Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Tory commission proposes £21bn tax cuts. By Dan Martin

by
19th Oct 2006
Save content
Have you found this content useful? Use the button above to save it to your profile.

A future Conservative government should introduce a radical system of tax cuts worth £21bn to create "a simpler, lower, flatter, fairer, and more stable" tax regime, a commission set up by David Cameron has recommended.

In a 176-page report, officially released today but published on and then removed from the Tories' website on Wednesday, the Tax Reform Commission made proposals including a 2p cut in the basic income tax rate to 20%, the abolition of the 10% lower rate and raising the taxable earnings threshold from £5,035 to £7,185.

The policy group, led by Lord Forsyth, also called for the scrapping stamp duty on shares and the abolition of inheritance tax replaced by "a capital gains tax on death".

Turning to business, the main rate of corporation tax should be slashed from 30% to 25%, the commission recommended, to ensure the UK is "competitive internationally".

Other suggestions in the report included the abolition of tax credits for research and development and film tax , a plan to "abolish, restrict or simplify" all tax-free perks for employees and a move to ensure that only basic rate taxpayers get child tax credits.

Writing the forward to the 'Tax Matters: Reforming the Tax System' report, Lord Forsyth said: "I do not expect everyone to agree with all of our conclusions but it is clear that Britain needs a less complex and more competitive tax system.

"Our proposals are nearly all achievable over a Parliament and are realistic. They set a direction of travel. While the speed of the journey is a matter for political judgement, the destination is clear – a simpler, lower, flatter, fairer, and more stable tax system."

Despite the recommendations, which press reports suggest were deliberately leaked yesterday to embarrass the Tory leader, David Cameron has spoken against making quick, short term and unfunded tax cuts.

Speaking during an event held by the Forum of Private Business in London on Wednesday, he said "economic stability must come before tax cuts".

Cameron added: "Our strategy will have three key components. First, economic stability as our number one priority. Second, to simplify business taxes - which would help pay for lower headline tax rates. And third, to rebalance our tax system - shifting the burden of tax from families, aspiration and opportunity, to pollution and carbon emissions."

Responding to the report, shadow chancellor George Osborne said he welcomed the report, particularly the business tax proposals saying "there is a strong case for a major simplification of business taxes that would pay for a significant reduction in our business tax rates".

However, Osborne added that tax cuts would be paid for by levies on unenvironmentally unfriendly activities, something not mentioned in the commission's report.

"We will rebalance our tax system and shift the burden from taxing families and jobs to taxing pollution and carbon emissions. I want to tax the bad not the good."

Osborne also announced that accountancy firm PriceWaterhouseCoopers is to conduct a detailed study of how to implement a simpler business tax regime, while former Conservative chancellor Lord Howe is to lead a small group which will study potential reforms in the way tax law is made.

Tags:

Replies (5)

Please login or register to join the discussion.

Richard Murphy
By Richard Murphy
20th Oct 2006 10:22

Intellectually bankrupt and economically incoherent
That's what I call this package.

I've explained why at http://www.taxresearch.org.uk/Blog/2006/10/19/intellectually-bankrupt-and-economically-incoherent/ so I hope I'm forgiven for not doing so again here.

Thanks (0)
avatar
By rasmith
19th Oct 2006 10:51

CT Rate
"Turning to business, the main rate of corporation tax should be slashed from 35%(????) to 25%, the commission recommended, to ensure the UK is "competitive internationally".

and they want us to trust them on tax????

Thanks (0)
avatar
By dan06
19th Oct 2006 11:15

Corporation tax
Robert, that was my error and not the commission's! Many apologies. I have corrected it.

Dan Martin
Business Editor
AccountingWEB

Thanks (0)
avatar
By NeilW
19th Oct 2006 12:09

Noble causes
I'm sure that noble causes get great headlines, however the problem with behaviour altering taxes on 'pollution and carbon emissions' is that when people stop doing those things you don't have a tax base.

At what point is a politician going to explain that if you want services you have to pay for them and the fairest and best way to do that is via income tax.

I shall now sit back and wait for hell to freeze over.

NeilW

Thanks (0)
avatar
By abelljms
19th Oct 2006 12:50

oh dear
the commission have missed the point of direct taxation.

left to their own devices, rich get richer relative to the poor. income/profits tax restricts this drift. There are differences of course between the parties as to how much this drift should be slowed.

this report proposes a massive shift to indirect taxes e.g. environmental and goods tax (VAT). people will definitely not like it if it ever happens.

what everyone seems to ignore is the imperative to actually reduce in real terms the overall cost of government - national and local because then the total (massive) tax burden can be reduced. rearranging the deck chairs is a diversion..?

Thanks (0)