Tax policy - campaign notebook

My thanks to Charles Dundas, Liberal Democrat candidate for Livingston and a former CIMA trainee, for providing a very concise summary of his party's tax policies. Top of the list is increasing the personal allowance for income tax to £10,000. Shadow chancellor Vince Cable's campaign team is also proposing the following measures:

• Restriction of tax relief on pension contributions to the basic rate
• Capital gains tax - alignment of rates to income tax rates
• Capital gains tax - reduction of annual exemption to £2,000
• A 1% levy on the value of properties over £2m
• Replacing Air Passenger Duty with a per plane tax
• Introduction of a levy on domestic flights

According to Dundas, the Lib Dems' tax policies are based on these principles:

• Fairness – tax policies should be equitable and ensure that the payment of taxes is linked proportionately to people’s ability to pay.
• Simplicity – tax policies should be clear to taxpayers and new policy should aim to eliminate complexity in existing legislation.
• Certainty – tax policies should not be retrospective and should provide the taxpayer with certainty over the correct treatment.
• Efficiency – tax policies should provide revenue to the government on an efficient basis and minimise tax leakage.
• Transparency – the reasons behind the introduction of new tax policy and the intention of spending of revenue raised should be clearly stated to the taxpayer.
• Competitiveness – UK tax policies should be internationally competitive.

"Under this Labour Government millions of people on low incomes are forced to pay hundreds of pounds in income tax every year, keeping pensioners on the bread line and meaning that for many people in low paid jobs, work simply doesn’t pay. Even a person working full time earning the minimum wage sees nearly £1,000 taken from them in income tax," Dundas added.

"The Liberal Democrats want to radically rebalance the tax system by cutting taxes for people on low and middle incomes, which we will pay for by cutting reliefs, closing tax loopholes that benefit the wealthiest and a 1% levy on properties over £2m."

Update, 14 April - Our source in Livingston was right on the money, with most of his pointers replicated verbatim in the formal manifesto, published today. It was accompanied by a tax policy briefing, which I've summarised in a separate thread in this group in answer to "martymcfly". It includes costings for the £10,000 threshold and projected anti-avoidance savings, plus detailed summaries of policies including the proposed per-pair air duty tax proposal and the general anti-avoidance provision for Corporation Tax.

A work in progress, drawn mainly from Budget 2010 announcements and the party's website.

• Reducing the deficit will come from a combination of public spending cuts, economic growth and tax increases “for those who can afford them” – with 60% of tax rises being paid for by the top 5% of earners.
• Finance Bill 2010 sets out a new 50p top Income Tax rate for those who earn over £150,000 (the top 1% of earners). People with incomes over £100,000 a year (the top 2% of earners) will see a gradual removal of their personal tax-free allowances.
• Tax relief on pensions will be restricted from next year for those with incomes above £130,000 a year. Tax relief on pension contributions will be restricted to the basic rate for those with income of over £180,000; those in the band £150,000 to £180,000 will see their tax relief reduced proportionately until they reach the £180,000 limit.
• The value of capital gains that can be made under Entrepreneur’s Relief will double, meaning gains under £2m are subject to Capital Gains Tax at the lower rate of 10%.
• IHT nil rate band remains frozen for the next four years at £325,000, allowing “fiscal creep” to raise additional funds if house prices, for example, recover.
• Corporation Tax rate will continue at 28% for 2011/12. The small profits rate is still due to increase from 21% to 22% from 1 April 2011
• Business Payment Support Scheme (aka “Time To Pay”) to be extended through the next parliamanet. In his Budget speech, Chancellor Alistair Darling claimed the scheme helped more than 200,000 businesses, which collectively employ 1.4m people, to pay more than £5bn in business taxes on a timetable they can afford.
• Will double Annual Investment Allowance – with the result that 99% of firms will receive tax relief when they invest in plant and machinery.
• Green taxes: zero-emmission goods vehicles will now attract a 100% first year capital allowance

Please let me know here if you are aware of any policies I've missed or new pronouncements that emerge during the campaign. Thanks too to WhichTyler for the pointer to the C4 fact-check page. We shall make copious use of it!

Again, a working notebook drawn from the Conservative website and draft manifesto:

• Will deal with the deficit more quickly than Labour and build a more stable, balanced economy, reform public services to deliver better value for money and create new jobs to “make Britain open for business again”.
• Will present an emergency Budget within 50 days of taking office to address the current budget deficit over the course of the next Parliament (Labour is promising to halve the deficit in that time). The first measures will start to take effect this year.
• Will create an Independent Office for Budget Responsibility  to restore trust in Treasury forecasts. The OBR will provide an independent audit of all Government liabilities, and hold the Government to account for its fiscal promises.
• Will stop the planned increases in National Insurance Contributions. Stopping Labour's “tax rise on jobs” will benefit 7 out of 10 working people and be funded by spending £6bn less in 2010-11 than Labour projections. The Conservatives will still allow the rates of NI rates to increase, but would also increase the starting threshold for applying the tax to £6,968 and the higher threshold to £38,908. The effect would be that anyone earning less than £45,000 would experience no increase in their NI payments.
• Emergency Budget will set out a five year road map for corporate tax reform, providing greater certainty and stability to businesses. All technical changes will be published in a Pre-Budget Report before each Budget for consultation and proper Parliamentary scrutiny,
• Undertake a full and fundamental review of small business taxation, including IR35. The aim will be to provide a simpler, clearer and lasting tax regime, so businesses can plan with confidence. “For the last 13 years, Labour have constantly meddled with the tax rules for freelancers and self-employed. IR35 has especially proved to over-complex, uncertain and often unfair,” said shadow business minister Mar Prisk. The Tories claim IR35 has cost business £73m over 10 years, but has barely raised any revenue. Prisk criticised Gordon Brown for making it harder to be self-employed at a time when Britain should be open for business.
• In support of longstanding pledges to simplify the tax system, a Conservative government would create an independent Office of Tax Simplification to review current arrangements with the aim of providing a clearer, lasting and fairer tax regime.
• Cut Corporation Tax for small firms and make small business rate relief automatic. “Our ambition is to create the most competitive corporate tax environment in the G20. To begin with, we will cut the headline rate of corporation tax to 25p or lower and the small companies’rate to 20p. The rate cut will be funded by reducing complex reliefs and allowances, including the Annual Ivestment Allowance that Labour has now raised to £100,000.
• Do not regard the new 50p tax rate as a permanent feature of the tax system, but would not abolish it while asking public sector workers to accept a pay freeze.
• Stop tax credits to families with incomes over £50,000.
• Raise the Inheritance Tax threshold to £1m.
• Take 9 out of 10 first-time buyers out of Stamp Duty by raising their threshold to £250,000 (an idea lifted by Labour in the 2010 Budget).
• Reverse the effects on pension savers of the 1997 abolition of the dividend tax credit for pension funds.

Keep us posted if you discover any other important points.

The Green Party intends to use taxation and regulation to discourage pollution and the wasteful use or over-use of finite resources, and encourage ecological sustainability. 

On the economy and public spending deficit leader Caroline Lucas commented: “We will raise taxes fairly and explain them honestly. The Green Party will be open about what we would cut, what we would defend, and about the fact that we need to raise taxation from 36% of GDP in 2009-10 to around 45% in 2013. This would halve the gap between government expenditure and revenues by 2013-14 (as the Labour government proposes) and progressively close the gap thereafter.”

Specific tax proposals include:

• Reduce bureaucracy by scrapping VAT. Taxes on pollution or the use of resources would encourage more sustainable ways of producing goods. If these taxes replaced VAT then prices would not rise overall.
• Simplify PAYE by abolishing National Insurance as a separate entity and merging it into general Income Tax.
• An end to the zero-rating of VAT on new dwellings, putting them on a level with conversions and renovations of existing dwellings, raising £5bn in 2010 and £7.5bn by 2013.
• End tax relief on pension contributions that mainly benefit the more wealthy. A non-means-tested state pension, set at £170 a week

Consult the party's website and manifesto for more details of the following proposals:

• Take tax off the minimum wage by raising the tax threshold to £11,500
• Introduce a 31% flat rate for income tax
• Roll all existing state pensions and benefits into a non means-tested minimum £130pw ‘Citizen’s Pension’
• Reinstate dividend tax credit at 20%
• Reduce the annual limit for tax-relievable pension contributions to £10,000, from £255,000
• Phase out employers’ NI contributions over five years
•  Save up to £120bn a year by leaving the EU. No British jobs or trade will be lost
• Axe Britain’s gigantic quango mountain and public sector non-jobs to reduce UK national debt
• Release businesses from 120,000 EU laws
• Replace VAT with a ‘Local Sales Tax’ to help councils and local businesses
• Abolish Inheritance Tax