Green Party pledges to ‘straighten out the tax system’
In the first of a series of analyses, we look at some of the proposals from The Green Party’s 92-page manifesto that are likely to be of interest to members of the profession.
The Green Party believes in environmental protection, transferring powers from national to local government and, it appears, taking a radical and potentially transformative look at many areas of governmental operation.
As a quid pro quo for the positives on the environmental front, with financial and moral support for green issues such as public transport, a large number of capital projects will bite the dust if the party has its way, including Trident nuclear weapons, the HS2 rail scheme and anything to do with airport expansion.
Green new deal and carbon tax
Predictably the Greens’ main headlines will be generated by issues connected to protecting the environment.
New green homes, green transport and green jobs will be introduced to reduce the UK’s carbon emissions to net-zero by 2030, rather than 2050 which is perceived to be a more practical target. This will come at a cost of over £100bn a year in what is called a Green New Deal.
A significant proportion of the cost is budgeted to be generated by a new carbon tax. This will be applied on all fossil fuel imports and domestic extraction, based on the greenhouse gas emissions produced when fuel is burnt. The tax will also cover imported energy.
Ambitiously, the rate will rise progressively over a decade, rendering coal, oil and gas financially unviable as cheaper renewable energies rise to take their place.
The party will also work with the Crown Estate to open up more coastal waters for offshore wind and marine energy. Profits from these assets are to go directly to the government, rather than energy companies. Whether this is effectively a tax or a form of nationalisation remains to be seen.
Help for business
The Greens have a number of plans that could help ailing businesses. These include
- A series of initiatives to make energy and production cleaner and better for the environment.
- Creating a network of regional mutual banks to provide funding for start-ups.
- Investing £2bn a year in training and skills.
Universal basic income (UBI)
Perhaps the most radical idea in the whole manifesto is the introduction of a UBI. This will be an unconditional payment for all UK residents regardless of employment status, replacing most income-related state benefits.
With an adult rate of £89 per week, the Greens assert that nobody will be worse off, while someone in full-time work earning the average salary is projected to have a 6% increase in disposable income over five years. This is despite the fact that as a quid pro quo the “income tax threshold” will disappear.
Pensioners will receive twice the amount of UBI, while various other disadvantaged groups will also get additional sums.
Further, there will be allowances of £70 per week for the first two children in a family with income of under £50,000 and £50 for each additional child. Those on higher incomes will receive smaller supplements.
At first sight, this innovative new system looks as if it could ultimately be a simplification. However, getting there will almost certainly be a nightmare for HMRC or whoever is expected to administer the project.
Minimum and maximum wage
At the same time, the living wage would be extended to all workers from the age of 16 upwards and increase to £12 per hour.
At the other end of the scale, the party proposes legislating to ensure that the maximum wage paid to any member of staff in an organisation would not exceed ten times that paid (pro-rata) to the lowest-paid worker in the same organisation. It will also ban any bonuses exceeding the annual wage of the lowest-paid worker in the organisation granting the bonus.
This last point could have major corporations up in arms. Rather than receiving bonuses that are quantified in millions, most high-powered executives would be restricted to something roughly akin to the annualised Living Wage, which would probably equate to less than £25,000.
The party is keen to close loopholes that allow employers in the gig economy (where workers are offered freelance work or short-term contracts only) to deny workers key rights. Such workers would always receive at least the current minimum wage and have job security, sick leave, holiday pay and pension provision.
Gender pay and associated issues
All large and medium-sized companies would be required to carry out equal pay audits and redress any inequality in terms of equal pay for equal work but also recruitment and retention practices which create a glass ceiling. The law would also be simplified to assist employees who believe that they have been treated unfairly.
There will be a new 40% quota for women on major company boards.
Free childcare for 35 hours a week will be available for children from the age of nine months.
Finally, there is an intention to create an environment where everyone feels fulfilled in worthwhile employment and with the ambition of a four-day working week and better work-life balance – with no loss of pay.
Nobody could accuse the Greens of failing to be innovative when it comes to setting out their tax policies.
Simplifying income taxes
Even those of us who have been advocating tax simplification for what feels like decades are likely to be shocked or possibly pleasantly surprised at a series of proposals that really would do the trick.
To quote from the manifesto “It’s time to straighten out the tax system so that tax avoiders can no longer evade their responsibilities, and so that income from wealth is taxed the same as income from work. This will ensure that the wealthiest pay their fair share.”
The plan is to
- Merge employees national insurance, capital gains tax, inheritance tax, dividend tax and income tax into a single consolidated income tax.
- As a result, all income would be treated in the same way for tax purposes.
- Close loopholes to yield an estimated £20bn per year for the public purse.
- Tax income from investments/assets at the same level as the taxation of income from work, through the consolidated income tax.
- Replace the income tax threshold with universal basic income.
- End the double taxation of pension funds, which are currently subject to corporation tax and then income tax when paid out to individual pensioners.
Council tax and business rates
A proposal to introduce a new land value tax (LVT) would mark the abolition of council tax and business rates, along with non-domestic rates, stamp duty on land, annual tax on enveloped dwellings, capital gains tax on land sales, inheritance tax on land and income tax on land for owner-occupiers.
The expectation is that this would be charged at an annual rate of around 1.4% of current values and presumably require a lengthy revaluation process.
As a direct result, it is claimed that millions of renters and business tenants would be removed from any obligation to pay property taxes. Somehow, there will also be legislation to prevent landowners from passing tax costs back to renters and tenants.
Attack on big business
The Greens believe that the business does not currently pay its fair share of taxes.
In an attempt to redress the balance, they propose increasing the corporation tax rate to 24%. They will also advocate public country by country reporting and consolidated corporation tax across the European Union to prevent profit shifting.
The bank asset tax will be increased by an indeterminate amount and stamp duty on shares will be extended to purchases of all values and to new issues.
The anti-avoidance principle will be entrenched in UK tax law and banks obliged to provide information to HMRC automatically.
In an attempt to close down loopholes, a new definition of profits will include dividends, share buybacks, additions to cash holdings, payments to parents or subsidiary companies, both on and offshore, and other distributed income.
There will be a clampdown on tax havens internationally and a domestic requirement for offshore companies reveal beneficial ownership if they wish to bid for publicly funded contracts.
All money and assets transferred to tax havens will be treated as income distribution and taxed at the full corporate or income tax level. This statement mysteriously ignores the proposal for a Consolidated Income Tax.
Help for small business
Small business will be given access to lending at affordable rates through regional mutual banks.
At least 15% of government contracts will be awarded to small and micro-businesses.
Businesses will be required to report the difference between their agreed and actual payment periods to suppliers.
VAT reductions are proposed on food and drinks served in pubs, bars and restaurants, hotel bookings and on theatre, music concert and museum and gallery tickets.
The employment allowance would increase from £3,000-£10,000 per annum.
HMRC would be established as an independent agency of government answerable to Parliament.
Other miscellaneous tax issues
- Support the transition to plant-based diets by phasing in a tax on meat and dairy products over the next ten years, to reduce the 5% of the UK’s carbon emissions that come from the methane produced by livestock. The revenues from this part of the carbon tax will be recycled back into farming.
- Advocate that the EU prioritises cross-border cooperation to co-ordinate crackdowns on tax avoidance and evasion, so no one seeking to hide from tax rules can do so anywhere in the EU.
- Reinstate free TV licences for the over 75s (regarded by some as a stealth tax).
- Ban the sale of personal data such as tax records.
Nobody can doubt that The Green Party has ambitious plans. While these primarily focus on environmental issues, some of the more radical proposals for the transformation of the tax system might be attractive to other parties, as could both attacks on big business and support for small businesses.
Even if the party fails to get a very large number of seats at the election, they might have just enough influence under a hung parliament to push through one or two of the less controversial ideas.