    > 75K 40%
    > 150K 45%
    > 1M 50%
    > 5M 55%
    > 10M 60%
    get ride of road tax, toll roads 2 enough on fuel
    higher tax on hight value purchases.
    TAX system to support Families,Children via allowances

  • rate this

    Comment number 97.

    Surprise. Everyone commenting about how their particular case means they are somehow being hard done by and how they should be allowed to benefit from the extra allowances but not pay any of the increases.

  • rate this

    Comment number 96.

    As is to be expected, the Grauniad readers are out in force with their usual chorous of, 'protect the public services' (translation - keep subsidising the bloated publi sector) and this is a, 'benefit for the rich' (translation - we are bitter and twisted envious little class warriors).

    I welcome this report. I welcome its ideas. I am sick of my hard-earned income going to the public sector.

  • rate this

    Comment number 95.

    >>>The commission recommends limiting taxation as a whole to a third of national income... Down from the current 40%! That is a pretty extreme hike in post-tax income, for somebody, and an absolutely fatal collapse in public spending.

  • rate this

    Comment number 94.

    And what about all those basic rate tax payers who have been contributing into a personal pension at 20% rebate, with no rebate on their NI contribution? They will get taxed at 30% on retirement. Nice one.

  • rate this

    Comment number 93.

    Another 'improvement' another income cut for the pensioner. I'm not surprised its what I have come to expect. Raising the tax threshold to £10,000 is the only good idea.

  • rate this

    Comment number 92.

    As our business "culture" is prepared to drive inequality to such heights there needs to be progressive tax to regulate.

    Its a recognised fact that inequality is the root of many of our economic and social problems - not growth.

  • rate this

    Comment number 91.

    Another way to tax the young. Because we don't have it hard enough already. A 30% tax rate will be my time to emigrate.

  • rate this

    Comment number 90.

    More idiotic nonsense from the Taxdodger's Alliance and their rich cronies.

  • rate this

    Comment number 89.

    Starve the dog. As long as you feed it scraps and keep it contained, it'll remain loyal to you.

    Utilize job insecurity and then tax the dogs. Keep them lean, mean and contained. Tory tactics for the lower paid while the rest gambol indifferently!

  • rate this

    Comment number 88.

    As the response to this article shows the general view is that "fair" taxes are ones paid by someone else.

    A single rate tax is a fine idea particularly if it is coupled with a reasonable personal allowance. The notion that higher tax rates bring in higher tax take is completely flawed imo...see the Laffer Curve ....

  • rate this

    Comment number 87.

    57. chiptheduck

    38.Matt Horne

    If you're a basic rate tax payer you pay 20% right? Wrong, you effectively pay 45% in income tax and national insurance.
    Get your facts right. NI is not 25%.

    Employees NI 12%, Employers NI 13% - total 25%. Your employer knows it when he's deciding on YOUR salary level. It is a tax on YOU.

    Understand what the figures actually mean to your pocket!

  • rate this

    Comment number 86.

    43.Ken Griffiths
    #I do not pay any national insurance.#
    Yes but look at it less selfishly. You doubtless want all the things it pays for, possibly more so now retired. It makes sense not to have a separate tax which is actually identical to income tax. If you are so rich in old age to get over the proposed huge personal allowance it is not unreasonable you pay on the amount over that.

  • rate this

    Comment number 85.

    I'm reminded of the film "The Great Escape" when the captured escapees are allowed out of the armoured car to stretch their legs. When they look round they're facing a machine gun which mows the lot down.

    For "escapees" read "pensioners".

  • rate this

    Comment number 84.

    I would directly benefit from this move to the tune of thousands but as a society the cost to those less able to pay would be astronomical and utterly unfair

    It is a divisive ,selfish,cynical, self serving suggestion presumably designed for those mega rich who don't want to bother going to the effort of becoming non dom to tax dodge.

  • rate this

    Comment number 83.

    Yes, simplify to a single rate only if you can close those tax loopholes that would make tax accountants redundant, collect more from the higher income earners, revoke special tax privileges of the gentry and lords.

  • rate this

    Comment number 82.

    Bad idea it will hit the low and middle earners the most and the rick off. Wonder how much they get paid.
    It is simple change the law. Anything that your average person would say is tax avoidance is, with a 1000% fine and prison for the MD for a year.


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